PERMA-PIPE INTERNATIONAL HOLDINGS, INC.
10-Ks and 10-Qs
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UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
SCHEDULE
14A
Proxy
Statement Pursuant to Section 14(a) of the Securities
Exchange
Act of 1934
Filed by
the
Registrant [x]
Filed by
a Party other than the
Registrant [
]
Check the
appropriate box:
[
] Preliminary
Proxy Statement
[
] Confidential,
for Use of the Commission Only (as permitted by Rule 14a-6(e) (2))
[x] Definitive
Proxy Statement
[
] Definitive
Additional Materials
[
] Soliciting
Material Pursuant to § 240.14a-12
MFRI,
INC.
(name of
registrant as specified in its charter)
_________________________________________
(name of
person(s) filing proxy statement, if other than registrant)
Payment
of Filing Fee (Check the appropriate box):
[x] No
fee required.
[
] Fee computed
on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title
of each class of securities to which transaction
applies: _________
(2) Aggregate
number of securities to which transaction
applies: _________
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(3)
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Per
unit price or other underlying value of transaction
_________
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computed pursuant to Exchange Act
Rule 0-11:
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(4) Proposed
maximum aggregate value of
transaction: _________
(5) Total
fee
paid:
_________
[
] Fee paid
previously with preliminary materials
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[
]
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Check
box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its
filing.
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(1) Amount
previously
paid: $ _________
(2) Form,
Schedule or Registration Statement
No.: _________
(3) Filing
Party:
_________
(4) Date
Filed: _________
7720
N. Lehigh Avenue
Niles,
Illinois 60714
June 8,
2010
NOTICE
OF ANNUAL MEETING OF STOCKHOLDERS
NOTICE IS
HEREBY GIVEN that the annual meeting of stockholders of MFRI, Inc. (the
“Company”) will be held at
The
Rosemont Hotel at O’Hare, 5550 North River Road, Rosemont, Illinois on
Wednesday, June 23, 2010, at 10:00 a.m., Chicago time, for the following
purposes:
1. to elect
directors;
2. to vote
on the 2009 Non-Employee Directors Stock Option Plan;
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3.
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to
ratify the appointment of Grant Thornton LLP as the Company’s independent
registered public accounting firm;
and
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4.
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to
transact such other business as may properly come before the
meeting.
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By order of the Board of
Directors,
Michael D. Bennett
Secretary
____________
PROXY
STATEMENT
For
the Annual Meeting of Stockholders of MFRI, Inc.
June
23, 2010
This
Proxy Statement is furnished in connection with the solicitation of proxies on
behalf of the Board of Directors (the “Board”) of MFRI, Inc. for use at the
annual meeting of stockholders to be held on June 23, 2010
at 10:00 a.m., Chicago time, at
The Rosemont Hotel at O’Hare, 5550 North River Road, Rosemont, Illinois,
and at any adjournment thereof. This Proxy Statement and the
form of proxy are first being mailed on or about June 8, 2010 to stockholders of
the Company. Only stockholders of record at the close of business on
May 3, 2010 will be entitled to notice of and to vote at the
meeting. On the record date, there were 6,839,183 shares of common
stock outstanding. There are no other voting
securities. Each stockholder is entitled to one vote per share for
the election of directors, as well as on all other matters. If the
accompanying proxy form is signed and returned, the shares represented thereby
will be voted; such shares will be voted in accordance with the directions on
the proxy form or, in the absence of direction as to any proposal, they will be
voted FOR the election of the director nominees, except to the extent authority
to vote is withheld, FOR adoption of the 2009 Non-Employee Directors Stock
Option Plan, and FOR ratification of the appointment of Grant Thornton LLP as
the Company’s independent registered public accounting firm. The
stockholder may revoke the proxy at any time prior to the voting thereof by
giving written notice of such revocation to the Company in care of the Corporate
Secretary at MFRI, Inc., 7720 N. Lehigh Avenue, Niles, Illinois 60714, by
executing and duly and timely delivering a subsequent proxy to the same address
shown immediately above, or by attending the meeting and voting in
person.
In case
any nominee named herein for election as a director is not available when the
election occurs, proxies in the accompanying form may be voted for a substitute
as well as for the other persons named herein. The Company expects
all nominees to be available and knows of no matters to be brought before the
meeting other than those referred to in the accompanying notice of annual
meeting. If, however, any other matters come before the meeting, it
is intended that proxies in the accompanying form will be voted thereon in
accordance with the judgment of the persons voting such proxies.
The
presence at the annual meeting, in person or by proxy, of the holders of a
majority of the outstanding shares of common stock of the Company (“Common
Stock”) shall constitute a quorum. Abstentions will be treated as
shares that are present and entitled to vote for purposes of determining the
presence of a quorum but as unvoted for purposes of determining the approval of
any matter submitted to the stockholders for a vote. If a broker
indicates on the proxy that it does not have discretionary authority as to
certain shares to vote on a particular matter, those shares will not be
considered as present and entitled to vote with respect to that
matter.
A
plurality of the votes of the shares present in person or represented by proxy
at the meeting will be required to elect the directors. The adoption
of the 2009 Non-Employee Directors Stock Option Plan and the ratification of the
appointment of Grant Thornton as our independent registered public accounting
firm for fiscal 2010 each requires the affirmative vote of a majority of the
votes present in person or represented by proxy at the annual meeting on such
matter in order to be approved.
In
addition to the use of the mail, proxies may be solicited by directors,
officers, or employees of the Company in person, by electronic mail, by
telephone or by other means. The cost of the proxy solicitations will
be paid by the Company.
On behalf
of your Board of Directors, thank you for your continued support of MFRI,
Inc.
The
Company’s fiscal year ends January 31. Years described as 2009, 2008
and 2007 are the fiscal years ended January 31, 2010, 2009 and 2008,
respectively.
Important
Notice Regarding the Availability of Proxy Materials for the Shareholder Meeting
to be held on June 23, 2010.
This Proxy Statement and the Company’s 2009 Annual Report are available
on the Company’s Web site at http://www.mfri.com/investorcenter/araps.aspx.
2
PRINCIPAL
STOCKHOLDERS AND SECURITY OWNERSHIP OF MANAGEMENT
Based on
filings made under Section 13(d) and Section 13(g) of the Securities Exchange
Act of 1934, as amended (“Exchange Act”), the following table sets forth the
only persons known to the Company to be the beneficial owner of more than 5% of
the outstanding shares of Common Stock, the name and address of such owner, the
number of shares of Common Stock beneficially owned, the nature of such
ownership, and the percentage such ownership is of the outstanding shares of
Common Stock.
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Name
and Address of
Beneficial Owner
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Amount
and Nature of
Beneficial Ownership
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Percent
of
Outstanding Shares
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Dimensional
Fund Advisors LP
Palisades
West
Building
One
6300
Bee Cave Road
Austin,
Texas, 78746
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579,036
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(1)
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8.5%
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Heartland
Advisors, Inc.
789
North Water Street
Milwaukee,
WI 53202
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576,000
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(2)
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8.4%
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David
Unger
7720
N. Lehigh Avenue
Niles,
IL 60714
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511,609
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(3)
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7.5%
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Tontine
Capital Partners, L.P.
55
Railroad Avenue
Greenwich,
CT 06830
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502,773
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(4)
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7.4%
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Edward
W. Wedbush
P.O.
Box 30014
Los
Angeles, CA 90030-0014
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433,612
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(5)
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6.3%
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Babson
Capital Management LLC
470
Atlantic Avenue
Boston,
MA 02210-2208
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415,940
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(6)
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6.1%
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_________
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(1)
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According
to a Schedule 13G dated December 31, 2009, Dimensional Fund Advisors LP, ,
in its capacity as investment adviser, may be deemed the beneficial owner
of 579,036 shares of Common Stock which are owned by investment advisory
client(s) to certain other commingled group trusts and separate
accounts. Dimensional disclaims beneficial ownership of such
securities.
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(2)
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According
to a Schedule 13G/A dated December 31, 2009, William J. Nasgovitz,
president and control person of Heartland Advisors, Inc. in his capacity
as investment adviser, may be deemed the beneficial owner of 576,000
shares of Common Stock, which are owned by investment advisory
client(s). Mr. Nasgovitz disclaims beneficial ownership of any
shares reported on the Schedule.
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(3)
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Includes
11,847 shares held in joint tenancy with Reporting Person’s spouse,
5,923.5 of which the Reporting Person disclaims beneficial
ownership. Includes 12,454 shares owned by the Reporting
Person’s spouse all of which the Reporting Person disclaims beneficial
ownership. Also includes 10,750 shares that are subject to
stock options granted by the Company that are exercisable on March 31,
2010, or will become, exercisable within 60 days
thereafter.
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(4)
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According
to a Schedule 13 G/A dated December 31, 2009, Tontine Overseas Associates,
L.L.C. (“TOA”) owns 99,384 shares of Common Stock and serves as investment
manager, and Tontine Capital Partners, L.P. (“TCP”) owns 403,389 shares of
Common Stock. The General Partner of TCP is Tontine Capital
Management, L.L.C. (“TCM”). As general partner of TCP, TCM has
the power to direct the affairs of TCP, including decisions respecting the
disposition of the proceeds from the sale of the shares of the
Company. Jeffrey L. Gendell is the Managing Member of TCM and
TOA and in that capacity directs their operations. Thus, Mr.
Gendell may be deemed the beneficial owner of the Common Stock owned by
each of TOA and TCP.
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3
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(5)
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According
to a Schedule 13G/A dated December 31, 2009 (“WI Schedule 13G”), Wedbush,
Inc. (“WI”) owns 226,949 shares of Common Stock. Edward W.
Wedbush is the chairman of WI and owns a majority of the outstanding
shares of WI and, thus, may be deemed the beneficial owner (but disclaims
ownership of such shares). According to WI Schedule 13G,
Wedbush Securities (“WS”) owns 2,300 shares of Common
Stock. Edward W. Wedbush is the president of WS. WI
owns all shares of WS, and thus Mr. Wedbush may be deemed beneficial owner
of the Common Stock owned by WS. According to the WI Schedule
13G, Mr. Wedbush, in his own name, owns 172,651 shares of Common
Stock.
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(6)
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According
to a Schedule 13G dated December 31, 2009, Babson Capital Management LLC,
in its capacity as investment adviser, may be deemed the beneficial owner
of 415,940 shares of Common Stock, which are owned by investment advisory
client(s).
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The
following table sets forth as of April 15, 2010, certain information concerning
the ownership of Common Stock of each director, nominee, and executive officer
named in the Summary Compensation Table hereof (“Named Executive Officers” or
“NEOs”) and all directors and executive officers of the Company as a
group:
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Name
of Beneficial Owner
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Shares
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Stock
options
exercisable
by
May
31, 2010
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Total
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Percent
of
Outstanding
Shares
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David
Unger
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500,859
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(1)
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10,750
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511,609
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7.5%
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Henry
M. Mautner
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295,469
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(2)
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10,750
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306,219
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4.5%
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Bradley
E. Mautner
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251,405
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(3)
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10,750
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262,155
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3.8%
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Fati
A. Elgendy
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28,925
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(4)
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18,625
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47,550
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*
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Arnold
F. Brookstone
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29,526
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(5)
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2,500
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32,026
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*
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Michael
D. Bennett
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11,364
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(6)
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11,500
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22,864
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*
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Robert
Maffei
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15,900
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(7)
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5,375
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21,275
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*
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Eugene
Miller
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15,000
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(8)
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5,500
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20,500
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*
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Stephen
B. Schwartz
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14,375
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(9)
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2,750
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17,125
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*
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Dennis
Kessler
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10,000
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2,500
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12,500
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*
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Mark
A. Zorko
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5,024
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2,500
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7,524
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*
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Michael
J. Gade
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2,000
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(10)
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2,500
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4,500
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*
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All
directors and executive
officers
as a group (18 persons)
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1,301,847
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19.0%
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*
Less than 1%.
