-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, BHFXYWixBLOzzyRMZo2070mr0F67C5O1aEd2Y+jJ2tsjQkQCyrPdWAYs3w3OpIQj tcPe5RJU5JrCXLvm5HUMNg== 0000950134-02-010022.txt : 20020814 0000950134-02-010022.hdr.sgml : 20020814 20020814145237 ACCESSION NUMBER: 0000950134-02-010022 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 20020630 FILED AS OF DATE: 20020814 FILER: COMPANY DATA: COMPANY CONFORMED NAME: INSITUFORM TECHNOLOGIES INC CENTRAL INDEX KEY: 0000353020 STANDARD INDUSTRIAL CLASSIFICATION: WATER, SEWER, PIPELINE, COMM AND POWER LINE CONSTRUCTION [1623] IRS NUMBER: 133032158 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-10786 FILM NUMBER: 02735133 BUSINESS ADDRESS: STREET 1: 702 SPIRIT 40 PARK DRIVE CITY: CHESTERFIELD STATE: MO ZIP: 63005 BUSINESS PHONE: 6365308000 MAIL ADDRESS: STREET 1: 702 SPIRIT 40 PARK DRIVE CITY: CHESTERFIELD STATE: MO ZIP: 63005 FORMER COMPANY: FORMER CONFORMED NAME: INSITUFORM OF NORTH AMERICA INC DATE OF NAME CHANGE: 19921217 FORMER COMPANY: FORMER CONFORMED NAME: INSITUFORM OF NORTH AMERICA INC/TN/ DATE OF NAME CHANGE: 19930617 10-Q 1 c71101e10vq.txt FORM 10-Q FOR QUARTER ENDING JUNE 30, 2002 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Quarterly Period Ended June 30, 2002 ------------------------------------------------- Commission file number #0-10786 --------------------------------------------------------- Insituform Technologies, Inc. - ------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Delaware 13-3032158 - ------------------------------------------------------------------------------------------------------------------- (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization)
702 Spirit 40 Park Drive, Chesterfield, Missouri 63005 - ------------------------------------------------------------------------------- (Address of Principal Executive Offices) (636) 530-8000 - ------------------------------------------------------------------------------- (Registrant's telephone number including area code) - ------------------------------------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Class Outstanding at August 12, 2002 - ------------------------------------------ ------------------------------ Class A Common Stock, $.01 par value 26,500,727 Shares INDEX
Page No. Part I Financial Information: Item 1. Financial Statements (Unaudited): Consolidated Statements of Income.................................................3 Consolidated Balance Sheets.......................................................4 Consolidated Statements of Cash Flows.............................................5 Notes to Consolidated Financial Statements........................................6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations..............................................11 Item 3. Quantitative and Qualitative Disclosures About Market Risk.......................14 Part II Other Information: Item 1. Legal Proceedings................................................................15 Item 4. Submission of Matters to a Vote of Security Holders..............................15 Item 6. Exhibits and Reports on Form 8-K.................................................15 Signatures...................................................................................................16
2 PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS INSITUFORM TECHNOLOGIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
FOR THE THREE MONTHS FOR THE SIX MONTHS ENDED JUNE 30, ENDED JUNE 30, 2002 2001 2002 2001 --------- --------- --------- --------- REVENUES $ 118,488 $ 118,071 $ 229,663 $ 216,921 COST OF REVENUES 87,491 80,227 169,777 149,178 --------- --------- --------- --------- GROSS PROFIT 30,997 37,844 59,886 67,743 SELLING, GENERAL AND ADMINISTRATIVE 16,741 18,065 34,396 38,605 --------- --------- --------- --------- OPERATING INCOME 14,256 19,779 25,490 29,138 OTHER (EXPENSE) INCOME: Interest expense (1,643) (2,374) (3,831) (4,825) Other 333 315 783 977 --------- --------- --------- --------- TOTAL OTHER EXPENSE (1,310) (2,059) (3,048) (3,848) --------- --------- --------- --------- INCOME BEFORE TAXES ON INCOME 12,946 17,720 22,442 25,290 TAXES ON INCOME 4,899 6,911 8,595 9,963 --------- --------- --------- --------- INCOME BEFORE MINORITY INTERESTS, EQUITY IN EARNINGS AND DISCONTINUED OPERATIONS 8,047 10,809 13,847 15,327 MINORITY INTERESTS (37) (74) (68) (172) EQUITY IN EARNINGS OF AFFILIATED COMPANIES 228 346 381 468 --------- --------- --------- --------- INCOME FROM CONTINUING OPERATIONS 8,238 11,081 14,160 15,623 INCOME (LOSS) FROM DISCONTINUED OPERATIONS (927) 356 (2,529) 440 --------- --------- --------- --------- NET INCOME $ 7,311 $ 11,437 $ 11,631 $ 16,063 ========= ========= ========= ========= EARNINGS PER SHARE OF COMMON STOCK AND COMMON STOCK EQUIVALENTS: Basic: Income from continuing operations $ 0.31 $ 0.41 $ 0.53 $ 0.60 Discontinued operations (0.03) 0.01 (0.09) 0.02 Net income 0.28 0.43 0.44 0.61 Diluted: Income from continuing operations $ 0.31 $ 0.40 $ 0.53 $ 0.58 Discontinued operations (0.03) 0.01 (0.09) 0.02 Net income 0.27 0.42 0.43 0.60
See accompanying notes to consolidated financial statements. 3 INSITUFORM TECHNOLOGIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT SHARE AMOUNTS)
UNAUDITED JUNE 30, 2002 DECEMBER 31, 2001 ------------- ----------------- ASSETS CURRENT ASSETS Cash and cash equivalents, including restricted cash of $3,445 and $4,262, respectively $ 64,294 $ 74,649 Receivables, net 91,890 86,191 Retainage 23,608 21,327 Costs and estimated earnings in excess of billings 28,328 23,719 Inventories 12,594 13,712 Prepaid expenses and other assets 10,887 8,135 Assets held for disposal 12,415 32,034 --------- --------- TOTAL CURRENT ASSETS 244,016 259,767 --------- --------- PROPERTY, PLANT AND EQUIPMENT, less accumulated depreciation 78,578 68,547 --------- --------- OTHER ASSETS Goodwill 125,733 117,251 Other assets 20,662 18,057 --------- --------- TOTAL OTHER ASSETS 146,395 135,308 --------- --------- TOTAL ASSETS $ 468,989 $ 463,622 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Current maturities of long-term debt and short-term borrowings $ 43,587 $ 35,218 Accounts payable and accrued expenses 72,995 68,302 Billings in excess of costs and estimated earnings 9,791 8,057 Liabilities related to discontinued operations 3,406 9,471 --------- --------- TOTAL CURRENT LIABILITIES 129,779 121,048 --------- --------- LONG-TERM DEBT, less current maturities 73,658 88,853 OTHER LIABILITIES 4,388 2,039 --------- --------- TOTAL LIABILITIES 207,825 211,940 --------- --------- MINORITY INTERESTS 1,323 1,555 --------- --------- STOCKHOLDERS' EQUITY Preferred stock, undesignated, $.10 par - shares authorized 1,400,000; none outstanding - - Series A Junior Participating Preferred stock, $.10 par - shares authorized 600,000; none outstanding - - Common stock, $.01 par - shares authorized 60,000,000; shares outstanding 26,510,727 and 26,602,385 287 286 Additional paid-in capital 130,905 129,651 Retained earnings 184,712 172,112 Treasury stock - 2,168,773 and 1,968,773 shares (48,920) (44,563) Cumulative foreign currency translation adjustments (7,143) (7,359) --------- --------- TOTAL STOCKHOLDERS' EQUITY 259,841 250,127 --------- --------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 468,989 $ 463,622 ========= =========
See accompanying notes to consolidated financial statements. 4 INSITUFORM TECHNOLOGIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (IN THOUSANDS)
FOR THE SIX MONTHS ENDED JUNE 30, 2002 2001 -------- --------- CASH FLOWS FROM OPERATING ACTIVITIES: NET INCOME $ 11,631 $ 16,063 Loss (income) from discontinued operations 2,529 (440) -------- --------- INCOME FROM CONTINUING OPERATIONS 14,160 15,623 -------- --------- ADJUSTMENTS TO RECONCILE NET CASH PROVIDED BY OPERATING ACTIVITIES: Depreciation 7,197 7,917 Amortization 721 3,642 Other (1,349) 448 Deferred income taxes 42 100 CHANGES IN OPERATING ASSETS AND LIABILITIES, NET OF PURCHASED BUSINESSES: Receivables, including costs and estimated earnings in excess of billings and retainage (6,098) (2,910) Inventories 1,121 4,474 Prepaid expenses and other assets (2,470) (275) Accounts payable, accrued expenses and billings in excess of costs and estimated earnings 3,240 (14,173) -------- --------- NET CASH PROVIDED BY OPERATING ACTIVITIES OF CONTINUING OPERATIONS 16,564 14,846 NET CASH PROVIDED BY OPERATING ACTIVITIES OF DISCONTINUED OPERATIONS 1,800 1,710 -------- --------- NET CASH PROVIDED BY OPERATING ACTIVITIES 18,364 16,556 -------- --------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (11,561) (11,688) Proceeds from sale of fixed assets 2,520 569 Purchases of businesses, net of cash acquired (8,484) (2,359) Cash from sale of business (discontinued operations) 1,515 - Other investing activities (501) (199) -------- --------- NET CASH USED IN INVESTING ACTIVITIES (16,511) (13,677) -------- --------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from issuance of common stock 1,257 5,908 Purchases of treasury stock (4,357) (5,152) Principal payments on long-term debt (17,870) (16,902) Increase in short-term borrowings 7,929 13,791 -------- --------- NET CASH USED IN FINANCING ACTIVITIES (13,041) (2,355) -------- --------- Effect of exchange rate changes on cash 833 (654) -------- --------- NET DECREASE IN CASH AND CASH EQUIVALENTS FOR THE PERIOD (10,355) (130) CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 74,649 64,107 -------- --------- CASH AND CASH EQUIVALENTS, END OF PERIOD $ 64,294 $ 63,977 ======== =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: CASH PAID FOR: Interest expense $ 4,074 $ 5,039 Income taxes 5,786 5,309 NONCASH INVESTING AND FINANCING ACTIVITIES: Note receivable on sale of business (discontinued operations) $ 2,000 $ - Liabilities established in connection with business acquisitions 1,690 - Amounts due to the Company settled in business acquisitions 2,300 - Reissuance of treasury shares in connection with business acquisitions - 64,650 Note payable issued in connection with business acquisitions - 5,350
