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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
OF 1934 {x}
For the quarterly period ended March 31, 1999
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
OF 1934 { }
For the transition period from ________________________
Commission File Number: 0-29292
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HAGLER BAILLY, INC.
(Exact name of registrant as specified in its charter)
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Delaware 54-1759180
(State or other jurisdiction of incorporation or organization)
I.R.S. Employer Identification Number
1530 Wilson Boulevard, Suite 400, Arlington, VA 22209
(Address of principal executive offices) (Zip Code)
703-351-0300
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or such shorter period that the registrant was required
to file such reports) and (2) has been subject to such filing requirements for
the past 90 days. {x}Yes { }No
As of April 19, 1999, the Registrant had 16,523,966 shares of its common stock
outstanding.
<PAGE>
ii
i
TABLE OF CONTENTS
PART I
ITEM 1. FINANCIAL STATEMENTS..................................................1
CONSOLIDATED BALANCE SHEETS AS OF MARCH 31, 1999 (UNAUDITED) AND DECEMBER 31,
1998...........................................................................1
CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31,
1999 AND 1998 (UNAUDITED)......................................................2
CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED MARCH 31,
1999 AND 1998 (UNAUDITED)......................................................3
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.....................................4
iTEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS..................................6
PART II
ITEM 1. LEGAL PROCEEDINGS....................................................14
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS............................14
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.....................................15
SIGNATURES....................................................................19
<PAGE>
PART I
Item 1. Financial Statements
<TABLE>
<CAPTION>
Hagler Bailly, Inc.
Consolidated Balance Sheets
(in thousands)
March 31, December 31,
1999 1998
------------------- -------------------
(unaudited)
<S> <C> <C>
Assets
Current assets:
Cash & cash equivalents $ 12,334 $ 16,165
Accounts receivable, net of allowance of $3,839 and $3,888
in 1999 and 1998, respectively 60,189 59,092
Note receivable - 382
Prepaid expenses 3,132 2,620
Other current assets 392 304
------------------- -------------------
Total current assets 76,047 78,563
Property and equipment,net 6,842 6,463
Software development costs, net 720 898
Intangible assets, net 15,268 14,208
Other assets 1,209 1,290
=================== ===================
Total assets $ 100,086 $ 101,422
=================== ===================
Liabilities and stockholders' equity
Current liabilities:
Accounts payable and accrued expenses $ 8,922 $ 8,476
Accrued compensation and benefits 8,566 8,713
Billings in excess of cost 2,064 2,288
Current portion of long-term debt 333 345
Income taxes payable 794 2,547
Deferred income taxes 1,900 1,900
------------------- -------------------
Total current liabilities 22,579 24,269
Long-term debt, net of current portion 670 681
Minority interest 223 177
Deferred income taxes 927 927
Other deferred 1,790 1,769
------------------- -------------------
Total liabilities 26,189 27,823
Stockholders' equity:
Common stock, $0.01 par value, 50,000 shares authorized; 16,636 and
16,483 issued and outstanding at March 31, 1999 and
December 31, 1998, respectively 166 165
Additional capital 71,486 72,322
Retained earnings 2,387 1,206
Foreign currency translation (142) (94)
------------------- -------------------
Total stockholders' equity 73,897 73,599
=================== ===================
Total liabilities and stockholders' equity $ 100,086 $ 101,422
=================== ===================
See accompanying notes.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Hagler Bailly, Inc.
Consolidated Statements of Operations
(in thousands except per share data)
(Unaudited)
Three Months Ended
March 31,
1999 1998
----------------- -----------------
<S> <C> <C>
Revenues:
Consulting revenues $ 39,687 $ 37,931
Other revenues 543 1,315
----------------- -----------------
Total revenues 40,230 39,246
Cost of services 30,623 28,768
----------------- -----------------
Gross profit 9,607 10,478
Merger related and other non-recurring costs - 367
Selling, general and administrative expenses 7,583 4,884
Stock and stock option compensation - 2,165
----------------- -----------------
Income from operations 2,024 3,062
Other income (expenses), net 87 (47)
----------------- -----------------
Income before income tax expense and loss from
equity investment in joint venture 2,111 3,015
Income tax expense 786 2,074
----------------- -----------------
Income before loss from equity investment in joint
venture 1,325 941
Loss from equity investment in joint venture (143) -
----------------- -----------------
Net income $ 1,182 $ 941
================= =================
Net income per share:
Basic $ 0.07 $ 0.06
Diluted $ 0.07 $ 0.06
Weighted average shares outstanding:
Basic 16,552 15,606
Diluted 17,171 16,417
See accompanying notes.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Hagler Bailly, Inc.
Consolidated Statements of Cash Flows
(in thousands)
(Unaudited)
Three Months Ended March 31,
1999 1998
------------------- --------------------
<S> <C> <C>
Operating activities
Net income $ 1,182 $ 941
Adjustments to reconcile net income to net cash used in
operating activities:
Depreciation and amortization expense 1,317 958
Stock and stock option compensation - 2,165
Provision for deferred income taxes - 279
Provision for accounts receivable 313 215
Loss on equity investment in joint venture 143 -
Minority interest 46 -
Changes in operating assets and liabilities:
Accounts receivable (1,090) (2,615)
Note receivable 382 -
Prepaid expenses (1,361) (2,205)
Other current assets (88) (100)
Other assets (89) 290
Deferred compensation - 40
Accounts payable and accrued expenses 389 (1,450)
Accrued compensation and benefits (409) (3,713)
Billings in excess of cost (256) 17
Income taxes payable (1,753) (832)
Other deferred 21 1,153
------------------- --------------------
Net cash used in operating activities (1,253) (4,857)
Investing activities
Acquisition of property and equipment (444) (575)
Amount received in liquidation of subsidiary - 160
Sale of investments - 4,247
Purchase of acquired companies - (440)
------------------- --------------------
Net cash (used in) provided by investing activities (444) 3,392
Financing activities
Issuance of common stock - options 106 21
Purchase of treasury stock (2,217) -
Dividends paid by foreign subsidiary - (333)
Net borrowings from bank line of credit - 1,706
Principal payments on debt (23) (191)
------------------- --------------------
Net cash (used in) provided by financing activities (2,134) 1,203
Net decrease in cash and cash equivalents (3,831) (262)
Cash and cash equivalents, beginning of period 16,165 5,261
------------------- --------------------
Cash and cash equivalents, end of period $ 12,334 $ 4,999
=================== ====================
See accompanying notes.