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__________________
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(1)
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Includes
11,847 shares held in joint tenancy with Reporting Person’s spouse,
5,923.5 of which the Reporting Person disclaims beneficial
ownership. Includes 12,454 shares owned by the Reporting
Person’s spouse all of which the Reporting Person disclaims beneficial
ownership.
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(2)
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Includes
105,780 shares held in trust, all of which the Reporting Person disclaims
beneficial ownership.
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(3)
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Includes
200 shares held as custodian for the Reporting Person’s children, all of
which the Reporting Person disclaims beneficial
ownership.
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(4)
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Includes
28,925 shares held in joint tenancy with Reporting Person’s spouse,
14,462.5 of which the Reporting Person disclaims beneficial
ownership.
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(5)
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Includes
29,526 shares held in a trust of which the Reporting Person is
trustee.
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(6)
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Includes
400 shares held by Reporting Person’s spouse, of which the Reporting
Person disclaims beneficial
ownership.
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(7)
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Includes
15,900 shares held in a trust of which the Reporting Person is
trustee.
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(8)
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Includes
15,000 shares held in a trust of which the Reporting Person is
trustee.
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(9)
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Includes
14,375 shares held in a trust of which the Reporting Person is
trustee.
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(10)
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Includes
2,000 shares held in joint tenancy with Reporting Person’s spouse, 1,000
of which the Reporting Person disclaims beneficial
ownership.
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4
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PROPOSAL
1 - ELECTION OF DIRECTORS
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Nine
individuals have been nominated by the Nominating and Corporate Governance
Committee for election to a one-year term at the annual meeting. All
of the nominees were previously elected by the stockholders, and all are
currently serving as directors of the Company.
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Name
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Offices
and Positions, if any,
held with the Company; Age
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First
Became a Director
of
the Company
or a Predecessor
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David
Unger
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Director,
Chairman of the Board and Chief Executive Officer of the Company; Age
75
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1989
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Henry
M. Mautner
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Director
of the Company and Employee; Age 83
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1989
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Bradley
E. Mautner
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Director,
President and Chief Operating Officer of the Company; Age
54
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1995
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Arnold
F. Brookstone
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Director
of the Company; Age 80
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1990
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Eugene
Miller
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Director
of the Company; Age 84
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1990
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Stephen
B. Schwartz
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Director
of the Company; Age 75
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1995
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Dennis
Kessler
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Director
of the Company; Age 71
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1998
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Michael
J. Gade
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Director
of the Company; Age 58
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2009
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Mark
A. Zorko
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Director
of the Company; Age 58
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2009
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Information
is set forth below regarding each nominee’s principal occupations and employment
during at least the past five years, the name and principal business of the
organization in which such occupations and employment were carried on, other
directorships held during at least the past five years, the person’s particular
areas of expertise or other relevant qualifications and the specific experience,
qualifications, attributes or skills that led to the conclusion that the person
should serve as a Director for the Company.
David
Unger has been employed by the Company and its predecessors for his entire
business career, since 1958. He became Chairman of the Board of
Directors and Chief Executive Officer, (“CEO”) of the Company in
1989. He was the President of the Company from 1994 until
2004. Mr. Unger earned a bachelor’s degree in mechanical engineering
from Northwestern University, and a master’s degree in business administration
from Harvard University. During his tenure with MFRI and its
predecessors, the Company has grown from 60 employees to more than 1,500, from
sales of less than $5 million to sales of more than $300 million and from a
Chicago company to a global company. Mr. Unger’s responsibilities
with the Company have included project management, system and product design,
debt and equity financings, merger and acquisition activities, and strategic
planning and execution.
Henry M.
Mautner has been employed by the Company and its predecessors for his entire
business career, since 1949. From 1989 until April 8, 2009, he served
as Vice Chairman of the Company. After his resignation as Vice
Chairman of the Company, he continues in the employ of the Company and acts as a
contact with customers and potential customers, maintains certain union
relations, and advises the Company on corporate policy and
strategy. He earned a bachelor’s degree in mechanical engineering
from the University of Illinois. Mr. Mautner was instrumental in the
Company’s entry into all of its present businesses, and has extensive knowledge
of the Company’s strategies and operations. Henry Mautner is the
father of Bradley E. Mautner.
Bradley
E. Mautner has been employed by the Company and its predecessors in various
executive and administrative capacities since 1978, has served as President and
Chief Operating Officer since December 2004, was Executive Vice President from
December 2002 to December 2004, was Vice President of the Company from December
1996 through December 2002 and has been a Director of the Company since
1995. His experience includes work in both manufacturing and
mechanical contracting. In those areas, he has experience in project
management, sales management, mergers and acquisitions, analysis and procurement
of all types of insurance used to manage risks and
5
employee
benefits, and strategy and business development planning and
execution. He has not served on any other public company Board in the
last five years. He has served on the Board of both private companies
and a not-for-profit organization. He earned a Bachelor of Science in
Mechanical Engineering and Master of Business Administration degree from
Washington University in Saint Louis. Bradley E. Mautner is the son
of Henry M. Mautner.
Arnold F.
Brookstone retired in 1996 as Executive Vice-President - Chief Financial and
Planning Officer of Stone Container Corporation (NYSE), a global manufacturer of
paper and packaging products, having served that company in financial executive
positions for more than 30 years and as Chief Financial Officer for more than 20
years. He has served as a member of a number of corporate boards of
directors, including 25 years with Donnelly Corporation (NYSE), a U.S. based
global manufacturer of automotive products; with Abitibi-Consolidated, Inc.
(NYSE and TSE) (now AbitibiBowater, Inc.), a Canadian based global manufacturer
of pulp and paper products; a public company in Venezuela; a joint venture
company based in Mexico; the U.K. operating subsidiary of a Canadian public
company and a number of privately owned companies. Mr. Brookstone has
continuously served on the Company’s Board since 1990, continuously served as
Audit Committee Chairman from 1990 until 2009, and has continuously served on
all of the Board’s other standing committees since 1990. Mr.
Brookstone’s many years of experience in strategic planning, mergers and
acquisitions, international business, banking and finance, together with his
early years of CPA practice and his legal education, give him valuable insights
and perspectives into MFRI’s domestic and global operations.
Eugene
Miller has been Executive-in-Residence and Adjunct Professor of Florida Atlantic
University for the past 24 years. He served as Vice Chairman of the
Board of Directors and Chief Financial Officer of USG Corporation, a building
materials holding company, from March 1987 until his retirement from that
company as of May 31, 1991. Mr. Miller’s business experience prior to
1987 included service as Vice President of McGraw-Hill, Inc., Senior Vice
President of the New York Stock Exchange, Senior Vice President of CNA Financial
Corporation, CEO of Ideon Group (NYSE), as a business journalist, and as adjunct
professor at the graduate schools of business of New York University and Fordham
University. During the past five years, Mr. Miller served as an
independent director of several privately held companies, and prior to that time
he had served on the boards of both public and private companies. Mr.
Miller has continuously served on the Company’s Board since 1990, continuously
served as Chairman of the Nominating and Corporate Governance Committee and its
predecessor committees from 1990 until 2009, and has continuously served on all
of the Board’s other standing committees since 1990. Mr. Miller’s
fields of particular expertise include finance, strategic planning, investor and
public relations, and marketing, all of which contribute to his value as an MFRI
director.
Stephen
B. Schwartz served as a senior vice president of IBM Corporation from 1990 until
his retirement in 1992. From 1957 to 1990, Mr. Schwartz served in
various capacities for IBM Corporation, including the full range of business
operations: marketing, business and product development, manufacturing,
international activities, quality enhancement, restructuring, acquisitions, and
business unit general management. His responsibilities at IBM
included an assignment in Japan, periods as CEO of Satellite Business Systems
and General Manager of the mid range computer systems business
unit. Prior to five years ago, Mr. Schwartz served as a director of
Niagara Mohawk Power, Western Digital Corporation, and Integrated Surgical
Systems. Mr. Schwartz has continuously served on the Company’s Board
since 1995, continuously served as Compensation Committee Chairman from 1995
until 2009, and has continuously served on all of the Board’s other standing
committees since 1995. Mr. Schwartz’s experience across the full
range of business operations, in general management, and in business abroad
combine to bring a comprehensive perspective to the MFRI Board.
Dennis
Kessler has been a principal with Family Business Innovations LLC since 2000,
specializing in helping families overcome the challenges inherent in mixing
business with family; and President of Kessler Management Consulting, LLC since
February 1998. He advises clients on conflict resolution, strategic
planning, employee recruitment and retention strategies, work/life benefits and
succession planning. From 1964 to February 1998, Mr. Kessler was
employed by Fel-Pro Inc., which manufactured and distributed gaskets, engine
parts and industrial chemicals, and was ranked fourth on Fortune Magazine’s list
of the best companies to work for. Fel-Pro employed 3,000 people in
seven countries, and its sales were approximately $500 million. Mr.
Kessler served Fel-Pro as Co-President, following service as its Vice President
of Engineering, Vice President of Operations, Vice President of Original
Equipment Sales, CEO for International Operations, and President of the Ventures
Group of companies, including Fel-Pro Realty and Fel-Pro Chemical Products
LLP. Prior to the past five years Mr. Kessler had many years of
experience as a member of public company boards, and continues to serve on the
boards of civic and not-for-profit organizations including serving as
President. Mr. Kessler has continuously served on the Company’s Board
since 1998, continuously served as Audit Committee Vice Chairman from 1998 until
2009, has continuously served as Lead Independent Director and Nominating and
Corporate Governance Committee Chairman since 2009, and has
6
continuously
served on all of the Board’s other standing committees since
1998. Mr. Kessler’s experience and background have enabled him to
develop a deep operational and strategic understanding of the Company’s global
business and work force.
Michael
J. Gade is an Executive in Residence at the University of North Texas, and a
Founding Partner of the Challance Group, LLP, providing corporate finance,
marketing and strategic services for clients. From 2003 to 2004, Mr.
Gade was the senior executive for the southwest region of Home Depot, Inc., and
from 2000 to 2003, he was Senior Vice President and Chief Marketing and
Merchandising Officer of 7-Eleven, Inc. Mr. Gade previously served as
Executive Vice President of Strategic Marketing and Development of Associates
First Capital Corporation, and as a Senior Partner of Coopers & Lybrand (now
a part of PriceWaterhouse Coopers). Since May 2005, Mr. Gade has
served as a director of Rent-A-Center, Inc. (NASDAQ), largest rent-to-own
operator in the United States, and of The Crane Group, a privately owned
provider of building and manufacturing products. He serves on the
Audit and Governance Committees of the Rent-A-Center Board, and previously
served on its Compensation Committee. He serves on the Audit
Committee of The Crane Group Board. Mr. Gade has continuously served
on the Company’s Board since April 2009, and has continuously served as
Compensation Committee Chairman and as a member of all of the Board’s other
standing committees since June 2009. Mr. Gade’s experience in finance
and marketing, as an educator, and as a director and board committee member of
other companies brings valuable qualifications to his service as an MFRI Board
member.
Mark A.
Zorko is the Chief Financial Officer and Secretary for Del Global Technologies
Corp., a medical imaging manufacturing company, a position he has held since
September 2006. From 2000 to 2010, he was a CFO Partner at Tatum,
LLC, a professional services firm where he has held CFO positions with public
and private client companies. Mr. Zorko is not currently a director
of any publicly traded company other than MFRI. However, during the
past five years he was a director of Guardian Technologies International, Inc.,
a provider of imaging software for homeland security and healthcare
applications, and of Software International Inc., a provider of application
development and information technology consulting services. Mr. Zorko
is presently a member of the audit committee of Opportunity International, a
microfinance bank, and a member of the finance committee for the Alexian
Brothers Health System. He is a Certified Public
Accountant. Mr. Zorko has continuously served on the Company’s Board
and Audit Committee since April 2009, and has continuously served as Audit
Committee Chairman and as a member of all of the Board’s other standing
committees since June 2009. Mr. Zorko has extensive experience with
international operations, mergers and acquisitions, information technology and
financing, which has enabled him to develop a deep operational understanding of
our global businesses.