See accompanying notes to consolidated financial statements. 5 INSITUFORM TECHNOLOGIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) JUNE 30, 2002 1. GENERAL In the opinion of the Company's management, the accompanying consolidated financial statements reflect all adjustments (consisting of only normal recurring adjustments) necessary to present fairly the Company's financial position, results of operations and cash flows. The financial statements have been prepared in accordance with the requirements of Form 10-Q and consequently do not include all the disclosures normally made in an Annual Report on Form 10-K. Accordingly, the consolidated financial statements included herein should be reviewed in conjunction with the financial statements and the notes thereto included in the Company's 2001 Annual Report on Form 10-K. The results of operations for the three and six months ended June 30, 2002 and 2001 are not necessarily indicative of the results to be expected for the full year. 2. BUSINESS ACQUISITIONS On May 2, 2002, the Company acquired the business and certain assets and liabilities of Elmore Pipe Jacking, Inc. ("Elmore") for approximately $12.5 million. The purchase price included $8.5 million in cash, settlement of $2.3 million of debt owed by Elmore to the Company, and an additional $1.7 million of non-interest bearing liabilities, including covenants not to compete, owed to the former owners of the Elmore assets. The Company's results reflect the results of operating Elmore's former assets from the date of acquisition. Elmore added $4.2 million of revenues and $0.1 million of net income in the tunneling segment for the second quarter of 2002. An additional $3.7 million of goodwill was added in the tunneling segment during the quarter related to the acquisition. Elmore is a regional provider of trenchless tunneling, microtunneling, segmented lining and pipe jacking services in the western U.S. On February 28, 2001, the Company acquired 100% of the stock of Kinsel Industries, Inc. ("Kinsel") and an affiliated company, Tracks of Texas, Inc. ("Tracks"). Kinsel has operations in pipebursting, microtunneling, commercial construction and highway construction and maintenance. Tracks is a real estate and construction equipment leasing company that primarily leases equipment to Kinsel. The purchase price was approximately $80 million, paid in a combination of cash, notes and 1,847,165 shares of the Company's common stock valued at $35.51 per share. The transaction was accounted for by the purchase method of accounting, and accordingly, Kinsel's and Tracks' results are included in the Company's consolidated income statements from the date of acquisition. The purchase price was allocated to assets and liabilities based on their respective fair value at the date of acquisition and resulted in goodwill of $61.2 million (see Note 8). There are no contingent payments, options, or commitments in connection with the acquisition. The Company subsequently decided to sell off portions of Kinsel that did not fit the Company's overall business strategy, and these operations have been segregated in the Company's consolidated financial statements as discontinued operations. Kinsel's wastewater treatment plant construction operations were sold effective January 1, 2002. Also see Note 3. The following unaudited pro forma summary presents information as if Kinsel and Tracks had been acquired as of January 1, 2001. The pro forma amounts include certain adjustments, primarily to recognize depreciation and amortization, including amortization of goodwill, based on the allocated purchase price of Kinsel and Tracks assets, and do not reflect any benefits from economies which might be achieved from combining operations. The unaudited pro forma information has been presented for comparative purposes and does not necessarily reflect the actual results that would have occurred nor is it necessarily indicative of future results of operations of the combined companies (in thousands, except per share amounts):
THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30, 2001 JUNE 30, 2001 (UNAUDITED) (UNAUDITED) ------------------ ---------------- Revenues $118,071 $226,533 Income from continuing operations 11,081 16,591 Income (loss) from discontinued operations 356 (332) Net income 11,437 16,259 Earnings (loss) per share: Basic Income from continuing operations 0.41 0.63 Income (loss) from discontinued operations 0.01 (0.01) Net income 0.43 0.62
6 Diluted Income from continuing operations 0.40 0.62 Income (loss) from discontinued operations 0.01 (0.01) Net income 0.42 0.61
3. DISCONTINUED OPERATIONS In the fourth quarter of 2001, the Company made the decision to sell certain operations acquired in the Kinsel transaction. Accordingly, the Company has classified as discontinued the wastewater treatment plant construction, commercial construction and highway operations acquired as part of the Kinsel acquisition. These operations are not consistent with the Company's operating strategy. The Company completed the sale of the wastewater treatment plant construction operations effective January 1, 2002. The Company received $1.5 million in cash and a $2.0 million note for a total sale price of $3.5 million, resulting in a slight loss on the sale. As part of the sale agreement, the Company agreed to absorb additional trailing costs on uncompleted jobs. This resulted in a $0.6 million loss in the first quarter on no revenue. The Company is currently marketing Kinsel's highway operations. As of June 30, 2002 and December 31, 2001, assets held for disposal totaled $12.4 million and $32.0 million, respectively, and included $3.1 million and $7.6 million of unbilled receivables, respectively. Assets held for disposal also included $4.0 million of trade accounts receivable and $3.1 million of fixed assets at June 30, 2002, and $6.8 million and $3.3 million of trade receivables and fixed assets, respectively, at December 31, 2001. Liabilities related to discontinued operations totaled $3.4 million and $9.5 million at June 30, 2002 and December 31, 2001, respectively. The results of operations for the discontinued operations are as follows (in thousands):
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30, 2002 2001 2002 2001 --------- ------- -------- -------- REVENUES: Wastewater treatment plant construction $ -- $ 5,969 $ -- $ 8,245 Commercial construction and highway construction 8,248 10,710 16,870 12,816 INCOME (LOSS) FROM DISCONTINUED OPERATIONS: Wastewater treatment plant construction, net of tax of $0, $156, $348 and $183, respectively -- 244 (642) 291 Commercial construction and highway construction, net of tax expense (benefit) of $(659), $71, $(563), and $90, respectively (927) 112 (1,887) 149
4. RESTRUCTURING In the fourth quarter of 2001, the Company recorded a restructuring charge of $4.1 million, $0.9 million of which is severance cost associated with the elimination of 112 company-wide positions specifically identified as of December 31, 2001. An additional $3.2 million of the charge relates to asset write-downs, lease cancellations and other costs associated with the closure of eight facilities in the United States and the disposal of the associated assets. As of June 30, 2002, the remaining liability was $0.6 million. 5. COMPREHENSIVE INCOME For the quarters ended June 30, 2002 and 2001, comprehensive income was $7.2 million and $12.1 million, respectively. For the six months ended June 30, 2002 and 2001, comprehensive income was $11.8 million and $15.8 million, respectively. The Company's adjustment to comprehensive income consists solely of cumulative foreign currency translation adjustments. 6. EARNINGS PER SHARE Earnings per share have been calculated using the following share information:
THREE MONTHS ENDED JUNE 30, 2002 2001 ---------- ---------- Weighted average number of common shares used for basic EPS 26,543,025 26,788,721 Effect of dilutive stock options and warrants 275,858 629,349 ---------- ---------- Weighted average number of common shares and dilutive potential common stock used in dilutive EPS 26,818,883 27,418,070 ---------- ----------
7
SIX MONTHS ENDED JUNE 30, 2002 2001 ---------- ---------- Weighted average number of common shares used for basic EPS 26,548,236 26,180,750 Effect of dilutive stock options and warrants 281,797 664,150 ---------- ---------- Weighted average number of common shares and dilutive potential common stock used in dilutive EPS 26,830,033 26,844,900 ---------- ----------
7. SEGMENT REPORTING The Company has three operating segments: rehabilitation, tunneling, and TiteLiner(R), the Company's corrosion and abrasion segment ("TiteLiner"). These operating units represent strategic business units that offer distinct products and services and correspond with the current organizational structure. The following disaggregated financial results have been prepared using a management approach, which is consistent with the basis and manner with which management internally disaggregates financial information for the purpose of assisting in making internal operating decisions. The Company evaluates performance based on stand-alone operating income. Financial information by segment is as follows (in thousands):
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30, 2002 2001 2002 2001 --------- ------------ --------- ----------- REVENUES Rehabilitation $ 93,351 $ 100,127 $ 184,793 $ 182,102 Tunneling 22,249 10,465 37,425 19,915 TiteLiner 2,888 7,479 7,445 14,904 --------- --------- --------- --------- TOTAL REVENUES $ 118,488 $ 118,071 $ 229,663 $ 216,921 --------- --------- --------- --------- GROSS PROFIT Rehabilitation $ 26,080 $ 33,281 $ 50,386 $ 58,921 Tunneling 4,224 2,044 7,275 3,991 TiteLiner 693 2,519 2,225 4,831 --------- --------- --------- --------- TOTAL GROSS PROFIT $ 30,997 $ 37,844 $ 59,886 $ 67,743 --------- --------- --------- --------- OPERATING INCOME Rehabilitation $ 11,904 $ 16,827 $ 20,530 $ 23,706 Tunneling 2,497 1,219 4,363 2,186 TiteLiner (145) 1,733 597 3,246 --------- --------- --------- --------- TOTAL OPERATING INCOME $ 14,256 $ 19,779 $ 25,490 $ 29,138 --------- --------- --------- ---------
8. ACQUIRED INTANGIBLE ASSETS AND GOODWILL In June 2001, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards No. 142 ("SFAS 142"), "Goodwill and Other Intangible Assets," which requires that an intangible asset that is acquired shall be initially recognized and measured based on its fair value. This statement also provides that certain intangible assets deemed to have an indefinite useful life, such as goodwill, should not be amortized, but shall be tested for impairment annually, or more frequently if circumstances indicate potential impairment, through a comparison of fair value to its carrying amount. SFAS 142 is effective for fiscal periods beginning after December 15, 2001. The Company adopted SFAS 142 on January 1, 2002, at which time amortization of goodwill ceased and a transitional impairment test was performed. Management retained an independent party to perform a valuation of goodwill as of that date and determined that no impairment of goodwill existed. 8 There was no goodwill in the TiteLiner segment at June 30, 2002. Changes in the carrying amount of goodwill in the rehabilitation and tunneling segment for the six months ended June 30, 2002 were as follows (in thousands):
REHABILITATION TUNNELING TOTAL -------------- ---------- --------- Balance as of December 31, 2001 $117,251 $ -- $ 117,251 Reassignment of goodwill due to adoption of SFAS 142 4,792 -- 4,792 Goodwill acquired as part of Elmore purchase -- 3,748 3,748 Impact of foreign exchange rates (58) -- (58) -------- --------- --------- Balance as of June 30, 2002 $121,985 $ 3,748 $ 125,733 -------- --------- ---------
Intangible assets are as follows (in thousands):
AS OF JUNE 30, 2002 GROSS CARRYING ACCUMULATED AMOUNT AMORTIZATION -------------- ------------ Amortized intangible assets: Patents and trademarks $21,959 $ (16,723) License agreements 3,408 (1,357) Non-compete agreements 4,628 (1,694) ------- --------- Total $29,995 $ (19,774) ------- --------- Aggregate amortization expense: For quarter ended June 30, 2002 $ 418 For six months ended June 30, 2002 721 Estimated amortization expense: For year ended December 31, 2002 $ 1,801 For year ended December 31, 2003 1,781 For year ended December 31, 2004 1,473 For year ended December 31, 2005 1,141 For year ended December 31, 2006 1,127
The effect of the adoption of SFAS 142 on reported net income was as follows (in thousands, except per share information):