</TABLE>
HAGLER BAILLY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Basis of Presentation
The accompanying unaudited interim consolidated financial statements of
Hagler Bailly, Inc. (the "Company") have been prepared pursuant to the rules of
the Securities and Exchange Commission ("SEC") for quarterly reports on Form
10-Q and do not include all of the information and note disclosures required by
generally accepted accounting principles. The information furnished herein
reflects all adjustments, of a normal recurring nature, which are, in the
opinion of management, necessary for a fair presentation of results for these
interim periods.
The interim results of operations are not necessarily indicative of the
results to be expected for the entire fiscal year ending December 31, 1999.
Note 2. Earnings per Share
Basic earnings per share is computed based on the weighted average
number of shares of common stock outstanding during the respective periods.
Diluted earnings per share is inclusive of the dilutive effect of unexercised
stock options using the treasury stock method.
<TABLE>
<CAPTION>
For the three months ended March 31,
1999 1998
---- ----
<S> <C> <C>
Net income $1,182 $ 941
================= =================
Weighted average shares of common stock outstanding
during the period 16,552 15,606
Effect of dilutive securities:
Stock options 619 811
----------------- -----------------
Weighted average shares of common stock and
dilutive securities 17,171 16,417
================= =================
</TABLE>
Note 3. Business Combination
On February 8, 1999, the Company acquired all of the outstanding stock
of Lacuna Consulting Limited ("Lacuna"), a United Kingdom corporation, in
exchange for 65,000 shares of the Company's common stock. The acquisition was
accounted for as a purchase. Accordingly, the consolidated financial statements
reflect the results of operations of Lacuna since the date of acquisition. As a
result of the transaction, the Company recorded intangible assets of
approximately $1.3 million.
Note 4. Stock Repurchase Plan
On March 22, 1999, the Company announced that its Board of Directors
authorized the repurchase of up to 1.5 million shares of the Company's common
stock. The purchases will be made from time to time in the open market or in
privately negotiated transactions. As of March 31, 1999, the Company had
repurchased 286,000 shares.
Note 5. Components of Comprehensive Income
Comprehensive income includes the Company's net earnings adjusted for
changes, net of tax, of cumulative translation adjustments. Comprehensive income
for the three months ended March 31, 1999 and 1998 is as follows:
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1999 1998
---- ----
<S> <C> <C>
Comprehensive Income:
Net Income $ 1,182 $ 941
Foreign translation adjustment (29) (93)
----------------- -----------------
Total comprehensive income: $ 1,153 $ 848
================= =================
</TABLE>
Note 6. Subsequent Events
From April 1, 1999 through April 19, 1999, the Company repurchased an
additional 112,500 shares of its common stock through its stock repurchase
program. As of April 19, 1999, the Company was authorized to repurchase
approximately 1.1 million additional shares.
On April 30, 1999, the Company acquired all of the outstanding stock of
Washington International Energy Group Ltd. , a Washington D.C. based worldwide
provider of energy and environmental policy consulting research services, in
exchange for cash and shares of the Company's common stock. The acquisition was
accounted for as a purchase.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Overview
Statements included in Management's Discussion and Analysis of
Financial Condition and Results of Operations which are not historical in
nature, are intended to be, and are hereby identified as, "forward looking
statements" for purposes of the safe harbor provided by Section 21E of the
Securities Exchange Act of 1934, as amended by Public Law 104-67.
Forward-looking statements may be identified by words including "anticipate,"
"believe," "estimate," "expect" and similar expressions. The Company cautions
readers that forward-looking statements, including without limitation, those
relating to the Company's future business prospects, revenues, working capital,
liquidity, and income, are subject to certain risks and uncertainties that would
cause actual results to differ materially from those indicated in the
forward-looking statements, due to several important factors such as
concentration of the Company's revenues from a relatively limited number of
public and private clients involved in the energy and network industries, the
Company's ability to attract, retain and manage professional and administrative
staff, fluctuations in quarterly results, risks related to acquisitions, and the
fact that historical operations and performance are not necessarily indicative
of future operations and performance, among others, and other risks and factors
identified from time to time in the Company's reports filed with the SEC,
including the risk factors identified in the Company's Registration Statement
(No. 333-22207) on Form S-1, and the Company's Annual Report on Form 10-K for
the year ended December 31, 1998.
The Company, together with its wholly owned subsidiaries PHB Hagler
Bailly, Hagler Bailly Services, and several of its other domestic and foreign
wholly owned subsidiaries, is a leading provider of professional services to
corporate and government clients on energy, network industries, and the
environment. As of March 31, 1999, Hagler Bailly employed a staff of 848, of
which over two-thirds were consulting and technical professionals. The Company's
common stock is quoted on the NASDAQ National Market under the symbol, "HBIX".
The Company's revenues consist of consulting revenues and other revenues.
Consulting revenues represent revenues associated with professional staff,
subcontractors and independent consultants, and client reimbursable expenses.
These revenues are derived from the Company's primary business of offering
corporate clients strategy and business operations consulting, economic counsel
and litigation support, and market research and survey analysis. Other revenues
include those derived from information-based products and services and
publication of newsletters, reference manuals and data series for the energy and
transportation industries services. The Company's client base includes both the
public and commercial rate sector. Revenue from the commercial rate sector is
typically characterized by higher gross margins than the public sector, yet
generally requires a higher relative level of infrastructure support.