PROPOSAL
2 – APPROVAL
OF 2009 NON-EMPLOYEE DIRECTORS STOCK OPTION PLAN
The Board
of Directors believes that ownership of the Company’s shares is important to
help align the director’s interests with those of the Company’s
stockholders. A director stock option plan has been an integral part
of the Company’s approach to incentive compensation for its non-employee
directors. Accordingly, the Board of Directors on June 23, 2009
adopted a stock option plan designated as the “2009 Non-Employee Directors Stock
Option Plan” (the “2009 Directors Plan”) which is intended to replace the 2001
Independent Directors Stock Option Plan (the “2001 Directors Plan”) pursuant to
which no additional shares are available. Each director of the
Company who is not an employee of the Company or any subsidiary of the Company
participates in the 2009 Directors Plan. The Board of Directors
believes that a stock plan is important not only to attract non-employee
directors of high caliber and outstanding capabilities but also to further
enhance the long-term mutuality of interest between the Company’s non-employee
directors and stockholders.
The
following summary description of the 2009 Directors Plan is qualified in its
entirety by reference to the full text of the 2009 Directors Plan that is
attached to this Proxy Statement as Appendix A.
Terms
of the Awards; Shares Available
Options
are granted under the 2009 Directors Plan as follows: (i) an option to purchase
10,000 shares of the Company’s common stock is granted automatically upon a
non-employee director’s first election as a director of the Company; (ii) an
option is granted automatically to non-employee directors upon each date such
non-employee director is re-elected as a director of the Company, commencing
with the annual meeting for the year 2009 to purchase the greater of (x) 1,000
shares of the Company’s common stock or (y) the number of shares subject to
options granted generally to the Company’s Tier 2 Managers (or comparable group
of managers, as determined by the Board of Directors) on such date or, if no
options were granted generally on such date, to such group, as of the most
recent date options were granted to such group; and (iii) the Board of Directors
shall have the discretion to make
7
additional
option grants to non-employee directors from time to time as the Board of
Directors deems necessary or desirable. Authority to grant such
options expires on May 30, 2019. Options granted under the 2009
Directors Plan are not intended to be “incentive stock options.” The
aggregate number of shares which may be sold by the Company pursuant to the 2009
Directors Plan may not exceed 100,000; provided, however, that on May 1, 2010
and each May 1 thereafter until May 1, 2019, the aggregate number of shares that
may be sold pursuant to awards made pursuant to the 2009 Directors Plan will be
increased by the number equal to 0.35% of the aggregate number of shares of
common stock outstanding as of the last day of the most recently ended fiscal
year of the Company.
Options
granted under the 2009 Directors Plan will expire approximately, but not more
than, ten years from the date of the grant, and the purchase price per share to
be specified in each option will be the fair market value of a share of the
Company’s common stock on the date the option is granted. Options
granted under the 2009 Directors Plan are not transferable other than by will or
the laws of descent and distribution. The 2009 Directors Plan permits
payment to the Company upon the exercise of stock options granted under the 2009
Directors Plan to be made in cash or in common stock of the Company or a
combination thereof. Each share of common stock received by the
Company in payment of the purchase price specified in a stock option will be
valued at its fair market value on the date of exercise.
The
exercise of options may be subject to such terms and conditions not inconsistent
with the 2009 Directors Plan as the Company may specify in granting or amending
such options or rights and such terms and conditions may differ from the terms
and conditions described herein. Upon the exercise of any option, the
Company may deliver either treasury shares or authorized but previously unissued
shares. If any option, or any portion of any option, under the 2009
Directors Plan expires or terminates unexercised, becomes unexercisable or is
forfeited or otherwise terminated, surrendered or cancelled as to any shares,
such shares shall thereafter be available for further grants under the 2009
Directors Plan.
Options
will vest in four equal annual cumulative installments, with the first
installment vesting approximately one year after the date of
grant. All installments vest in the event there is a change in
control of the Company. Options may not be exercised until they
vest. In addition, options that have vested may be exercised by an
optionee after the date he ceases to be a director of the Company until the
expiration date of the option, except that any options that have not been
exercised at the time an optionee ceases to be a director because he was removed
for cause will terminate on the date of such removal. An optionee’s
estate or an optionee may exercise an option that has not vested after death or
permanent disability until the expiration date of the option.
The Board
of Directors may in its discretion prescribe such provisions and interpretations
not inconsistent with the 2009 Directors Plan as it deems necessary or desirable
for the implementation of the 2009 Directors Plan. The Board of
Directors may amend the 2009 Directors Plan without stockholder approval, except
any amendment that would (i) materially increase the benefits accruing to
participants under the 2009 Directors Plan, (ii) materially increase the number
of shares which may be issued under the 2009 Directors Plan, (iii) materially
expand the class of participants eligible to participate in the 2009 Directors
Plan, or (iv) expand the types of options or awards provided under the 2009
Directors Plan, must be approved by a vote of the stockholders of the
Company.
At any
time when an optionee must pay to the Company an amount required to be withheld
under applicable income tax laws in connection with the exercise of an option,
the optionee may satisfy this obligation by electing (“Election”) to have the
Company withhold shares of common stock having a value equal to the amount
required to be withheld. The value of the shares to be withheld is
based on the fair market value of such shares on the date that the amount of tax
to be withheld is determined (“Tax Date”). Each Election must be made
prior to the Tax Date. The Board of Directors may disapprove of any
Election or may suspend or terminate the right to make Elections. An
Election is irrevocable.
Capital
Adjustments
In the
event of a stock dividend, stock split, or combination of other reduction in the
number of issued shares of common stock of the Company, under the 2009 Directors
Plan, the Board of Directors must make such adjustments in the number of
unpurchased shares subject to the 2009 Directors Plan, the number of shares
subject to options outstanding under the 2009 Directors Plan and the exercise
price specified in options outstanding under the 2009 Directors Plan as it
determines to be appropriate and equitable. In the event of a merger,
consolidation, reorganization or dissolution of the Company, or the sale or
exchange of substantially all of the Company’s assets, (i) the rights under
options outstanding under the 2009 Directors Plan will terminate, except to the
extent and subject to such adjustments as may be provided by the Board of
Directors or by the terms of the plan or agreement of merger,
consolidation,
8
reorganization,
dissolution or sale or exchange of such assets, and (ii) the Company must notify
the holders of outstanding options of such event at least 30 days prior to the
effective date of such event.
Certain
Federal Income Tax Consequences
Upon the
grant of an option under the 2009 Directors Plan, an optionee will not realize
taxable income for federal income tax purposes. Upon the exercise of
an option granted under the 2009 Directors Plan, the optionee will realize
compensation taxable as ordinary income in an amount equal to the excess of the
fair market value of the stock acquired, determined at the time of exercise,
over the option price. The Company will be entitled to a federal
income tax deduction to the extent the optionee realizes compensation taxable as
ordinary income for federal income tax purposes.
The
Company recognizes expense, based on the grant date fair value of the option, on
a straight-line basis over the four-year vesting period of the
option. The fair value of each option award is estimated on the date
of grant using the Black-Scholes Merton option-pricing model.
New
Plan Benefits
We
currently have six non-employee directors who participate in the 2009 Directors
Plan. The following table reflects option awards granted to our
non-employee directors pursuant to our 2009 Directors Plan in fiscal year
2009. The table does not include (i) dollar values for the awards
because they are presently not determinable or (ii) any options granted to
directors under the 2001 Directors Plan. As of May 10, 2010, the
closing price per share of our common stock was $6.73. If the 2009
Directors Plan is not approved by the stockholders, the options granted pursuant
to the 2009 Directors Plan will be null and void and no future options will be
granted under the 2009 Directors Plan.
2009
Non-Employee Directors Stock Option Plan
|
Name and Position
|
Number of Option Shares
|
|
Dennis
Kessler
|
2,500
|
|
Arnold
F. Brookstone
|
2,500
|
|
Eugene
Miller
|
2,500
|
|
Stephen
B. Schwartz
|
2,500
|
|
Michael
J. Gade
|
2,500
|
|
Mark
A. Zorko
|
2,500
|
|
Non-Employee
Director Group
|
15,000
|
Vote
Required
The
affirmative vote of a majority of the shares present or represented by proxy and
entitled to vote for this proposal at the Annual Meeting is required to approve
the 2009 Directors Plan.
THE BOARD
OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE FOR APPROVAL OF THE
2009 NON-EMPLOYEE DIRECTORS STOCK OPTION PLAN.
PROPOSAL
3 – RATIFICATION OF APPOINTMENT OF GRANT THORNTON LLP
The Audit
Committee has appointed Grant Thornton LLP (“Grant Thornton”) as the Company’s
principal independent registered public accounting firm for the year ending
January 31, 2011, and the Board of Directors and the Audit Committee recommend
that the stockholders ratify this appointment.
While the
Audit Committee is responsible for the appointment, discharge, compensation and
oversight of the independent registered public accounting firm, the Company is
requesting, as a matter of good corporate governance, that the stockholders
ratify the appointment of Grant Thornton. If the stockholders fail to
ratify the appointment, the Audit Committee will consider the appointment of
other independent registered public accounting firms, and may retain Grant
Thornton or another firm without re-submitting the matter to the
stockholders. Even if the appointment is
9
ratified,
the Audit Committee may, at its discretion, appoint a different independent
registered public accounting firm at any time during the year if it determines
that such change would be in the best interests of the Company and its
stockholders.
CORPORATE
GOVERNANCE AND THE BOARD OF DIRECTORS
Director
Independence
The
Company’s Board of Directors consists of nine directors, each of whom is being
nominated for re-election at the annual meeting. The Board of
Directors has determined that six of the directors are “independent directors”
within the meaning of the Nasdaq Stock Market rules. The other three
directors, David Unger, Henry M. Mautner and Bradley E. Mautner, are employees
of the Company and do not meet the definition of “independent” under the Nasdaq
Stock Market rules.
Board
of Directors’ Meetings and Committees
The Board
of Directors held five meetings during 2009. The Board of Directors
has three standing committees: the Audit Committee, the Nominating and Corporate
Governance Committee, and the
Compensation Committee.
Audit
Committee
The Audit
Committee consists of Mark A. Zorko (Chairman), Arnold F. Brookstone (Deputy
Chairman), Dennis Kessler, Eugene Miller, Michael J. Gade, and Stephen B.
Schwartz. The Board of Directors has determined that all members of
the Audit Committee are “independent” as that term is defined in the Nasdaq
Stock Market rules. The Board of Directors has also determined that
four of the members of the Audit Committee, Mr. Zorko, Mr. Brookstone, Mr. Gade
and Mr. Miller qualify as “audit committee financial experts” as defined in Item
407(d) of Regulation S-K. During 2009, the Audit Committee held five
meetings.
The Board
of Directors has adopted and approved a charter for the Audit
Committee. Under the charter, the Audit Committee’s responsibilities
include, among other things:
|
·
|
Selecting
and discharging of the independent auditors and approving the compensation
of the independent auditors;
|
|
·
|
Reviewing
independence with the independent auditors periodically, no less
frequently than annually, including confirmation that no prohibited
services were provided by the independent auditors or their affiliates,
and obtaining on an annual basis written confirmation of the independence
of the independent auditors;
|
|
·
|
Considering
the results of the review of the interim financial statements by the
independent auditors;
|
|
·
|
Reviewing
the Company’s compliance with applicable accounting and financial
reporting rules;
|
|
·
|
Considering
and reviewing with management and with the independent auditors the
adequacy of the Company’s internal controls, including information system
controls, security, and compliance with Sarbanes Oxley Section
404;
|
|
·
|
Considering,
in consultation with the independent auditors, the audit scope and plan of
the independent auditors;
|
|
·
|
Reviewing
with management and the independent auditors the results of annual audits
and related matters;
|
|
·
|
Considering
the results of the review of the interim financial statements by the
independent auditors and discussing the results with the Company’s chief
financial officer and independent
auditors;
|
|
·
|
Reviewing
with the independent auditors any impending changes in accounting and
financial reporting rules and the expected impact of such changes on the
Company; and
|
|
·
|
Conducting
or authorizing investigations into any matters within the Audit
Committee’s scope of
responsibilities.
|
A copy of
the Committee’s charter is available at www.mfri.com under:
corporate governance.
