Aggregate
number of securities to which transaction applies:
________________
(3)
Per
unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was
determined):
Proposed
maximum aggregate value of transaction:
________________________
(5)
Total
fee paid:
_____________________________________________________
[ ]
Fee
paid previously with preliminary
materials.
[
]
Check
box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its
filing.
You are invited to attend Insituform
Technologies, Inc.’s 2008 Annual Meeting of Stockholders. The meeting
will be held on Monday, May 19, 2008, at 8:00 a.m. local time at TPC
Southwind, 3225 Club at Southwind, Memphis, Tennessee38125.
The purposes of this year’s meeting
are:
(1)
to
elect seven directors,
(2)
to
ratify the appointment of PricewaterhouseCoopers LLP as our independent
auditors for the year ending December 31, 2008, and
(3)
to
transact any other business that may properly come before the meeting or
any adjournment(s) of the meeting.
The Board of Directors set April 9,2008 as the record date for the meeting. This means that if you were
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 vote at the meeting and any
adjournment(s) of the meeting.
Whether or not you expect to attend the
meeting, please vote by using the WHITE proxy card to vote by telephone or
Internet, or by marking, signing, dating and returning the enclosed WHITE proxy
card in the postage-paid envelope provided.. If you have any
questions or need assistance in voting your shares of our common stock, please
call Innisfree M&A Incorporated, which is assisting us, toll-free at (888)
750-5834.
As
always, your vote is very important and your Board of Directors urges you to
re-elect your directors by voting the enclosed WHITE proxy card
today.
IMPORTANT
NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE
ANNUAL
MEETING OF STOCKHOLDERS TO BE HELD ON MAY 19, 2008:
The
Proxy Statement and 2007 Annual Report are available at www.insituform.com under
Investors/SEC.
*
* * CAUTION * * *
You should know that a Cayman
Island-based hedge fund, TRF Master Fund (Cayman) LP, together with its
affiliates and its investment advisor, Water Asset Management LLC (collectively,
“TRF”), has notified us that it intends to (i) nominate five nominees in
opposition to your directors and (ii) propose an amendment to the Company’s
Amended and Restated By-Laws to set the number of directors at six.
We strongly urge you to vote for the
nominees proposed by the Board by using the enclosed WHITE proxy card and not to
return any blue proxy card sent to you by TRF. If you have
previously returned a blue proxy card sent to you by TRF, you can revoke it by
using the WHITE proxy card to vote by telephone or Internet, or by marking,
signing, dating and returning our Company’s WHITE proxy card in the postage-paid
envelope provided. Only your last-dated proxy will
count.
In the
event that there are not sufficient votes for a quorum or to approve the items
of business at the time of the Annual Meeting, the Annual Meeting may be
adjourned in order to permit further solicitation of proxies.
You are cordially invited to attend the
Insituform Technologies, Inc. 2008 Annual Meeting of
Stockholders. The meeting will be held on Monday, May 19, 2008,
at 8:00 a.m., local time, at TPC Southwind, 3225 Club at Southwind,
Memphis, Tennessee38125.
As you may know, our U.S. manufacturing
facility is located just a short distance from Memphis, in Batesville,
Mississippi. If you are able to attend the meeting in person, I would like
to invite you to tour our Batesville facility following the close of the
meeting. In order for us to arrange transportation for you to the
facility, please contact Jaime Kleekamp at (636) 530-8000.
I encourage you to vote your
shares as described in the enclosed Proxy Statement, and if your schedule
permits, to attend the meeting. I would appreciate your support of
our nominated directors. Your vote is very
important. Please cast your vote at your first
opportunity.
On behalf of your Board of Directors, I
thank you for your continued support of Insituform.
Sincerely,
Alfred L.
Woods,
Chairman of the Board
and
Interim Chief
Executive Officer
Proxy
Statement
The enclosed proxy is solicited on
behalf of the Board of Directors of Insituform Technologies, Inc. (the
“Company”) to be voted at our 2008 Annual Meeting of Stockholders, or at any
adjournment(s) of the meeting. This Proxy Statement, the WHITE proxy
card and our 2007 Annual Report were first mailed on April 21,2008. The meeting will be held on Monday, May 19, 2008,
at 8:00 a.m. local time at TPC Southwind, 3225 Club at Southwind, Memphis,
Tennessee38125, for the purposes listed in the accompanying
notice.
We have
received a notice from TRF Master Fund (Cayman) LP, together with its affiliates
and its investment advisor, Water Asset Management LLC (collectively, “TRF”)
regarding its nomination of five nominees to our Board of Directors and its
proposal for amendment of our Amended and Restated By-Laws to set the number of
directors at six at the Annual Meeting. TRF’s nominations and
proposal have NOT been endorsed by your Board of Directors. We urge
you NOT to sign any blue proxy card that you may receive from
TRF. Your Board of Directors urges you to vote “FOR” our nominees for
director, Alfred L. Woods, J. Joseph Burgess, Stephen P. Cortinovis, Stephanie
A. Cuskley, John P. Dubinsky, Juanita H. Hinshaw and Sheldon
Weinig.
You may
vote if you owned shares of our common stock at the close of business on April9, 2008, the record date for our 2008 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 April 9, 2008, we had 27,470,623 shares of
common stock, $.01 par value, outstanding. We have no class or series
of voting stock outstanding other than our common stock.
A list of
stockholders entitled to vote at the meeting will be available for examination
at the Company’s executive office located at 17988 Edison Avenue, Chesterfield,
Missouri63005 for ten days before the Annual Meeting and at the Annual
Meeting.
What
am I voting on?
·
First,
you are voting to elect seven directors. Each director, if
elected, will serve a term of one year or until his or her successor has
been elected and qualified.
Our
Board of Directors recommends a vote “FOR” the election of each of our nominees
for director.
·
Second,
you are voting to ratify the appointment of PricewaterhouseCoopers LLP as
our independent auditors for the year ending December 31,2008.
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, 2008.
·
In
addition, you may vote on other business, if it properly comes before the
meeting, or any adjournment(s) of the
meeting.
How
do I vote?
·
By Telephone or
Internet: You can vote by telephone or Internet by
following the instructions included on the enclosed WHITE proxy
card.
·
By Written
Proxy: You can vote by written proxy by signing, dating
and returning the enclosed WHITE proxy card in the postage-paid envelope
provided.
·
In Person: If
you are a record stockholder, you can vote in person at the
meeting.
What
is the difference between a record stockholder and a stockholder who holds
shares in street name?
·
If
your shares are registered in your name, you are a record
stockholder.
·
If
your shares are in the name of your broker or bank, your shares are held
in street name.
2
How
many votes are required to elect directors?
Directors
are elected by a plurality vote. Because the number of nominees
timely nominated exceeds the number of directors to be elected at the 2008
Annual Meeting, only the seven nominees who receive the most votes will be
elected. A majority vote is not required. Only votes cast
“FOR” a nominee will be counted. Unless indicated otherwise by your
WHITE proxy card, if you vote using a WHITE proxy card, your shares will be
voted “FOR” the seven nominees named in this Proxy
Statement. Instructions on the accompanying WHITE proxy card to
withhold authority to vote for one or more of the nominees will result in those
nominees receiving fewer votes but will not count against the
nominees.
How
many votes are required to ratify the appointment of PricewaterhouseCoopers LLP
as our independent auditors for 2008?
Ratification
of the appointment of PricewaterhouseCoopers LLP as our independent auditors for
the fiscal year ended December 31, 2008 requires the affirmative vote of a
majority of the shares of our common stock entitled to vote on the
proposal.
How
many votes are required to pass any stockholder proposal?
In order
to pass any stockholder proposal, an affirmative vote of a majority of the
shares of our common stock present in person or by proxy and entitled to vote at
the 2008 Annual Meeting is required.
As
indicated above, we have received a notice from TRF regarding its proposal to
amend our Amended and Restated By-Laws to fix the size of the Board of
Directors at six at the Annual Meeting. Our Board does not support
this proposal, as discussed in the section of this Proxy Statement entitled
"Other Matters" beginning on page 42.
If you
vote using a WHITE proxy card, your shares will be voted “AGAINST” this
proposal. For any stockholder proposal, an abstention will have the
same effect as a vote “AGAINST” the proposal.
What
if other matters are voted on at the Annual Meeting?
If any
other matters are properly presented at the Annual Meeting for consideration,
the persons named as proxies in the enclosed WHITE proxy card will have the
discretion to vote on those matters for you. At the date we filed
this Proxy Statement with the Securities and Exchange Commission, except for the
TRF proposal, our Board of Directors did not know of any other matter to be
raised at the Annual Meeting.
What does
it mean if I receive more than one proxy card?
If you
hold your shares in more than one account, you will receive a WHITE proxy card
for each account. To ensure that all of your shares are voted, please
vote by telephone or Internet for each account, or complete, sign, date and
return a WHITE proxy card for each account in the postage-paid envelope
provided.
3
As
previously noted, TRF has provided notice that it intends to nominate at the
Annual Meeting, and to solicit proxies for use at the Annual Meeting to vote in
favor of, its own slate of five nominees for election as
directors. As a result, you may receive proxy cards from both TRF and
the Company. To ensure stockholders have the Company’s latest proxy
information and materials to vote, the Board expects to conduct multiple
mailings prior to the date of the Annual Meeting, each of which will include a
WHITE proxy card regardless of whether or not you have previously
voted. Only the latest proxy card you vote will be
counted.
THE BOARD OF DIRECTORS URGES YOU NOT
TO SIGN OR RETURN ANY BLUE PROXY CARD SENT TO YOU BY
TRF. Even if you have previously signed a blue proxy card sent
by TRF, you have every right to change your vote by using your WHITE proxy card
to vote by telephone or Internet, or by signing, dating and returning the
enclosed WHITE proxy card in the postage-paid envelope provided. Only
the latest dated proxy card you vote will be counted. We urge you to
disregard any blue proxy card sent to you by TRF.
What
should I do if I receive a proxy card from TRF?
TRF has
provided notice that it intends to nominate at the Annual Meeting, and to
solicit proxies for use at the Annual Meeting to vote in favor of, its own slate
of five nominees for election as directors. You may receive proxy
solicitation materials from TRF, including an opposition proxy statement and
blue proxy card. THE
BOARD OF DIRECTORS URGES YOU NOT TO SIGN OR RETURN ANY BLUE PROXY CARD SENT TO YOU BY
TRF. Even if you have previously signed a blue proxy card sent
by TRF, you have every right to change your vote by following the instructions
on the WHITE proxy card to vote by telephone or Internet, or by signing, dating
and mailing the enclosed WHITE proxy card in the postage-paid envelope
provided. Only the latest dated proxy card you vote will be
counted. We urge you to disregard any blue proxy card sent to you by
TRF.
Can
I revoke my proxy?
Yes. You can revoke your
proxy by:
·
writing
to the attention of our corporate Secretary at the address of our
executive office prior to the date of the Annual
Meeting,
·
delivering
a later-dated proxy card prior to or at the Annual Meeting,
or
·
voting
in person at the Annual Meeting.
What
is the record date and what does it mean?
The
record date for the 2008 Annual Meeting of Stockholders is April 9,2008. 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:
·
receive
notice of the meeting, and
·
vote
at the meeting, or at any adjournment(s) of the
meeting.
4
What
if I do not specify my vote when I return my proxy?
You
should specify your choice for each proposal on the enclosed WHITE proxy
card. If no specific instructions are given, WHITE proxies that
are signed and returned will be voted “FOR” the election of the director
nominees named in this Proxy Statement and “FOR” the ratification of the
appointment of PricewaterhouseCoopers LLP as our independent auditors for
the year ending December 31, 2008.
In
addition, as discussed above, if you vote using a WHITE proxy
card, your shares will be voted “AGAINST” the TRF proposal for
amendment of our Amended and Restated By-Laws to set the size of the Board
of Directors at six. For any stockholder proposal, an
abstention will have the same effect as a vote “AGAINST” the
proposal.
How
are broker non-votes and abstentions counted?
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 Annual 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:
·
has
not received voting instructions on a particular matter from the
beneficial owner or persons entitled to vote,
and
·
does
not have discretionary voting power on the
matter.
If you
are the beneficial owner of shares held in “street name” by a broker, the
broker, as the record holder of the shares, is required to vote those shares in
accordance with your instruction. If you do not give instructions to
the broker, the broker will be entitled to vote the shares with respect to
“discretionary” items but will not be permitted to vote the shares with respect
to “non-discretionary” items (those shares are treated as “broker
non-votes”). Broker non-votes on a particular matter are not deemed
to be shares present and entitled to vote on such matters. Broker
non-votes, if any, will not be counted as votes cast on any
proposal. Stockholder proposals are “non-discretionary”
items.
If TRF
solicits proxies to elect its director nominees to our Board at the Annual
Meeting, then the election of directors will also be a “non-discretionary”
item. As a result, if your shares are held in “street name” and you
do not provide instructions as to how your shares are to be voted in the
election of directors, your broker or other nominee will not be able to vote
your shares in the election of directors, and your shares will not be voted for
any of our nominees. We urge you to provide instructions to your
broker or nominee so that your votes may be counted on this important
matter. You should vote your shares by following the instructions
provided on the enclosed WHITE proxy card and return the proxy card to your
bank, broker or other nominee to ensure that your shares are voted on your
behalf.
If
none of TRF’s director nominees are nominated to the Board at the Annual
Meeting, then the election of the directors will not be a
“non-discretionary” item.
Abstentions
will be counted as present for the purpose of determining the presence of
a quorum for transacting business at the Annual Meeting and as votes cast
on Proposal 2, ratification of the appointment of PricewaterhouseCoopers
LLP as our independent auditors for the year ending December 31, 2008, and
for stockholder proposals properly brought before the Annual Meeting.
Because these proposals require a majority of the votes cast for approval,
an abstention will have the effect of a vote against the
proposal.
5
How
many votes must be present to conduct business at the 2008 Annual
Meeting?
Our
Amended and Restated By-Laws require that a quorum must be present to
conduct business at the Annual Meeting. To constitute a quorum,
a majority of the outstanding shares of our common stock must be
represented, in person or by proxy at the Annual
Meeting.
Who
should I call with questions?
If you
have any questions about the Annual Meeting or if you need additional copies of
this Proxy Statement or the enclosed WHITE proxy card, please contact the firm
assisting us with the solicitation of proxies:
At our 2008 Annual Meeting,
stockholders will elect seven directors, each to serve a term of one year or
until a successor is elected and qualified. Our Board of Directors is
not divided into classes of directors, meaning all of our directors are voted on
every year at our annual meeting. Our Board of Directors currently
consists of seven directors. Unless otherwise instructed in the
proxy, each of the persons named on the accompanying WHITE proxy card intends to
vote the shares represented thereby in favor of the seven nominees listed under
“Certain Information Concerning Director Nominees” below. In no event
may the persons named on the accompanying WHITE proxy card vote the shares for
greater than seven nominees.