Consequently, the Company's operating performance is affected by its public
sector / commercial rate sector business mix. Through strategic acquisitions and
internal growth, the Company has increased its commercial rate sector client
base, and will continue to pursue such opportunities in the future.
On February 8, 1999, the Company acquired all of the outstanding stock
of Lacuna Consulting Limited, a United Kingdom corporation, in exchange for
65,000 shares of the Company's common stock. The acquisition was accounted for
as a purchase method.
Results of Operations
The following table presents for the periods indicated the percentage
of revenues represented by certain income and expense items, and the percentage
period-to-period increase (decrease) in such items:
<TABLE>
<CAPTION>
% period-to-period
increase
(decrease) in
dollars
------------------------ --------------------
Percentage of revenues Three months
------------------------ ended Mar. 31, 1999
compared to
Three months ended three months
March 31, ended Mar. 31, 1998
<S> <C> <C> <C>
1999 1998
Revenues:
Consulting 98.6 96.6 4.6
Other 1.4 3.4 (58.7)
Total revenues 100.0 100.0 2.5
Cost of services 76.1 73.3 6.4
Merger related and other non-recurring costs - 0.9 (100.0)
Selling, general, and administrative
expenses 18.8 12.4 55.3
Stock and stock option compensation - 5.5 (100.0)
Income from operations 5.1 7.8 (33.9)
Other income (expenses), net 0.2 (0.1) 285.1
Income before income tax expense and
loss from equity investment in joint
venture 5.3 7.7 (30.0)
Income tax expense 2.0 5.3 (62.1)
Income before loss from equity
investment in joint venture 3.3 2.4 40.8
Loss from joint venture (0.4) - (100.0)
Net income 2.9 2.4 25.6
</TABLE>
Three months ended March 31, 1999, compared with three months ended March 31,
1998
Revenues for the three months ended March 31, 1999, increased by
approximately $984,000, or 2.5%, to $40.2 million from the three months ended
March 31, 1998. An increase of approximately $1.8 million in consulting revenues
was offset by a decrease of approximately $770,000 in other revenues. Consulting
revenues increased 4.6% for the three months ended March 31, 1999, as compared
to the comparable period of the prior year. This increase was primarily the
result of acquisitions and internal growth in the commercial rate sector, which
was partially offset by the sale of certain assets of the Company's public
sector consulting practice in September 1998. Other revenues decreased by 58.7%
for the three months ended March 31, 1999, as compared to the comparable period
of the prior year. This decrease was the result of the Company's decision the
cease operations in its financial advisory services business and also a decrease
in revenues from information-based products and services. In the three months
ended March 31, 1999, approximately 98.6% of the Company's revenues were derived
from consulting revenues, as compared with 96.6% in the three months ended March
31, 1998.
Cost of services for the three months ended March 31, 1999 increased by
$1.9 million, or 6.4%, to $30.6 million from the three months ended March 31,
1998. Cost of services as a percentage of revenue increased from 73.3% in the
three months ending March 31, 1998, to 76.1% in the three months ending March
31, 1999. This increase was the result of an increase in staffing costs to
support an anticipated increase of business and an increase in cash compensation
paid to consulting staff.
Selling, general and administrative expenses ("SG&A") for the three
months March 31, 1999, increased by $2.7 million, or 55.3%, to $7.6 million from
the three months ended March 31, 1998. Expressed as a percentage of total
revenues, SG&A expenses increased from 12.4% in the three months ended March 31,
1998, to 18.8% in the three months ended March 31, 1999. This increase is
reflective of increased marketing costs, an increase in administrative staff in
anticipation of increased business and duplication of certain administrative
costs related to the Company's recent business combinations.
There were no merger related and other non-recurring costs for the
three months ended March 31, 1999, compared with approximately $367,000 in the
three months ended March 31, 1998. The majority of these costs in the comparable
period were associated with the Company's business combination with TB&A Group,
Inc. and its wholly-owned subsidiary Theodore Barry & Associates (collectively
"TB&A").
There were no stock and stock option compensation expenses for the
three months ended March 31, 1999, compared with approximately $2.2 million in
the three months ended March 31, 1998. All of these costs in the prior period
were related to the business combination with Putnam, Hayes & Bartlett, Inc.
("PHB") which occurred in August 1998 and included non-cash, non-tax deductible
compensation based on the difference between the fair market and book values of
PHB common stock issuable under subscriptions within one year of the companies'
merger.
Other income (expenses), net includes interest income, interest
expense, minority interest and other income and expenses. For the three months
ended March 31, 1999, other income (expenses), net increased approximately
$134,000, to income of approximately $87,000 from the three months ended March
31, 1998.
The Company's effective tax rate decreased to 37.2% in the three months
ended March 31, 1999, from 68.8% in the three months ended March 31, 1998. The
effective tax rate for the comparable period was higher than the provisional
rate as a result of the non-deductibility for tax reporting purposes of the
stock compensation charge discussed above.
Net income for the three months ended March 31, 1999, increased by
approximately $241,000, or 25.6%, to approximately $1.2 million, from the three
months ended March 31, 1998, due to reasons discussed above.
Liquidity and Capital Resources
As of March 31, 1999, working capital was $53.5 million as compared to
$54.3 million at December 31, 1998.
Net cash of approximately $1.3 million was used in operating activities
during the three months ended March 31, 1999. The net use of funds is largely
attributable to the payment of income taxes, along with increases in prepaid
expenses and accounts receivable for the three months ended March 31, 1999.
Investment activities used approximately $444,000 during the three
months ended March 31, 1999. The Company used these funds for the purchase of
office and computer related equipment, leasehold improvements and other
resources necessary for the growth of the Company.