Nominating
and Corporate Governance Committee
The
Nominating and Corporate Governance Committee is comprised
of Dennis Kessler (Chairman and Lead Independent Director), Eugene Miller
(Deputy Chairman), Arnold F. Brookstone, Stephen B. Schwartz, Michael J. Gade,
and Mark A. Zorko. Four meetings were held in 2009. The
Board of Directors has determined that all members of the Nominating and
Corporate Governance Committee are
“independent” as that term is defined under the Nasdaq Stock Market
rules.
10
The Board
of Directors of the Company adopted a Nominating and Corporate Governance
Committee Charter in 2010, which is available at www.mfri.com under:
corporate governance.
Management
Succession
The
Nominating and Corporate Governance Committee oversees the CEO succession
planning process, and reviews and approves other management succession plans to
ensure continuity in other senior management positions, during reviews that
occur at least annually.
Nominating
Process and Stockholder Recommendations
The
Nominating and Corporate Governance Committee identifies
the attributes of the Board’s incumbent members believed to contribute to the
work of the Board and its committees, including leadership, accomplishments,
experience, skills, diversity, integrity and commitment to Board
duties. When a position on the Board of Directors becomes vacant, or
if the number of the members of the Board of Directors is being increased, the
Nominating and Corporate Governance Committee will review
these attributes of the incumbent members and determine the attributes that, if
possessed by the new board member, would likely result in a significant
contribution to the Board of Directors. People recommended to the
Nominating and Corporate Governance Committee for
consideration as nominees for vacant or new Board positions will then be
evaluated with respect to the attributes determined by the Nominating and
Corporate Governance Committee to be optimal
for the vacant or new position. Following the evaluation, which may
include interviews or such other procedures the Nominating and Corporate
Governance Committee deems
advisable, the Nominating and Corporate Governance Committee will make a
recommendation to the Board regarding a candidate either to be nominated for
election at the next annual meeting of stockholders or appointed by the Board
between such meetings. Diversity is understood by the Committee and
the Board as involving point of view and experience, and search for such
diversity is an integral part of the needs evaluation and candidate evaluation
processes described immediately above.
Recommendations
for potential nominees may come from many sources, including members of the
Board, executive officers, stockholders, self-recommendations, members of the
communities the Company serves, or search firms. All persons
recommended to the Board or the Nominating and Corporate Governance Committee for a vacant
or new Board position will be given equal consideration regardless of the source
of the recommendation.
Any
stockholder wishing to make a recommendation for a person to be considered by
the Nominating and Corporate Governance Committee pursuant to
the process described above as a potential nominee to the Board of Directors
should refer to “Stockholder Proposals and Nominations for 2011 Annual Meeting”
for a discussion of the procedures that stockholders are required to follow in
order to submit nominees for consideration by the Nominating and Corporate
Governance Committee.
Compensation
Committee
The
Compensation Committee consists of Michael J. Gade (Chairman), Stephen B.
Schwartz (Deputy Chairman), Dennis Kessler, Arnold F. Brookstone, Eugene Miller,
and Mark A. Zorko. The Board of Directors has determined that all
members of the Compensation Committee are
“independent” as that term is defined under the Nasdaq Stock Market
rules.
The
Compensation Committee
|
·
|
Assists
the Board in among other things: overseeing the Company's compensation,
equity plans and benefits
strategies.
|
|
·
|
Determines
appropriate compensation for the Chairman/CEO and reviews the compensation
of the President/COO, who together are considered Tier I Executive
Officers, and recommends approval to the
Board.
|
|
·
|
Reviews
the compensation of the Company’s Corporate Executive Officers (other than
the Chairman/CEO and President/COO) and Divisional Presidents, who
together are considered Tier II Executive Officers, and recommends
approval to the Board.
|
|
·
|
Recommends
Board of Director compensation.
|
|
·
|
Reviews
and approves with Executive Officers the Compensation Discussion and
Analysis (“CD&A”) to be included in the Company’s proxy statement or
Form 10-K.
|
In
discharging its role, the Compensation Committee is empowered to investigate any
compensation matter brought to its attention with access to all records and
personnel of the Company. The Compensation Committee has the
authority
11
to retain
and terminate outside counsel (which may be the Company’s regular outside
counsel or another counsel), compensation consultants or other experts, and will
receive adequate funding from the Company to engage such
advisors. The Compensation Committee has sole authority to retain,
compensate, terminate, and oversee the compensation consultants they retain and
who report to the Compensation Committee.
The
Compensation Committee has delegated to the Company’s Vice President Human
Resources the authority to operate, manage and administer all executive
compensation, equity based compensation plans and benefit plans, but not to do
any of the following: grant waivers of plan terms, conditions, restrictions and
limitations, accelerate vesting or exercise of an award, establish new kinds of
awards, establish or modify performance goals, or certify the attainment of
performance goals.
The
Compensation Committee held four meetings during
2009.
The Board
of Directors of the Company adopted a Compensation Committee Charter in 2010,
which is available at www.mfri.com under:
corporate governance.
Board
and Company Leadership
The Board
believes it should remain free to structure the leadership of the Board and the
Company in the manner that best serves the Company’s interests at a given time,
and, accordingly, has no fixed policy with respect to combining or separating
the offices of Chairman and CEO. The Board believes that combining
those offices in David Unger is appropriate at this time due to the depth,
breadth, and long MFRI history that Mr. Unger possesses. During 2009,
the Board determined that, if the Chairman is not an Independent Director, a
Lead Independent Director should be selected by the Independent Directors and
should serve as the chair of the Nominating and Corporate Governance Committee
and, as David Unger serves as both Chairman and CEO, the Independent Directors
elected Mr. Dennis Kessler Lead Independent Director.
The
Board’s Oversight of Risk
The Board
is responsible for overseeing the major risks facing the Company and reviewing
management’s proposals for their mitigation. It reviews and discusses
significant financial and nonfinancial risk exposures and the steps management
has taken to monitor, control, and report such exposures. In
performing its oversight responsibilities, the Board periodically discusses with
management the Company’s policies with respect to risk assessment and risk
management including risks inherent in proposals for which the Board’s approval
is sought. The Audit Committee and Compensation Committee report to
the Board regularly on matters relating to the specific areas of risk the
committees oversee. Throughout the year, the Board and certain of its
committees receive regular reports from management regarding major risks and
exposures facing the Company and the steps management has taken to monitor and
control such risks and exposures. In addition, throughout the year,
the Board and the relevant committees dedicate a portion of their meetings to
reviewing and discussing specific risk topics in greater
detail. Additionally, management routinely assesses significant risks
inherent to the business.
Indemnification
The
Company has entered into indemnification agreements with each person who is
currently a member of the Board of Directors of the Company and expects to enter
into such agreements with persons who may in the future become directors of the
Company. The Company has also entered into indemnification agreements
with each of its executive officers. In general, such agreements
provide for indemnification against any and all expenses incurred in connection
with, as well as any and all judgments, fines, and amounts paid in settlement
resulting from any threatened, pending, or completed action, suit, or
proceeding, whether civil, criminal, administrative, or investigative, by reason
of the fact that such director or executive officer is or was a director,
officer, employee or agent of the Company, or is or was serving at the request
of the Company as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust, or other enterprise.
Board
and Stockholder Meeting Attendance
The
Company expects Board members to attend all meetings of the Board, of Board
committees of which they are a member, and the annual meeting of the Company’s
stockholders. During 2009, all directors attended at least 75% of the
meetings of the board and each of the committees of which they were
members. All of the Company’s directors attended the Company’s annual
meeting of stockholders held in June 2009.
12
Code
of Conduct
The
Company has adopted a Code of Conduct, which is applicable to all employees of
the Company, including the Chief Executive Officer and Chief Financial Officer,
and to the Company’s Board of Directors. The Code of Conduct is
publicly available on the Company’s website at www.mfri.com under:
corporate governance.
Rights
Agreement
On
September 15, 1999 the Company adopted and on September 15, 2009 it amended and
extended through September 15, 2019 a Rights Agreement pursuant to which
stockholders own Rights which become exercisable if any person acquires or by
tender offer attempts to acquire 15% or more of the Company's outstanding Common
Stock without approval by a majority of the Board of Directors of the
Company.
The
Rights approved by the Board are designed to protect and maximize the value of
the outstanding equity interests in the Company in the event of a coercive
attempt by an acquirer to take over the Company, in a manner or on terms not
approved by the Board of Directors. Takeover attempts frequently
include coercive tactics to deprive the Company's Board of Directors and its
stockholders of any real opportunity to determine the destiny of the
Company. The Rights have been declared by the Board in order to deter
such tactics, including a gradual accumulation of shares in the open market of a
15% or greater position to be followed by a merger or a partial or two-tier
tender offer that does not treat all stockholders equally. These
tactics unfairly pressure stockholders, squeeze them out of their investment
without giving them any real choice and deprive them of the full value of their
stock.
The
Rights may be redeemed by the Company at $0.01 per Right within 10 business days
(or such later date as may be determined by a majority of the Board of
Directors) after the accumulation of 15% or more of the Company's stock by a
single acquirer or group. Similarly, the Rights will terminate upon
the closing of an acquisition approved by the Board of Directors.
The
issuance of the Rights themselves has no dilutive effect, will not affect
reported earnings per share, and should not be taxable to the Company or to its
stockholders. The Company's Board of Directors believes that the
Rights represent a reasonable means of addressing the complex issues of
corporate policy created by corporate takeovers.
However,
the Rights may have the effect of rendering more difficult or discouraging an
acquisition of the Company deemed coercive and undesirable by the Board of
Directors. The Rights may cause substantial dilution to a person or
group that attempts to acquire the Company on terms or in a manner not approved
by the Company's Board of Directors, except pursuant to an offer conditioned
upon the negation, purchase or redemption of the Rights.
A copy of
the Rights Agreement and the Amendment, including the form of Rights Certificate
and the Summary of Rights were attached to reports on Form 8-K filed on
September 15, 1999 and Amendment No. 1 to Form 8-A filed on September 17,
2009. A copy of the Rights Agreement and the Amendment is available
to stockholders free of charge from the Company.
Stockholder
Communication with the Board of Directors
Stockholders
may communicate with the Board by submitting their communications in writing,
addressed to the Board as a whole or, at the election of the stockholder, to one
or more specific directors, in care of the Secretary of the Company,
to: Corporate Secretary, MFRI, Inc., 7720 N. Lehigh Avenue, Niles,
Illinois 60714. Stockholders also have the opportunity to communicate
with Board members at the annual meeting.
The Audit
Committee of the Board of Directors has established procedures for the receipt,
retention and treatment of complaints regarding accounting, internal accounting
controls, or auditing matters. Stockholders who wish to submit a
complaint under these procedures should submit the complaint in writing
to: Ethics Compliance Officer, MFRI, Inc., 7720 N. Lehigh Avenue,
Niles, Illinois 60714.
13
REPORT
OF THE AUDIT COMMITTEE
The Audit
Committee represents and assists the Board of Directors in its oversight of the
integrity of MFRI’s financial reporting. In particular, the Audit
Committee reviews the independence, qualifications and performance of MFRI’s
independent registered public accounting firm. Included in the
Company’s Annual Report on Form 10-K for the year ended January 31, 2010 are the
consolidated balance sheets of the Company and its subsidiaries as of January
31, 2010 and 2009 and the related consolidated statements of operations,
stockholders’ equity and cash flows for each of the three years ended January
31, 2010, 2009 and 2008. The balance sheets and statements are the
subject of a report by Grant Thornton LLP who has been engaged since December
2004 as the Company’s independent auditors. Subject to stockholder
ratification, the Audit Committee will appoint independent auditors for the year
ending January 31, 2011 at a meeting to be held after the 2010 annual meeting of
stockholders. The Committee recommends the ratification of the
appointment of Grant Thornton.