We recently announced the appointment
of J. Joseph Burgess as our new President and Chief Executive Officer, effective
as of April 14, 2008. Mr. Burgess was also appointed as a member of
our Board of Directors and the Strategic Planning Committee of our Board,
effective as of such date, filling the vacancy created upon the death of Alfred
T. McNeill.
Each director nominee named below is
presently serving as a director of our Company. All nominees have
consented to being named in this Proxy Statement and to serve if
elected. If, however, any nominee should become unable or unwilling
to serve, the persons named on the accompanying WHITE 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.
Reasons
for the Board’s Recommendation to Vote for its Slate of Director
Nominees
Our Board strongly believes that the
election of the nominees proposed by TRF in place of our Board’s nominees for
director is not in the best interests of our Company and all of our
stockholders. Our continuing directors of the Board have significant
and varied experience in the industries in which we operate, as well as intimate
knowledge of our Company through their years of dedicated service on the
Board. J. Joseph Burgess, our new President and Chief Executive
Officer, has over 20 years of experience in the water, energy and petrochemical
industries. We are committed to, and have been working diligently to
execute, our business and strategic plan to maximize the value of our Company
for all stockholders.
The
centerpiece of TRF’s campaign is the election of its five nominees to serve
on our Board of Directors. Yet, TRF offers few concrete
details of its plans for our Company, other than the suggestion that, if
elected, TRF's nominees will support an independent turnaround
strategy should a strategic review of available alternatives demonstrate that
this is the best way to maximize value for stockholders, and only at that point
would the TRF nominees begin a search for and hire a new Chief Executive
Officer. TRF's plan would have left our Company without the leadership of
a permanent Chief Executive Officer until after a new TRF board had completed
its exploration of our Company's strategic alternatives and concluded that our
Company should remain independent. TRF has not offered to purchase a
controlling interest in our Company nor offered to pay our stockholders any
control premium for the privilege of having the TRF nominees control our
Board.
Our Board
and management have already completed a review of our Company’s strategic
options, drawing upon input received from outside advisors,
including Merrill Lynch & Co., our independent financial
advisor. Merrill Lynch reviewed our current business plan and a
number of alternative scenarios, and evaluated a variety of potential financial
and strategic alternatives, and made a detailed presentation to our
Board. We also have spoken with many of our stockholders about our
Company’s business plan, including the hiring of a Chief Executive Officer, and
the opportunities available to our Company. As a result of this
process, Our Board unanimously concluded that execution of the Company’s
business plan and hiring a new Chief Executive Officer are the best ways to
enhance stockholder value.
7
For these
reasons, among others, our Board believes that the re-election of our current
directors, including our new President and Chief Executive Officer, will further
the best interests of all of our stockholders, as opposed to the election of the
nominees proposed by TRF.
For
the foregoing reasons, our Board urges you to vote for its nominees for
re-election to our Board by marking, signing, dating and returning the enclosed
WHITE proxy card only and not to sign or return any blue proxy card provided by
TRF.
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.
J. JOSEPH
BURGESS
Director
since 2008
Age
49
Our
President and Chief Executive Officer since April 14, 2008; President and
Chief Executive Officer of Veolia Water North America (a leading provider
of water and wastewater services to municipal, federal and industrial
customers) from 2005 until joining our Company in 2008; Chief Operating
Officer of Veolia Water North America from 2003 to 2005 and as its Vice
President and General Manager for the Northeast business center from 2002
to 2003; Executive Vice President for Water Systems Operations for Ogden
Projects (later renamed Covanta Water; a subsidiary of Ogden Corporation
that specialized in waste-to-energy projects for municipalities) prior
thereto.
Member
of our Strategic Planning
Committee.
STEPHEN P.
CORTINOVIS
Director
since 1997
Age
58
Co-owner
of Lasco Foods, Inc. (a food services industry manufacturer and
distributor) since 2005; Partner of Bridley Capital Partners (a private
equity firm) from 2001 until 2007; President - Europe of Emerson Electric
Co. from 1977 until 2001; Director: Plexus Corp. and Lasco Foods,
Inc.
Member
of our Corporate Governance & Nominating Committee and Strategic
Planning Committee.
STEPHANIE A.
CUSKLEY
Director
since 2005
Age
47
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; Director: Avantair, Inc.
Chair
of our Audit Committee and member of our Compensation
Committee.
8
JOHN P.
DUBINSKY
Director
since 2002
Age
64
President and Chief Executive Officer of Westmoreland
Associates, LLC (a financial consulting company) since before 2001;
President and Chief Executive Officer of CORTEX (a public purpose
non-profit established to buy property for the development of a
biotechnology corridor in the St. Louis, Missouri area) since 2003;
Vice Chairman: BJC HealthCare; Director: Stifel Financial Corp.;
Trustee: Barnes-Jewish Hospital.
Chair
of our Strategic Planning Committee and member of our Compensation
Committee.
JUANITA H.
HINSHAW
Director
since 2000
Age
63
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 before 2001 until 2005;
Director: Synergetics USA, Inc. and The Williams Company,
Inc.
Chair
of our Compensation Committee and member of our Audit
Committee.
SHELDON
WEINIG
Director
since 1992
Age
80
Adjunct
Professor at Columbia University and at State University of New York,
Stony Brook from before 2001; Director: Sion Power Corporation and Math
for America.
Chair
of our Corporate Governance & Nominating Committee and member of
our Audit Committee
ALFRED L.
WOODS
Director
since 1997
Age
64
Chairman
of the Board since 2003; Our Interim Chief Executive Officer from August13, 2007 through April 14, 2008; President of Woods Group, LLC (a
management consulting company) since before 2001; Chairman and Chief
Executive Officer of R&S/Strauss, Inc., a specialty retail chain, from
before 2000 until 2001; Director: Clutchmobile,
Inc.
OUR
BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE
ELECTION
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 Global Select Market:
Stephen P.
Cortinovis Juanita
H. Hinshaw
Stephanie A.
Cuskley Sheldon
Weinig
John P.
Dubinsky
Alfred
L. Woods
From August 13, 2007 through April 14,2008, Alfred L. Woods, our Chairman of the Board, served as our Interim Chief
Executive Officer. Accordingly, under Nasdaq rules, Mr. Woods was not
considered an independent director during the period of his service as Interim
Chief Executive Officer. Mr. Woods’ service as our Interim Chief
Executive Officer concluded upon the appointment of J. Joseph Burgess as our
President and Chief Executive Officer on April 14, 2008. In
accordance with the Nasdaq rules, our Board, based on the recommendation of our
Corporate Governance & Nominating Committee, has determined that Mr. Woods
is again an independent director.
Except for Mr. Woods’ service as our
Interim Chief Executive Officer, none of our independent directors, other than
Mr. Dubinsky, have had any personal, financial or business relationships with us
either currently or during the three-year period ended December 31,2007. Mr. Dubinsky is the President and Chief Executive Officer of
CORTEX, a public purpose non-profit corporation that was organized to purchase
real property in the St. Louis, Missouri area with the goal of establishing a
biotechnology corridor. Mr. Dubsinky’s position with CORTEX is an
unpaid position. During 2006, CORTEX purchased a parcel of real
property from one of our subsidiaries for $2.35 million in cash. Mr.
Dubinsky did not participate in the negotiation or the consideration of the
transaction for either CORTEX or us. Our Board considered the size of
the transaction, the arm’s length nature of the negotiations (including an
independent appraisal we received on the value of the property), and the fact
that Mr. Dubinsky has no personal financial or ownership interest in CORTEX in
determining that the transaction did not negatively impact Mr. Dubinsky’s
independence.
Our Chairman of the Board position is
historically a non-executive position. As discussed above, however,
Mr. Woods served as our Interim Chief Executive Officer from August 13, 2007
until April 14, 2008 when Mr. Burgess was appointed as our new President and
Chief Executive Officer. Alfred L. Woods has served as our Chairman
since July 2003.
Our Chairman is responsible for the
smooth functioning of our Board, enhancing its effectiveness. The
Chairman guides the processes of our Board, setting the agenda for, and
presiding at, Board meetings. Our Chairman also presides at
stockholder meetings, and ensures that directors receive appropriate information
from our Company to fulfill their responsibilities.
Our Chairman is an ex officio member of
each standing Board committee, providing guidance and, like all directors,
taking an active role in evaluating our executive officers.
Our Chairman acts as a regular liaison
between our Board and our executive management, consulting regularly with our
executives over business matters and providing our executives with immediate
consultation and advice on material business decisions which require prompt
reflection or policy interpretation.
10
The 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
executive management.
Board of
Directors. During 2007, our
Board of Directors held nine meetings and acted once 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 2007. Our Board has four standing Committees, an Audit
Committee, a Compensation Committee, a Corporate Governance &
Nominating Committee and a Strategic Planning Committee. The Board
may also, from time to time, establish such other Committees as it may deem
necessary.
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 Global Select Market.
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) our
independent auditors’ qualifications and independence and (d) the
performance of our internal audit function and independent
auditors. The Audit Committee also prepares the Report of the Audit
Committee 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:
·
the
appointment, compensation, retention and termination of our independent
auditors and of our internal
auditors;
·
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;
·
oversight
of our internal auditors’ work;
·
review
of the scope and results of our internal
controls;
·
approval
of the professional services provided by our independent auditors;
and
·
review
of the independence of our 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 2007, the Audit Committee held
seven meetings. Our Board has adopted a written charter for the Audit
Committee.
Compensation
Committee. The members of
our Board’s Compensation Committee are Juanita H. Hinshaw (Chair), Stephanie A.
Cuskley and John P. Dubinsky. Mmes. Hinshaw and Cuskley and Mr.
Dubinsky are independent directors as defined by the rules applicable to
companies listed on The Nasdaq Global Select Market.
11
The Compensation Committee
(a) determines the compensation level of our Chief Executive Officer and
other executive officers, as well as certain other highly-compensated key
employees, (b) reviews management’s Compensation Discussion and Analysis
relating to our Company’s executive compensation programs and approves the
inclusion of the same in our Proxy Statement and/or Annual Report on Form 10-K,
(c) issues a report confirming the Compensation Committee’s review and approval
of the Compensation Discussion and Analysis for inclusion in our Proxy Statement
and/or Annual Report on Form 10-K, and (d) administers, and makes
recommendations with respect to, our incentive compensation plans and
stock-based plans.
During 2007, the Compensation Committee
held six meetings and acted twice 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 during 2007. The members of the
Compensation Committee are set forth above under “Compensation
Committee.”
Corporate
Governance & Nominating Committee. The members of
our Board’s Corporate Governance & Nominating Committee are Sheldon
Weinig (Chair) and Stephen P. Cortinovis. Alfred T. McNeill served as
a member of our Corporate Governance & Nominating Committee until his death
in March 2008. Messrs. Weinig and Cortinovis are independent
directors as defined by the rules applicable to companies listed on The Nasdaq
Global Select Market.
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.
Stockholders also may make nominations
for directors. Stockholders wishing to propose nominees for
consideration at our 2009 Annual Meeting of Stockholders must comply with the
provisions of our Amended and Restated By-Laws 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. In its evaluation of director candidates, the Corporate
Governance & Nominating Committee considers a variety of
characteristics including, but not limited to: certain core competencies,
including knowledge of accounting and finance, sound business judgment,
knowledge of management trends, crisis response ability, industry knowledge and
strategy and vision; experience, specifically in the industries in which we
operate; 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.
The Corporate Governance &
Nominating Committee held five meetings and acted once by unanimous written
consent in 2007. 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 and J. Joseph Burgess. Alfred T.
McNeill served as a member of our Strategic Planning Committee until his death
in March 2008, and Thomas S. Rooney, Jr., our former Chief Executive Officer,
served as a member of the Committee until his resignation in August
2007. Mr. Burgess, our new President and Chief Executive Officer, was
appointed to serve on the Strategic Planning Committee, effective as of April14, 2008. Messrs. Dubinsky and Cortinovis are independent directors
as defined by the rules applicable to companies listed on The Nasdaq Global
Select Market. The role of this Committee is to review and to make
recommendations to the Board regarding our strategy and strategic planning
process.
12
The Strategic Planning Committee held
five meetings during 2007. Our Board has adopted a written charter
for the Strategic Planning Committee.
Corporate
Governance Guidelines. 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, the Board has adopted a charter for each of its standing Committees, the
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.
Code of
Conduct. In addition,
based on the recommendation of the Corporate Governance & Nominating
Committee, our Board has adopted a code of conduct that applies to all of our
employees, including our officers, and our directors.
Availability of
Corporate Governance Documents. Each of our
corporate governance guidelines, Board committee charters, code of ethics and
code of conduct are available, free of charge, on our website,
www.insituform.com, under “Investors – Corporate Governance.” We also
will provide these documents, free of charge, to any stockholder who requests
them by writing to the following address:
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 is available, free of charge, on
our website, www.insituform.com. The Audit Committee consists of
three independent directors: Stephanie A. Cuskley (Chair), Juanita H. Hinshaw
and Sheldon Weinig.
The Audit
Committee reviewed and discussed our audited consolidated financial statements
for 2007 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, as adopted by the Public Company Accounting Oversight Board in Rule
3200T, which include the following:
·
PricewaterhouseCoopers
LLP’s responsibility under generally accepted auditing
standards;
·
significant
accounting policies;
·
management
judgments and accounting estimates;
·
audit
adjustments that individually or in the aggregate could have a significant
effect on our financial reporting process;
·
PricewaterhouseCoopers
LLP’s judgments about the quality of our accounting
principles;
·
other
information in documents containing audited financial
statements;
·
disagreements
with our management, including the application of accounting principles,
scope
of audit, disclosures and the wording of PricewaterhouseCoopers LLP’s
report;
·
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, as adopted by the Public Company Accounting Oversight
Board in Rule 3600T), 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 2007 be included in the Annual
Report on Form 10-K for the fiscal year ended December 31,2007.
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 listing standards of The Nasdaq Stock Market LLC (“Nasdaq”).
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, as amended, or the
Securities Exchange Act of 1934, as amended, 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
information concerning compensation earned by our non-employee directors in
fiscal year 2007:
Name
(1)
Year
Fees
Earned
or
Paid
In
Cash
($)
Stock
Awards
($)(2)
Option
Awards
($)(3)
Non-Equity
Incentive Plan
Compensation
($)
Change
in
Pension Value
and
Nonqualified
Deferred
Compensation
Earnings
($)
All
Other
Compensation
($)
Total
($)
Stephen
P. Cortinovis
2007
$47,500
$78,156
—
—
—
—
$125,656
Stephanie
A. Cuskley
2007
57,500
78,156
—
—
—
—
135,656
John
P. Dubinsky
2007
53,500
78,156
—
—
—
—
131,656
Juanita
H. Hinshaw
2007
57,500
78,156
—
—
—
—
135,656
Alfred
T. McNeill(4)
2007
47,500
78,156
—
—
—
—
125,656
Sheldon
Weinig
2007
57,500
78,156
—
—
—
—
135,656
_______________
(1)
For
information concerning compensation in fiscal year 2007 earned by or paid
to Alfred L. Woods, our Chairman of the Board and, from August 13, 2007
through April 14, 2008, our Interim Chief Executive Officer, please see
the Summary Compensation Table in this Proxy
Statement.