Financing activities used approximately $2.1 million for the three
months ended March 31, 1999. Substantially all of these funds were used for the
repurchase of 286,000 shares of the Company's common stock by the Company. The
Company is authorized to repurchase approximately 1.2 million additional shares.
The Company's primary source of liquidity for the past 12 months has been
funds generated from operations and from sales of common stock, periodically
supplemented by borrowings under a bank line of credit. During the year ended
December 31, 1998, the Company established $50.0 million in revolving credit
facilities with NationsBank. The amount available under the line of credit at
March 31, 1999 was $50.0 million. The Company believes that current projected
levels of cash flows and the availability of financing, including borrowings
under the Company's credit facility, will be adequate to fund its anticipated
cash needs, which may include future acquisitions of complementary businesses,
for at least the next 12 months and the foreseeable future. The Company,
depending on market conditions, may consider other sources of financing,
including equity financing.
<PAGE>
Year 2000
The Year 2000 issue is the result of a computer hardware and software
design that defines the year field as two digits instead of four digits.
Computer programs and systems with this problem will be unable to properly
distinguish between the year 2000 and the year 1900. As a result, the programs
could fail or yield incorrect results. The Company's business, as well of those
of its principal suppliers and clients, is dependent on the ability of its
software and hardware systems to properly function. Failure of one or more of
these systems of the Company or a material client or supplier could disrupt the
Company's operations and cause a material adverse impact on the Company's
business, results of operations and financial condition.
The Company's Year 2000 Strategy
The Company has established the Year 2000 Readiness Plan (the "Plan") to
prepare for the Year 2000 issue. This Plan is comprised of the following
elements:
1. Audit, assessment, remediation, and testing of internal systems.
2. Obtaining assurance or information on the state of Year 2000 readiness
of our material clients and suppliers who exchange information
electronically with us or upon whom our work product may depend.
3. Developing contingency plans, when practical, to address potential Year 2000
failures.
Except where noted below, the Company's goal is to complete
implementation of the Plan by September 30, 1999.
<TABLE>
<CAPTION>
Audit and Remediation Testing Implementation
Assessment
<S> <C> <C> <C> <C>
- --------------------------- -------------------- ------------------- ------------------ --------------------
IT - Domestic 80% Complete In Progress 3rd Quarter 3rd Quarter
- --------------------------- -------------------- ------------------- ------------------ --------------------
IT - International 2nd Quarter 3rd Quarter 3rd Quarter 4th Quarter
- --------------------------- -------------------- ------------------- ------------------ --------------------
Business Operations Complete Complete During 2nd and 3rd Quarter
3rd Quarter
- --------------------------- -------------------- ------------------- ------------------ --------------------
Embedded 1st - 3rd Quarter 1st - 3rd Quarter 1st - 3rd 3rd Quarter
Quarter
- --------------------------- -------------------- ------------------- ------------------ --------------------
3rd Party 2nd - 3rd Quarter 3rd - 4th N/A 4th Quarter
Quarter
</TABLE>
Year 2000 Readiness Report
The Company made several acquisitions in 1998. It undertook a
comprehensive due diligence examination that identified general Year 2000
Readiness issues for itself and the companies it acquired. The Company recently
formalized its efforts by establishing a Year 2000 Working Committee (the
"Committee") led by its Chief Information Officer to oversee the integration of
its Year 2000 efforts and to implement the Plan. The Committee includes the CEO,
CFO, General Counsel, and other Company executives and outside consultants as
required. The Company has engaged a consultant to complete the assessment of its
domestic offices and to assist in the assessment of its major international
offices.
The Company's front office systems (used for the delivery of services
to clients), both hardware and software, were replaced or significantly upgraded
in 1997 and 1998 and were manufactured to be Year 2000 ready (with minor,
vendor-identified problems). Due to the release of new Year 2000 "software"
fixes from Microsoft, the principal supplier of the Company's front office
software, the Company currently expects that the process of updating those
systems that are not Year 2000 ready will be performed in the 3rd quarter of
1999.
With some exceptions, the Company does not employ significant custom
programming in its front office, work product, or back office systems. The
Company's work product is generated almost exclusively with commercially
available statistical, econometric, word processing, spreadsheet, database, or
mathematical software for which the Company has obtained Year 2000 Readiness
assurances. These software products have been audited and have been or will be
updated where appropriate. In the cases where the Company has supplemented these
commercially available softwares with custom programming, a team is being
established to assess the software. These situations do not represent a
significant percentage of the Company's work product. The Company is
implementing a software application to aide the monitoring of Year 2000
compliance of new work product and to provide a testing mechanism for the re-use
of models, spreadsheets, or databases. This application is a commercially
available Year 2000 audit and remediation product specifically designed for
Microsoft Windows compliant software applications.
A conversion was undertaken in 1998 to replace a significant and
non-compliant analytic system (used to service client analysis needs), including
hardware and software, with a compliant system. The implementation is complete
and the conversion of existing analytic applications will be complete by
September 30, 1999.
Back office systems including financial accounting, project accounting,
fixed asset management, human resources, payroll, and conflict management have
been replaced, updated with vendor supplied Year 2000 fixes, or converted to
compliant versions of the software. During the second quarter 1999, the Company
plans to undertake a comprehensive test of its back office systems. Certain
models of personal computers have been identified as non-compliant and will be
replaced in 1999. The number of Year 2000 replacements will not exceed the
normal annual personal computer turnover.
The Company is contacting the vendors of its principal office systems
in order to obtain proof of Year 2000 readiness. The Company's material office
systems include its telephone, communications and networking equipment, security
and facilities systems, copiers, pagers, voicemail, and faxing systems. Because
the Company is highly decentralized with 21 domestic and international
offices, it does not expect the audit and remediation of these office systems to
be complete before September 30, 1999. Some office systems in the Company's
international offices will not be corrected by December 31, 1999, but the
Company does not expect such systems to materially affect the Company's ability
to complete its engagements.