The Audit
Committee reviewed and discussed the Audited Financial Statements with the
Company’s management and with the independent registered public accounting firm
prior to publication and filing. The Audit Committee has discussed
with the independent registered public accounting firm, among other matters, the
matters required to be discussed by Statement of Auditing Standards No.
61. The Audit Committee has received from the independent registered
public accounting firm the written disclosures and letter required by
Independence Standards Board Standard No. 1, and it has discussed with the
independent registered public accounting firm their independence with respect to
the Company. The Audit Committee also discussed, with management and
separately with Grant Thornton, in executive sessions their evaluations of
MFRI’s internal control over financial reporting and the overall quality of
MFRI’s financial reporting.
Based
upon the review and discussions referred to above, the Audit Committee
recommended to the Company’s Board of Directors that the Audited Financial
Statements be included in the Company’s Annual Report on Form 10-K for the year
ended January 31, 2010, for filing with the Securities and Exchange Commission
(“SEC”).
This
Report of the Audit Committee shall not be deemed incorporated by reference by
any general statement incorporating by reference this proxy statement into any
filing under the Securities Act of 1933, as amended (“Securities Act”), or the
Exchange Act, except to the extent that the Company specifically incorporates
this information by reference, and shall not otherwise be deemed to be
soliciting material or deemed filed under any such acts.
Mark A.
Zorko, Chairman
Arnold F.
Brookstone, Deputy Chairman
Dennis
Kessler
Eugene
Miller
Stephen
B. Schwartz
Michael
J. Gade
Members
of the Audit Committee
COMPENSATION
DISCUSSION AND ANALYSIS
The
following discusses the material principles underlying the Company’s
compensation policies for its Named Executive Officers and its Management
Committee (consisting of the CEO, President (also referred to by the Company as
Tier I executive officers), Chief Financial Officer, Vice President Human
Resources, and Segment Presidents (Tier II executive officers)), including both
the separate elements of executive compensation and executive compensation as a
whole. The specific amounts paid or payable to the NEOs are disclosed
in the tables and narrative in the section of this proxy statement titled
“Executive Compensation”. The following discussion cross-references
those specific tables and narrative disclosures where appropriate.
14
Compensation
Philosophy and Objectives:
The
Compensation Committee
|
·
|
Assists
the Board in overseeing the Company's compensation, equity plans and
benefits strategies.
|
|
·
|
Determines
appropriate compensation for the Chairman/CEO and reviews the compensation
of the President/COO, who together are considered Tier I Executive
Officers, and recommends approval to the
Board.
|
|
·
|
Reviews
the compensation of the Company’s Corporate Executive Officers (other than
the Chairman/CEO and President/COO) and Divisional Presidents, who
together are considered Tier II Executive Officers, and recommends
approval to the Board.
|
|
·
|
Recommends
Board of Director compensation.
|
|
·
|
Reviews
and approves with Executive Officers the CD&A to be included in the
Company’s proxy statement or Form
10-K.
|
The
Company’s compensation program is designed to attract, motivate and retain
talented individuals that MFRI needs to achieve business success, and to reward
performance. The program reflects the following philosophy and
objectives:
The interests of MFRI employees and
stockholders should be aligned. We believe that MFRI employees should act
in the interests of MFRI stockholders; Executive Officer compensation includes
equity compensation in the form of stock options to encourage such
action.
Compensation should be related to
performance. Executive Officer compensation should vary based
on objectively measurable performance of the Company or of the business unit of
which the Executive Officer is a part.
Incentive compensation should be a
greater part of total compensation for employees with more senior
positions. The proportion of an employee’s total compensation
that varies based on performance should increase as the employee’s business
responsibilities increase.
Compensation should balance
long-term and short-term goals. The Company’s incentive
compensation plans reward short-term performance through cash compensation based
on one year’s financial performance. Employee stock options are
designed to increase in value with the Company’s long-term financial
performance, and outstanding options vest over a four-year period.
Periodic
review:
The
Compensation Committee periodically reviews and approves the Company’s executive
compensation and benefit strategy and principles to ensure that they are aligned
with the Company’s business strategy and objectives, shareholder interests,
desired behaviors and corporate culture; and annually assure that actual
implemented plans are consistent with compensation
strategy. Compensation plans in place during 2009 were as described
in the following discussion.
Benchmarking:
The
Company uses compensation information that becomes available when recruiting
employees at all levels of the organization, and on other occasions, to attempt
to ensure that total compensation is competitive and fair. The
Company has reviewed executive compensation benchmark data, and has found no
discrepancies in base compensation for Company executives compared to executives
in similar roles.
Elements
of compensation:
The
Company’s compensation program for NEOs and other Executive Officers is
comprised of salary, annual cash incentive compensation, stock options,
non-qualified deferred compensation, and other benefits and
perquisites.
Salary:
Base
salary is paid to all the Company’s salaried employees, including Executive
Officers, to provide a degree of financial certainty. Competitive
base salaries are intended to attract talented employees by providing a fixed
portion of compensation on which employees can rely. Salary level for
each employee other than members of the
15
Management
Committee is ordinarily reviewed annually by his or her manager with the
approval of and under the oversight of that manager’s
manager. However, the Company’s practice has been to review
Management Committee salaries every two years, taking a somewhat longer view of
those salaries than of salaries of other employees. The CEO,
following consultation with the President, the Chief Financial Officer and the
Vice President of Human Resources, recommends to the Compensation Committee base
salary changes for the Management Committee. The most recent increase
in Management Committee base salaries was in mid-2008, with a half-year effect
on 2008 salaries and a full year effect in 2009.
Incentive
Compensation:
Annual
cash incentive compensation for Executive Officers is intended to reflect the
Company’s belief that a significant portion of each Executive Officer’s
potential compensation should be contingent on the performance of the Company or
of the business unit of which the Executive Officer is a
part. Incentive compensation formulas remain in place over many
years. To align Executive Officer interests with the Company’s
interests, incentive compensation formulas are not limited to minimum or maximum
amounts earned. Executive Officers of the parent company earn
incentive compensation based upon defined percentages ranging from 0.5% to 2%
from the first dollar of the Company’s consolidated income before income taxes
and before corporate profit-based incentive compensation. Executive
Officers in more senior positions have a higher defined percentage than those in
less senior positions. In the year 2000, the Board of Directors
amended the incentive compensation formulas for parent company Executive
Officers to provide for doubling of the defined percentage for earnings in
excess of those earned during the year ended January 31, 1998, $4,584,000, to
provide additional compensation for growth in the Company’s
earnings. Executive Officers of the Company’s business units
generally earn incentive compensation based upon defined percentages of the
business unit’s income from operations before allocated corporate expenses to
the extent, such income exceeds six percent of business unit sales, or based
upon improvement in the business unit’s income from operations. The
incentive compensation amounts for the NEOs are disclosed in Table 1 column
g.
Stock
Options:
Historically,
the Company’s exclusive form of long-term compensation has been stock options
with option price equal to market value (average of the highest price and lowest
price) on the option grant date. Stock option grants provide a direct
link to shareholder value as they only have value when stock price exceeds the
option price. The Company’s practice of granting such stock options
with a ten-year life and graduated vesting on each of the first four grant
anniversary dates encourages retention of the stock option
recipients. The CEO, following consultation with the members of the
Management Committee, recommends stock option grants to the Compensation
Committee, generally at the Compensation Committee’s meeting preceding the
recommended grant date, but never later than its meeting on the recommended
grant date. The Compensation Committee makes the final determination
of grants. On occasion, the Company has granted stock options to a
new hire effective on the individual’s date of hire.
The total
number of shares to grant on each grant date is determined subjectively, and is
intended to provide significant performance and retention incentive to stock
option recipients, while maintaining capacity to grant additional stock options
in future years and avoiding excessive potential stockholder dilution upon stock
option exercise. Allocation of the total shares granted among more
senior executives, less senior executives, and other key employees of the
Company is also a subjective process, which is an important part of the CEO’s
consultation with the Management Committee members.
The
Company has never backdated stock option grants, has not attempted to time stock
option grants in coordination with announcement of material nonpublic
information, has not timed its release of material non-public information to
affect the value of executive compensation, and has no plan to practice such
timing. The general practice of annual stock option grants that has
been in effect since May 1995 was approved by the Compensation Committee, upon
recommendation by the CEO.
Non-Qualified
Deferred Compensation:
In 1997,
the Company instituted a non-qualified deferred compensation plan for its
Executive Officers and certain key employees whose participation in the
Company’s 401(k) retirement plan is restricted by federal limits, to provide
those executives with financial security after their employment has terminated
by retirement or after long service. Company deferred compensation
contributions are fully vested at all times for terminations that result from
death, disability or retirement, and vest 20% per year from years six through
ten of the participant’s service for terminations for any other
reason. Participant elective deferrals are fully vested at all
times.
16
Other
Benefits and Perquisites:
The
executive officers participate in the benefit plans that are available generally
to all salaried employees of the Company in the United States, including group
medical insurance, life insurance, paid vacation, accidental death and
dismemberment insurance and long-term disability insurance
plans. These benefits provide financial security and peace of mind
for employees and executives and are seen as a standard part of basic employee
benefits. The cost of country club membership is reimbursed for Mr.
Unger and Mr. Bradley Mautner. All the NEOs except for Mr. Bennett
are furnished with a company automobile, for which NEOs reimburse the Company a
fixed amount toward personal use; personal use beyond the amount reimbursed to
the Company is shown as compensation in the accompanying compensation
tables.
Compensation
Policies and Risk:
The
Company does not believe that risks arising from the registrant’s compensation
policies and practices for its employees are reasonably likely to have a
material adverse effect on the Company.
Tax
Deductibility of Pay:
Section
162(m) of the Internal Revenue Code places a limit of $1,000,000 on the amount
of compensation that the Company may deduct in any one year with respect to each
of the NEOs employed by the Company on the last day of the fiscal
year. There is an exception to the $1,000,000 limitation for
performance-based compensation meeting certain requirements. While
the Committee considers the tax impact of Section 162(m), the Committee has
determined that it is appropriate to maintain flexibility in compensating NEOs
in a manner intended to promote varying corporate goals, recognizing that
certain amounts paid to NEOs in excess of $1,000,000 may not be deductible under
Section 162(m). For 2009, all compensation paid to NEOs was
deductible for federal income tax purposes.
COMPENSATION
COMMITTEE REPORT
The
information contained in this report shall not be deemed to be “soliciting
material” or “filed” with the SEC or subject to the liabilities of Section 18 of
the Exchange Act, except to the extent that the Company specifically
incorporates it by reference into a document filed under the Securities Act or
Exchange Act.
The
Compensation Committee, comprised of independent directors, reviewed and
discussed the above CD&A with the Company’s management. Based on
such review and discussions, the Compensation Committee recommended to the
Company’s Board of Directors that the CD&A be included in the Company’s
Proxy Statement for its 2010 Annual Meeting of Stockholders.
No
compensation consultant was involved during 2009 in determining or recommending
the amount or form of executive and director compensation (other than in a role
limited to consulting on any broad-based plan that does not discriminate in
scope, terms, or operation, in favor of executive officers or directors of the
registrant, and that is available generally to all salaried
employees).
Michael
J. Gade, Chairman
Stephen
B. Schwartz, Deputy Chairman
Dennis
Kessler
Arnold F.
Brookstone
Eugene
Miller
Mark A.