(2)
Represents
the amount recognized for financial statement reporting purposes during
2007 and the award date fair value, calculated in accordance with FAS
123(R), with respect to deferred stock units awarded on April 25, 2007, in
the following amounts: 3,600 to each of Messrs. Cortinovis,
Dubinsky, McNeill and Weinig and Mmes. Cuskley and
Hinshaw. Please refer to Note 8, “Equity-Based Compensation,”
in the Notes to Consolidated Financial Statements contained in our Annual
Report on Form 10-K, filed on March 10, 2008, for a discussion regarding
the valuation of our stock awards. The aggregate number of
stock awards outstanding at December 31, 2007, was as
follows: Mr. Cortinovis, 16,325; Ms. Cuskley, 10,000; Mr.
Dubinsky, 16,325; Ms. Hinshaw, 16,325; Mr. McNeill, 13,200; Mr. Weinig,
16,325; and Mr. Woods, 62,416.
(3)
The
aggregate number of option awards outstanding at December 31, 2007, was as
follows: Mr. Cortinovis, 37,500; Mr. Dubinsky, 15,000; Ms.
Hinshaw, 22,500; Mr. Weinig, 31,500; and Mr. Woods,
37,500. Neither Ms. Cuskley nor Mr. McNeill previously received
an option award.
(4)
Mr.
McNeill served as a member of our Board of Directors until his death in
March 2008.
Each non-employee director, other than
our Chairman, is compensated at a rate of $32,000 per year, plus reimbursement
of related business travel expenses. Directors are not paid meeting
fees. Mr. Woods, our Chairman, was compensated at a rate of
$109,000 per year, plus reimbursement of related business travel expenses,
except during his term of service as our Interim Chief Executive Officer from
August 13, 2007 through April 14, 2008. While serving as our Interim
Chief Executive Officer, all payments for director compensation to Mr. Woods
ceased.
Non-employee directors other than
Mr. Woods 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 2006 Non-Employee Director Equity Incentive Plan from time to
time. During 2007, each of Messrs. Cortinovis, Dubinsky, McNeill and
Weinig and Mmes. Cuskley and Hinshaw received a grant of 3,600 deferred
stock units. Prior to his service as our Interim Chief Executive
Officer, Mr. Woods received a grant of 6,400 deferred stock units during
2007 for his service as Chairman of the Board of Directors. 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
award. Following termination of the director’s service on our Board
or per any other distribution date as the director may elect, 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
2007.
During 2006, we adopted a policy with
respect to required levels of stock ownership for our non-employee
directors. Under the policy, each current director is required to
beneficially own (and retain thereafter) at least 10,000 shares of our common
stock by July 25, 2009. Each non-employee director who is elected or
appointed after adoption of the policy will be required to beneficially own (and
retain thereafter) at least 10,000 shares of our common stock no later than the
fourth anniversary of the director’s election or appointment. As of
December 31, 2007, each director was in compliance with the stock ownership
requirements of this policy.
Our Compensation Committee is
responsible for establishing our compensation philosophy and ensuring that the
total compensation paid to our executive officers and certain other high-level
employees is fair, reasonable and competitive. The Committee also
makes recommendations to our Board regarding the adoption, amendment and
rescission of our equity-based incentive compensation plans and administers our
employee equity-incentive plans and the long-term incentive plans for executive
officers.
In making
compensation determinations for executive officers, the Committee periodically
reviews our business goals and objectives, evaluates the performance of the
executive officers in light of such goals and objectives and assesses our
competitive position for executive talent against an established peer group of
companies and other market data. With the assistance of an
independent executive compensation advisor and the input of our Chief Executive
Officer, the Committee also considers individual factors for each of our
executive officers, including the executive officer’s experience, tenure with
our Company, specific job duties and responsibilities and the achievement of
individual performance goals in setting executive compensation.
Throughout
this Proxy Statement, each of the individuals who served as our Chief Executive
Officer and Chief Financial Officer during fiscal 2007, as well as the other
individuals included in the Summary Compensation Table on page 30, are referred
to as our “Named Officers.”
Our Compensation Committee believes
that the most effective compensation program is one that is designed to attract
and retain top talent by providing a competitive and equitable compensation
package, while aligning the interests of our executives with those of our
stockholders. The Committee believes that the best way to achieve
such alignment is by rewarding the achievement of specific annual, long-term and
strategic goals, with the ultimate objective of increasing stockholder
value. Direct compensation levels of our executive officers are
generally established based on competitive benchmarking and performance factors,
as well as executive specific factors, including experience, tenure with our
Company, specific job duties and responsibilities and the achievement of
individual performance goals. Our Committee also believes that our
compensation program should be cost-effective, therefore, it considers the tax
and accounting effects when determining the elements, structure and amounts of
our executive officers’ total compensation packages.
In
establishing individual executive compensation, the Committee strives to ensure
that: (i) our executive compensation remains competitive relative to
the compensation paid to similarly situated executives of our peer group; (ii)
our executives are compensated based on each executive’s level of responsibility
and contribution to our business goals; and (iii) each executive’s compensation
is linked with the individual goals and objectives of the executive as well as
the financial performance of the entire Company.
Role of the Compensation
Committee. The Compensation Committee is responsible for
determining the total compensation of our executive officers, including our
Chief Executive Officer, as well as certain of our other high-level
employees. In making compensation determinations for our executive
officers, the Committee periodically reviews our goals and objectives relative
to executive compensation, evaluates the performance of the executive officers
in light of such goals and objectives and assesses our competitive position for
executive compensation against an established peer group of companies and other
market data. For executive officers other than our Chief Executive
Officer, the Committee will review and consider recommendations of our Chief
Executive Officer. The Committee also considers other factors, such
as an executive’s experience, tenure with our Company and specific job duties in
determining the appropriate compensation of an executive.
Role of the Compensation
Consultant. The Committee has engaged Towers Perrin, an
outside professional services firm, to conduct an annual survey of our
established peer group of 15 companies and to provide the Committee with data
showing a range of total compensation paid to individuals in positions similarly
situated to those of our executives. The data includes base salary,
annual bonus or incentive cash payments and long-term incentive components of
pay. Towers Perrin also provides certain survey market data where
peer data for a like position is not available.
Role of the Executive Officers in
Compensation Decisions. Our Chief Executive Officer annually
reviews the performance of each other executive officer and makes
recommendations to the Compensation Committee regarding the specific
compensation levels of those executives. Our Chief Executive Officer
and executive management then typically work together to develop performance
target recommendations for presentation to and consideration by the Committee in
connection with incentive compensation determinations. In addition,
executive management also recommends the incentive compensation plans for review
and consideration by the Committee.
In making decisions regarding the
target total compensation of our executive officers, our Compensation Committee
reviews information provided by Towers Perrin and considers, among other factors
as discussed above, the relative compensation of similarly-situated employees of
our peer group of companies. In 2006, our Compensation Committee,
based on data requested from Towers Perrin, selected 15 companies to serve as
the peer group that our compensation consultant and the Committee believed most
appropriately represented our Company. At that time, each of the peer
group companies had total annual revenues of not less than $200 million and not
more than $3 billion and operated in an industry similar to
ours. This peer group, which is periodically reviewed by the
Committee and updated as the Committee deems appropriate, consists of companies
against which the Committee believes we compete for talent. The
companies currently comprising our peer group are:
§ American
States Water Co.
§ MasTec
Inc.
§ Chicago
Bridge & Iron Co. NV
§ Michael
Baker Corp.
§ Dycom
Industries Inc.
§ Perini
Corp.
§ ENGlobal
Corp.
§ Preformed
Line Products Company
§ Foster
Wheeler Ltd.
§ Quanta
Services Inc.
§ Granite
Construction Inc.
§ Sterling
Construction Co. Inc.
§ Kennametal
Inc.
§ Vectren
Corp.
§ Layne
Christensen Co.
18
For compensation paid to our Named
Officers in 2007, the Committee targeted base salaries at the 50% range of peer
group salaries for similarly-situated executives and total compensation at 75%
of the range of total compensation for equivalent executive positions in the
peer group. The Committee in making the target determination
considered the peer group data, as well as our strategic and operational
goals. These targets represented the Committee’s expectation that,
over the long-term, our financial performance and the individual performance of
the Named Officers would remain consistent with these goals. It was
also the Committee’s belief that to retain current management and attract top
talent, we should compensate our executives and management above median market
levels.
For 2008, the Committee revised the
target level of total compensation whereby the target for base salaries of
executive officers was set at 50% of the range of peer group salaries, and total
incentive compensation, as opposed to total compensation, was targeted at 75% of
the range of total incentive compensation at peer group
companies. This change represents the Committee’s belief that total
compensation should be targeted between the median and 75% levels, and that base
salaries establish the minimum compensation upon which an executive can
rely. Actual incentive compensation, and therefore total
compensation, can meet or fall short of the target based on the applicable
performance requirements, thereby more appropriately aligning the total
compensation of our executives with the interests of our stockholders and the
long-term growth of our Company.
As previously noted, the target
compensation levels are only one factor in the Committee’s determination of
executive compensation levels. Actual compensation levels for
executive officers may be more or less than the targeted levels based upon other
factors that the Compensation Committee may consider in its discretion,
including the level of responsibility and duties of the executive, individual
performance, tenure and experience.
The principal elements of compensation
for our Named Officers are:
§
base
salary;
§
annual
cash incentive compensation; and
§
long-term
incentive compensation.
Base
Salary. In determining the base salary of each Named Officer,
other than Mr. Woods, our Compensation Committee considers, among other things,
the level of responsibility and duties of the executive, individual performance,
tenure and experience, as well as the applicable market data, as detailed
above.
In 2007,
the Committee, on the recommendation of our then Chief Executive Officer,
determined that the annual salaries of the executive officers be increased to
continue to move these executives to base salary levels commensurate with other
executives with similar positions, duties, responsibilities and tenure based on
the peer group data and other market data. The salary of Thomas E.
Vossman, the Senior Vice President and Chief Operating Officer, was raised 19%
to $370,000. David F. Morris, then our Vice President and General
Counsel, received a salary increase of 23% to $295,000. The salary of
David A. Martin, then our Vice President and Controller, was increased by 6% to
$190,000. The Committee also approved a special monthly stipend of
$6,000 for Mr. Martin as compensation for his service as acting Chief Financial
Officer. Alexander J. Buehler, our Vice President – Marketing and
Technology, received a 10% increase to $215,000. Our former Chief
Executive Officer, Thomas S. Rooney, Jr., received a 4% increase to
$655,000.
19
On August13, 2007, Mr. Rooney resigned as our Chief Executive Officer, and our Board of
Directors appointed Alfred L. Woods as our Interim Chief Executive
Officer. As compensation for Mr. Woods’ service as Interim Chief
Executive Officer for the six-month period beginning on August 13, 2007, the
Compensation Committee awarded Mr. Woods 33,291 deferred stock units in lieu of
a base salary, annual cash incentive compensation and long-term incentive
compensation that is available to other executive officers. The
deferred stock units vested on April 14, 2008, upon the appointment of our new
President and Chief Executive Officer. The award date fair value of
the deferred stock units was $500,000, based on the closing price of our common
stock on August 13, 2007.
In
connection with the resignation of Mr. Rooney, the Board also appointed Mr.
Morris as our Chief Administrative Officer, in addition to his positions as
Senior Vice President, General Counsel and Secretary, and Mr. Martin as our
Chief Financial Officer, in addition to his position as Vice
President. The Committee accordingly increased the base salaries of
Mr. Morris and Mr. Martin to $325,000 and $275,000, respectively. Mr.
Martin’s monthly stipend of $6,000 for his service as Interim Chief Financial
Officer was terminated at this time.
For 2008,
the Committee again reviewed peer group and survey market data regarding the
competitiveness of the base salaries provided to our executives. The
Committee determined, based on the recommendation of our Interim Chief Executive
Officer and in light of our current operating results and our ongoing cost
reduction initiative, that the base salaries of the executive officers remain at
current levels; provided, however, that due to additional duties and
responsibilities assigned to Mr. Buehler for 2008, the Committee determined that
Mr. Buehler’s base salary be increased to $230,000, a 7% increase.
To
compensate Mr. Woods for his service as Interim Chief Executive Officer for the
six-month period beginning on February 13, 2008, the Compensation Committee
determined that Mr. Woods was to receive a monthly cash fee of $25,000 during
the remaining period of his service as Interim Chief Executive Officer,
effective as of February 13, 2008. In addition, the Committee awarded
Mr. Woods 26,236 deferred stock units under the 2006 Non-Employee Director
Equity Incentive Plan. The award date fair value of the deferred
stock units was $350,000, based on the closing price of our common stock on
March 3, 2008. This award of deferred stock units was subject to a
pro rata adjustment in the event Mr. Woods’ service as Interim Chief Executive
Officer was completed prior to August 12, 2008. As a result of the
appointment of our new President and Chief Executive Officer on April 14, 2008,
this award was adjusted downward to 8,745 deferred stock units to reflect
the actual period of Mr. Woods’ service as Interim Chief Executive
Officer.
For a
description of the compensation arrangement for J. Joseph Burgess, our
newly appointed President and Chief Executive Officer, please refer to the
section titled “Other Compensation Matters” beginning on page 26 of this Proxy
Statement.
Annual Cash
Incentive Compensation. We maintain a Management Annual
Incentive Plan, as reviewed and approved by the Compensation Committee, pursuant
to which our executive officers and other key employees are eligible to receive
annual cash incentive awards. Each participant in the Management
Annual Incentive Plan is assigned an incentive award goal that is expressed as a
percentage of his or her base salary. The Committee believes that
this annual cash incentive plan promotes our compensation philosophy by
rewarding our executives and key employees for the achievement of short-term
initiatives and advances our ultimate objective of improving stockholder
value.
20
For 2007, the Committee assigned the
following incentive award goals to the Named Officers (excluding Mr. Woods, our
then non-employee Interim Chief Executive Officer):
Named
Officer Target % of Base
Salary
Thomas S.
Rooney,
Jr. 70%
Thomas E.
Vossman 50
David F.
Morris 50
David A.
Martin 50
Alexander J.