Clients
The Company's clients include domestic and international companies,
private law firms, the United States and state, local and foreign governments
and governmental agencies and government-owned enterprises. The Company has
responded to Year 2000 compliance surveys from over 50 of its major clients and
shared the readiness information disclosed here. In April 1999, the Company
initiated a survey of a cross section of its largest clients (measured by
revenue generated for the Company in 1998) to determine their Year 2000
readiness. The Company plans to survey other clients if circumstances warrant
and, where practical, to survey new clients upon new engagements.
Material Vendors
The Company performs analytic work on time sensitive matters. Certain
vendors have been identified as critical to implementing the Plan. These vendors
include payroll, credit, transportation, information resources, and certain
maintenance providers of mission critical hardware and software. If one or more
of the Company's principal vendors experiences significant business disruption
as a result of the Year 2000 issue, it could have a material adverse effect on
the Company's business, results of operations and financial condition. For
example, if the Company's principal suppliers of real-time electricity data are
not functioning properly, the Company may be unable to perform analytic work for
clients. Similarly, if hardware used to perform modeling cannot be supported
because of a Year 2000 issue at the vendor, the Company's ability to meet client
demands for time sensitive analysis might be jeopardized. The Committee will be
contacting the Company's principal vendors during the second quarter of 1999.
Based on the responses, the Committee may need to develop contingency plans to
replace those vendors whose ability to certify Year 2000 readiness is in doubt.
The Committee expects that the process of evaluating and working with outside
vendors will continue into the third and fourth quarters of 1999.
Contingency Planning
The Committee is developing a contingency plan in the event that a
material system or vendor will not be Year 2000 ready by December 31, 1999. This
contingency plan is scheduled to be substantially complete by the end of the
third quarter of 1999, although it will be reviewed and refined thereafter as
the Committee continues to evaluate the Company's systems and vendors. The
Company is considering other contingency initiatives with respect to office
systems, personnel, and new engagements.
Costs
The Company will budget $300,000 in each of the next two fiscal years,
1999 and 2000, to cover the costs of evaluating systems, acquiring Year 2000
remediation software, additional testing of hardware and software, hiring an
outside Year 2000 consultant, and administrative costs associated with
implementing the Plan. Although the Company believes this amount will be
sufficient to meet the costs of the Company's Year 2000 readiness efforts, there
can be no assurance that the costs to implement the Plan will not significantly
exceed the Company's current estimates. To date, expenditures for Year 2000
readiness have been nominal and associated with the rapid implementation of
already planned front office and back office systems upgrades.
Risks
At present, the Company perceives that its greatest Year 2000 risk is
its dependence on an external network of information providers, vendors, and
experts to complete its engagements. Even if the Company can satisfy itself that
the systems of its material suppliers and partners are Year 2000 ready, those
suppliers and partners in turn rely on a myriad of suppliers to operate their
businesses. Year 2000-related failures far removed from the Company could
trigger a chain of events that could materially harm the Company's business.
Certain clients, despite their best efforts, may suffer the effects of Year 2000
failures of others and thus delay, cancel, or substantially alter work in
progress resulting in a negative effect on the operations of the Company,
including the failure to meet financial expectations or the loss of key
personnel. Such a chain of events could also lead to litigation against the
Company. The Company also performs work in regions deemed at high risk for Year
2000 disruptions, specifically, Latin America, Eastern Europe, and Asia. Lastly,
the Company perceives that the stability of technical and critical office staff
is important to the Plan and is considering steps to decrease the risk of losing
critical resources. Notwithstanding these efforts, there can be no assurance
that Year 2000 problems will not have a material adverse effect on the Company's
business, results of operations, or financial condition.
<PAGE>
PART II
Item 1. Legal Proceedings
Apogee Research, Inc. ("Apogee"), a wholly owned subsidiary of the Company,
received a subpoena in July 1998 from the Office of the Inspector General of the
Environmental Protection Agency (the "EPA") requesting records from April 1993
through October 1995 pertaining to a contract between Apogee and the EPA. Apogee
has provided records in response to the subpoena. The work under this contract
has been completed. The subpoena was served in connection with an EPA
investigation relating to the submission of potential false statements and false
claims under the contract. Hagler Bailly is unable to determine at this time
what effect, if any, the investigation will have on its business, financial
condition or results of operations.
The Company and its subsidiaries are from time to time parties to litigation
arising in the ordinary course of business. Neither the Company nor any of its
subsidiaries is a party to any pending material litigation nor are any of them
aware of any pending or threatened litigation that would have a material adverse
effect on the Company or its business.
Item 2. Changes in Securities and Use of Proceeds
On February 8, 1999, the Company completed the acquisition of Lacuna
Consulting Limited ("Lacuna"), a United Kingdom corporation, and issued 65,000
shares of its common stock to the former shareholders of Lacuna in connection
therewith. The shares of common stock issued in connection with this transaction
were exempt from registration pursuant to Rule 506 of the Securities and
Exchange Commission's Regulation D and Section 4(2) of the Securities Act of
1933.
<PAGE>
Item 6. Exhibits and Reports on Form 8-K.
None filed during the period
(a) Exhibits
Exhibit
No. Description
2 Sale Agreement between RCG International, Inc., and Hagler Bailly
Consulting, Inc. (1)
2.1 Agreement and Plan of Merger by and among Hagler Bailly, Inc., PHB
Acquisition Corp. and Putnam, Hayes and Bartlett, Inc., dated as of 6/11/98. (5)
3.1 By-Laws of the Company, as amended. (6)
3.2 Amended Restated Certificate of Incorporation of the Company. (7)
4.0 Specimen Stock Certificates. (1)
4.1 Registration Rights Agreement dated November 18, 1997 by and between
Hagler Bailly, Inc. and Richard R. Mudge, acting as Stockholders'
Representation. (3)
4.2 Form of Escrow Agreement by and among the Company, PHB Acquisition
Corp., William E. Dickenson as Stockholders' Representative and State Street
Bank and Trust Company, as Escrow Agent. (5)
4.3 Registration Rights Agreement dated February 23, 1998 by and between
Hagler Bailly, Inc. and Michael J. Beck, acting as Stockholders' Representative.