Zorko
Members
of the Compensation Committee
17
EXECUTIVE
COMPENSATION
The
following table shows the total compensation earned by the Company’s CEO, Chief
Financial Officer, and the three most highly paid executive officers other than
the CEO and Chief Financial Officer for the fiscal years ended January 31, 2010,
2009 and 2008 for services rendered in all capacities to the Company and its
subsidiaries.
The NEOs
were not entitled to receive payments that would be characterized as “Bonus” or
“Stock Award” payments as defined by the SEC, for the years ended January 31,
2010, 2009 and 2008. Annual incentive compensation earned is shown
under column (g), “Non-Equity Incentive Plan Compensation.”
Summary
Compensation Table
|
TABLE
1
Name
and Principal Position
(a)
|
Year
(b)
|
Salary
($)
(c)
|
Option
Awards
($)
(f)
(1)
|
Non-Equity
Incentive
Plan
Compensation
($)
(g)
(2)
|
Change
in Nonqualified Deferred Compensation Earnings ($) (h) (3)
|
All
Other
Compensation
($)
(i)
(4)
|
Total
($)
(j)
|
|||||||||||||||||||||
|
David
Unger
Chairman
and Chief Executive Officer
|
2009
2008
2007
|
$
|
305,141
282,500
275,000
|
$
|
20,372
47,998
73,802
|
$ |
140,333
267,020
12,109
|
$ |
0
0
0
|
$ |
51,719
100,725
40,299
|
$ |
517,565
698,243
401,210
|
|||||||||||||||
|
Michael
D. Bennett
Vice
President and Chief Financial Officer
|
2009
2008
2007
|
202,500
197,500
192,500
|
20,372
47,998
73,802
|
70,167
133,510
6,055
|
54,396
(44,038)
13,231
|
|
8,870
8,446
7,494
|
356,305
343,416
293,082
|
||||||||||||||||||||
|
Fati
Elgendy
Vice
President,
President
Perma-Pipe, Inc.
|
2009
2008
2007
|
212,500
202,500
192,500
|
20,372
47,998
73,802
|
943,418
934,524
303,248
|
116,726
(78,525)
90,885
|
17,038
17,466
17,869
|
1,310,054 1,123,963 678,304 |
|||||||||||||||||||||
|
Robert
A. Maffei
Vice
President Perma-Pipe, Inc.
|
2009
2008
2007
|
135,000
135,000
120,000
|
10,186
23,999
36,901
|
567,536
549,720
182,479
|
86,358
(152,754)
12,286
|
13,288
7,833
12,659
|
812,368
563,798
364,325
|
|||||||||||||||||||||
|
Bradley
E. Mautner
President
and Chief Operating Officer
|
2009
2008
2007
|
290,000
270,000
250,000
|
20,372
47,998
73,802
|
140,333
267,020
6,055
|
84,068
(72,923)
37,150
|
31,964
30,376
45,338
|
566,737
542,471
412,345
|
|||||||||||||||||||||
|
(1)
|
The
amounts in column (f) represent the dollar amounts for the years shown of
the aggregate grant date fair value of stock options granted in those
years in accordance with SEC rules. These amounts reflect the
Company’s accounting expense and do not correspond to the actual value
that will be realized by the NEOs. For information on the
valuation assumptions, refer to Note 9 – Stock Options in the MFRI, Inc.
financial statements filed with the Annual Report on Form 10-K for the
respective year-end. See the Grants of Plan-Based Awards table
for information on stock options awarded in
2009.
|
|
(2)
|
See
Table 3 for additional disclosure.
|
|
(3)
|
The
amounts in column (h) are presented in more detail in Table 7 columns (b)
and (c).
|
18
|
(4)
|
Details
of the amounts presented in Table 1 column (i) All Other Compensation are
as follows:
|
|
TABLE
2
Name
(a)
|
Year
|
Medical
Payments and Premiums for Individually Selected Insurance Policies
(including Income Tax Gross-Up in 2007 and 2008 but not 2009)
(b)
|
Club
Dues and Fees
(c)
|
Personal
Use of Company Provided Automobile
(d)
|
401(k)
Contribution
(e)
|
Life
Insurance Premiums
(f)
|
Total
All Other
Compensation
(g)
|
|
David
Unger
|
2009
2008
2007
|
$36,637
81,957
19,996
|
$5,745
6,780
8,300
|
$569
3,807
3,781
|
$7,532
6,945
6,986
|
$1,236
1,236
1,236
|
$51,719
100,725
40,299
|
|
Michael
D. Bennett
|
2009
2008
2007
|
0
0
0
|
0
0
0
|
0
0
0
|
6,075
5,925
4,973
|
2,795
2,521
2,521
|
8,870
8,446
7,494
|
|
Fati
A. Elgendy
|
2009
2008
2007
|
0
0
0
|
0
0
0
|
6,810
7,742
8,185
|
7,350
6,950
6,910
|
2,878
2,774
2,774
|
17,038
17,466
17,869
|
|
Robert
A. Maffei
|
2009
2008
2007
|
0
0
0
|
0
0
0
|
5,696
0
6,740
|
6,404
6,938
5,145
|
1,188
895
774
|
13,288
7,833
12,659
|
|
Bradley
E. Mautner
|
2009
2008
2007
|
0
0
0
|
24,200
22,962
28,252
|
0
0
7,776
|
7,350
7,000
6,896
|
414
414
2,414
|
31,964
30,376
45,338
|
Grants
of Plan-Based Awards
Amounts
in Table 1 column Non-Equity Incentive Plan Compensation represent the
following:
|
TABLE
3
Name
(a)
|
Grant
Date
(b)
|
Estimated
Future Payouts under Non-Equity Incentive
Plan
Awards
|
||
|
Threshold ($)
(c)
|
Target
($) (d)
|
Maximum
($) (e)
|
||
|
David
Unger
|
2/1/09
|
$140,333
|
||
|
Michael
D. Bennett
|
2/1/09
|
70,167
|
||
|
Fati
A. Elgendy
|
2/1/09
|
943,418
|
||
|
Robert
A. Maffei
|
2/1/09
|
567,536
|
||
|
Bradley
E. Mautner
|
2/1/09
|
140,333
|
||
|
Name
|
Grant
Date
|
Option
Award
(j)
|
Exercise
Price of
Option
Award
(k)
|
Grant
Date Fair
Value
of Option
Awards
(l)
|
|
David
Unger
|
6/23/09
|
5,000
|
$6.885
|
$20,372
|
|
Michael
D. Bennett
|
6/23/09
|
5,000
|
6.885
|
20,372
|
|
Fati
A. Elgendy
|
6/23/09
|
5,000
|
6.885
|
20,372
|
|
Robert
A. Maffei
|
6/23/09
|
2,500
|
6.885
|
10,186
|
|
Bradley
E. Mautner
|
6/23/09
|
5,000
|
6.885
|
20,372
|
A
substantial portion of the total compensation reported in the Summary
Compensation Table above is paid to the NEOs pursuant to the terms of their
compensation plans described below maintained by the Company.
All the
Company’s NEOs are employed at will, except for Fati A. Elgendy, whose
employment agreement is described below, and are eligible for employee benefits
available to the Company’s other salaried employees in the United States of
America, including group medical insurance, group life insurance, Company-funded
short-term
19
disability
benefits, group long-term-disability insurance, and a 401(k) retirement
plan. The only amounts payable to a NEO, except for Mr. Elgendy, upon employment termination
are amounts vested under the Company’s Nonqualified Deferred Compensation Plan,
pro-rated amounts earned for a partial year under the NEO’s Non-Equity Incentive
formula, and amounts required by law.
Compensation
Plans for NEOs as of January 31, 2010
David Unger. In
addition to Mr. Unger’s annual base salary, he earns incentive compensation
calculated as a defined percentage of the Company’s consolidated income before
income taxes and before corporate profit-based incentive
compensation. The Company makes available to Mr. Unger an annual
amount to pay premiums for certain insurance policies for Mr. Unger and his wife
currently or in later years, reimburses his and his wife’s medical expenses,
and, until 2009, paid him an annual allowance for income tax gross-up on such
insurance premiums and medical insurance payments. Beginning in 2009,
no allowance for income tax gross-up was paid to Mr. Unger. Mr. Unger
is reimbursed for a club membership, and is provided a company
automobile. Mr. Unger is granted stock options as approved by the
Compensation Committee from time to time.
Michael D.
Bennett. In addition to Mr. Bennett’s annual base salary, he
earns incentive compensation calculated as a defined percentage of the Company’s
consolidated income before income taxes and before corporate profit-based
incentive compensation. Mr. Bennett is credited with nonqualified
deferred compensation and is granted stock options as approved by the
Compensation Committee from time to time.
Fati A. Elgendy. On
November 12, 2007, the Company and Mr. Elgendy entered into an employment
agreement to confirm Mr. Elgendy’s employment arrangement with the Company
(“Employment Agreement”). For details, refer to Exhibit 10(j) filed
with the Company’s Form 10- K on April 19, 2009. In addition to Mr.
Elgendy’s annual base salary under the Employment Agreement, he earns incentive
compensation calculated as a defined percentage of the Perma-Pipe Incentive
Earnings, which is the business unit’s income from operations before allocated
corporate expenses; to the extent such income exceeds six percent of business
unit sales. In 2009, $943,418 of management incentive was
earned. Pursuant to the Employment Agreement, Mr. Elgendy is provided
a company automobile, credited with nonqualified deferred compensation, and
granted stock options as approved by the Compensation Committee from time to
time.
Robert A.
Maffei. In addition to Mr. Maffei’s annual base salary, he
earns incentive compensation calculated as a defined percentage of the
Perma-Pipe Incentive Earnings, which is the business unit’s income from
operations before allocated corporate expenses, to the extent such income
exceeds six percent of business unit sales. Mr. Maffei is credited
with nonqualified deferred compensation and is granted stock options as approved
by the Compensation Committee from time to time.
Bradley E.
Mautner. In addition to Mr. Mautner’s annual base salary, he
earns incentive compensation calculated as a defined percentage of the Company’s
consolidated income before income taxes and before corporate profit-based
incentive compensation. Mr. Mautner is reimbursed for a club
membership, and is provided a company automobile. Mr. Mautner is
credited annually with nonqualified deferred compensation and is granted stock
options as approved by the Compensation Committee from time to
time.