Buehler 40
In
determining the incentive award goals for these executives, the Committee
reviewed peer group data and other survey market data and trends and considered
the mix of total compensation of individuals in positions similarly situated to
our executives. Based on its review and analysis, the Committee
determined that a significant portion of the total cash compensation of our
executives be tied to our Company’s operating results, whereby the incentive
award goals are “mid-point” targets, and the executives’ cash compensation could
be higher or lower than the award goals. For Messrs. Rooney, Vossman,
Morris and Martin, it was determined that in accordance with our 2006 Executive
Performance Plan, that the maximum amount of annual cash incentive award that
could be received was equal to twice each such executive’s award
goal. Mr. Buehler is not a participant under the 2006 Executive
Performance Plan.
The
amount available for funding of the Management Annual Incentive Plan in 2007 was
based on a net income target recommended by our then Chief Executive Officer and
approved by the Compensation Committee in January 2007. At the time
the net income target was determined, the Committee believed the net income
target was in line with our operational goals and strategies and, therefore,
achievable. The minimum amount of funding to be available, regardless
of our net income for the year, was set at $700,000, although it was not
required that the entire amount available be awarded.
In fiscal
year 2007, our results were such that no bonus awards were paid to the Named
Officers under the Management Annual Incentive Plan for fiscal
2007.
After
considering our 2007 operating results in light of our objectives in providing
annual incentive compensation, our Committee and executive management determined
that satisfaction of an individual performance component be included as a
requirement to receiving certain incentive compensation, in addition to a
Company financial performance target. Our Interim Chief Executive
Officer and other executive officers and management have worked together to
develop measurable business objectives for executive officers as well as
non-executive participants in our annual incentive compensation plans to be used
as the measure of performance. Each individual’s performance against
such objectives will be evaluated at the end of the fiscal year, and the
individual’s receipt of certain incentive compensation will be based on the
level of achievement of Company and individual objectives.
For 2008,
a new Management Annual Incentive Plan was presented by our Interim Chief
Executive Officer and executive management and adopted by the Committee that
includes not only Company performance requirements, but also individual
participant performance requirements. The new plan is funded through
two separate funding pools. Each pool provides funding with respect
to 50% of a participant’s total target award. The first pool is
funded based on the achievement of a consolidated Company net income
target. If the minimum consolidated Company net income target is
achieved or exceeded, and therefore, the pool is funded, all participants will
be eligible to receive a cash incentive award from this pool. The
second pool is funded based on the achievement of an operating income target set
for each business unit. If the minimum operating income is achieved
by the applicable business unit, then a pool is funded for that particular
business unit. To receive a cash incentive award from this pool,
however, each participant must achieve certain individual performance objectives
established for such participant at the beginning of the plan
year. All awards under the 2008 Management Annual Incentive Plan are
at the discretion of our Board or Compensation Committee, and the plan may be
modified, suspended or terminated at any time.
21
For
purposes of the Plan, consolidated net income is determined from our audited
financial statements for the year and is adjusted to exclude the
following:
·
losses
associated with the write-down of assets of a discontinued business
operation or a business operation to be
liquidated;
·
gains
or losses on the sale of any subsidiary, business unit or division or
their assets or business;
·
gains
or losses on the disposition of material capital assets or the refinancing
of indebtedness;
·
losses
associated with the write-down of goodwill or other intangible assets due
to impairment;
·
net
gains or losses from material property casualty events or condemnation
awards;
·
other
material income or loss the realization of which is not directly
attributable to current senior
management;
·
any
effect from a change in generally accepted accounting principles from
those previously used; and
·
income
taxes or benefits of any of the
above.
A
threshold funding amount is set for the achievement of 100% of the applicable
performance target for each funding pool. The threshold funding
amount for the Company performance-based pool for 2008 is
$5,000,000. Where our actual net income exceeds the net income
target, the threshold funding amount will be increased by one-third of the
amount by which our actual net income exceeds the target. The plan
also provides for reduced funding amounts where the target net income is not
achieved, but our actual net income exceeds 75% of the target. If
less than 75% of the net income target is achieved, the consolidated Company
performance-based pool will not be funded; provided, however, that a minimum
amount of $700,000 will be available for discretionary awards for extraordinary
performance by individual participants as may be determined by our Chief
Executive Officer at the end of the plan year. The funding of each
business unit performance-based pool is conditioned upon the achievement of at
least 90% of the applicable business unit operating income target; however, at
least 75% of the consolidated Company net income target must be achieved in
order for amounts to be funded to the pool in excess of the threshold funding
amount.
In
determining the net income and operating income targets for the Management
Annual Incentive Plan for 2008, the Committee considered the recommendations of
executive management regarding current industry and market conditions and
projections, based on management’s internal market analysis and various market
surveys, our 2008 business plan as approved by our Board of Directors in
December 2007 and prior year operating results. It is the Committee’s
belief that although the 2008 targets are reasonably aggressive, the targets are
reachable and are set at levels that promote our compensation
objectives.
The
Committee assigned the following incentive award goals to the Named Officers
(excluding Mr. Woods) for the 2008 plan year:
Named
Officer Target % of Base
Salary
Thomas E.
Vossman 60%
David F.
Morris 60
David A.
Martin 60
Alexander J.
Buehler
51
22
Long-Term
Incentive Compensation. In order to align further the
interests of our executives with those of our stockholders over the long-term,
as opposed to the short-term focus of our Management Annual Incentive Plan, and
to encourage the retention of our executives, the Committee provides certain
long-term equity-based incentives to our executives and other key
employees. In addition, due to their levels of responsibility and
duties, the Committee has included a long-term cash-based incentive compensation
component of the total compensation for Messrs. Vossman, Morris and Martin under
our 2006 Executive Performance Plan.
For 2007, the Committee determined that
the mix of the total long-term incentive compensation of Messrs. Vossman, Morris
and Martin be 60% stock options, 25% restricted stock units and 15% long-term
incentive cash. The mix of Mr. Buehler’s total long-term incentive
compensation for 2007 was 46% stock options and 54% restricted stock
units. For 2008, the Committee reduced the amount of the long-term
incentive compensation allocated to stock options and increased the amount of
restricted stock awarded. Restricted stock awards are less dilutive
than stock options, and upon a forfeiture of a restricted stock award, the
expense of the award may be reversed, unlike stock option expense. In
addition, the Committee believes that restricted stock awards are perceived by
our key employees to provide a greater value than stock options. The
mix of total long-term incentive compensation for Messrs. Vossman, Morris and
Martin for 2008 is 50% stock options, 35% restricted stock and 15% long-term
incentive cash. The mix of Mr. Buehler’s total long-term incentive
compensation for 2008 is 50% stock options and 50% restricted
stock.
Equity-Based
Incentives. Through equity awards, the Committee provides our
key employees an opportunity to benefit from increases in the market price of
our common stock, encourages key employees to acquire an ownership interest in
our Company and aligns their interests with those of our
stockholders. The Committee generally makes all equity-based
incentive awards during its January meeting and limits mid-year grants to newly
hired or promoted employees.
Our 2006
Employee Equity Incentive Plan provides for the granting of stock options,
restricted stock, restricted stock units and other equity-based incentive awards
to our key employees whose talents and special efforts are essential to the
success of our Company. In 2007, the Committee awarded stock options
and restricted stock units to our key employees, including our
executives. For 2008, however, the Committee, on the recommendation
of executive management, has determined that along with stock options,
restricted stock be awarded, rather than restricted stock units. It
was determined that there was not a strong need for the distribution deferral
capability available with restricted stock unit awards.
Stock Options. The
award of stock options to our executives and certain key employees represents
the high-risk and potential high-return component of our long-term incentive
compensation philosophy, as the potential value of a stock option can fall to
zero if the price of our common stock is lower than the exercise price when the
option expires. As detailed above, the number of stock options
awarded to an executive is based primarily on the target dollar value of the
amount of such executive’s long-term incentive compensation allocated to stock
options. That target dollar value is translated into a number of
shares based on the estimated economic value of the award, as determined using a
binomial valuation. No stock options are granted at a price that is
less than the fair market value of a share of our common stock on the date of
grant. Subject to limits imposed by Section 422 of the Internal
Revenue Code, all stock options granted to our key employees in the United
States are incentive stock options.
23
In
January 2007, the Compensation Committee approved grants of stock options to our
executive officers. These options had an exercise price of $25.60,
the closing price of our common stock on The Nasdaq Global Select Market on the
date of grant. The options were granted pursuant to our 2006 Employee
Equity Incentive Plan, which was approved by our stockholders in April
2006. These options vested immediately as to 25% of the shares
underlying the option and were to vest in additional 25% increments on each of
the next three anniversaries of the date of grant. As of December 31,2007, these option awards were voluntarily cancelled by our
executives. Our executives determined that in light of our 2007
operating results, it was in the best interests of our Company and our
stockholders that such options be cancelled. We paid no additional
compensation to our executives in exchange for or as a result of the voluntary
cancellation of these options.
In August
2007, upon the resignation of our then Chief Executive Officer, the Committee
approved grants of stock options to Messrs. Morris and Martin in connection with
Mr. Morris’ appointment as Chief Administrative Officer and Mr. Martin’s
appointment as Chief Financial Officer.
For the
2008 stock option grants, on the recommendation of executive management, the
Compensation Committee determined that the vesting schedule of the stock options
be modified, such that no portion of the option vests on the date of
grant. Rather, the Committee believes that the stock option grants
will be more effective for the retention of key employees where the options vest
in one-third increments beginning on the first anniversary of the date of
grant. All outstanding stock options vest immediately upon a “change
in control” of our Company, as defined in the applicable stock option
agreements.
Generally,
our stock options terminate seven years after the date of grant. To
the extent that an option remains unexercised at the end of such seven-year
period, the employee’s right to purchase shares pursuant to the option
terminates. In addition, an option will terminate upon the occurrence
of certain other events. Upon retirement, stock options terminate
five years after the date of retirement. If an employee is terminated
without cause, terminates his employment voluntarily or if employment is
terminated as a result of disability, options terminate 90 days after the date
of termination of employment. In the event of the death of an
employee (or if an employee dies during a period in which an option remains
exercisable following a termination as described above), options remain
exercisable for a period of one year following the employee’s
death. If employment is terminated for any other reason, options
terminate immediately.
We do not
back-date stock options or grant stock options or other equity awards
retroactively. All options are granted with an exercise price equal
to the closing price of our common stock on The Nasdaq Global Select Market on
the date of grant. In addition, we do not purposely schedule the
grant of equity-based incentive awards prior to the disclosure of favorable
information or after the announcement of unfavorable information. In
general, the Compensation Committee makes all equity-based incentive awards
during its January meeting and limits mid-year grants to newly-hired or promoted
employees.
Restricted Stock and Restricted
Stock Units. The granting of restricted stock or restricted
stock units is specifically targeted toward the retention of our executives and
key employees. Our long-term equity-based incentives have enabled us
to attract and retain key employees by encouraging their ownership in our common
stock. The award of restricted stock or restricted stock units is
also designed to assist executives in satisfying our Company’s ownership
guidelines with respect to our common stock.
Restricted
stock units awarded to our executives in 2007 are subject to forfeiture until
the third anniversary of the January 2007 award date. The restricted
stock units awarded to Mr. Rooney in 2007 were forfeited in connection with his
resignation in August 2007.
24
For 2008,
restricted stock awarded to our executive officers and all key employees
contains both a performance restriction and a service
restriction. The performance restriction requires the achievement of
a consolidated net income target during the performance period of January 1,2008 through December 31, 2008, adjusted in accordance with the Management
Annual Incentive Plan as discussed above. If 100% of the
restricted stock performance target is not achieved, a lesser amount of
restricted stock will be awarded based on a straight-line sliding scale, so long
as we achieve at least 75% of the performance goal. The sliding scale
is set such that the achievement of 75% of the performance goal will equal a
reduction of the award by 50% and the failure to achieve 75% of performance goal
will result in a forfeiture of the entire award.
In
general, the service restrictions on restricted stock and restricted stock unit
awards lapse on the third anniversary of the date of award, unless the recipient
is not an employee of our Company or any subsidiary on such date, and the awards
remain subject to forfeiture until such time. The service
restrictions will, however, lapse prior to such date immediately upon the
occurrence of the recipient’s death, attainment of age 65, termination of
employment as a result of disability or upon a change in control of our
Company. In addition, if we terminate a recipient’s employment
without cause, the restriction will lapse as to a percentage of the award
determined by dividing the number of whole months of the recipient’s employment
beginning on the date that is 18 months after the date of grant by
36. If a recipient is terminated for cause or voluntarily terminates
his employment prior to the third anniversary of the date of award, the award is
forfeited.
Each of
the restricted stock or restricted stock unit awards is 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 2006 Executive
Performance Plan.
Cash-Based
Incentives. Long-term cash incentives are provided to certain
of our executive officers (excluding Mr. Woods) under our 2006 Executive
Performance Plan based on the level of achievement of financial and other
pre-established performance criteria over a three-year performance
period. The Committee determines the participants in the 2006
Executive Performance Plan based on an executive’s level of responsibility and
duties. For these executive officers, the Committee establishes a
three-year performance period and determines certain performance targets for
threshold, target and maximum incentive cash payments. For each
three-year period, the target cash incentive award is set at 15% of the total
dollar value of the long-term incentive compensation established for each
participating executive officer. One hundred percent of the target
cash award for each executive officer is paid when we meet 100% of our
three-year performance target. A threshold payment equal to one-half
of the target cash award for each executive officer is paid when we meet at
least 75% of our three-year performance target, and a maximum award of two times
the target award is paid when we are at least 25% over our three-year
performance target. The payment of a long-term cash incentive award
may be reduced by the Compensation Committee in its sole discretion, and the
granting of such awards is subject to the discretion of the Compensation
Committee.
The Committee believes these awards
focus the interests of our key executives on one or more of the key measures of
our financial success as determined by the Compensation Committee over the
longer term than the annual cash incentive payments. Those key
measures may include stock price, sales, return on equity, book value, expense
management, earnings per share, free cash flow, net income, individual
performance and business unit performance, as set forth in our 2006 Executive
Performance Plan.
25
For the three-year performance period
beginning in 2007 and ending in 2009, the Compensation Committee established a
target cash incentive payout of $322,188 for Mr. Rooney, $176,042 for Mr.
Vossman and $100,521 for Mr. Morris. Mr. Rooney forfeited his
opportunity to earn the long-term cash incentive award when he resigned in
August 2007. Messrs. Martin and Buehler were not designated as
participants in the 2006 Executive Performance Plan for the 2007 – 2009
period.
For the
three-year performance period beginning in 2008 and ending in 2010, our
Compensation Committee designated Messrs. Vossman, Morris and Martin as
participants in the 2006 Executive Performance Plan. The Committee
set a target cash incentive payout of $145,833 for Mr. Vossman, $114,583 for Mr.
Morris and $104,167 for Mr. Martin. Mr. Buehler was not designated as
a participant in the 2006 Executive Performance Plan for the 2008 – 2010
period.