THREE MONTHS SIX MONTHS ENDED JUNE 30, ENDED JUNE 30, 2002 2001 2002 2001 ------ -------- -------- -------- Reported income from continuing operations $8,238 $ 11,081 $ 14,160 $ 15,623 Add: Goodwill amortization related to continuing operations -- 1,666 -- 2,838 ------ -------- -------- -------- Adjusted income from continuing operations $8,238 $ 12,747 $ 14,160 $ 18,461 Reported net income (loss) from discontinued operations (927) 356 (2,529) 440 Add: Goodwill amortization related to discontinued operations -- 62 -- 83 ------ -------- -------- -------- Adjusted net income $7,311 $ 13,165 $ 11,631 $ 18,984 ------ -------- -------- -------- Basic earnings per share: Reported income from continuing operations $ 0.31 $ 0.41 $ 0.53 $ 0.60 Add: Goodwill amortization related to continuing operations -- 0.06 -- 0.11 ------ -------- -------- -------- Adjusted income from continuing operations $ 0.31 $ 0.48 $ 0.53 $ 0.71 Reported net income (loss) from discontinued operations (0.03) 0.01 (0.09) 0.02 Add: Goodwill amortization related to discontinued operations -- -- -- -- ------ -------- -------- -------- Adjusted net income $ 0.28 $ 0.49 $ 0.44 $ 0.73 ------ -------- -------- --------
9 Diluted earnings per share: Reported income from continuing operations $ 0.31 $ 0.40 $ 0.53 $ 0.58 Add: Goodwill amortization related to continuing operations -- 0.06 -- 0.11 ------ -------- -------- -------- Adjusted income from continuing operations $ 0.31 $ 0.46 $ 0.53 $ 0.69 Reported net income (loss) from discontinued operations (0.03) 0.01 (0.09) 0.02 Add: Goodwill amortization related to discontinued operations -- -- -- -- ------ -------- -------- -------- Adjusted net income $ 0.27 $ 0.48 $ 0.43 $ 0.71 ------ -------- -------- --------
9. LITIGATION The Company is involved in certain litigation incidental to the conduct of its business. The Company does not believe that the outcome of any such litigation will have a material adverse effect on the Company's financial position, results of operations and liquidity. The financial statements include the estimated amounts of liabilities that are likely to be incurred from these and various other pending litigation and claims. 10. SUBSEQUENT EVENTS The Company plans to incur restructuring charges to continue its focus on efficiency in costs. This restructuring plan is in addition to that implemented in 2001, and focuses on gaining efficiencies in the Company's administrative, sales and support functions. As part of the plan, certain fixed assets will be eliminated and approximately 75 salaried employees will be impacted by the efforts. The Company expects to incur a charge of approximately $1.5 million, or $0.06 per diluted share after taxes, all of which will be charged in the third quarter of 2002. In the third quarter of 2002, the Company also expects to incur charges related to valuation adjustments to certain intangible assets under SFAS 144. SFAS 144, "Accounting for the Impairment or Disposal of Long-Lived Assets," which the Company adopted in 2001, provides authoritative guidance for the impairment review of long-lived assets subject to amortization. In July 2002, the Company preliminarily reviewed its patent, trademark, license and non-compete intellectual property assets and concluded that some of them may have become impaired based on recent business decisions and other circumstances. The Company expects to incur a non-cash charge of up to $2.3 million, or $0.09 per diluted share after taxes. In addition, the write-down of these intangible assets will decrease the estimated annual amortization expense reported in Note 8 by an undetermined amount. 10 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following is management's discussion and analysis of certain significant factors that have affected the Company's financial condition and results of operations during the periods included in the accompanying consolidated financial statements. RESULTS OF OPERATIONS - Three and Six Months Ended June 30, 2002 and 2001 The following table highlights the results for each of the segments and periods presented (in thousands):
THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30, 2002 JUNE 30, 2002 REVENUES GROSS PROFIT OPERATING INCOME REVENUES GROSS PROFIT OPERATING INCOME --------- ------------ ---------------- --------- ------------ ---------------- Rehabilitation $ 93,351 $ 26,080 $11,904 $184,793 $ 50,386 $ 20,530 Tunneling 22,249 4,224 2,497 37,425 7,275 4,363 TiteLiner 2,888 693 (145) 7,445 2,225 597 --------- -------- ------- -------- -------- -------- Total $ 118,488 $ 30,997 $14,256 $229,663 $ 59,886 $ 25,490 --------- -------- ------- -------- -------- --------
THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30, 2001 JUNE 30, 2001 REVENUES GROSS PROFIT OPERATING INCOME REVENUES GROSS PROFIT OPERATING INCOME --------- ------------ ---------------- --------- ------------ ---------------- Rehabilitation $ 100,127 $ 33,281 $16,827 $182,102 $ 58,921 $ 23,706 Tunneling 10,465 2,044 1,219 19,915 3,991 2,186 TiteLiner 7,479 2,519 1,733 14,904 4,831 3,246 --------- -------- ------- -------- -------- -------- Total $ 118,071 $ 37,844 $19,779 $216,921 $ 67,743 $ 29,138 --------- -------- ------- -------- -------- --------
For the three months ended June 30, 2002, consolidated revenues from continuing operations totaled $118.5 million, representing a 0.4% increase over the second quarter of 2001. Tunneling reported a 112.6% increase in revenues compared to the second quarter of 2001, while all other business units experienced lower revenues during the second quarter of 2002. The addition of Elmore's operations beginning May 2, 2002 contributed $4.2 million to revenues in the tunneling segment. Negative pricing trends in the rehabilitation segment continued to impact revenue and gross margin. In addition, TiteLiner's traditional markets continued to contract through a low point in their economic cycle. Copper and palladium miners are historically significant consumers of the TiteLiner product. Pricing pressures in these commodities translated to decreased revenues in the TiteLiner segment. Consolidated revenues from continuing operations for the six months ended June 30, 2002 were 5.9% higher than in the first six months of the prior year, largely as a result of tunneling's 87.9% revenue increase over the six months ended June 30, 2001. Additionally, rehabilitation operations achieved a 1.5% increase in revenues in the first six months of 2002 as compared to the same period of 2001, due primarily to the inclusion of Kinsel in the full six months in 2002 versus only four of the first six months in 2001 after the date of acquisition (February 28, 2001). Cost of sales increased 9.1% in the second quarter of 2002 to $87.5 million from $80.2 million in the second quarter of 2001. This increase is primarily due to the tunneling business in which cost of sales increased 114.1% (41.2% related to the Elmore acquisition) in the second quarter of 2002 compared to the same quarter of 2001. Cost of sales in the tunneling segment is expected to continue growing in line with anticipated revenue growth indicated by the increases obtained in tunneling backlog over the previous two quarters. Consolidated gross profit from continuing operations for the Company was $31.0 million in the second quarter of 2002, representing a decrease of 18.1% compared to $37.8 million in gross profit from the same period of the prior year. Gross margin percentage also decreased for the second quarter of 2002 to 26.2% of consolidated revenues from 32.1% gross margin in the second quarter of 2001. The Company continued to see average per foot revenue decreases that slightly outpaced decreases in cost of sales for the cured-in-place pipe rehabilitation business. In addition, the tunneling segment, where project gross margins are lower than in the rehabilitation and TiteLiner segments, continued to be a bigger percentage of the Company's overall business, decreasing consolidated gross margin percentages. For the six months ended June 30, 2002 and 2001, gross profit was $60.0 million and $67.7 million, respectively, representing an 11.6% decline. Margins for the first half of 2002 were 26.1% compared to 31.2% in 2001, due primarily to pricing pressures and tunneling's continued growth in the Company's overall operation. 11 Selling, general and administrative expenses decreased 7.3% to $16.7 million in the second quarter of 2002 compared to $18.1 million in the second quarter of 2001. As a percent of revenue, selling, general and administrative costs decreased to 14.1% of total consolidated revenues in the second quarter of 2002 versus 15.3% in the same period of 2001. This decrease is primarily a result of the Company's adoption of SFAS 142 that required the cessation of amortization on goodwill as of January 1, 2002. This was partially offset by modest increases in incentive compensation and profit sharing accruals. In the first half of 2002, selling, general and administrative expenses were $34.4 million, a decrease of 5.3% from the $38.6 million posted in the first half of 2001. Much of this decrease was attributable to the adoption of SFAS 142 with a small offset from incentive compensation accruals. The decrease in selling, general and administrative expenses was inclusive of a full first quarter of Kinsel expenses in 2002. The Company's ongoing management of overhead costs held operating expenses down even while adding the Kinsel business. Operating income for the second quarter of 2002 was $14.3 million, resulting in a 27.9% decrease from the $19.8 million reported for the second quarter of 2001. Tunneling reported $2.5 million in operating income for the second quarter of 2002, a 104.9% increase over the second quarter of 2001. For the second quarter and first six months of 2002, all other business units reported lower operating income compared to the second quarter and first six months of the prior year. For the first half of 2002, operating income was $25.5 million, a 12.5% decrease from the $29.1 million in operating income reported during the first half of 2001. For the three months ended June 30, 2002, income from continuing operations was $8.2 million, or $0.31 per diluted share, representing a decrease of 25.7% from the $11.1 million, or $0.40 per diluted share, in income from continuing operations in the second quarter of 2001. Income from continuing operations increased by $0.1 million in the second quarter of 2002 compared to the same quarter of 2001 as a result of the additional income from Elmore operations during the second quarter of 2002. Loss from discontinued operations was $0.9 million in the second quarter of 2002 versus income of $0.4 million in 2001. This loss was a result of cost overruns in the heavy highway businesses. The resulting net income for the second quarter of 2002 was $7.3 million, a 36.1% decline from the $11.4 million reported in the second quarter of the prior year. For the six months ended June 30, 2002, income from continuing operations was $14.2 million, a 9.4% decrease from the $15.6 million in income from continuing operations in the first half of 2001. The loss from discontinued operations in the first six months of 2002 was $2.5 million compared to income of $0.4 million in the first half of 2001. The Company expects a continuing decline in the commercial construction and heavy highway businesses that currently comprise discontinued operations and is actively seeking qualified buyers for these businesses. RECENT EVENTS In July 2002, a Company crew had an accident on a cured-in-place pipe project in Des Moines, Iowa. Two workers died and five workers were injured in the accident. The Company is cooperating with Iowa's state OSHA in investigating the accident and is reviewing its safety procedures. During the third quarter, the Company expects to incur the cost of its $250 thousand insurance deductible. In addition, operational performance will be affected in the rehabilitation segment because of disruption in work in the unit impacted by the accident and because of a one-day stand down in North American rehabilitation to review safety procedures. Iowa's state OSHA