20
Outstanding
Equity Awards at January 31, 2010
The
following unexercised stock options are outstanding as of January 31,
2010:
|
TABLE
4
Name
(a)
|
Number
of Securities Underlying Unexercised Options
(#)
Exercisable
(b)
|
Number
of Securities Underlying Unexercised Options
(#)
Unexercisable
(c)
|
Option
Exercise
Price
($)
(e)
|
Option
Vesting
Date
|
Option
Expiration Date
(f)
|
|
David
Unger
|
4,000
3,000
2,500
1,250
|
1,000
1,250
1,250
1,250
1,250
1,250
1,250
1,250
1,250
1,250
|
$7.61
10.075
10.075
28.99
28.99
28.99
17.635
17.635
17.635
17.635
6.885
6.885
6.885
6.885
|
6/22/10
6/19/10
6/19/11
6/19/10
6/19/11
6/19/12
6/23/10
6/23/11
6/23/12
6/23/13
|
5/31/15
5/31/16
5/31/16
5/31/17
5/31/17
5/31/17
5/31/18
5/31/18
5/31/18
5/31/18
5/31/19
5/31/19
5/31/19
5/31/19
|
|
Michael
D. Bennett
|
1,250
1,500
2,000
3,000
2,500
1,250
|
1,000
1,250
1,250
1,250
1,250
1,250
1,250
1,250
1,250
1,250
|
$2.15
2.16
7.61
10.075
10.075
28.99
28.99
28.99
17.635
17.635
17.635
17.635
6.885
6.885
6.885
6.885
|
6/22/10
6/19/10
6/19/11
6/19/10
6/19/11
6/19/12
6/23/10
6/23/11
6/23/12
6/23/13
|
5/31/12
5/31/13
5/31/15
5/31/16
5/31/16
5/31/17
5/31/17
5/31/17
5/31/18
5/31/18
5/31/18
5/31/18
5/31/19
5/31/19
5/31/19
5/31/19
|
|
Fati
A. Elgendy
|
7,000
875
4,000
3,000
2,500
1,250
|
1,000
1,250
1,250
1,250
1,250
1,250
1,250
1,250
1,250
1,250
|
$3.12
2.16
7.61
10.075
10.075
28.99
28.99
28.99
17.635
17.635
17.635
17.635
6.885
6.885
6.885
6.885
|
6/22/10
6/19/10
6/19/11
6/19/10
6/19/11
6/19/12
6/23/10
6/23/11
6/23/12
6/23/13
|
11/30/11
5/31/13
5/31/15
5/31/16
5/31/16
5/31/17
5/31/17
5/31/17
5/31/18
5/31/18
5/31/18
5/31/18
5/31/19
5/31/19
5/31/19
5/31/19
|
|
Robert
A. Maffei
|
2,000
1,500
1,250
625
|
500
625
625
625
625
625
625
625
625
625
|
7.61
10.075
10.075
28.99
28.99
28.99
17.635
17.635
17.635
17.635
6.885
6.885
6.885
6.885
|
6/22/10
6/19/10
6/19/11
6/19/10
6/19/11
6/19/12
6/23/10
6/23/11
6/23/12
6/23/13
|
5/31/15
5/31/16
5/31/16
5/31/17
5/31/17
5/31/17
5/31/18
5/31/18
5/31/18
5/31/18
5/31/19
5/31/19
5/31/19
5/31/19
|
|
Bradley
E. Mautner
|
4,000
3,000
2,500
1,250
|
1,000
1,250
1,250
1,250
1,250
1,250
1,250
1,250
1,250
1,250
|
$7.61
10.075
10.075
28.99
28.99
28.99
17.635
17.635
17.635
17.635
6.885
6.885
6.885
6.885
|
6/22/10
6/19/10
6/19/11
6/19/10
6/19/11
6/19/12
6/23/10
6/23/11
6/23/12
6/23/13
|
5/31/15
5/31/16
5/31/16
5/31/17
5/31/17
5/31/17
5/31/18
5/31/18
5/31/18
5/31/18
5/31/19
5/31/19
5/31/19
5/31/19
|
21
Option
Exercises and Stock Vested 2009
The
following stock options were exercised during 2009:
|
TABLE
5
Name
(a)
|
Option
Awards
|
|
|
Number
of Shares Acquired on Exercise (#)
(b)
|
Value
Realized on Exercise
($)
(c)
|
|
|
David
Unger
|
0
|
$0
|
|
Michael
D. Bennett
|
0
|
0
|
|
Fati
A. Elgendy
|
0
|
0
|
|
Robert
A. Maffei
|
4,500
|
20,680
|
|
Bradley
E. Mautner
|
0
|
0
|
Nonqualified
Deferred Compensation 2009 and at January 31, 2010
The
following table contains additional required disclosures regarding nonqualified
deferred compensation:
|
TABLE
6
Name
(a)
|
Executive
Contributions in Last FY
($)
(b)
|
Registrant
Contributions in Last FY
(c)
(1)
|
Aggregate
Earnings in Last FY
($)
(d)
(1)
|
Aggregate
Balance at Last FYE
($)
(f)
|
||
|
David
Unger
|
$0
|
$0
|
$0
|
$0 |
|
|
|
Michael
D. Bennett
|
33,378
|
20,000
|
34,396
|
211,360
|
||
|
Fati
A. Elgendy
|
138,750
|
20,000
|
96,726
|
1,219,562
|
||
|
Robert
A. Maffei
|
274,860
|
15,000
|
71,358
|
765,934
|
||
|
Bradley
E. Mautner
|
0
|
25,000
|
59,068
|
242,662
|
|
(1)
|
Following
are the amounts in Columns (c) and (d) above also reported in the Summary
Compensation Table for the last Fiscal Year, and amounts reported as
compensation to the NEOs in the Company’s Summary Compensation Tables of
previous years:
|
|
TABLE
7
Name
(a)
|
Amounts
in Columns (c) and (d) Above Also Reported in the Summary Compensation
Table for the Last Fiscal Year
|
Amounts
Reported as Compensation to the Named Executive Officer in The Company’s
Summary Compensation Tables of Previous Years
(d)
|
|
|
Col
(c) Registrant Contributions in Last FY
(b)
|
Col
(d) Aggregate Earnings in Last FY
(c)
|
||
|
David
Unger
|
$0
|
$0
|
$0
|
|
Michael
D. Bennett
|
20,000
|
34,396
|
105,389
|
|
Fati
A. Elgendy
|
20,000
|
96,726
|
198,069
|
|
Robert
A. Maffei
|
15,000
|
71,358
|
14,121
|
|
Bradley
E. Mautner
|
25,000
|
59,068
|
115,689
|
22
Non-management
Directors’ Compensation 2009
|
Name
(a)
|
Fees
Earned or Paid in Cash
($)
(b)
|
Option
Awards
($)
(d)
(1)
|
Total
($)
(h)
|
|
Dennis
Kessler
|
$25,850
|
$10,186
|
$36,036
|
|
Arnold
F. Brookstone
|
28,534
|
10,186
|
38,720
|
|
Eugene
Miller
|
26,050
|
10,186
|
36,236
|
|
Stephen
B. Schwartz
|
26,050
|
10,186
|
36,236
|
|
Michael
Gade
|
19,750
|
46,614
|
66,364
|
|
Mark
A. Zorko
|
21,716
|
46,614
|
68,330
|
|
(1)
|
The
amounts in column (d) represent the dollar amounts of the aggregate grant
date fair value of stock options granted in accordance with SEC
rules. These amounts reflect the Company’s accounting expense
and do not correspond to the actual value that will be
realized
|
The
following table provides information about option awards granted to the
non-management directors in 2009:
|
Name
|
Grant
Date
|
Option
Award
(j)
|
Exercise
Price of Option Award
(k)
|
Grant
Date Fair Value of Option Awards
(l)
|
|
Dennis
Kessler
|
6/23/09
|
2,500
|
$6.885
|
$10,186
|
|
Arnold
F. Brookstone
|
6/23/09
|
2,500
|
6.885
|
10,186
|
|
Eugene
Miller
|
6/23/09
|
2,500
|
6.885
|
10,186
|
|
Stephen
B. Schwartz
|
6/23/09
|
2,500
|
6.885
|
10,186
|
|
Michael
Gade
|
4/7/09
6/23/09
|
10,000
2,500
|
6.185
6.885
|
36,428
10,186
|
|
Mark
A. Zorko
|
4/7/09
6/23/09
|
10,000
2,500
|
6.185
6.885
|
36,428
10,186
|
Directors
who are also employees of the Company or a subsidiary of the Company are not
compensated for service as a Director.
Independent
Directors are paid a quarterly fee of $3,750, a fee of $2,000 for each day of
attendance at Board meetings, $1,000 for attendance at each Audit Committee
meeting, and a $200 fee per hour for engagement in any other activity on behalf
of the Company, and are reimbursed for their expenses. The Audit
Committee Chairman receives an additional $1,250 quarterly fee as compensation
for that service.
23
Stock
options under the 2001 Directors Plan were granted as follows: (i) an option to
purchase 10,000 shares upon an Independent Director’s first election to the
Board; (ii) an option to purchase 1,000 shares automatically upon each date the
Independent Director is re-elected to the board, and (iii) the Board of
Directors had the discretion to make additional option grants to Independent
Directors from time to time as the Board of Directors deemed necessary or
desirable. No discretionary grants were made under that
plan.
The
affirmative vote of a majority of the shares present or represented by proxy and
entitled to vote for this proposal at the Annual Meeting is required to approve
the 2009 Directors Plan, under which stock options are granted as follows: (i)
an option to purchase 10,000 shares of the Company’s common stock is granted
automatically upon a non-employee director’s first election as a director of the
Company; (ii) an option is granted automatically to non-employee directors upon
each date such non-employee director is re-elected as a director of the Company,
commencing with the annual meeting for the year 2009to purchase the greater of
(x) 1,000 shares of the Company’s common stock or (y) the number of shares
subject to options most recently granted generally to the Company’s Tier 2
Managers (or comparable group of managers, as determined by the Board of
Directors); and (iii) the Board of Directors shall have the discretion to make
additional option grants to non-employee directors from time to time as the
Board of Directors deems necessary or desirable.
The
following stock options were exercised during 2009:
|
Name
(a)
|
Option
Awards
|
|
|
Number
of Shares Acquired on Exercise (#)
(b)
|
Value
Realized on Exercise
($)
(c)
|
|
|
Dennis
Kessler
|
0
|
$
0
|
|
Arnold
F. Brookstone
|
0
|
0
|
|
Eugene
Miller
|
11,000
|
37,485
|
|
Stephen
B. Schwartz
|
0
|
0
|
|
Michael
Gade
|
0
|
0
|
|
Mark
A. Zorko
|
0
|
0
|
The
following unexercised stock options are outstanding as of January 31,
2010:
|
Name
(a)
|
Number
of Securities Underlying Unexercised Options
(#)
Exercisable
(b)
|
Number
of Securities Underlying Unexercised Options
(#)
Unexercisable
(c)
|
Option
Exercise Price
($)
(e)
|
Option
Vesting
Date
|
Option
Expiration Date
(f)
|
|
Dennis
Kessler
|
1,000
750
500
250
|
250
250
250
250
250
250
625
625
625
625
|
$7.61
10.075
10.075
28.99
28.99
28.99
17.635
17.635
17.635
17.635
6.885
6.885
6.885
6.885
|
6/22/10
6/19/10
6/19/11
6/19/10
6/19/11
6/19/12
6/23/10
6/23/11
6/23/12
6/23/13
|
5/31/15
5/31/16
5/31/16
5/31/17
5/31/17
5/31/17
5/31/18
5/31/18
5/31/18
5/31/18
5/31/19
5/31/19
5/31/19
5/31/19
|
|
Arnold
F. Brookstone
|
1,000
750
500
250
|
250
250
250
250
250
250
625
625
625
625
|
$7.61
10.075
10.075
28.99
28.99
28.99
17.635
17.635
17.635
17.635
6.885
6.885
6.885
6.885
|
6/22/10
6/19/10
6/19/11
6/19/10
6/19/11
6/19/12
6/23/10
6/23/11
6/23/12
6/23/13
|
5/31/15
5/31/16
5/31/16
5/31/17
5/31/17
5/31/17
5/31/18
5/31/18
5/31/18
5/31/18
5/31/19
5/31/19
5/31/19
5/31/19
|
|
Eugene
Miller
|
1,000
1,000
1,000
1,000
750
500
250
|
250
250
250
250
250
250
625
625
625
625
|
$2.15
2.16
3.31
7.61
10.075
10.075
28.99
28.99
28.99
17.635
17.635
17.635
17.635
6.885
6.885
6.885
6.885
|
6/22/10
6/19/10
6/19/11
6/19/10
6/19/11
6/19/12
6/23/10
6/23/11
6/23/12
6/23/13
|
5/31/12
5/31/13
5/31/14
5/31/15
5/31/16
5/31/16
5/31/17
5/31/17
5/31/17
5/31/18
5/31/18
5/31/18
5/31/18
5/31/19
5/31/19
5/31/19
5/31/19
|
|
Stephen
B. Schwartz
|
250
1,000
750
500
250
|
250
250
250
250
250
250
625
625
625
625
|
$3.31
7.61
10.075
10.075
28.99
28.99
28.99
17.635
17.635
17.635
17.635
6.885
6.885
6.885
6.885
|
6/22/10
6/19/10
6/19/11
6/19/10
6/19/11
6/19/12
6/23/10
6/23/11
6/23/12
6/23/13
|
5/31/14
5/31/15
5/31/16
5/31/16
5/31/17
5/31/17
5/31/17
5/31/18
5/31/18
5/31/18
5/31/18
5/31/19
5/31/19
5/31/19
5/31/19
|
|
Michael
Gade
|
2,500
2,500
2,500
2,500
625
625
625
625
|
6.185
6.185
6.185
6.185
6.885
6.885
6.885
6.885
|
4/7/10
4/7/11
4/7/12
4/7/13
6/23/10
6/23/11
6/23/12
6/23/13
|
3/7/19
3/7/19
3/7/19
3/7/19
5/31/19
5/31/19
5/31/19
5/31/19
|
|
|
Mark
A. Zorko
|
2,500
2,500
2,500
2,500
625
625
625
625
|
6.185
6.185
6.185
6.185
6.885
6.885
6.885
6.885
|
4/7/10
4/7/11
4/7/12
4/7/13
6/23/10
6/23/11
6/23/12
6/23/13
|
3/7/19
3/7/19
3/7/19
3/7/19
5/31/19
5/31/19
5/31/19
5/31/19
|
24
401(k)
Plan
The
domestic employees of the Company, including the NEOs, are eligible to
participate in the MFRI, Inc. Employee Savings and Protection Plan (“401(k)
Plan”), which is applicable to all employees except certain employees covered by
collective bargaining agreement benefits. The 401(k) Plan allows
employee pretax payroll contributions of up to 16% of total
compensation. The Company matches 50% of each participant's
contribution, up to a maximum of 3% of each participant’s salary.