As discussed above, J. Joseph
Burgess was appointed as our new President and Chief Executive Officer,
effective as of April 14, 2008. We have entered into a letter
agreement with Mr. Burgess that provides for: (i) an annual base salary in the
amount of $500,000; (ii) an annual incentive bonus target of 100% of his annual
base salary (where the actual award may be lesser or greater than the target
amount, up to a maximum of two times the target amount), subject to the
achievement of certain performance goals by our Company and by Mr. Burgess
individually; (iii) certain long-term incentive awards, including an option
to purchase our common stock, restricted stock and long-term performance cash,
having an aggregate nominal value of approximately $1,300,000; and (iv) a
one-time award of restricted stock, with a nominal value of approximately
$1,500,000.
The stock
options will vest in three equal installments beginning on the first anniversary
of the date of grant and will have an exercise price equal to the closing price
of our common stock on the Nasdaq Global Select Market on the date of
grant. The long-term incentive restricted stock award is subject to a
three-year cliff vesting and the achievement of a financial performance
goal by our Company in the 2008 fiscal year. The one-time restricted
stock award is subject to a five-year cliff vesting, but is not subject to any
performance restrictions. The grant of stock options and the awards
of restricted stock were made on April 14, 2008. These equity awards were
issued as "inducement grants" under the rules of the Nasdaq Global Select Market
and, as such, were not issued pursuant to our 2006 Employee Equity Incentive
Plan.
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 officers, but it
contains an exception for performance-based compensation that satisfies certain
conditions. Our 2006 Executive Performance Plan is intended to allow
us to pay performance-based compensation as defined in
Section 162(m). Under our 2006 Executive Performance Plan, our
Compensation Committee designates participants in various incentive programs for
each fiscal year or other period set by the 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 key financial measures as discussed
above. Performance goals may be determined based on any of the key
measures, individually or in combination, adjusted in the manner our
Compensation Committee determines in its sole discretion.
The payment of any incentive program
award under our 2006 Executive Performance 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 addition,
our Board may modify or terminate this plan at any time in its
discretion.
On October 24, 2007, our Board of
Directors adopted our Policy on Recoupment of Incentive
Compensation. This policy provides that if during any fiscal year
there occurs a material misstatement or omission of financial information in our
financial statements, our Board of Directors or our Compensation Committee may,
in its discretion, recoup or cancel all or part of the incentive compensation
provided to any executive officer or key employee. For the purposes
of the policy, incentive compensation includes any bonus, incentive payment,
equity award or other compensation, including the amount of any annual salary
increase or any gains realized on the exercise of stock options or sale of
shares of our common stock. In addition to the recoupment of
incentive compensation, our Board or Compensation Committee may take such other
actions as it deems necessary or appropriate to address the events that gave
rise to the material misstatement or omission and to prevent its
recurrence. Such actions may include, to the extent permitted by
applicable law:
·
adjusting
the future compensation of the executive officer or key
employee;
·
terminating
the employment of the executive officer or key employee;
and
·
pursuing
other legal remedies against the executive officer or key
employee.
Each
executive officer or key employee that receives incentive compensation pursuant
to any of our incentive compensation plans is required to acknowledge in writing
such executive officer’s or key employee’s agreement with the policy and
understanding that any incentive compensation made to such executive officer or
key employee is conditioned upon and subject to the policy.
We have a policy with respect to the
required stock ownership levels of certain highly-compensated key employees,
including our Named Officers (other than Mr. Woods, while an interim executive
officer), that was adopted by our Board of Directors on July 25, 2006 and
amended and restated on January 23, 2008. Pursuant to the policy,
each of our current Named Officers is required to beneficially own, by no later
than the third anniversary of the date he became subject to the policy, at least
the number of shares of our common stock that is equal to his base salary on the
date he became subject to the policy divided by the average of the closing price
of our common stock for the 10 trading days prior to such date. The
required share ownership of each of our Named Officers is as
follows:
Mr. Woods is subject to our policy
requiring levels of stock ownership for our non-employee
directors. Pursuant to such policy, Mr. Woods is required to own
10,000 shares of our common stock no later than July 25, 2009. To
date Mr. Woods and each of the other Named Officers (excluding Mr. Rooney) are
in compliance with the stock ownership requirements of these
policies.
J. Joseph Burgess, our newly appointed
President and Chief Executive Officer, became subject to the ownership policy
for our key employees on April 14, 2008. Accordingly, he will be
required to own 33,355 shares of our common stock by April 14,2011. His required share ownership was calculated based on his
current base salary of $500,000 and an average closing price of our common stock
for the 10 trading days prior to April 14, 2008 of $14.99.
Standard Benefit
Package. We provide
standard Company-sponsored benefit plans to all of our employees, including the
Named Officers. Such benefits include Company-sponsored insurance,
retirement (defined contribution), severance benefits, 401(k) matching
contributions, short-term disability insurance in the amount of 100% of each
employee’s base salary at the time of disability for disabilities lasting for up
to 90 days and long-term disability insurance in the amount of 60% of each
employee’s base salary at the time of disability for disabilities lasting longer
than 90 days from the time of the disability until the age of 65. The
long-term disability benefits are capped at $12,500 per month. We
also provide life insurance benefits in the amount of two times salary, up to
$500,000, for all of our employees (except our Chief Executive Officer who has
$1.0 million in life insurance benefits). In addition, in order to
provide a competitively attractive package to secure and retain executive
officers, we supplement the standard benefit packages offered to all employees
with appropriate executive benefits, as listed below. The executive
officers’ benefits package are designed to assist the executive officers in
providing for their own financial security in a manner that recognizes
individual needs and preferences.
Supplemental Benefits for Certain
Executives.
Deferred Compensation
Plan. Executive officers may choose to defer up to specified
maximum amounts of compensation by contributing those amounts to our
nonqualified deferred compensation plan for key employees. This plan
allows for base salary deferral of up to 15% of base salary, and bonus deferral
of up to 50% of bonus amounts. Under the plan, we will match
contributions equal to the first 3% of compensation at a 100% rate, and
contributions equal to the next 2% of compensation at a 50% rate, when
aggregated with any matching contributions made under our 401(k) Profit Sharing
Plan (Company-matching contributions were limited to a maximum aggregate of
$9,000 per employee for 2007). Contributions in the nonqualified
deferred compensation plan are adjusted to match the performance of
participant-selected indices, which mirror fund choices available under our
401(k) Profit Sharing Plan.
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 are at all times 100% vested in
their deferrals, Company-matching contributions and investment
earnings. Participants generally will be paid their account balances
after termination of their employment with our Company or on such other
distribution date as they may elect. For a key employee participant,
however, no payments may be made from his or her account balance until the date
that is six months following the date of termination of such key employee’s
employment. Accordingly, no payment from Mr. Rooney’s account balance
will be made prior to March 31, 2008.
During
2007, Messrs. Rooney, Martin and Morris deferred $192,620, $6,500 and $18,000 of
their compensation, respectively, under our nonqualified deferred compensation
plan. The amount for Mr. Martin does not include $1,160 in
Company-matching contributions that we contributed to Mr. Martin’s account under
the plan during 2007. No Company-matching contributions were made to
Messrs. Rooney and Morris under the nonqualified deferred compensation plan
during 2007.
Other
Benefits. In 2007, each of our executive officers received a
car allowance of $900 per month. For 2008, our Compensation
Committee, on the recommendation of executive management, determined to no
longer provide a car allowance to our executive officers. We provide
to each of our executive officers a cellular phone with e-mail
capabilities.
The
responsibilities of the Compensation Committee are provided in its charter,
which has been approved by our Board of Directors.
In
fulfilling its oversight responsibilities with respect to the Compensation
Discussion and Analysis included in this Report, the Compensation Committee,
among other things, has:
·
reviewed
and discussed the Compensation Discussion and Analysis with management,
and
·
in
reliance on such review and discussions, approved the inclusion of such
Compensation
Discussion
and Analysis in this Proxy
Statement.
SUBMITTED
BY THE COMPENSATION COMMITTEE
Juanita
H. Hinshaw, Chair Stephanie A. Cuskley
John
P. Dubinsky
Notwithstanding
anything set forth in any of our previous filings under the Securities Act of
1933 or the
Securities
Exchange Act of 1934 that might incorporate future filings, including this Proxy
Statement, in
whole
or in part, the preceding report shall not be deemed incorporated by reference
in any such filings.
The following table sets forth
information concerning compensation earned for the fiscal years ended December31, 2007 and 2006, if applicable, for all persons who served as our principal
executive officer or principal financial officer during 2007 and the three other
most highly compensated executive officers of our Company (collectively, the
“Named Officers”):
Name
and Principal
Position
Year
Salary
($)(1)
Stock
Awards
($)(2)
Option
Awards
($)(3)
Non-Equity
Incentive
Plan
Compensation
($)(4)
All
Other
Compensation
($)(5)
Total
($)
Alfred
L. Woods(6)
Chairman of the
Board
and Interim
Chief
Executive Officer
2007
–
$138,944(7)
–
–
$ 46,000(8)
$
184,944
Thomas
S. Rooney, Jr.
(9)
Former
President and
Chief Executive
Officer
2007
2006
$404,337
630,000
257,803
385,921
$ 310,835
1,087,050
–
$264,000
1,015,133
31,567
1,526,997
2,398,538
David
A. Martin
Vice
President and
Chief
Financial
Officer
2007
2006
267,025
178,075
28,123
–
237,764
42,305
–
65,000
18,695
19,817
551,607
305,197
Thomas
E. Vossman
Senior
Vice President
and
Chief Operating
Officer
2007
2006
370,001
310,000
131,875
48,981
251,031
247,648
–
70,000
20,475
20,620
773,382
697,249
David
F. Morris
Senior
Vice President,
General
Counsel and
Chief
Administrative
Officer
2007
2006
306,597
240,000
82,970
30,960
201,866
141,671
–
72,000
20,691
22,679
612,124
507,310
Alexander
J. Buehler
Vice
President –
Marketing
and
Technology
2007
2006
214,846
195,000
78,076
–
45,338
–
–
34,000
15,704
11,439
353,964
240,439
(1)
Includes
amounts earned but deferred at the election of the executive officer under
our nonqualified deferred compensation
plan.
(2)
Represents
the dollar amount recognized for financial statement reporting purposes in
accordance with FAS 123(R) with respect to deferred stock units, in the
case of Mr. Woods, and restricted stock and restricted stock units for the
other Named Officers. Please refer to Note 8, “Equity-Based
Compensation,” in the Notes to Consolidated Financial Statements contained
in our Annual Report on Form 10-K, filed on March 10, 2008, for a
discussion regarding the valuation of our stock
awards.
(3)
Represents
the dollar amount recognized for financial statement reporting purposes in
accordance with FAS 123(R) with respect to options to purchase shares of
our common stock, before reflecting forfeitures, awarded to Named Officers
(other than Mr. Woods). The amounts recognized include expenses
for 25% of each of the option grants to our Named Officers on January 11,2007 that were immediately vested on the date of grant, which options were
voluntarily cancelled as of December 31, 2007, as well as the expense
associated with a portion of options granted in 2005 and
2006. Please refer to Note 8, “Equity-Based Compensation,” in
the Notes to Consolidated Financial Statements contained in our Annual
Report on Form 10-K, filed on March 10, 2008, for a discussion regarding
the valuation of our option awards.
(4)
Represents
bonuses awarded under our 2006 Management Annual Incentive
Plan.
(5)
Represents
the following amounts paid or accrued in 2007: Mr. Rooney,
$789,548 in severance payments made pursuant to that certain Executive
Separation and Release Agreement effective as of August 13, 2007, $8,829
in employer-matching contributions under our 401(k) Profit Sharing Plan,
$600 in term life insurance premiums, a $6,300 car allowance and $3,725 in
club membership dues and related fees; Mr. Martin, $7,840 in
employer-matching contributions under our 401(k) Profit Sharing Plan and
nonqualified deferred compensation plan, $55 in term life insurance
premiums and a $10,800 car allowance; Mr. Vossman, $9,000 in
employer-matching contributions under our 401(k) Profit Sharing Plan, $675
in term life insurance premiums and a $10,800 car
allowance; Mr. Morris, $9,000 in employer-matching
contributions under our 401(k) Profit Sharing Plan, $891 in term life
insurance premiums and a $10,800 car allowance; and Mr.
Buehler, $4,501 in employee-matching contributions under our 401(k) Profit
Sharing Plan, $403 in term life insurance premiums and a $10,800 car
allowance.
30
(6)
Mr.
Woods served as our Interim Chief Executive Officer from August 13, 2007
through April 14, 2008. Mr. Woods did not receive a salary for
his service as Interim Chief Executive Officer in 2007; rather he received
compensation in the form of deferred stock
units.
(7)
Includes
the award of 6,400 deferred stock units on April 25, 2007 in connection
with Mr. Woods’ service as the Chairman of our Board of
Directors.
(8)
The
amount shown consists of fees paid to Mr. Woods in connection with his
service on our Board of Directors. For more information
regarding the director fees paid to Mr. Woods for 2007, please refer to
“Additional Information About Director Compensation” in this Proxy
Statement.
(9)
Mr.
Rooney resigned as President and Chief Executive Officer on August 13,2007. Mr. Rooney's resignation caused the reversal by the Company of
$461,111 in compensation expense in
2007.
The
following table sets forth information concerning grants of plan-based awards
earned for the fiscal year ended December 31, 2007 for the Named
Officers:
Name
Grant
Date
Estimated
Future Payouts Under Non-
Equity Incentive Plan
Awards(1)
Estimated
Future Payouts Under
Equity Incentive Plan
Awards
All
Other
Stock
Awards: Number
of
Shares
of Stock or
Units
(#)
All
Other
Option
Awards: Number of Securities Underlying Options
(#)(3)
Exercise
or
Base Price of Option Awards ($/Sh)
Grant
Date
Fair Value of
Stock
and Option
Awards
($)(4)
Threshold
($)
Target
($)
Maximum
($)
Threshold
(#)
Target
(#)(2)
Maximum
(#)
Alfred
L. Woods
4/25/2007
—
—
—
—
—
—
6,400(5)
—
—
$
138,944
8/23/2007
—
—
—
—
—
—
33,291(6)
—
—
524,999
Thomas
S. Rooney, Jr.
1/11/2007
$161,094
$322,188
$644,375
—
—
—
—
—
—
—
1/11/2007
—
—
—
—
17,404
—
—
—
—
445,542
1/11/2007
—
—
—
—
—
—
—
113,343
$25.60
1,243,373
David
A. Martin
1/11/2007
—
—
—
—
1,500
—
—
—
—
38,400
8/23/2007
—
—
—
—
8,340
—
—
—
—
131,522
8/23/2007
—
—
—
—
—
—
—
53,106
15.77
370,871
Thomas
E. Vossman
1/11/2007
88,021
176,042
352,083
—
—
—
—
—
—
—
1/11/2007
—
—
—
—
9,510
—
—
—
—
243,456
David
F. Morris
1/11/2007
50,260
100,521
201,042
—
—
—
—
—
—
—
1/11/2007
—
—
—
—
5,430
—
—
—
—
139,008
8/23/2007
—
—
—
—
2,661
—
—
—
—
41,964
8/23/2007
—
—
—
—
—
—
—
14,451
15.77
100,920
Alexander
J. Buehler
1/11/2007
—
—
—
—
3,622
—
—
—
—
92,723
(1)
Represents
estimated future payouts under our Long-Term Incentive Plan for the 2007
– 2009 performance period. The target amount is
earned if performance targets are achieved. Any awards earned
under our Long-Term Incentive Plan for the 2007 – 2009 performance period
would be paid in 2010.