4.4 Registration Rights Agreement dated November 17, 1998 by and between
Hagler Bailly, Inc. and the stockholders of Fieldston Publications, Inc. and The
Fieldston Company.
10.2 Form of Non-Compete, Confidentiality and Registration Rights
Agreement between the Company and each stockholder.
(1)
10.3 Lease by and between Wilson Boulevard Venture and RCG/Hagler Bailly,
Inc. dated October 25, 1991. (1)
10.4 First Amendment to Lease by and between Wilson Boulevard Venture and
RCG/Hagler Bailly, Inc., dated February 26, 1993. (1)
10.5 Second Amendment to Lease by and between Wilson Boulevard Venture and
RCG/Hagler Bailly, Inc., dated December 12, 1994. (1)
10.6 Lease by and between Bresta Futura V.B.V. and Hagler Bailly
Consulting, Inc. dated May 8, 1996. (1)
10.7 Lease by and between L.C. Fulenwider, Inc., and RCG/Hagler Bailly,
Inc. dated December 14, 1994. (1)
10.8 Lease by and between University of Research Park Facilities Corp. and
RCG/Hagler Bailly, Inc., dated April 1, 1995. (1)
10.9 Credit Agreement by and between Hagler Bailly Consulting, Inc. and
State Street Bank and Trust Company, dated May 17, 1995. (1)
10.10 Amendment to Credit Agreement by and between Hagler Bailly
Consulting, Inc. and State Street Bank and Trust Company, dated as of June 20,
1996. (1)
10.11 Extension Agreement by and between Hagler Bailly Consulting, Inc. and
State Street Bank and Trust Company, dated as of August 1, 1996. (1)
10.12 Amendment to Credit Agreement by and between Hagler Bailly
Consulting, Inc. and State Street Bank and Trust Company, dated as of November
12, 1996. (1)
10.13 Term Note by and between Hagler Bailly Consulting, Inc., and State
Street Bank and Trust Company, dated May 26, 1995. (1)
10.14 Revolving Credit Note by and between Hagler Bailly Consulting, Inc.
and State Street Bank and Trust Company dated May 26, 1995. (1)
10.15 Amendment to Credit Agreement by and between Hagler Bailly
Consulting, Inc., and State Street Bank and Trust Company, dated as of June 12,
1997. (1)
10.16 Credit Agreement by and among Hagler Bailly Consulting, Inc., Hagler
Bailly Services, Inc. and State Street Bank and Trust Company, dated as of
September 30, 1997. (2)
10.17 Promissory Note by Hagler Bailly Consulting, Inc. and Hagler Bailly
Services, Inc. to State Street Bank and Trust Company, dated September 30, 1997.
(2)
10.18 Security Agreement by and between Hagler Bailly Consulting, Inc. and
State Street Bank and Trust Company, dated as of September 30, 1997. (2)
10.19 Security Agreement by and between Hagler Bailly Services, Inc. and
State Street Bank and Trust Company, dated as of September 30, 1997. (2)
10.20 Guaranties by Hagler Bailly, Inc. to State Street Bank and Trust
Company, dated September 30, 1997. (2)
10.21 Guaranties by HB Capital, Inc. to State Street Bank and Trust
Company, dated September 30, 1997. (2)
10.22 Subordination Agreement and Negative Pledge/Sale Agreement by and
between Hagler Bailly, Inc. and State Street Bank and Trust Company for Hagler
Bailly Consulting, Inc., dated September 30, 1997. (2)
10.23 Subordination Agreement and Negative Pledge/Sale Agreement by and
between Hagler Bailly, Inc. and State Street Bank and Trust Company for Hagler
Bailly Services, Inc., dated September 30, 1997. (2)
10.24 Guaranty of Monetary Obligations to Bresta Futura V.B.V. by Hagler
Bailly, Inc., dated July 23, 1997. (2)
10.25 Amendment to Credit Agreement by and between Hagler Bailly
Consulting, Inc. and State Street Bank and Trust Company dated May 18, 1998. (6)
10.26 Sublease Agreement by and between Coopers and Lybrand L.L.P. and
Hagler Bailly, Inc. dated December 5, 1997. (6)
10.27 Employment Agreement between the Company and Henri-Claude A. Bailly,
dated August 27, 1998. (7)
10.28 Employment Agreement between the Company and William E. Dickenson,
dated August 27, 1998. (7)
10.29 Employment Agreement between the Company and Howard W. Pifer III,
dated June 10, 1998. (7)
10.30 Hagler Bailly, Inc. Amended and Restated Employee Incentive and
Non-Qualified Stock Option and Restricted Stock Plan. (7)
10.31 Credit Agreement by and between Hagler Bailly, Inc. and The Lenders
From Time to Time a Party thereto, as Lenders and NationsBank, N.A., dated
November 20, 1998. (8)
10.32 Revolving Note by and between Hagler Bailly, Inc. and NationsBank,
N.A., dated November 20, 1998. (8)
10.33 Swing Line Note by and between Hagler Bailly, Inc. and NationsBank,
N.A., dated November 20, 1998. (8)
10.34 Subsidiary Guarantee by and among Hagler Bailly Services, Inc.,
Hagler Bailly Consulting, Inc., HB Capital, Inc., Putnam, Hayes & Bartlett,
Inc., TB&A Group, Inc., Theodore Barry & Associates, Private Label Energy
Services, Inc., Fieldston Publications, Inc. and NationsBank, N.A., dated
November 20, 1998. (8)
10.35 Form of Security Agreement by and between Hagler Bailly, Inc. and
NationsBank, N.A., dated November 20, 1998. (8)
10.36 Security Agreement by and between Hagler Bailly Consulting, Inc. and
NationsBank, N.A., dated November 20, 1998. (8)
10.37 Security Agreement by and between Hagler Bailly Services, Inc. and
NationsBank, N.A., dated November 20, 1998. (8)
10.38 Security Agreement by and between HB Capital, Inc. and NationsBank,
N.A., dated November 20, 1998. (8)
10.39 Security Agreement by and between Putnam, Hayes & Bartlett, Inc. and
NationsBank, N.A., dated November 20, 1998. (8)
10.40 Security Agreement by and between TB&A Group, Inc. and NationsBank,
N.A., dated November 20, 1998. (8)
10.41 Security Agreement by and between Theodore Barry & Associates and
NationsBank, N.A., dated November 20, 1998. (8)
10.42 Security Agreement by and between PHB Hagler Bailly, Inc. and
NationsBank, N.A., dated February 22, 1999. (8)