has the ability to impose fines on the Company if it believes there were violations of safety regulations in connection with this accident. The Company does not expect the accident to have any significant financial impact on forecasted results for the third quarter of 2002 or for future quarters. The five-year Jacksonville Electric Authority ("JEA") term contract was awarded to PM Construction & Rehabilitation L.P. and Kinsel Industries, Inc., a Joint Venture (the "Joint Venture") in November 2000, for a not to exceed amount of $380 million. As of June 30, 2002, the Company included $136.0 million of total backlog for the JEA contract. The unreleased term contract backlog portion was $128.6 million, and there was $7.4 million of released contract backlog. JEA has not changed the "not to exceed amount" under the contract. On August 1, 2002, the original contract was ratified and affirmed by the parties as being continued in full force and effect. However, JEA has been publicly quoted as stating that for its next fiscal year beginning October 1, 2002, only $20 million will be awarded to the Joint Venture under the current contract, from which the Company would anticipate receiving $10 million, and that $40 million of similar work would be out to bid. The amount JEA will actually award to the Joint Venture in the future under the contract of for work related to the contract is uncertain. In what the Company considers the unlikely event that JEA were to award only $20 million per year to the Joint Venture for the balance of the contract term, the Company would need to reduce its unreleased backlog related to this contract by $98.6 million. As a result of JEA's expressed intention, the Company reviewed its goodwill related to the 2001 Kinsel acquisition. The Company believes it is still fairly valued even if the JEA contract backlog is reduced. However, the Company will continue to review the Kinsel goodwill valuation based on changes in the current facts and circumstances. See Note 10 for discussion of additional items occurring subsequent to the date of the financial statements. BACKLOG The following table highlights backlog for each of the segments and at each date presented (in millions): JUNE 30, 2002:
APPARENT LOW BID AND APPARENT LOW BID AND UNRELEASED TERM EXPECTED UNRELEASED TERM CONTRACT BACKLOG IN NEXT 12 MONTHS AVAILABLE BEYOND 12 MONTHS ---------------- ------------------------ -------------------------- Rehabilitation $122.0 $ 94.3 $ 155.5 Tunneling 122.7 9.7 11.0 TiteLiner 3.2 -- -- ------ ------- ------- Total $247.9 $ 104.0 $ 166.5 ------ ------- ------- DECEMBER 31, 2001: 2002 APPARENT LOW BID AND APPARENT LOW BID AND UNRELEASED TERM CONTRACT BACKLOG UNRELEASED TERM AVAILABLE BEYOND 2002 ---------------- -------------------- --------------------- Rehabilitation $125.8 $ 87.0 $ 148.9 Tunneling 36.4 11.0 61.9 TiteLiner 2.1 -- -- ------ ------- ------- Total $164.3 $ 98.0 $ 210.8 ------ ------- -------
Contract backlog is management's expectation of revenues to be generated from received, signed, uncompleted contracts whose cancellation is not anticipated at the time of reporting. Reported contract backlog excluded any term contract amounts for which there was not specific and determinable work released. At June 30, 2002 and December 31, 2001, the Company reported contract backlog (excluding projects where the Company was advised that it was low bidder, but not formally awarded the contract) in the amounts of approximately $247.9 million and $164.3 million, respectively. The Company anticipates that a significant portion of contract backlog reported at June 30, 2002 and an additional $104.0 million of unreleased term contracts and jobs on which the Company was the 12 apparent low bidder will be completed through June 30, 2003. An additional $166.5 million of unreleased term contract work and work on which the Company was the apparent low bidder was anticipated for completion beyond June 30, 2003. All backlog values were the estimate of management based on contracts outstanding at June 30, 2002 and are subject to change due to factors beyond the control of the Company. LIQUIDITY AND CAPITAL RESOURCES Cash and cash equivalents were $64.3 million at June 30, 2002, roughly unchanged compared to the $64.0 million balance at June 30, 2001 and 13.9% less than the $74.6 million in cash and cash equivalents at December 31, 2001. The cash balance at June 30, 2002 included $3.4 million of cash and cash equivalents restricted in various escrow accounts. In the first six months of 2002, operating activities from continuing operations contributed $16.6 million, compared to $14.8 million in the first half of 2001, a 12.2% increase. Discontinued operations contributed an additional $1.8 million during the first half of 2002 for a total of $18.4 million in operating cash flow. In the first six months of 2001, discontinued operations contributed $1.7 million in cash flow for a total operating cash flow of $16.6 million. Working capital increased by $4.2 million in the first half of 2002 due in part to underbillings recorded as additional receivables just prior to the cutoff date. Specifically, the tunneling segment performed significant work on jobs that were not yet billed to customers, causing a change in underbillings from December 31, 2001 to June 30, 2002 of approximately $5.0 million. The sale of the Company's Kinsel wastewater treatment plant construction operations in February contributed $1.5 million to cash during the first six months of 2002. The sale of fixed assets contributed an additional $2.5 million during the first half of 2002. A scheduled $15.7 million principal payment on the Company's Senior Notes, Series A (the "Senior Notes") in the first quarter of 2002 along with $2.2 million in additional repayments of long-term debt were the most significant uses of cash in the first half of 2002. Additionally, capital expenditures totaled $11.6 million in the first half of 2002, $6.1 million of which was in the second quarter. Much of the capital expenditure activity continued to be the addition of machinery and equipment necessary to support the expanding tunneling segment, along with ongoing upgrades and purchases necessary to support the rehabilitation segment. The Company purchased an additional 100,000 shares of its stock in the second quarter of 2002, bringing the total shares purchased in the first six months to 200,000 for a total of $4.4 million in cash. During the first half of 2001, 222,600 shares were purchased for $5.2 million. Cumulatively, the Company spent $71.8 million for 3,760,115 shares through June 30, 2002 in the stock repurchase program since its inception in 1998. Repurchased shares are held as treasury stock until reissued. In the first half of 2002, $13.0 million in cash was consumed by financing activities compared to $2.4 million in financing activities in the first half of 2001. The greater use of cash in 2002 was due to a decreased rate of borrowing on notes payable, a reduction of $5.9 million compared to the first six months of 2001, and decreased proceeds from the exercise of options by $4.7 million compared to the first half of 2001. Trade receivables and retainage totaled $115.5 million on June 30, 2002, representing a 7.4% increase from December 31, 2001. Costs and estimated earnings in excess of billings were $28.3 million in the first half of 2002, a 19.4% increase over the December 31, 2001 balance of $23.7 million. The increase was due primarily to the initiation of new projects in the first half of 2002, particularly in the tunneling segment. At project start-up, significant costs were incurred for equipment acquisition and mobilization of equipment and crews. These costs were incurred prior to any work being performed. Therefore, these costs were not charged to the customer and margin was not recognized during this time period. The Company has a line of credit facility under a credit agreement (the "Credit Agreement") to borrow up to $50 million. At June 30, 2002, the Company had unused committed bank credit facilities under the Credit Agreement totaling $21.8 million. Of the $28.2 million used under the Credit Agreement, $23.0 million related to short-term borrowings and $5.2 million was for various standby letters of credit. The commitment fee paid per annum by the Company is 0.2% on the unborrowed balance. The interest rates under this facility vary and are based on the prime rate. As of June 30, 2002, the rate was 2.5%. The Company's Senior Notes, due February 14, 2007, bear interest, payable semi-annually in August and February of each year, at the rate per annum of 7.88%. Each year, from February 2002 to February 2006, inclusive, the Company will be required to make principal payments of $15.7 million, together with an equivalent payment at maturity. On June 30, 2002, the principal amount of Senior Notes outstanding was $78.6 million. The Senior Notes may be prepaid at the Company's option, in whole or in part, at any time, together with a make-whole premium. Upon specified change in control events each holder has the right to require the Company to purchase its Senior Notes without any premium thereon. The note purchase agreements pursuant to which the Senior Notes were acquired, and the Credit Agreement, obligate the Company to comply with certain financial ratios and restrictive covenants that, among other things, place limitations on operations and sales of assets by the Company or its subsidiaries, limit the ability of the Company to incur further secured 13 indebtedness and liens and of subsidiaries to incur indebtedness, and, in the event of default, limit the ability of the Company to pay cash dividends or make other distributions to the holders of its capital stock or to redeem such stock. The Credit Agreement also obligates certain of the Company's domestic subsidiaries to guaranty the Company's obligations, as a result of which the same subsidiaries have also delivered their guaranty with respect to the Senior Notes. The Company is in compliance with all of its debt covenants. The Company believes it has adequate resources and liquidity to fund future cash requirements for working capital, capital expenditures and debt repayments with cash generated from operations, existing cash balances, additional short- and long-term borrowing and the sale of assets. MARKET RISK The Company is exposed to the effect of interest rate changes and foreign currency fluctuations. INTEREST RATE RISK The fair value of the Company's cash and short-term investment portfolio and the fair value of the line of credit facility at June 30, 2002 approximated carrying value. Given the short-term nature of these instruments, market risk, as measured by the change in fair value resulting from a hypothetical 10% change in interest rates, was not material. The Company's objectives in managing exposure to interest rate changes are to limit the impact of interest rate changes on earnings and cash flows and to lower overall borrowing costs. To achieve these objectives, the Company maintained fixed rate debt as a percentage of its net debt in a percentage range set by policy. The impact to earnings and cash flows from a hypothetical 10% change in interest rates is not material. FOREIGN EXCHANGE RISK The Company operates subsidiaries, and is associated with licensees and affiliates operating solely in countries outside of the United States, and in currencies other than the U.S. dollar. Consequently, these operations are inherently exposed to risks associated with fluctuation in the value of the local currencies of these countries compared to the U.S. dollar. The effect of a hypothetical adverse change of 10% in exchange rates (a weakening of the U.S. dollar) is immaterial. FORWARD-LOOKING INFORMATION This quarterly report contains various forward-looking statements that are based on information currently available to management and on management's beliefs and assumptions. When used in this document, the words "anticipate," "estimate," "believes," "plans," and similar expressions are intended to identify forward-looking statements, but are not the exclusive means of identifying such statements. Such statements are subject to risks and uncertainties. The Company's actual results may vary materially from those anticipated, estimated or projected due to a number of factors, such as the competitive environment for the Company's products and services, the geographical distribution and mix of the Company's work, the timely award or cancellation of projects, political circumstances impeding the progress of work, and other factors set forth in reports and other documents filed by the Company with the Securities and Exchange Commission from time to time. The Company does not assume a duty to update forward-looking statements. Please use caution and do not place reliance on forward-looking statements. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK For information concerning this item, see "Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations - Market Risk," which information is incorporated herein by reference. 14 PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS There have been no material changes since the filing of the Company's Form 10-Q for the period ended March 31, 2002. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS At the Company's Annual Meeting of Stockholders on May 30, 2002, stockholders elected the following persons as directors of the Company:
WITHHOLD FOR AUTHORITY ---------- ----------- Robert W. Affholder 23,150,772 2,275,931 Paul A. Biddelman 25,333,453 93,250 Stephen P. Cortinovis 25,333,453 93,250 John P. Dubinsky 25,333,453 93,250 Juanita H. Hinshaw 25,333,453 93,250 Anthony W. Hooper 23,150,542 2,276,161 Thomas N. Kalishman 25,333,653 93,050 Sheldon Weinig 25,333,653 93,050 Alfred L. Woods 25,333,453 93,250
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) The exhibits filed as part of this Quarterly Report on Form 10-Q are listed on the annexed Index to Exhibits. (b) On May 2, 2002, the Company filed a Current Report on Form 8-K, under Item 5, to provide the Company's press release dated May 2, 2002, announcing that it completed the acquisition of the business and certain assets and liabilities of Elmore Pipe Jacking, Inc. On June 10, 2002, the Company filed two Current Reports on Form 8-K. One Current Report on Form 8-K was filed under Item 9 to provide the Company's press release dated June 10, 2002, announcing April and May 2002 new orders for the cured-in-place pipe unit of its North American rehabilitation business. The second Current Report on Form 8-K filed on June 10, 2002 was filed under Item 4, reporting that the Company's Board of Directors, based on the recommendation of its Audit Committee, authorized the dismissal of Arthur Andersen LLP as the Company's independent public accountants and authorized the engagement of PricewaterhouseCoopers LLP to serve as the Company's independent public accountants for the 2002 fiscal year. 15 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. INSITUFORM TECHNOLOGIES, INC. August 14, 2002 /s/ Joseph A. White ------------------------------------------ Joseph A. White Vice President - Chief Financial Officer Principal Financial and Accounting Officer 16 INDEX TO EXHIBITS 2 - Not applicable. 3(i) - Not applicable. 3(ii) - Not applicable. 4 - Not applicable. 10.1 - Note Modification Allonge executed on July 17, 2002 relating to Promissory Note (filed as Exhibit 10.2 hereto).(1) 10.2 - Promissory Note dated September 24, 1997 made by Anthony W. Hooper in favor of the Company.(1) 10.3 - Form of Directors' Indemnification Agreement.(1) 11 - Not applicable. 15 - Not applicable. 18 - Not applicable. 19 - Not applicable. 22 - Not applicable. 23 - Not applicable. 24 - Not applicable. 99.1 - Certification of Anthony W. Hooper pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 99.2 - Certification of Joseph A. White pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
- ------------ (1) Management contract or compensatory plan or arrangement. 17 EX-10.1 3 c71101exv10w1.txt NOTE MODIFICATION ALLONGE EXECUTED JULY 17, 2002 EXHIBIT 10.1 NOTE MODIFICATION ALLONGE The $200,000 Promissory Note (the "NOTE"), dated September 24, 1997, made by Anthony W. Hooper (the "MAKER") in favor of Insituform Technologies, Inc. (the "CORPORATION") is hereby amended and modified to change the due date from the "fifth anniversary" of the date of the Note to the "seventh anniversary" of the date of the Note. If any change in applicable law would require the Note to be repaid prior to the scheduled due date, then Maker will comply with such law. Except as hereby modified, the Note shall remain in full force and effect, and Maker hereby ratifies the Note as so modified. ORAL AGREEMENTS OR COMMITMENTS TO LOAN MONEY, EXTEND CREDIT OR TO FORBEAR FROM ENFORCING REPAYMENT OF A DEBT, INCLUDING PROMISES TO EXTEND OR RENEW SUCH DEBT, ARE NOT ENFORCEABLE. TO PROTECT MAKER AND CORPORATION FROM MISUNDERSTANDING OR DISAPPOINTMENT, ANY AGREEMENTS THEY REACH COVERING SUCH MATTERS ARE CONTAINED IN THIS WRITING (AND THE NOTE), WHICH ARE THE COMPLETE AND EXCLUSIVE STATEMENTS OF THE AGREEMENT BETWEEN THEM, EXCEPT AS THEY MAY LATER AGREE IN WRITING TO MODIFY THEM. IN WITNESS WHEREOF, the undersigned have executed this Note Modification Allonge on July 17, 2002. /s/ Anthony W. Hooper ------------------------------------ Anthony W. Hooper Insituform Technologies, Inc. By: /s/ Stephen P. Cortinovis ------------------------------------ Stephen P. Cortinovis, Chair of the Compensation Committee of the Board of Directors EX-10.2 4 c71101exv10w2.txt PROMISSORY NOTE DATED SEPTEMBER 24, 1997 Exhibit 10.2 PROMISSORY NOTE $200,000 As of September 24, 1997 SECTION 1. General. The undersigned, Anthony W. Hooper (the "Maker"), residing at 3 Wendover, St. Louis, Missouri 63124, for value received, hereby promises to pay to INSITUFORM TECHNOLOGIES, INC., with offices at 702 Spirit 40 Park Drive, Chesterfield, Missouri 63005 (the "Corporation"), or order, the principal amount of $200,000 (Two Hundred Thousand Dollars), the principal balance of which shall be due and payable in full on the fifth anniversary of the date hereof (subject to mandatory and optional prepayment in whole or in part in the manner provided in Section 2 hereof), all payments under this Note to be in such coin or currency of the United States of America as at the time of payment shall be legal tender therein for the payment of public and private debts, the principal balance hereof not to accrue interest except in the circumstances provided under Section 2(b) and Section 4 hereof; all payments and prepayments under this Note to be made at 702 Spirit 40 Park Drive, Chesterfield, Missouri 63005, or such other location as shall be specified in writing by the holder of this Note to the Maker. SECTION 2. Mandatory And Optional Prepayment. (a) In the event that the Maker's employment with the Corporation is terminated by action of the Maker for other than "good reason" (as hereinafter defined), or by action of the Corporation for "cause" (as hereinafter defined), the entire outstanding principal balance of this Note shall immediately become due and payable. For purposes hereof: (x) "good reason" shall mean the assignment to the Maker by the Corporation of duties inconsistent with the position of chief executive officer, or any purported termination by the Corporation of the Maker's employment otherwise than for "cause"; and (y) "cause" shall mean the willful and continued failure of the Maker substantially to perform his duties to the Corporation (other than as a result of incapacity due to physical or mental illness) after written demand therefor by the Corporation, or the conviction by the Maker of a crime other than misdemeanor traffic offenses or of an act of moral turpitude. (b) In the event the Maker's employment with the Corporation is terminated for any reason other than by the Maker without "good reason", or by the Corporation with "cause", then: (i) the outstanding principal balance of this Note shall, from the date of termination (the "Termination Date"), accrue interest at a rate per annum calculated as the Extension Rate (as hereinafter defined); (ii) the Maker shall, from the Termination Date, pay to the holder of this Note eleven equal installments, monthly on the same day of each month thereafter, as if the entire principal balance of this Note outstanding on the Termination Date, together with interest accrued as aforesaid, were to be liquidated in equal monthly payments as aforesaid extending over the period ending 30 years after the Termination Date, each such installment hereunder to be applied, first, to interest so accrued and, then, to the principal balance hereof; and (iii) the entire outstanding principal balance of this Note, together with interest accrued hereon, shall be due and payable on the first anniversary of the Termination Date. For purposes hereof, the "Extension Rate" shall mean one percent per annum in excess of the interest rate per annum then offered by NationsBank NA as its prime lending rate. (c) The Maker shall have the right at any time to prepay the whole, or any part, of the unpaid principal amount of this Note, without premium or penalty, provided that interest, if any, accrued to the date of such prepayment shall be paid concurrently therewith. Notices of prepayment under this paragraph (c) shall be given by the Maker by mail and shall be mailed to the holder of this Note not less than ten days from the date fixed for prepayment. In case this Note is to be prepaid in part only, such notice shall specify the principal amount hereof to be prepaid. In the event this Note is to be prepaid in part, and the provisions of paragraph (b)(ii) immediately preceding obtain, such prepayment shall be applied in inverse order of maturity to the installments so required. Upon giving of notice of prepayment as aforesaid, this Note or portion hereof so specified for prepayment, shall on the prepayment date specified in such notice become due and payable, and the principal of this Note or portion hereof so specified for prepayment, together with interest, if any, accrued thereon, shall then be paid by the Maker. SECTION 3. Events of Default and Remedies. 3.1 The entire unpaid principal amount of this Note, together with all accrued interest, if any, hereon, at the option of the holder hereof exercised by written notice to the Maker, shall forthwith become and be due and payable if any one or more of the following events (herein called "Events of Default") shall have occurred (for any reason whatsoever and whether such happening shall be voluntary or involuntary or come about or be effected by operation of law or pursuant to or in compliance with any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body) and be continuing at the time of such notice, that is to say: (a) if default shall be made in the due and punctual payment of the principal of, or any installment on, or any interest accrued on, this Note when and as the same shall become due and payable, whether at maturity, by acceleration or otherwise, and such default shall have continued for a period of 30 days after written notice by the holder of this Note to the Maker; (b) if this Note shall cease to be enforceable in accordance with its terms against the Maker, or the Maker shall so state in writing; (c) if the Maker shall: 2 (i) admit in writing his inability to pay his debts generally as they become due; (ii) file a petition in bankruptcy or a petition to take advantage of any insolvency act; or (iii) on a petition in bankruptcy filed against him, be adjudicated a bankrupt. 