(2)
Represents
the number of restricted stock units awarded in 2007. These
restricted stock units (including the restricted stock units awarded to
Messrs. Martin and Morris on August 23, 2007) will fully vest on January11, 2010, provided that employment continues through such
date.
(3)
Does
not include grants of stock options to Messrs. Martin, Vossman, Morris and
Buehler on January 11, 2007 that were voluntarily cancelled by such Named
Officers as of December 31, 2007. See “Narrative for Summary
Compensation Table and Grants of Plan-Based Awards Table” below for more
information about the cancelled
options.
(4)
Represents
the grant date fair value of $25.60 per share for the restricted stock
unit awards to the Named Officers and $10.97 per share for the stock
option grant to Mr. Rooney on January 11, 2007 and $15.77 per share for
the restricted stock unit awards and $6.98 per share for the stock option
grants on August 23, 2007 to Messrs. Martin and Morris on August 23, 2007,
each computed in accordance with FAS 123(R). Please refer to
Note 8, “Equity-Based Compensation,” in the Notes to Consolidated
Financial Statements contained in our Annual Report on Form 10-K, filed on
March 10, 2008, for a discussion regarding the valuation of our stock and
option awards.
(5)
Mr.
Woods was awarded 6,400 deferred stock units in April 2007 as director
compensation.
(6)
Mr.
Woods was awarded 33,291 deferred stock units in August 2007 in connection
with his service as Interim Chief Executive Officer. These
deferred stock units vested on April 14, 2008, upon the appointment of our
new President and Chief Executive
Officer.
On August 13, 2007, Thomas S. Rooney,
Jr. resigned as President and Chief Executive Officer of our Company, and Alfred
L. Woods, the Chairman of our Board of Directors, was named Interim Chief
Executive Officer. Mr. Woods served as our Interim Chief Executive
Officer through April 14, 2008, at which time J. Joseph Burgess was appointed
our new President and Chief Executive Officer. Also in connection
with Mr. Rooney’s resignation, David A. Martin was promoted to Vice President
and Chief Financial Officer and David F. Morris was named Chief Administrative
Officer in addition to his duties as Senior Vice President, General Counsel and
Secretary. At such time, Mr. Martin and Mr. Morris each received an
increase in base salary. The amounts shown in the “Salary” column of
the Summary Compensation Table for Messrs. Martin and Woods reflect the
increased base salaries beginning as of August 13, 2007.
The dollar amounts of “Stock Awards”
shown in the Summary Compensation Table represent the amounts recognized by our
Company for financial statement reporting purposes in 2007 as
follows: (i) deferred stock units awarded to Mr. Woods in connection
with his service on our Board of Directors in the amount of 6,400 deferred stock
units on April 25, 2007 ($138,944); and (ii) shares of restricted stock and
restricted stock units awarded to the other Named Officers as
follows: Mr. Rooney, 26,000 shares of restricted stock on October 27,2004 ($116,616), 4,182 deferred stock units on January 4, 2005 ($28,557), 14,000
shares of restricted stock on May 5, 2005 ($40,522), 18,700 shares of restricted
stock on January 5, 2006 ($72,108) and 17,404 restricted stock units on January11, 2007 ($0); Mr. Martin, 1,500 restricted stock units on January 11, 2007
($12,416) and 8,340 restricted stock units on August 23, 2007 ($15,707); Mr.
Vossman, 4,000 shares of restricted stock on May 5, 2005 ($19,499), 5,200 shares
of restricted stock on January 5, 2006 ($33,579) and 9,510 restricted stock
units on January 11, 2007 ($78,797); Mr. Morris, 2,000 shares of restricted
stock on May 5, 2005 ($9,742), 3,600 shares of restricted stock on January 5,2006 ($23,234), 5,430 restricted stock units on January 11, 2007 ($44,979) and
2,661 restricted stock units on August 23, 2007 ($5,015); and Mr. Buehler, 3,900
shares of restricted stock on May 5, 2005 ($19,016), 4,500 shares of restricted
stock on January 5, 2006 ($29,057) and 3,622 restricted stock units on January11, 2007 ($30,003).
The dollar amounts of “Option Awards”
shown in the Summary Compensation Table represent the amounts recognized by our
Company for financial statement reporting purposes in 2007 as
follows: Mr. Rooney, 104,000 options on October 27, 2004 ($-215,378),
95,000 options on May 5, 2005 ($-61,516), 112,000 options on January 5, 2006
($-184,218) and 113,343 options on January 11, 2007 ($310,835); Mr.
Martin, 4,500 options on May 5, 2005 ($3,851), 4,000 options on January 5, 2006
($6,878), 4,000 options on January 11, 2007 ($10,970) and 53,106 options on
August 23, 2007 ($216,066); Mr. Vossman, 26,000 options on May 5,2005 ($22,235), 34,300 options on January 5, 2006 ($58,959) and 61,930 options
on January 11, 2007 ($169,838); Mr. Morris, 13,500 options on May 5,2005 ($11,545), 20,100 options on January 5, 2006 ($34,544), 35,362 options on
January 11, 2007 ($96,975) and 14,451 options on August 23, 2007
($58,802); and Mr. Buehler, 1,500 options on July 29, 2004 ($745),
5,800 options on May 5, 2005 ($4,958), 9,700 options on January 5, 2006
($16,675) and 8,372 options on January 11, 2007 ($22,960).
On
January 11, 2007, the executive officers and certain key employees of the
Company were granted stock options under the Company’s 2006 Employee Equity
Incentive Plan. In light of the Company’s performance in 2007, the
executive officers and certain key employees determined to voluntarily cancel
such stock options. The following grants of stock options to Named
Officers on January 11, 2007 were deemed cancelled as of December 31,2007: Mr. Martin, 4,000 options; Mr. Vossman, 61,930 options; Mr.
Morris, 35,362 options; and Mr. Buehler, 8,372 options. The dollar
amounts shown for each of such option grants represents the expense required to
be recorded by the Company in connection with the 25% of each option grant that
vested immediately on the date of grant.
The
Summary Compensation Table reflects certain bonuses paid to Named Officers under
the Company’s 2006 Management Annual Incentive Plan. For 2007,
however, our results were such that no bonus awards were paid to the Named
Officers under the 2007 Management Annual Incentive Plan.
The
following table sets forth information concerning outstanding equity awards, as
of the fiscal year ended December 31, 2007, held by the Named
Officers:
Option
Awards
Stock
Awards
Name(1)
Number
of
Securities
Underlying Unexercised
Options
(#)
Exercisable
Number
of
Securities
Underlying Unexercised
Options
(#)
Unexercisable
Equity
Incentive
Plan
Awards:
Number
of Securities Underlying Unexercised Unearned
Options
(#)
Option
Exercise
Price
($)
Option
Expiration
Date
Number
of
Shares
or
Units
of
Stock
that
Have
Not
Vested
(#)(2)
Market
Value
of
Shares
or
Units
of
Stock
that
Have
Not
Vested
($)(3)
Equity
Incentive
Plan
Awards:
Number of Unearned Shares,
Units,
or
Other
Rights
that Have Not Vested
(#)
Equity
Incentive
Plan
Awards:
Market
or
Payout
Value
of Unearned
Shares,
Units,
or
Other
Rights
that
Have
Not
Vested
($)
Alfred
L. Woods
15,000
—
—
$13.81
12/18/08
—
—
—
—
7,500
—
—
28.94
2/17/10
—
—
—
—
7,500
—
—
29.06
3/19/11
—
—
—
—
7,500
—
—
23.85
6/03/12
—
—
—
—
—
—
—
—
—
33,291
$492,707
—
—
David
A. Martin
2,750
—
—
29.06
3/19/11
—
—
—
—
4,353
—
—
23.92
2/25/12
—
—
—
—
2,750
—
—
12.50
3/7/10
—
—
—
—
3,750
—
—
16.26(4)
5/25/11
—
—
—
—
1,250
—
—
15.50
5/25/11
—
—
—
—
3,375
1,125
—
14.65
5/5/12
—
—
—
—
2,000
2,000
—
19.41
1/5/13
—
—
—
—
13,276
39,829
15.77
1/11/14
—
—
—
—
—
—
—
—
—
9,840
145,632
—
—
Thomas
E. Vossman
19,500
6,500
—
14.65
5/5/12
—
—
—
—
17,150
17,150
—
19.41
1/5/13
—
—
—
—
—
—
—
—
—
18,710
276,908
—
—
David
F. Morris
10,125
3,375
—
14.65
5/5/12
—
—
—
—
10,050
10,050
—
19.41
1/5/13
—
—
—
—
3,613
10,838
15.77
1/11/14
—
—
—
—
—
—
—
—
—
13,691
202,627
—
—
Alexander
J. Buehler
4,350
1,450
—
14.65
5/05/12
—
—
—
—
4,850
4,850
—
19.41
1/5/13
—
—
—
—
—
—
—
—
—
12,022
177,926
(1)
No
stock options or other stock-based awards were outstanding for Thomas S.
Rooney, Jr. as of December 31, 2007. Does not include
grants of stock options to Messrs. Martin, Vossman, Morris and Buehler on
January 11, 2007, in the amounts of 4,000, 61,930, 35,362 and 8,372
shares, respectively, that were voluntarily cancelled by such Named
Officers as of December 31, 2007.
(2)
Represents
the number of shares of deferred stock units, restricted stock or
restricted stock units, awarded as follows: Mr. Woods, 33,291
deferred stock units on August 23, 2007; Mr. Martin, 1,500 restricted
stock units on January 11, 2007 and 8,340 restricted stock units on August23, 2007; Mr. Vossman, 4,000 shares of restricted stock on May5, 2005, 5,200 shares of restricted stock on January 5, 2006 and 9,510
restricted stock units on January 11, 2007; Mr. Morris, 2,000 shares of
restricted stock on May 5, 2005, 3,600 shares of restricted stock on
January 5, 2006, 5,430 restricted stock units on January 11, 2007 and
2,661 restricted stock units on August 23, 2007; and Mr. Buehler, 3,900
shares of restricted stock on May 5, 2005, 4,500 shares of restricted
stock on January 5, 2006 and 3,622 restricted stock units on January 11,2007. The shares of restricted stock and restricted stock units
will fully vest on the third anniversary of the date of award, except that
the awards of restricted stock units to Mr. Morris and Mr. Martin on
August 23, 2007 shall vest on January 11, 2010; provided, however, that in
each case employment continues through such
date.
(3)
Represents
the value of shares of restricted stock and restricted stock units
calculated on the basis of the closing price of our common stock on The
Nasdaq Global Select Market on December 31, 2007 ($14.80 per
share).
33
(4)
Effective
December 29, 2006, the exercise price with respect to 3,750 options
granted to Mr. Martin on May 25, 2004 was increased from $15.50 to $16.26
in order to avoid a 20% excise tax at exercise of the options under
Section 409A of the Internal Revenue Code of 1986, as
amended.
The
following table sets forth information concerning contributions, earnings and
balances under our nonqualified deferred contribution plan for the Named
Officers:
Name
Executive
Contribution
in
Last
FY
($)(1)
Registrant
Contributions
in
Last
FY
($)(1)
Aggregate
Earnings in
Last
FY
($)(2)
Aggregate
Withdrawals/
Distributions
($)
Aggregate
Balance
at
Last FYE
($)
Thomas
S. Rooney, Jr.
$192,620
—
$11,849
—
$743,026
David
A. Martin
6,500
$1,160
1,114
—
16,549
David
F. Morris
18,000
—
2,207
—
31,177
(1)
Named
Officer and registrant contributions also are reported in the “Salary” and
“Other Compensation” columns, respectively, of the Summary Compensation
Table.
(2)
Amounts
credited do not constitute above-market
earnings.
Executive
officers may choose to defer up to specified maximum amounts of compensation by
contributing those amounts to our nonqualified deferred compensation plan for
key employees. This plan allows for base salary deferral of up to 15%
of base salary, and bonus deferral of up to 50% of bonus
amounts. Under the plan, we will match contributions equal to the
first 3% of compensation at a 100% rate, and contributions equal to the next 2%
of compensation at a 50% rate, when aggregated with any matching contributions
made under our 401(k) Profit Sharing Plan (Company-matching contributions were
limited to a maximum aggregate of $9,000 per employee for
2007). Contributions in the nonqualified deferred compensation plan
are adjusted to match the performance of participant-selected indices, which
mirror fund choices available under our 401(k) Profit Sharing Plan.
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 are at all times 100% vested in
their deferrals, Company-matching contributions and investment
earnings. Participants generally will be paid their account balances
after termination of their employment with our Company or on such other
distribution date as they may elect. For a key employee participant,
however, no payments may be made from his or her account balance until the date
that is six months following the date of termination of such key employee’s
employment. Accordingly, no payment from Mr. Rooney’s account balance
will be made prior to March 31, 2008.
During
2007, Messrs. Rooney, Martin and Morris deferred $192,620, $6,500 and $18,000 of
their compensation, respectively, under our nonqualified deferred compensation
plan. The amount for Mr. Martin does not include $1,160 in
Company-matching contributions that we contributed to Mr. Martin’s account under
the plan during 2007. No Company-matching contributions were made to
Messrs. Rooney and Morris under the nonqualified deferred compensation plan
during 2007.
In connection with his resignation, Mr.
Rooney entered into an Executive Separation and Release Agreement with the
Company, effective as of August 13, 2007 (the “Separation
Agreement”). Pursuant to the Separation Agreement, Mr. Rooney is
entitled to receive an aggregate severance payment in the amount of $1,015,133
(the “Severance Payment”) in exchange for certain representations and covenants,
including covenants of confidentiality, non-solicitation and non-competition, as
well as a full release of the Company from all claims.
34
Under the Separation Agreement, the
Severance Payment will be paid as follows: (i) a lump-sum payment of
$676,755 was made on August 20, 2007, and (ii) additional payments in the
aggregate amount of $338,378 payable in equal monthly installments over twelve
months beginning in September 2007 and ending in August 2008. During
2007, Mr. Rooney received payments for the portion of the Severance Payment
equal to $789,548.
The Separation Agreement supersedes and
terminates all other prior agreements regarding severance between us and Mr.
Rooney. Other than as set forth in the Separation Agreement, we owe
no other payments for severance, termination or other benefits to Mr.