10.43 Security Agreement by and between Private Label Energy Services, Inc.
and NationsBank, N.A., dated November 20, 1998. (8)
10.44 Security Agreement by and between Fieldston Publications, Inc. and
NationsBank, N.A., dated November 20, 1998. (8)
10.45 Lease by and between One Memorial Drive Limited Partnership and
Putnam, Hayes & Bartlett, Inc. dated January 1, 1998. (8)
10.46 Lease by and between George H. Beuchert, Jr., Trustee, Thomas J.
Egan, Trustee, Oliver T. Carr, Jr., Trustee, William Joseph H. Smith, Trustee,
and the Kiplinger Washington Editors, Inc., Trustee, acting collectively as
trustee on behalf of the beneficial owner, The Greystone Square 127 Associates,
and Putnam, Hayes & Bartlett, Inc. dated March 31, 1997. (8)
10.47 First Amendment to Lease by and between Greystone Square 127 Limited
Liability Company, as successor in interest collectively to The Greystone Square
127 Associates, and George H. Beuchert, Jr., Trustee, and The Kiplinger
Washington Editors, Inc., Trustee, the owners of record who held legal title to
the Building as trustees on behalf of the Greystone Square 127 Associates, the
former beneficial owners of the Building, and Putnam, Hayes & Bartlett, Inc.
dated February 10, 1998. (8)
10.48 Employment agreement between the Company and Jasjeet S. Cheema, dated
February 2, 1999
10.49 First amendment to revolving credit agreement between Hagler Bailly,
Inc, the lenders from time to time a party thereto, as lenders, and NationsBank,
N.A., dated as of March 22, 1999.
10.50 Hagler Bailly, Inc. Amended and Restated Employee Incentive and
Non-Qualified Stock Option and Restricted Stock Plan, amended as of March 31,
1999.
21 Subsidiaries (8)
24 Powers of Attorney (included on Signature Pages) (1)
27.1 Financial Data Schedule - March 31, 1999
- --------------------------------------------------------------------------------
(1) Included in the Company's Registration Statement on Form S-1 (No.
333-22207) and incorporated herein by reference thereto.
(2) Included in the Company's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1997 and incorporated herein by reference
thereto.
(3) Included in the Company's Current Report on Form 8-K filed on December
16, 1997 and incorporated herein by reference thereto.
(4) Included in the Company's Annual Report on Form 10-K for the year
ended December 31, 1997 and incorporated herein by reference thereto.
(5) Included in the Company's Proxy Statement for Special Meeting of
Stockholders dated July 24, 1998 on Form DEF 14A and incorporated
herein by reference thereto.
(6) Included in the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1998 and incorporated herein by reference
thereto.
(7) Included in the Company's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1998 and incorporated herein by reference
thereto.
(8) Included in the Company's Annual Report on Form 10-K for the year
ended December 31, 1998 and incorporated herein by reference thereto.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
---------------------------------------
Date: May 14, 1999 William E. Dickenson
President and Chief Executive Officer
/s/William E. Dickenson
---------------------------------------
Date: May 14, 1999 Glenn J. Dozier
Senior Vice President, Chief Financial Officer,
Treasurer and Secretary
/s/ Glenn J. Dozier
<PAGE>
29
Exhibit 10.48
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is entered into
as of February 2nd, 1998, by and between HAGLER BAILLY CONSULTING, INC., a
Delaware corporation (the "Company"), and Jasjeet Cheema ("Employee").
WHEREAS, pursuant to that certain Agreement and Plan of Merger
(the "Merger Agreement") dated as of the date hereof among TB&A GROUP, INC., a
Delaware corporation ("TB&A"), HAGLER BAILLY, INC., a Delaware corporation
("Hagler Bailly"), and HAGLER BAILLY ACQUISITION CORP. 1998-1, a Delaware
corporation and wholly-owned subsidiary of Hagler Bailly ("Merger Sub"), Merger
Sub will merge with and into TB&A (the "Merger"), and Hagler Bailly will acquire
one hundred percent (100%) of the common stock of TB&A, including the common
stock of TB&A owned by the Employee, in exchange for shares of common stock of
Hagler Bailly ("Common Stock");
WHEREAS, as an inducement to Hagler Bailly to enter into the
Merger Agreement and as a condition precedent to Hagler Bailly's obligations
under the Merger Agreement, Employee has agreed to execute and deliver this
Agreement and to terminate, effective as of the effective time of the Merger,
any prior employment agreements or arrangements with TB&A;
WHEREAS, the Company is a wholly-owned subsidiary of Hagler Bailly;
WHEREAS, the Company desires to employ Employee, and Employee
desires to be employed by the Company, from and after the effective time of the
Merger on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing and of the
mutual covenants and agreements hereinafter set forth, the parties hereto hereby
agree as follows:
1. Employment.
On the terms and conditions set forth in this Agreement, the Company
agrees to employ Employee and Employee agrees to be employed by the
Company for the term set forth in Section 2 hereof and in the position
and with the duties set forth in
---------
Section 3 hereof.