3.2 In the case any one or more of the Events of Default specified in Section 3.1 hereof shall have occurred and be continuing, the holder of this Note may proceed to protect and enforce its rights either by suit in equity and/or by action at law, whether for the specific performance of any covenant or agreement contained in this Note, or the holder of this Note may proceed to enforce the payment of all sums due upon this Note or to enforce any other legal or equitable right of the holder of this Note. In the event an Event of Default shall have occurred and the holder of this Note shall employ attorneys, or incur other costs and expenses for the collection of payments due or to become due, or for the enforcement or performance or observance of any obligation or agreement of the Maker under this Note, the Maker agrees that it will pay to the holder, on demand, the reasonable fees of such attorney together with all other costs and expenses incurred by the holder hereof. 3.3 No remedy herein conferred upon the holder of this Note is intended to be exclusive of any other remedy and each and every such remedy shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing at law or in equity or by statute or otherwise. 3.4 No course of dealing between the Maker and the holder of this Note or any delay on the part of the holder hereof in exercising any rights hereunder shall operate as a waiver of any rights of the holder hereof. SECTION 4. Default Interest. 4.1 While an Event of Default is continuing, the Maker shall pay interest on the outstanding principal balance of this Note at a rate per annum which is equal to twelve percent (12%), such interest to be payable in arrears on the first day of each calendar month for the immediately preceding calendar month, commencing with the first such day following the date of the Event of Default, until the principal amount of this Note is paid in full. 4.2 Notwithstanding anything to the contrary contained in this Note, the Maker shall not be obligated to pay, and the holder of this Note shall not charge, reserve, collect or receive interest (which shall be calculated as the aggregate of all charges which constitute interest under applicable law) in excess of the maximum non-usurious interest rate, as in effect from time to time, which may be charged, reserved, received or collected by the holder in connection with this Note. During any period of time in which the interest rates specified herein exceed the maximum rate as aforesaid, 3 interest shall accrue and be payable at such maximum rate; provided, however, that if the interest rate payable hereunder declines below the maximum rate as aforesaid, interest shall continue to accrue and be payable at such maximum rate until the interest that has been paid by the Maker hereunder equals the amount of interest that would have been paid if interest had at all times accrued and been payable at the applicable interest rate specified in this Note. In the event that the holder of this Note shall collect from the Maker any amount which is deemed to constitute interest at a rate in excess of the maximum rate as aforesaid, all such excess amounts shall be credited to the payment of outstanding principal advanced to the Maker. Section 5. Captions. Captions and section titles contained herein are inserted as a matter of convenience and for reference only and are not intended to define, limit, extend or describe the scope of this Note or the intent of any provision hereof. Section 6. Severability. In the event that one or more of the provisions of this Note shall for any reason be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provisions of this Note, but this Note shall be construed as if such invalid, illegal or unenforceable provision had never been contained herein. Section 7. Governing Law. This Note shall be governed by and construed in accordance with the laws of the State of Missouri applicable to agreements made and to be performed entirely within such state. Section 8. Statutory Notice. The following notice is given pursuant to applicable statute; nothing contained in such notice shall be deemed to limit or modify the terms of this Note: ORAL AGREEMENT OR COMMITMENTS TO LOAN MONEY, EXTEND CREDIT OR TO FOREBEAR FROM ENFORCING REPAYMENT OF A DEBT, INCLUDING PROMISES TO EXTEND OR RENEW SUCH DEBT OR TO AMEND OR MODIFY THE TERMS OF SUCH DEBT, ARE NOT ENFORCEABLE. TO PROTECT THE MAKER AND THE HOLDER OF THIS NOTE FROM MISUNDERSTANDING OR DISAPPOINTMENT, ANY AGREEMENTS REACHED BY THE MAKER AND THE HOLDER HEREOF COVERING ANY OF THE FOREGOING SUCH MATTERS OR OTHERWISE ARE CONTAINED EXCLUSIVELY AND SOLELY IN THIS NOTE, WHICH NOTE IS A COMPLETE AND EXCLUSIVE STATEMENT OF THE AGREEMENTS BETWEEN THE MAKER AND THE HOLDER HEREOF WITH RESPECT TO THE SUBJECT MATTER HEREOF, EXCEPT AS THE MAKER AND THE HOLDER MAY LATER AGREE IN WRITING TO MODIFY THEM. IN WITNESS WHEREOF, the undersigned has executed this Note as of the date first-above written. /s/ Anthony W. Hooper ---------------------- Anthony W. Hooper 4 EX-10.3 5 c71101exv10w3.txt FORM OF DIRECTORS' INDEMNIFICATION AGREEMENT EXHIBIT 10.3 AGREEMENT This Agreement, made and entered into as of this 30th day of May, 2002 ("AGREEMENT"), by and between Insituform Technologies, Inc., a Delaware corporation ("COMPANY"), and John P. Dubinsky ("INDEMNITEE"): WHEREAS, highly competent persons are becoming more reluctant to serve publicly-held corporations as directors or in other capacities unless they are provided with adequate protection through insurance or adequate indemnification against inordinate risks of claims and actions against them arising out of their service to and activities on behalf of the corporation; and WHEREAS, the current impracticability of obtaining adequate insurance and the uncertainties relating to indemnification have increased the difficulty of attracting and retaining such persons; WHEREAS, the Board of Directors of the Company has determined that the inability to attract and retain such persons is detrimental to the best interests of the Company's stockholders and that the Company should act to assure such persons that there will be increased certainty of such protection in the future; and WHEREAS, it is reasonable, prudent and necessary for the Company contractually to obligate itself to indemnify such persons to the fullest extent permitted by applicable law so that they will serve or continue to serve the Company free from undue concern that they will not be so indemnified; and WHEREAS, Indemnitee is willing to serve, continue to serve and to take on additional service for or on behalf of the Company on the condition that he be so indemnified; NOW, THEREFORE, in consideration of the premises and the covenants contained herein, the Company and Indemnitee do hereby covenant and agree as follows: Section 1. Services by Indemnitee. Indemnitee agrees to serve as a director of the Company. Indemnitee may at any time and for any reason resign from such position (subject to any other contractual obligation or any obligation imposed by operation of law), in which event the Company shall have no obligation under this Agreement to continue Indemnitee in such position. Section 2. Indemnification - General. The Company shall indemnify, and advance Expenses (as hereinafter defined) to, Indemnitee (a) as provided in this Agreement and (b) to the fullest extent permitted by applicable law in effect on the date hereof and as amended from time to time. The rights of Indemnitee provided under the preceding sentence shall include, but shall not be limited to, the rights set forth in the other Sections of this Agreement. Section 3. Proceedings Other Than Proceedings By Or In The Right of the Company. Indemnitee shall be entitled to the rights of indemnification provided in this Section 3 if, by reason of his Corporate Status (as hereinafter defined), he is, or is threatened to be made, a party to any threatened, pending, or completed Proceeding (as hereinafter defined), other than a Proceeding by or in the right of the Company. Pursuant to this Section 3, Indemnitee shall be indemnified against all Expenses, judgments, penalties, fines and amounts paid in settlement actually and reasonably incurred by him or on his behalf in connection with such Proceeding or any claim, issue or matter therein, if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Company and, with respect to any criminal Proceeding, had no reasonable cause to believe his conduct was unlawful. Section 4. Proceedings By Or In The Right Of The Company. Indemnitee shall be entitled to the rights of indemnification provided in this Section 4 if, by reason of his Corporate Status, he is, or is threatened to be made, a party to any threatened, pending or completed Proceeding brought by or in the right of the Company to procure a judgment in its favor. Pursuant to this Section 4, Indemnitee shall be indemnified against all Expenses actually and reasonably incurred by him or on his behalf in connection with such Proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Company; provided, however, that, if applicable law so provides, no indemnification against such Expenses shall be made in respect of any claim, issue or matter in such Proceeding as to which Indemnitee shall have been adjudged to be liable to the Company unless and to the extent that the Court of Chancery of the State of Delaware, or the court in which such Proceeding shall have been brought or is pending, shall determine that such indemnification may be made. Section 5. Indemnification For Expenses of A Party Who is Wholly Or Partly Successful. Notwithstanding any other provision of this Agreement, to the extent that Indemnitee is, by reason of his Corporate Status, a party to and is successful, on the merits or otherwise, in any Proceeding, he shall be indemnified against all Expenses actually and reasonably incurred by him or on his behalf in connection therewith. If Indemnitee is not wholly successful in such Proceeding but is successful, on the merits or otherwise, as to one or more but less than all claims, issues or matters in such Proceeding, the Company shall indemnify Indemnitee against all Expenses actually and reasonably incurred by him or on his behalf in connection with each successfully resolved claim, issue or matter. For purposes of this Section and without limitation, the termination of any claim, issue or matter in such a Proceeding by dismissal, with or without prejudice, shall be deemed to be a successful result as to such claim, issue or matter. Section 6. Indemnification For Expenses Of A Witness. Notwithstanding any other provision of this Agreement, to the extent that Indemnitee is, by reason of his Corporate Status, a witness in any Proceeding to which Indemnitee is not a party, he shall be indemnified against all Expenses actually and reasonably incurred by him or on his behalf in connection therewith. Section 7. Advancement of Expenses. The Company shall advance all reasonable Expenses incurred by or on behalf of Indemnitee in connection with any Proceeding within ten days after the