Rooney.
In 2007, we did not maintain a formal
policy regarding payments to executive officers pursuant to change of control,
severance or termination. Effective March 1, 2008, we adopted a
Severance Policy that would provide for severance payments to Named Officers at
the rate of twelve weeks of base salary, plus two additional weeks of base
salary for each full year of continuous service time with our Company; provided,
however, that the Named Officers would not receive less than twelve nor more
than 42 weeks of base salary. This Severance Policy would apply where
a Named Officer in good standing with our Company is involuntarily terminated
without cause, the Named Officer completed a minimum of six months continuous
service time and the termination was not due to a violation of our Code of
Conduct.
The award
agreements in connection with our stock option, restricted stock and restricted
stock unit awards granted to our key employees and the award agreements in
connection with the deferred stock unit awards made to Mr. Woods as compensation
for his service as Interim Chief Executive Officer provide that upon a change in
control of our Company, all outstanding unvested equity awards will immediately
vest. One of the change in control events designated under the award agreements
is the replacement of 50% or more of our current directors over a one-year
period, if the replacement were not approved by a majority of our current
directors.
If such a change in control event would
have occurred as of December 31, 2007, the amount of compensation that would
have been recognized by our Company for unvested awards of our Named Officers
(excluding Mr. Rooney) as of such date would have been:
Named
Officer
Amount
Recognized
for
Stock
Option
Awards
($)
Amount
Recognized
for
Restricted
Stock
or
Restricted
Stock
Unit
Awards
($)
Amount
Recognized
for
Deferred
Stock
Unit
Awards
($)
Alfred
L. Woods
–
–
$
524,999
David
A. Martin
$158,486
$141,799
–
Thomas
E. Vossman
29,130
205,526
–
David
F. Morris
58,851
157,989
–
Alexander
J. Buehler
7,939
98,825
–
TOTAL
$254,406
$604,139
$524,999
35
The
employment letter between our Company and J. Joseph Burgess dated
April 4, 2008 provides for certain severance benefits in connection with certain
termination events. If during the first 24 months of his employment
Mr. Burgess (i) is terminated by the Company for reasons other than “Cause” (as
defined in the employment letter), or (ii) following a “Change in Control” (as
defined in the employment letter), terminates his employment with the Company
for “Good Reason” (as defined in the employment letter), he shall receive a
severance payment equal to 24 months of his current base salary and 24 months of
the monthly cost of medical and dental insurance that was provided by the
Company at such time. Any such severance payments owed after the
first 12 months of employment but prior to the end of the initial 24-month
period shall be reduced by any amount that Mr. Burgess receives as compensation
from a successor employer. If Mr. Burgess’ employment is terminated
by the Company for reasons other than “Cause” after the initial 24-month period,
the severance payment would be reduced to 12 months of his current base salary
and 12 months of the monthly cost of medical and dental insurance that was
provided by the Company at such time. A severance payment would be
made in either 24 or 12 equal monthly installments, depending on the period in
which the termination occurs.
Any
severance payments made pursuant to Mr. Burgess’ employment letter are
conditioned upon certain representations, warranties, covenants and agreements
to be made by Mr. Burgess, including, but not limited to, a release of all
claims and covenants of confidentiality, non-solicitation and
non-competition.
The
following table illustrates the potential payment and benefits to be received by
Mr. Burgess under the above-referenced termination events:
Involutary
Termination
without
Cause Following
Change
in Control
Volutary
Termination
for
Good Reason
Following
Change in
Control
Type
of Payment
First 24
Months(1)
After 24
Months
First 24
Months(1)
After
24
Months
Base
Salary(2)
$1,000,000
$500,000
$1,000,000
N/A
Medical
Insurance Cost(3)
12,914
6,457
12,914
N/A
Dental
Insurance Cost(4)
1,338
669
1,338
N/A
Long-Term
Performance Cash(5)
90,278
90,278
90,278
N/A
Stock
Options(6)
650,000
650,000
650,000
N/A
Restricted
Stock(7)
1,955,000
1,955,000
1,955,000
N/A
TOTAL
$3,709,530
$3,202,404
$3,709,530
N/A
____________________
(1)
Does
not include any amount by which the severance payment would be reduced for
compensation received from a successor employer, for any severance payment
owed due to a termination event occurring after the first 12 months of
employment and prior to the end of the initial 24-month
period.
(2)
Assumes
Mr. Burgess’ current base salary of
$500,000.
(3)
Based
on a current monthly medical insurance cost to the Company of
$538.08.
(4)
Based
on a current monthly dental insurance cost to the Company of
$55.77.
(5)
Assumes
a termination at the end of the twelfth full month of employment, where
the amount owed would be equal to one-third of the target long-term
performance cash award.
(6)
Represents
the nominal value of the option to purchase 52,784 shares of our common
stock granted to Mr. Burgess on April 14, 2008; assumes a termination as
of April 14, 2008, the date of
grant.
(7)
Represents
the aggregate nominal value of the 155,876 shares of restricted stock
granted to Mr. Burgess on April 14, 2008; assumes a termination as of
April 14, 2008, the date of the
awards.
Directors
and executive officers as a group (12 persons) . . . . . . . . . . .
. . .
845,324(22)
3.09%
__________
(1)
Except
as otherwise indicated, as of April 14, 2008, 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 April14, 2008, 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 April 14,2008. A director would only receive shares of common stock in
connection with deferred stock units within 60 days after April 14,2008 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.
37
(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 13,2008. T. Rowe Price Associates, Inc. has sole voting power with
respect to 1,049,500 shares of our common stock, sole dispositive power
with respect to 3,573,650 shares of our common stock and no shared voting
or dispositive power. T. Rowe Price Small-Cap Value Fund, Inc.
has sole voting power with respect to 1,675,000 shares, no shared voting
power and no sole or shared dispositive power. These securities
are owned by various individual and institutional investors for which T.
Rowe Price Associates, Inc. serves as investment adviser. 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 filed by Invesco,
Ltd. with the Securities and Exchange Commission on February 9, 2008, as
amended by the Schedule 13G/A filed on February 13, 2008, on behalf of the
following subsidiaries: PowerShares Capital Management LLC,
Invesco Asset Management Limited, Invesco Asset Management Ireland Limited
and Invesco National Trust Company (collectively, the
“Subsidiaries”). The information in the Schedule 13G indicates
that the Subsidiaries, each an investment adviser, beneficially own
3,128,760 shares and have sole voting and dispositive power with respect
to these shares as follows: PowerShares Capital Management LLC,
2,782,110 shares; Invesco Asset Management Limited, 293,900 shares;
Invesco Asset Management Ireland Limited, 48,000 shares; and Invesco
National Trust Company, 4,750 shares. The Subsidiaries
have no shared voting or dispositive
power.
(4)
The
information provided herein is based on a Schedule 13G filed jointly by
KBC Asset Management Ltd., KBC Group NV, KBC Asset Management NV and KBC
Bank NV (the “KBC Group”) with the Securities and Exchange Commission on
August 28, 2007. The KBC Group has shared voting and
dispositive power with respect to all 2,976,723 shares and no sole voting
or dispositive power.
(5)
The
information provided herein is based on a Schedule 13G/A filed by Pictet
Asset Management SA with the Securities and Exchange Commission on January11, 2008. The information in the Schedule 13G/A indicates that
Pictet Asset Management SA, is the beneficial owner of 2,012,300 shares
and has sole voting and dispositive power with respect to all of these
shares. For purposes of the reporting requirements of the
Securities Exchange Act of 1934, Pictet Asset Management SA is deemed to
be a beneficial owner of these securities; however, Pictet Asset
Management SA expressly disclaims that it is, in fact, the beneficial
owner of these securities, which are owned of record and beneficially by
three non-U.S. investment funds that are managed by Pictet Asset
Management SA.
(6)
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 13, 2008. The information in the
Schedule 13G indicates that Barrow, Hanley, Mewhinney & Strauss, Inc.,
an investment adviser, is the beneficial owner of 1,878,600 shares and has
sole voting power with respect to 844,500 of these shares, shared voting
power with respect to 1,034,100 of these shares and sole dispositive power
with respect to all 1,878,000 of these shares. The right to
receive or the power to direct the receipt of dividends from, or the
proceeds from the sale of, these shares is held by certain clients of
Barrow, Hanley, Mewhinney & Strauss, Inc., none of which has such
right or power with respect to five percent or more of these
shares.
(7)
The
information provided herein is based on a Schedule 13D/A filed jointly by
Water Asset Management, LLC, Matthew J. Diserio, Disque D. Deane, Jr., TRF
Master Fund (Cayman), LP and Water Investment Advisors (Cayman), Ltd.
(collectively, “TRF”) with the Securities and Exchange Commission on
January 25, 2008. The information in the Schedule 13D/A
indicates that TRF is the beneficial owner of 1,466,008 shares and has
shared voting and shared dispositive power with respect to all 1,466,008
shares.
(8)
The
information provided herein is based on a Schedule 13G filed by Barclays
Global Investors NA with the Securities and Exchange Commission on
February 5, 2008. The information in the Schedule 13G indicates
that Barclays Global Investors (Deutchland) AG, an investment adviser, is
the beneficial owner of 1,437,779 shares and has sole voting power with
respect to 1,065,564 of these shares and sole dispositive power with
respect to all 1,437,779 of these shares. The shares reported
are held by Barclays Global Investors NA in trust accounts for the
economic benefit of the beneficiaries of those accounts.
(9)
Represents
options to purchase 14,575 shares of stock and 28,856 shares of restricted
stock. Does not include the award of 3,622 restricted stock
units on January 11, 2007, which units shall vest on January 11, 2010,
provided employment continues through such
date.
(10)
Less
than one percent.
(11)
Represents
an option to purchase 52,784 shares of stock and 155,876 shares of
restricted stock.
(12)
Represents
15,000 shares of common stock, options to purchase 37,500 shares of stock
and 16,325 deferred stock units.
(13)
Represents
7,559 shares of common stock and 10,000 deferred stock
units.
38
(14)
Represents
10,152 shares of common stock, options to purchase 15,000 shares of stock
and 16,325 deferred stock units.
(15)
Represents
2,000 shares of common stock, options to purchase 22,500 shares of stock
and 16,325 deferred stock units.
(16)
Represents
1,595 shares of common stock, options to purchase 48,905 shares of stock
and 23,179 shares of restricted stock. Does not include the
award of 1,500 restricted stock units on January 11, 2007 and 8,340
restricted stock units on August 23, 2007, all of which units shall vest
on January 11, 2010, provided employment continues through such
date.
(17)
Represents
10,000 shares of common stock, options to purchase 35,801 shares of stock
and 33,097 shares of restricted stock. Does not include the
award of 5,430 restricted stock units on January 11, 2007 and 2,661
restricted stock units on August 23, 2007, all of which units shall vest
on January 11, 2010, provided employment continues through such
date.
(18)
Mr.
Rooney’s employment terminated on August 13, 2007; ownership represents
4,182 shares of common stock underlying deferred stock units that were
distributed on March 1, 2008.
(19)
Represents
options to purchase 51,725 shares of stock and 45,560 shares of restricted
stock. Does not include the award of 9,510 restricted stock
units on January 11, 2007, which units shall vest on January 11, 2010,
provided employment continues through such
date.
(20)
Represents
9,000 shares of common stock, options to purchase 31,500 shares of stock
and 16,325 deferred stock units.
(21)
Represents
2,500 shares of common stock, options to purchase 37,500 shares of stock
and 62,416 deferred stock units.
(22)
Includes
options to purchase 286,364 shares of stock, 134,127 shares of restricted
stock and 137,716 deferred stock
units.
Pursuant to its charter, our Audit
Committee is responsible for reviewing and approving all transactions of our
Company in which a related person has a direct or indirect material interest and
the amount involved exceeds $120,000. It is our policy that executive
management notify the Audit Committee of any transaction that may be deemed a
related-party transaction. Upon such a notification, the Audit
Committee will meet to review the terms of such a transaction and make any
necessary determinations.
We
maintain various policies and procedures relating to the review, approval or
ratification of transactions in which we, or any of our directors, officers or
employees, may have a direct or indirect material interest. Our Code
of Conduct, which may be found on our website at www.insituform.com
under Investors/Corporate Governance, prohibits our directors, officers and
employees from engaging in specified activities without prior approval of
management or our Board or Audit Committee, as
appropriate. Activities that may constitute a conflict of interest
with our Company and require prior approval include: (i) investing in or being
an officer or employee of one of our customers, suppliers, subcontractors or
competitors; (ii) having a substantial business interest in a company competing
with or doing business with our Company; (iii) receiving any benefit, either
direct or indirect, from the investment in or association with a company that
our Company may have otherwise received; and (iv) engaging in a transaction with
our Company personally or through an affiliate.
Additionally,
we require each of our directors and officers to complete a comprehensive
questionnaire each year that, among other things, identifies any transactions or
potential transactions with us in which the director or officer, or a family
member or associated entity, has any interest, financial or
otherwise. Our directors and officers are also required to update
their information if there are changes throughout the year.
We
believe that these policies and procedures ensure that all related-party
transactions are appropriately reviewed and, if required, disclosed pursuant to
the rules of the Securities and Exchange Commission.
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 2007 all filing
requirements applicable to our directors, officers and 10% stockholders under
Section 16(a) were satisfied.
Equity
Compensation Plan Information
The following table provides
information as of December 31, 2007 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(1)
(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
1,167,174
$20.70
1,946,503
Equity
compensation plans not approved by security holders
—
—
—
Total
1,167,174
$20.70
1,946,503
(1)
The
number of securities to be issued upon exercise of outstanding options,
warrants and rights includes 909,987 stock options, 47,789 restricted
stock units, 54,300 shares of restricted stock and 155,098 deferred stock
units outstanding at December 31,2007.
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, 2008. 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 31,2007. 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.
Consistent with its charter adopted by
our Board of Directors, the Audit Committee pre-approves all auditing services
and all 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 our independent auditors:
2007
2006
Audit
Fees
$857,745
$694,500
Audit-Related
Fees
12,000
15,000
Tax
Fees
—
104,851
All
Other Fees
—
—
Total
(1)
$869,745
$814,351
(1)
Does
not include $15,953 and $27,627 in administrative and out-of-pocket fees
paid for the years ended December 31, 2007 and 2006,
respectively.
Audit
Fees. We paid an aggregate of $857,745 to
PricewaterhouseCoopers LLP for the 2007 fiscal year audit, for the review of the
financial statements included in our 2007 quarterly reports on Form 10-Q, and
for statutory and subsidiary audits. In 2006, we paid an aggregate of
$694,500 to PricewaterhouseCoopers LLP for these services.
Audit-Related
Fees. In 2007, we paid PricewaterhouseCoopers LLP $12,000 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 assistance with various state
qualification forms. All of these services were pre-approved by our
Audit Committee. In 2006, we paid an aggregate of $15,000 to
PricewaterhouseCoopers LLP for these services.