Compensation
Committee Interlocks and Insider Participation
There are
no matters related to Compensation Committee interlocks or insider participation
that the Company is required to report.
Section
16(a) Beneficial Ownership Reporting Compliance
Section
16(a) of the Exchange Act requires that the Company’s directors, executive
officers, and persons who own more than 10% of the Company’s outstanding Common
Stock report their beneficial ownership and changes in their beneficial
ownership of the Company’s Common Stock by filing reports with the
SEC. Based solely on the Company’s review of reports provided to the
Company, no director, officer or owner of more than 10% of the Common Stock has
failed to file on a timely basis a Statement of Beneficial Ownership of
Securities on Form 3, 4 or 5 during 2009.
INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
Fees
The chart
below sets forth the aggregate fees for professional services billed by Grant
Thornton LLP in 2009 and 2008, and breaks down these amounts by category of
service:
|
2009
|
2008
|
||||
|
Audit
Fees
|
$
|
699,170
|
$
|
784,214
|
|
|
Audit-Related
Fees
|
0
|
0
|
|||
|
Tax
Fees
|
0
|
0
|
|||
|
All
Other Fees
|
3,950
|
3,750
|
|||
|
Total
|
$
|
703,120
|
$
|
787,964
|
Audit Fees - Audit fees
represent services rendered for the audit of the Company’s consolidated annual
financial statements and reviews of the quarterly financial statements, and the
audit of internal controls over financial reporting. Additionally,
audit fees include consents and other services related to SEC
matters.
Audit-Related Fees - There
were no fees billed for audit related fees.
Tax Fees - There were no fees
billed for tax services in 2009.
All Other Fees – Fees
represent subscription fees for an accounting and auditing research
tool.
Engagement - Grant Thornton
was engaged by the Audit Committee, and the Audit Committee approved in advance
all audit and non-audit services rendered to the Company for 2009.
Representatives
of Grant Thornton are expected to be present at the meeting and will be
available to respond to appropriate questions and may make a statement if they
so desire. The Audit Committee has considered whether the provision
of non-audit services is compatible with maintaining the independence of Grant
Thornton.
MULTIPLE
STOCKHOLDERS SHARING AN ADDRESS
The rules
of the SEC permit companies to provide a single copy of an annual report and
proxy statement to households in which more than one stockholder resides
(“Householding”). Stockholders who share an address and who have been
previously notified that their broker, bank or other intermediary will be
Householding their proxy materials will receive only one copy of the Company’s
Proxy Statement and 2009 Annual Report to Stockholders unless they have
affirmatively objected to the Householding notice.
25
Stockholders
sharing an address who received only one set of these materials may request a
separate copy, which will be promptly sent at no cost, by contacting the
Corporate Secretary of the Company orally or in writing. For future
annual meetings, a stockholder may request separate annual reports or proxy
statements, or may request the Householding of such materials, by contacting the
Company’s Transfer Agent at the following address:
Continental
Stock Transfer & Trust Company
1 Battery
Place
New York,
New York 10004
(212)
509-4000
ANNUAL
REPORT ON FORM 10-K
A copy of
the Company’s Annual Report on Form 10-K for the year ended January 31, 2010
filed with the SEC accompanies this Proxy Statement. Additional copies of the Annual
Report on Form 10-K may be obtained, without charge, from the Company’s website
at www.mfri.com,
847-966-1000, or by
writing to the Company’s Corporate Secretary at MFRI, Inc., 7720 N. Lehigh
Avenue, Niles, Illinois 60714.
STOCKHOLDER
PROPOSALS AND NOMINATIONS FOR 2011 ANNUAL MEETING
Inclusion
of Proposals in the Company’s Proxy Statement and Proxy Card Under SEC
Rules
In order
to be eligible for inclusion in the proxy statement and proxy form relating to
such meeting pursuant to the rules and regulations of the SEC, any proposal
which a stockholder intends to present at the annual meeting of stockholders in
2011 must be in writing, must be received by the Company at its principal
executive offices in Niles, Illinois by January 26, 2011 and must satisfy the
applicable rules and regulations of the SEC.
Advance
Notice Requirements for Shareholder Submission of Nominations and
Proposals
In
addition, a stockholder recommendation for nomination of a candidate for
election to the Board of Directors or a proposal for consideration at the 2011
annual meeting of stockholders must be submitted in accordance with the advance
notice procedures and other requirements in the Company’s
bylaws. These requirements are separate from, and in addition to, the
requirements discussed above to have the stockholder proposal included in the
proxy statement and form of proxy/voting instruction card pursuant to the SEC’s
rules.
Our
bylaws require a stockholder who wants to nominate a director or submit a
stockholder proposal be a stockholder of record at the time of giving the notice
and on the record date for the determination of stockholders entitled to vote at
the meeting and comply with the advance notice provisions of our
bylaws.
Our
bylaws require that stockholder recommendations for nominees to the Board must
include the name of the nominee or nominees, all information relating to such
person that is required to be disclosed in a proxy statement, a consent signed
by the nominee evidencing a willingness to serve as a director, if elected, and
disclosure of any relationship between the stockholder making the recommendation
and the proposed nominee or nominees.
Our
bylaws require that stockholder proposals include a brief description of the
business to be brought before the meeting, the reasons for conducting such
business at the meeting, and all information relating to such business that
would be required to be disclosed in a proxy statement or otherwise in
connection with solicitations of proxies for election of
directors. In order to be considered timely under the advance notice
requirements of our bylaws, the proposal or recommendation for nomination must
be received by the Board of Directors at least 90 days but no more than 120 days
prior to the first anniversary of the previous year’s annual
meeting. For the 2011 annual meeting of stockholders, a proposal or
recommendation for nomination must be received by the Board of Directors not
earlier than February 23, 2011 and not later than March 25, 2011. If
the date of the annual meeting is more than 30 days from the date of the
previous year’s annual meeting, then the proposal or recommendation must be
received not later than five business days after the date on which notice of the
2011 annual meeting is mailed or publicly disclosed or such proposal will be
considered untimely. Except for proposals properly made in accordance
with the applicable rules and regulations of the SEC, the advance notice
provisions of the bylaws shall be the exclusive means for a stockholder to
propose business to be brought before an annual meeting of
stockholders.
In
addition, our bylaws require that the stockholder giving notice must also
include (i) the name and address of the stockholder, (ii) the class or series
and number of shares which are beneficially owned or held of record by the
stockholder, (iii) the nominee holder for, and number of, shares beneficially
owned but not owned of record by such
26
stockholder,
(iv) whether and to the extent to which any hedging or other transaction or any
other arrangement has been entered into by or on behalf of the stockholder, the
intent of which is to mitigate loss to or manage risk or benefit of share price
changes for, or to increase or decrease the voting power of, such stockholder
with respect to any shares in the Company, (v) if known by the stockholder, the
name and address of any other stockholder supporting the nominee or proposal,
(vi) any arrangements or understandings between such persons, (vii) whether the
stockholder intends to solicit proxies in connection with the nomination or
proposal, and (viii) a representation that the stockholder intends to appear in
person or by proxy at the meeting to present the proposal or
nomination.
IMPORTANT
All
stockholders are cordially invited to attend the meeting in person.
If you
cannot be present at the meeting, we urge you to PROMPTLY vote your shares by
phone, via the internet, or by signing, dating and returning the enclosed Proxy
in the enclosed self-addressed envelope. No postage need be affixed
if mailed in the United States.
MFRI,
INC.
THIS
PROXY WILL BE VOTED IN ACCORDANCE WITH SPECIFICATIONS MADE. IF NO
CHOICES ARE INDICATED, THIS PROXY WILL BE VOTED FOR EACH OF THE
NOMINEES LISTED UNDER ITEM 1 FOR APPROVAL OF THE
2009 NON-EMPLOYEE DIRECTORS STOCK OPTION PLAN, AND FOR THE RATIFICATION
OF GRANT THORNTON AS THE COMPANY’S AUDITORS.
|
1. Election
of Directors
Nominees: David
Unger, Henry M. Mautner, Bradley E. Mautner, Dennis Kessler, Arnold F.
Brookstone, Eugene Miller,
Stephen B. Schwartz, Michael J. Gade and Mark A. Zorko.
(INSTRUCTION: To
withhold authority to vote for any individual
nominee,
write that nominee's name in the space provided at the right
and
mark the oval "For All Nominees Except")
|
For
/
/
|
Withheld
/
/
|
For
All Nominees
Except
/
/
|
|
Nominee
|
Exceptions
|
||
|
2. approval
of the 2009 Non-Employee Directors Stock Option Plan;
|
/
/
|
/
/
|
|
|
3. ratification
of Grant Thornton as the Company’s auditors
|
/
/
|
/
/
|
|
|
4. In
accordance with their discretion upon all other matters that may properly
come before said meeting and any adjournment thereof.
|
The
undersigned hereby revokes any proxy or proxies heretofore given to vote such
shares at said meeting or at any adjournment thereof.
|
Signature
Signature
|
|
|
|
Date: ,
2010
NOTE: Please
sign exactly as name appears hereon. For joint accounts, both
owners should sign. When signing as executor, administrator,
attorney, trustee or guardian, etc., please sign your
full title.
|
PROXY PROXY
MFRI,
INC.
FOR
SHARES OF COMMON STOCK SOLICITED ON
BEHALF OF THE BOARD OF DIRECTORS FOR THE ANNUAL MEETING
OF STOCKHOLDERS TO BE HELD ON JUNE 23, 2010
BEHALF OF THE BOARD OF DIRECTORS FOR THE ANNUAL MEETING
OF STOCKHOLDERS TO BE HELD ON JUNE 23, 2010
The
undersigned hereby appoints DAVID UNGER, BRADLEY E. MAUTNER and MICHAEL D.
BENNETT, and each of them, proxies with power of substitution and revocation,
acting by majority of those present and voting, or if only one is present and
voting then that one, to vote, as designated on the reverse side hereof, all of
the shares of stock of MFRI, INC. which the undersigned is entitled to vote, at
the annual meeting of stockholders to be held at The Rosemont Hotel at O’Hare,
5550 North River Road, Rosemont, Illinois on June 23, 2010 at 10:00 a.m. Chicago
time, and at any adjournment thereof, with all the powers the undersigned would
possess if present.
PLEASE
VOTE, SIGN AND DATE ON REVERSE SIDE AND RETURN PROMPTLY IN THE ENCLOSED
ENVELOPE. NO POSTAGE NEED BE AFFIXED IF MAILED IN THE UNITED
STATES.
TABLE OF CONTENTS