receipt by the Company of a statement or statements from Indemnitee requesting such advance or advances from time to time, whether prior to or after final disposition of such Proceeding. Such statement or statements shall reasonably evidence the Expenses incurred by Indemnitee and shall include or be preceded or accompanied by an undertaking by or on behalf of Indemnitee to repay any Expenses advanced if it shall ultimately be determined that Indemnitee is not entitled to be indemnified against such Expenses. Section 8. Procedure For Determination Of Entitlement to Indemnification. (a) To obtain indemnification under this Agreement, Indemnitee shall submit to the Company a written request, including therein or therewith such documentation and information as is reasonably available to Indemnitee and is reasonably necessary to determine whether and to what extent Indemnitee is entitled to indemnification. The Secretary of the Company shall, promptly upon 2 receipt of such a request for indemnification, advise the Board of Directors in writing that Indemnitee has requested indemnification. (b) Upon written request by Indemnitee for indemnification pursuant to the first sentence of Section 8(a) hereof, a determination, if required by applicable law, with respect to Indemnitee's entitlement thereto shall be made in the specific case: (i) if a Change in Control (as hereinafter defined) shall have occurred, by Independent Counsel (as hereinafter defined) in a written opinion to the Board of Directors, a copy of which shall be delivered to Indemnitee; or (ii) if a Change of Control shall not have occurred, (A) by the Board of Directors by a majority vote of a quorum consisting of Disinterested Directors (as hereinafter defined), or (B) if a quorum of the Board of Directors consisting of Disinterested Directors is not obtainable or, even if obtainable, such quorum of Disinterested Directors so directs, by Independent Counsel in a written opinion to the Board of Directors, a copy of which shall be delivered to Indemnitee or (C) if so directed by the Board of Directors, by the stockholders of the Company; and, if it is so determined that Indemnitee is entitled to indemnification, payment to Indemnitee shall be made within ten (10) days after such determination. Indemnitee shall cooperate with the person, persons or entity making such determination with respect to Indemnitee's entitlement to indemnification, including providing to such person, persons or entity upon reasonable advance request any documentation or information which is not privileged or otherwise protected from disclosure and which is reasonably available to Indemnitee and reasonably necessary to such determination. Any costs or expenses (including attorneys' fees and disbursements) incurred by Indemnitee in so cooperating with the person, persons or entity making such determination shall be borne by the Company (irrespective of the determination as to Indemnitee's entitlement to indemnification) and the Company hereby indemnifies and agrees to hold Indemnitee harmless therefrom. (c) In the event the determination of entitlement to indemnification is to be made by Independent Counsel pursuant to Section 8(b) hereof, the Independent Counsel shall be selected as provided in this Section 8(c). If a Change of Control shall not have occurred, the Independent Counsel shall be selected by the Board of Directors, and the Company shall give written notice to Indemnitee advising him of the identity of the Independent Counsel so selected. If a Change of Control shall have occurred, the Independent Counsel shall be selected by Indemnitee (unless Indemnitee shall request that such selection be made by the Board of Directors, in which event the preceding sentence shall apply), and Indemnitee shall give written notice to the Company advising it of the identity of the Independent proceedings Counsel so selected. In either event, Indemnitee or the Company, as the case may be, may, within 10 days after such written notice of selection shall have been given, deliver to the Company or to Indemnitee, as the case may be, a written objection to such selection; provided, however, that such objection may be asserted only on the ground that the Independent Counsel so selected does not meet the requirements of Independent Counsel as defined in Section 17 of this Agreement, and the objection shall set forth with particularity the factual basis of such assertion. If such written objection is so made and substantiated, the Independent Counsel so selected may not serve as Independent Counsel unless and until such objection is withdrawn or a court has determined that such objection is without merit. If, within 20 days after submission by Indemnitee of a written request for indemnification pursuant to Section 8(a) hereof, no Independent Counsel shall have been selected and not objected to, either the Company or Indemnitee may petition the Court of Chancery of the State of Delaware or other court of competent jurisdiction for resolution of any objection which shall have been made by the Company or Indemnitee to the other's selection of Independent Counsel and/or for the appointment as Independent Counsel of a person selected by the Court or by such other person as the Court shall designate, and the person with respect to whom all objections are so resolved or the person so appointed shall act as Independent Counsel under Section 8(b) hereof. The Company shall pay any and all reasonable fees and expenses of Independent 3 Counsel incurred by such Independent Counsel in connection with acting pursuant to Section 8(b) hereof, and the Company shall pay all reasonable fees and expenses incident to the procedures of this Section 8(c), regardless of the manner in which such Independent Counsel was selected or appointed. Upon the due commencement of any judicial proceeding or arbitration pursuant to Section 10(a)(iii) of this Agreement, Independent Counsel shall be discharged and relieved of any further responsibility in such capacity (subject to the applicable standards of professional conduct then prevailing). Section 9. Presumptions and Effect of Certain Proceedings. (a) If a Change of Control shall have occurred, in making a determination with respect to entitlement to indemnification hereunder, the person or persons or entity making such determination shall presume that Indemnitee is entitled to indemnification under this Agreement if Indemnitee has submitted a request for indemnification in accordance with Section 8(a) of this Agreement, and the Company shall have the burden of proof to overcome that presumption in connection with the making by any person, persons or entity of any determination contrary to that presumption. (b) The termination of any Proceeding or of any claim, issue or matter therein, by judgment, order, settlement or conviction, or upon a plea of nolo contendere or its equivalent, shall not (except as otherwise expressly provided in this Agreement) of itself adversely affect the right of Indemnitee to indemnification or create a presumption that Indemnitee did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the Company or, with respect to any criminal Proceeding, that Indemnitee had reasonable cause to believe that his conduct was unlawful. Section 10. Remedies of Indemnitee. (a) In the event that (i) a determination is made pursuant to Section 8 of this Agreement that Indemnitee is not entitled to indemnification under this Agreement, (ii) advancement of Expenses is not timely made pursuant to Section 7 of this Agreement, (iii) no determination of entitlement to indemnification shall have been made pursuant to Section 8(b) of this Agreement within 90 days after receipt by the Company of the request for indemnification, (iv) payment of indemnification is not made pursuant to Section 5 or 6 of this Agreement within ten (10) days after receipt by the Company of a written request therefor, or (v) payment of indemnification is not made within ten (10) days after a determination has been made that Indemnitee is entitled to indemnification, Indemnitee shall be entitled to an adjudication in an appropriate court of the State of Delaware, or in any other court of competent jurisdiction, of his entitlement to such indemnification or advancement of Expenses. Alternatively, Indemnitee, at his option, may seek an award in arbitration to be conducted by a single arbitrator pursuant to the Commercial Arbitration Rules of the American Arbitration Association. Indemnitee shall commence such proceeding seeking an adjudication or an award in arbitration within 180 days following the date on which Indemnitee first has the right to commence such proceeding pursuant to this Section 10(a); provided, however, that the foregoing clause shall not apply in respect of a proceeding brought by Indemnitee to enforce his rights under Section 5 of this Agreement. (b) In the event that a determination shall have been made pursuant to Section 8(b) of this Agreement that Indemnitee is not entitled to indemnification, any judicial proceeding or arbitration commenced pursuant to this Section 10 shall be conducted in all respects as a de novo trial, or arbitration, on the merits and Indemnitee shall not be prejudiced by reason of that adverse determination. If a Change of Control shall have occurred, in any judicial proceeding or arbitration 4 commenced pursuant to this Section 10 the Company shall have the burden of proving that Indemnitee is not entitled to indemnification or advancement of Expenses, as the case may be. (c) If a determination shall have been made pursuant to Section 8(b) of this Agreement that Indemnitee is entitled to indemnification, the Company shall be bound by such determination in any judicial proceeding or arbitration commenced pursuant to this Section 10, absent (i) a misstatement by Indemnitee of a material fact, or an omission of a material fact necessary to make Indemnitee's statement not materially misleading, in connection with the request for indemnification, or (ii) a prohibition of such indemnification under applicable law. (d) In the event that Indemnitee, pursuant to this Section 10, seeks a judicial adjudication of or an award in arbitration to enforce his rights under, or to recover damages for breach of , this Agreement, Indemnitee shall be entitled to recover from the Company, and shall be indemnified by the Company against, any and all expenses (of the types described in the definition of Expenses in Section 17 of this Agreement) actually and reasonably incurred by him in such judicial adjudication or arbitration, but only if he prevails therein. If it shall be determined in said judicial adjudication or arbitration that Indemnitee is entitled to receive part but not all of the indemnification or advancement of expenses sought, the expenses incurred by Indemnitee in connection with such judicial adjudication or arbitration shall be appropriately prorated. Section 11. Non-Exclusivity; Survival of Rights; Insurance; Subrogation. (a) The rights of indemnification and to receive advancement of Expenses as provided by this Agreement shall not be deemed exclusive of any other rights to which Indemnitee may at any time be entitled under applicable law, the Certificate of Incorporation, the By-Laws, any agreement, a vote of stockholders or a resolution of directors, or otherwise. No amendment, alteration or repeal of this Agreement or of any provision hereof shall limit or restrict any right of Indemnitee under this Agreement in respect of any action taken or omitted by such Indemnitee in his Corporate Status prior