Tax
Fees. In 2006, we paid PricewaterhouseCoopers LLP $104,851 for
tax services, which primarily consisted of services for tax planning and
consulting, exclusive of tax services rendered in connection with the
audit. Our Audit Committee pre-approved all of these
services. We did not engage PricewaterhouseCoopers LLP to provide
these services in 2007.
All Other
Fees. In 2007 and 2006, PricewaterhouseCoopers LLP did not
perform any services for us other than those described above.
41
We intend to use our independent
auditors to provide only audit, audit-related and tax services in the
future.
Ratification of the appointment of
PricewaterhouseCoopers LLP as our independent auditors for the year ending
December 31, 2008 will require the affirmative vote of a majority of the votes
entitled to vote 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
If any
other matters are properly presented for action at the 2008 Annual Meeting, it
is the intention of the persons named on the accompanying WHITE proxy card to
vote the shares represented thereby in accordance with their judgment on such
matters.
In
particular, on January 24, 2008, we received notice from TRF of its intention
to:
·
nominate
the following five (5) individuals to our Board: Alfonse M. D’Amato,
Disque D. Deane Jr., Matthew J. Diserio, Richard Onses and Nickolas W.
Vande Steeg; and
·
propose
an amendment to our Amended and Restated By-Laws to set the number of
directors on our Board at six.
As of
January 25, 2008, TRF and its affiliates were the beneficial owner of 1,466,008
shares, or 5.3%, of our common stock.
Currently,
our Amended and Restated By-Laws provide that our Board of Directors shall
consist of no less than six and no more than fifteen directors, with the exact
number of directors to be fixed from time to time pursuant to a resolution
adopted by a majority of the directors then serving. Our Board
believes it is in the best interests of our Company and our stockholders to
maintain an efficient means to allow it to increase or decrease the size of our
Board from time to time, within the limits of our Restated Certificate of
Incorporation. TRF’s proposal would fix the number of directors in
our Amended and Restated By-Laws at six directors. If this proposed
amendment to our Amended and Restated By-Laws is approved, then to change the
size of the Board, a majority of the directors or a majority of the shares
present and entitled to vote at a special or annual meeting would be required to
amend the Amended and Restated By-Laws thereafter.
If TRF
presents its proposals at the Annual Meeting, our Board will recommend against
our stockholders casting any votes for TRF’s director nominees and that
stockholders vote AGAINST the by-law amendment. Our Board strongly
urges you to vote FOR our Board’s director nominees by marking, signing, dating
and returning the enclosed WHITE proxy card only and not to sign or return any
blue proxy card provided by TRF.
In the
event that there are not sufficient votes for a quorum or to approve the items
of business at the time of the Annual Meeting, the Company reserves the right to
adjourn the Annual Meeting in order to permit the Company to solicit additional
proxies.
We will
bear all costs relating to our solicitation of proxies. We have
retained the services of Innisfree M&A Incorporated to solicit proxies for
the Annual Meeting for a fee not to exceed $350,000 and agreed to reimburse them
for certain expenses. Innisfree M&A Incorporated will employ
approximately 75 people for the solicitation. As discussed above
under the heading “Other Matters,” TRF indicated that it will nominate five
directors to stand for election at the Annual Meeting. As a result,
we have and will continue to incur substantial additional costs in connection
with the solicitation of proxies. Increased costs will include
increased fees of outside counsel and public relations advisors, increased
printing and mailing costs for additional solicitation materials, including the
reimbursement of reasonable expenses of banks, brokerage houses and other agents
incurred in forwarding solicitation materials to beneficial owners as described
above, and the costs of retaining an independent inspector of
election. We estimate that the aggregate cost (exclusive of
litigation, if any) to us for the solicitation of proxies will be approximately
$1,350,000, of which approximately $500,000 has been incurred to
date. The additional costs do not include the costs represented by
the regular salaries and wages of our employees and officers.
In some instances, only one copy of
this Proxy Statement or our 2007 Annual Report is being delivered to multiple
stockholders sharing an address, unless we have received instructions from one
or more of the stockholders to continue to deliver multiple
copies. We will deliver promptly upon oral or written request a
separate copy of the Proxy Statement or 2007 Annual Report, as applicable, to
any stockholder at your address. If you wish to receive a separate
copy of the Proxy Statement or 2007 Annual Report, you may call us at (636)
530-8000 or send a written request to Insituform Technologies, Inc., 17988
Edison Avenue, Chesterfield, Missouri63005, Attention:
Secretary. Alternatively, stockholders sharing an address who now
receive multiple copies of the Proxy Statement or Annual Report may request
delivery of a single copy also by calling us at the number or writing to us at
the address listed above.
Our
Amended and Restated 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 prior to the anniversary
date on which we first mailed our proxy materials for the preceding year’s
Annual Meeting of Stockholders (which for the 2009 Annual Meeting would be
December 22, 2008), 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 at
our principal executive office not less than 90 days nor more than 120 days
prior to the anniversary date of the preceding year’s Annual Meeting of
Stockholders (which for the 2009 Annual Meeting of Stockholders would
be February 18, 2009 and January 19, 2009, respectively).
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.
43
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
prior to the anniversary date on which we first mailed our proxy materials for
the preceding year’s Annual Meeting of Stockholders (which for the 2009 Annual
Meeting of Stockholders would be March 7, 2009).
Any
written notice of a stockholder proposal must include the information required
by our Amended and Restated By-Laws and, in the case of a notice of nomination
of directors, 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 2009
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:
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. Seven directors attended the 2007 Annual Meeting of
Stockholders.
INFORMATION
CONCERNING PARTICIPANTS IN INSITUFORM TECHNOLOGIES, INC.’S SOLICITATION OF
PROXIES
The
following tables (“Directors” and “Officers and Employees”) set forth the name,
principal business address and the present principal occupation or employment,
and the name, principal business and address of any corporation or other
organization in which their employment is carried on, of our directors and
executive officers who, under the rules of the Securities and Exchange
Commission, are considered to be “Participants” in our solicitation of proxies
from our stockholders in connection with our 2008 Annual Meeting of
Stockholders.
Directors
The principal occupations of our
directors who are considered “participants” in our solicitation are
set forth under the section above titled “Proposal 1: Election of Directors” of
this Proxy Statement. The name and business addresses of the
organization of employment of our directors are as follows:
The principal occupations of our
executive officers who are considered “participants” in our
solicitation of proxies are set forth below. The principal occupation
refers to such person’s position with our Company, and the business address is
Insituform Technologies, Inc., 17988 Edison Avenue, Chesterfield, Missouri63005.
Name
Principal
Occupation
J.
Joseph Burgess
President
and Chief Executive Officer
Thomas
E. Vossman
Senior
Vice President and Chief Operating Officer
David
F. Morris
Senior
Vice President, General Counsel, Chief Administrative Officer and
Secretary
David
A. Martin
Vice
President and Chief Financial Officer
Alexander
J. Buehler
Vice
President – Marketing and Technology
Daniel
E. Cowan
Vice
President – Strategic Business
Initiatives
A-1
Information
Regarding Ownership of the Company’s Securities by Participants
The shares of our common stock held as
of April 14, 2008 by the persons listed above under “Directors” and
“Officers and Employees” (other than Mr. Cowan) are set forth in the section
titled “Information Concerning Certain Stockholders” of this Proxy
Statement. Shares beneficially owned by Mr. Cowan are included in the
“Directors and executive officers as a group (12 persons)” line item under such
section. Mr. Cowan is the beneficial owner, as of April 14,2008, of 301 shares of our common stock, options to purchase 3,898 shares of
common stock and 13,245 shares of restricted stock. Mr. Cowan’s total
beneficial ownership does not include the award of 6,416 restricted stock units
on January 11, 2007, which units shall vest on January 11, 2010, provided his
employment continues through such date.
Information
Regarding Transactions in the Company’s Securities by Participants
The following table sets forth all
transactions that may be deemed purchases and sales of shares of our common
stock by the individuals who are considered “participants” since March1, 2006 and prior to April 21, 2008, the date the Proxy Statement was first
mailed. Except as described in this Proxy Statement, shares of our
common stock owned of record by each participant are also beneficially owned by
such participant. Unless otherwise indicated, all transactions were
in the public market and none of the purchase price or market value of those
shares is represented by funds borrowed or otherwise obtained for the purpose of
acquiring or holding such securities.
Awarded
in connection with annual director
compensation.
A-3
(2)
Acquired
upon exercise of stock option.
(3)
Awarded
in connection with service as Interim Chief Executive Officer, following
the resignation of the Company’s former President and Chief Executive
Officer, for the period from August 13, 2007 through February 12,2008.
(4)
Awarded
in connection with service as Interim Chief Executive Officer for the
period from February 13, 2008 through April 14, 2008. A portion
of the original award of 26,236 deferred stock units was forfeited since
Mr. Woods’ service as Interim Chief Executive Officer was completed on
April 14, 2008, prior to the end of the period of service contemplated in
connection with the original award.
(5)
Awarded
in connection with appointment as President and Chief Executive
Officer.
(6)
Annual
award of incentive compensation; option cancelled (including
any vested and unexercised portion of option) as of December 31,2007.
(7)
Annual
award of incentive compensation.
(8)
Awarded
in connection with appointment as Chief Administrative Officer following
the resignation of the Company’s former President and Chief Executive
Officer.
(9)
Awarded
in connection with appointment as Chief Financial Officer following the
resignation of the Company’s former President and Chief Executive
Officer.
Miscellaneous
Information Regarding Participants
Except as described in this Appendix A
or the Proxy Statement, to our knowledge, none of the participants (i)
beneficially owns (within the meaning of Rule 13d-3 under the Exchange Act),
directly or indirectly, any shares or other securities of our Company or any of
our subsidiaries, (ii) has purchased or sold any of such securities within the
past two years or (iii) is, or within the past year was, a party to any
contract, arrangement or understanding with any person with respect to any such
securities. Except as disclosed in this Appendix A or the Proxy
Statement, to the best knowledge of the participants, none of their associates
beneficially owns, directly or indirectly, any of our
securities. Other than as disclosed in this Appendix A or the Proxy
Statement, to our knowledge, neither we nor any of the participants has any
substantial interests, direct or indirect, by security holding or otherwise, in
any matter to be acted upon at the Annual Meeting or is or has been within the
past year a party to any contract, arrangement or understanding with any person
with respect to any of our securities, including, but not limited to, joint
ventures, loan or option agreements, put or calls, guarantees against loss or
guarantees of profit, division of losses or profits or the giving or withholding
of proxies. Other than as set forth in this Appendix A or Proxy
Statement, to our knowledge, none of us, the participants or any of their
associates has had or will have a direct or indirect material interest in any
transaction or series of similar transactions since the beginning of our last
fiscal year or any currently proposed transactions, or series of similar
transactions, to which we or any of our subsidiaries was or is to be a party in
which the amount involved exceeds $120,000.
Other than as set forth in this
Appendix A or the Proxy Statement, to our knowledge, none of us, any of the
participants or any of their associates has any arrangements or understandings
with any person with respect to any future employment by us or our affiliates or
with respect to any future transactions to which we or any of our affiliates
will or may be a party.
A-4
PLEASE
VOTE TODAY!
SEE
REVERSE SIDE
FOR THREE EASY WAYS TO
VOTE!
uTO VOTE BY MAIL PLEASE
DETACH PROXY CARD HERE, AND SIGN, DATE AND RETURN IN THE ENVELOPE PROVIDEDu
W
H
I
T
E
P
R
O
X
Y
INSITUFORM
TECHNOLOGIES, INC.
THIS
PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The
undersigned having received the notice of the 2008 Annual Meeting of
Stockholders of Insituform Technologies, Inc. (the “Company”) and the
proxy statement, appoints David F. Morris and David A. Martin, 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 the Company’s 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
no direction is made, the proxy will be voted: (a) “FOR” all of the
Company’s director nominees in Proposal 1 and (b) “FOR” Proposal
2. 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.
YOUR
VOTE IS VERY IMPORTANT – PLEASE VOTE TODAY.
(Continued
and to be signed on the reverse side)
YOUR VOTE IS
IMPORTANT
Please
take a moment now to vote your shares of Insituform Technologies,
Inc.
Class
A Common Stock for the upcoming Annual Meeting of Stockholders.
PLEASE
REVIEW THE PROXY STATEMENT
AND VOTE TODAY IN ONE OF THREE
WAYS:
1.
Vote by Telephone—Call
toll-free in the U.S. or Canada at 1-866-289-1753, on a
touch-tone telephone. If outside the U.S. or Canada, call 1-215-521-1342. Please
follow the simple instructions. You will be required to provide
the unique control number printed
below.
OR
2.
Vote on the
Internet—Access https://www.proxyvotenow.com/insu and follow the
simple instructions. Please note, you must type an “s” after
“http.” You will be required to provide the unique control
number printed below.
CONTROL
NUMBER:
You
may vote by telephone or on the Internet 24 hours a day 7 days a
week.
Your
telephone or Internet vote authorizes the named proxies to vote your shares in
the same manner
as
if you had marked, signed and returned a proxy card.
OR
3.
Vote by Mail—If you do
not wish to vote by telephone or on the Internet, please complete, sign,
date and return the proxy card in the envelope provided, or mail to:
Insituform Technologies, Inc., c/o Innisfree M&A Incorporated, FDR
Station, P.O. Box 5155, New York, NY10150-5155.
uTO VOTE BY MAIL PLEASE
DETACH PROXY CARD HERE, AND SIGN, DATE AND RETURN IN THE ENVELOPE PROVIDEDu
The
Board of Directors recommends a vote FOR ALL the nominees
listed and FOR
Proposal 2.
1.
Election of directors:
01 –
J. Joseph Burgess
02 –
Stephen P. Cortinovis
03
–Stephanie A. Cuskley
04
–John P. Dubinsky
05
–Juanita H. Hinshaw
06
–Sheldon Weinig
07
–Alfred L. Woods
FOR
ALL
£
WITHHOLD
FROM ALL
£
FOR
ALL, WITH EXCEPTION
£
2.
To ratify the appointment of PricewaterhouseCoopers LLP as independent
auditors for the year ending December 31, 2008
FOR
£
AGAINST
£
ABSTAIN
£
INSTRUCTIONS:
To withhold authority to vote for any individual nominee(s), mark the “FOR
ALL, WITH EXCEPTIONS” box and write the number of the excepted nominee(s)
in the space provided below:
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. Should a nominee be unable to serve, this
proxy may be voted for a substitute selected by the Board of
Directors.
Dated: ______________________________
____________________________
Signature
____________________________
Signature
(if jointly held)
____________________________
Title
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 an authorized officer. If signer is a
partnership, please sign in partnership name by an authorized
person.
Dates Referenced Herein and Documents Incorporated by Reference