to such amendment, alteration or repeal. (b) To the extent that the Company maintains an insurance policy or policies providing liability insurance for directors, officers, employees, or agents of the Company or of any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise which such person serves at the request of the Company, Indemnitee shall be covered by such policy or policies in accordance with its or their terms to the maximum extent of the coverage available for any such director, officer, employee or agent under such policy or policies. (c) In the event of any payment under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of Indemnitee, who shall execute all papers required and take all action necessary to secure such rights, including execution of such documents as are necessary to enable the Company to bring suit to enforce such rights. (d) The Company shall not be liable under this Agreement to make any payment of amounts otherwise indemnifiable hereunder if and to the extent that Indemnitee has otherwise actually received such payment under any insurance policy, contract, agreement or otherwise. Section 12. Duration of Agreement. This Agreement shall continue until and terminate upon the later of: (a) 10 years after the date that Indemnitee shall have ceased to serve as a director, officer, employee, or agent of the Company or of any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise which Indemnitee served at the request of the Company; or (b) the final termination of any Proceeding then pending in respect of which Indemnitee 5 is granted rights of indemnification or advancement of expenses hereunder and of any proceeding commenced by Indemnitee pursuant to Section 10 of this Agreement relating thereto. This Agreement shall be binding upon the Company and its successors and assigns and shall inure to the benefit of Indemnitee and his heirs, executors and administrators. Section 13. Severability. If any provision or provisions of this Agreement shall be held to be invalid, illegal or unenforceable for any reason whatsoever: (a) the validity, legality and enforceability of the remaining provisions of this Agreement (including without limitation, each portion of any Section of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that is not itself invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby; and (b) to the fullest extent possible, the provisions of this Agreement (including, without limitation, each portion of any Section of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that is not itself invalid, illegal or unenforceable) shall be construed so as to give effect to the intent manifested thereby. Section 14. Exception to Right of Indemnification or Advancement of Expenses. Notwithstanding any other provision of this Agreement, Indemnitee shall not be entitled to indemnification or advancement of Expenses under this Agreement with respect to any Proceeding brought by Indemnitee, or any claim therein prior to a Change in Control, unless the bringing of such Proceeding or making of such claim shall have been approved by the Board of Directors. Section 15. Identical Counterparts. This Agreement may be executed in one or more counterparts, each of which shall for all purposes be deemed to be an original but all of which together shall constitute one and the same Agreement. Only one such counterpart signed by the party against whom enforceability is sought needs to be produced to evidence the existence of this Agreement. Section 16. Headings. The headings of the paragraphs of this Agreement are inserted for convenience only and shall not be deemed to constitute part of this Agreement or to affect the construction thereof. Section 17. Definitions. For purposes of this Agreement: (a) "CHANGE IN CONTROL" means a change in control of the Company occurring after the Effective Date of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A (or in response to any similar item on any similar schedule or form) promulgated under the Securities Exchange Act of 1934 (the "ACT"), whether or not the Company is then subject to such reporting requirement; provided, however, that, without limitation, such a Change in Control shall be deemed to have occurred if after the Effective Date (i) any person (as such term is used in Sections 13(d) and 14(d) of the Act) is or becomes the "beneficial owner" (as defined Rule 13d-3 under the Act), directly or indirectly, of securities of the Company representing 20% or more of the combined voting power of the Company's then outstanding securities without the prior approval of at least two-thirds of the members of the Board of Directors in office immediately prior to such person attaining such percentage interest; (ii) there occurs a proxy contest, or the Company is a party to a merger, consolidation, sale of assets, plan of liquidation or other reorganization not approved by at least two-thirds of the members of the Board of Directors then in office, as a consequence of which members of the Board of Directors in office immediately prior to such transaction or event constitute less than a majority of the Board of Directors thereafter; or (iii) during any period of two consecutive years, other than as a result of an event described in clause (a) (ii) of this Section 17, individuals who at the beginning of such period constituted the Board of Directors (including for this purpose any new director whose election or nomination for election by 6 the Company's stockholders was approved by a vote of at least two-thirds of the directors then still in office who were directors at the beginning of such period) cease for any reason to constitute at least a majority of the Board of Directors. (b) "CORPORATE STATUS" describes the status of a person who is or was a director, officer, employee or agent of the Company or of any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise which such person is or was serving at the request of the Company. (c) "DISINTERESTED DIRECTOR" means a director of the Company who is not and was not a party to the Proceeding in respect of which indemnification is sought by Indemnitee. (d) "EFFECTIVE DATE" means May 30, 2002. (e) "EXPENSES" shall include all reasonable attorneys' fees, retainers, court costs, transcript costs, fees of experts, witness fees, travel expenses, duplicating costs, printing and binding costs, telephone charges, postage, delivery service fees, and all other disbursements or expenses of the types customarily incurred in connection with prosecuting, defending, preparing to prosecute to defend, investigating, or being or preparing to be a witness in a Proceeding. (f) "INDEPENDENT COUNSEL" means a law firm, or a member of a law firm, that is experienced in matters of corporation law and neither presently is, nor in the past five years has been, retained to represent: (i) the Company or Indemnitee in any matter material to either such party, or (ii) any other party to the Proceeding giving rise to a claim for indemnification hereunder. Notwithstanding the foregoing, the term "Independent Counsel" shall not include any person who, under the applicable standards of professional conduct then prevailing, would have a conflict of interest in representing either the Company or Indemnitee in an action to determine Indemnitee's rights under this Agreement. (g) "PROCEEDING" includes any action, suit, arbitration, alternate dispute resolution mechanism, investigation, administrative hearing or any other proceeding, whether civil, criminal, administrative or investigative, except one (i) initiated by an Indemnitee pursuant to Section 10 of this Agreement to enforce his rights under this Agreement (ii) pending on or before the Effective Date or (iii) involving any act or omission occurring prior to September 2, 1987. Section 18. Modification and Waiver. No supplement, modification or amendment of this Agreement shall be binding unless executed in writing by both of the parties hereto. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provisions hereof (whether or not similar) nor shall such waiver constitute a continuing waiver. Section 19. Notice by Indemnitee. Indemnitee agrees promptly to notify the Company in writing upon being served with any summons, citation, subpoena, complaint, indictment, information or other document relating to any Proceeding or matter which may be subject to indemnification or advancement of Expenses covered hereunder. Section 20. Notices. All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given if (i) delivered by hand and receipted for by the party to whom said notice or other communication shall have been directed, or (ii) mailed by certified or registered mail with postage prepaid, on the third business day after the date on which it is so mailed: 7 (a) If to Indemnitee, to: John P. Dubinsky --------------------- --------------------- --------------------- (b) If to the Company to: Insituform Technologies, Inc. 702 Spirit 40 Park Drive Chesterfield, Missouri 63005 or to such other address as may have been furnished to Indemnitee by the Company or to the Company by Indemnitee, as the case may be. Section 21. Governing Law. The parties agree that this Agreement shall be governed by, and construed and enforced in accordance with, the laws of the State of Delaware. Section 22. Miscellaneous. Use of the masculine pronoun shall be deemed to include usage of the feminine pronoun where appropriate. IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the day and year first above written. ATTEST: INSITUFORM TECHNOLOGIES, INC. BY BY -------------------------------- ----------------------------------- Thomas A. A. Cook, Secretary Anthony W. Hooper Chairman of the Board and President INDEMNITEE: ------------------------------------- John P. Dubinsky 8 EX-99.1 6 c71101exv99w1.txt CERTIFICATION OF ANTHONY W. HOOPER, SECTION 906 EXHIBIT 99.1 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the quarterly report of Insituform Technologies, Inc. (the "COMPANY") on Form 10-Q for the period ending June 30, 2002 as filed with the Securities and Exchange Commission on the date hereof (the "FORM 10-Q"), I, Anthony W. Hooper, Chairman, President and Chief Executive Officer of the Company, hereby certify, as of the date hereof, that: (1) the Form 10-Q fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ Anthony W. Hooper ---------------------------------------- Anthony W. Hooper, Chairman, President and Chief Executive Officer The foregoing certification is being furnished solely pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to accompany the Form 10-Q and is not being filed as part of the Form 10-Q or as a separate disclosure document. EX-99.2 7 c71101exv99w2.txt CERTIFICATION OF JOSEPH A. WHITE, SECTION 906 Exhibit 99.2 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the quarterly report of Insituform Technologies, Inc. (the "Company") on Form 10-Q for the period ending June 30, 2002 as filed with the Securities and Exchange Commission on the date hereof (the "FORM 10-Q"), I, Joseph A. White, Vice President and Chief Financial Officer of the Company, hereby certify, as of the date hereof, that: (1) the Form 10-Q fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ Joseph A. White ------------------------------------------ Joseph A. White, Vice President and Chief Financial Officer The foregoing certification is being furnished solely pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to accompany the Form 10-Q and is not being filed as part of the Form 10-Q or as a separate disclosure document. -----END PRIVACY-ENHANCED MESSAGE-----