- ---------
2. Term.
The term of this Agreement shall commence as of the
effective time of the Merger (the "Commencement Date")
and shall end on the third anniversary of the date hereof, unless sooner
terminated pursuant to Section 6 hereof (the "Term").
3. Position and Duties.
Employee shall serve as Chief Operating Officer and Senior Vice President
of the Company and the Company shall cause Employee to become, and
Employee shall serve as, President of TB&A or such other position as
may, from time to time, be prescribed by the Chief Executive Officer
and Board of Directors of the Company (the "Board of Directors") or
any of its affiliates and agreed to by Employee.
Employee agrees to serve the Company faithfully and to the best of his
ability; to devote his time, energy and skill during regular business
hours (except for illness or incapacity and except for vacation time
as provided herein) to such employment; to use his best efforts,
skills and ability to promote the Company's interests; if elected, to
serve as a director of the Company and its subsidiaries or affiliated
corporations or entities; to perform such duties and responsibilities
as from time to time may be assigned to him by the Chief Executive
Officer and the Board of Directors, which duties shall be consistent
with his positions as set forth in the preceding paragraph.
4. Compensation.
The Company agrees to pay Employee, either directly or through one of its
affiliates, as compensation for all duties performed by him in any
capacity during the period of his employment under this Agreement:
(a) an annual base salary ("Base Salary"), payable in equal installments twice
monthly to Employee, at the rate of $120,000 per year commencing on the
Commencement Date through December 31, 1998. Commencing January 1, 1999 and for
the remainder of the Term, the annual rate of Base Salary shall be determined by
management of the Company in accordance with the compensation policies of the
Company for officers of comparable rank;
(b) a bonus payment ("Bonus") for the calendar year 1998, in an amount, if any,
determined by management of the Company in accordance with the compensation
policies of TB&A as set forth in Appendix A attached hereto; for calendar year
1999 and each calendar year during the Term, a Bonus, in an amount, if any,
determined by management of the Company in accordance with the compensation
policies of the Company for officers of comparable rank;
(c) a non-refundable payment in the amount of One Hundred Thousand Dollars
($100,000) payable, at the option of Employee, (i) in cash at the closing of the
Merger or (ii) into the Plan (as defined below) as consideration for entering
into this Agreement;
(d) payments from the Hagler Bailly Consulting, Inc. Deferred Compensation
Plan (the "Plan") on the first, second and third anniversary dates of
the Commencement Date in amounts equal to one-seventh (1/7) of the
funds vested under the Plan on such dates;
(d) a grant of options to purchase 15,000 shares of common stock of Hagler
Bailly, Inc. on the Commencement Date, with an exercise price at the fair market
value on the Commencement Date, vesting in equal amounts over four years
commencing on the first anniversary date of the Commencement Date, with a term
of ten (10) years, and subject to the terms and conditions of the Hagler Bailly
Employee Incentive and Non-Qualified Stock Option and Restricted Stock Plan or
any successor plan; and
(e) from time to time Employee shall also be eligible to receive options to
purchase Common Stock pursuant to the terms of the Hagler Bailly Employee
Incentive and Non-Qualified Stock Option and Restricted Stock Plan or any
successor plan, and in the amounts determined by, and subject to the terms and
conditions of, the Stock Option Committee of the Board of Directors, or the
Board of Directors, of Hagler Bailly.
5. Benefits; Reimbursement of Expenses; Vacation.
During the Term, Employee shall also be eligible to:
(a) participate in all of the benefit programs which are currently or may
hereafter be provided by the Company, including, without limitation, all stock
option, pension, thrift, employee stock ownership, incentive, retirement, salary
continuance and health, life and disability insurance programs ("Benefit
Programs") in accordance with policies in effect for officers of comparable
rank; provided, that nothing in this Agreement shall require the Company to
create, continue or refrain from amending, modifying, revising or revoking any
Benefit Programs described herein. Employee shall be entitled to vacation,
holidays and personal days on the same basis as other officers of the Company
during the first and each subsequent twelve (12) month period during the Term;
(b) reimbursement by the Company of all expenses reasonably incurred by
him during the Term in connection with the performance of his duties,
including, without limitation, travel and entertainment expenses
reasonably related to the business or interests of the Company, upon
submission by him of written documentation of
such expenses; and
(b) the other benefits set forth in this Agreement.
6. Termination.
This Agreement may be terminated prior to the
expiration of its Term as follows:
(a) Automatically upon Employee's death;
(b) For "cause," which for purposes of this Agreement shall mean (A)
dereliction of duty by Employee which dereliction has not been cured
by Employee within thirty (30) days after written notice thereof has
been given to Employee by the Company, (B) Employee's willful
engagement in conduct materially injurious to the Company (which shall
not include conduct by Employee without malicious intent in the
ordinary course of business which results in financial loss to the
Company), (C) dishonesty of a material nature that relates to the
performance of Employee's duties under this Agreement, (D) Employee's
conviction for any misdemeanor that involves fraud, moral turpitude or
a material loss to the Company or any felony; or (E) failure by
Employee to perform or observe any of the material terms or provisions
of this Agreement which failure has not been cured by Employee within
thirty (30) days after written notice thereof has been given to
Employee by the Company;
(c) Upon the Company's failure to perform or observe any of the material
terms or provisions of this Agreement, and the continued failure of
the Company to cure such default within thirty (30) days after written
demand for performance has been given to the Company by Employee,
which demand shall describe specifically the nature of such alleged
failure to perform or observe such material terms or provisions.
Without limiting the generality of the foregoing, it is acknowledged
and agreed that Sections 4 and 5 of this Agreement are material
provisions of this Agreement;
(d) Upon notice from Employee upon the Company's failure to pay Employee
amounts under Section 4 when
due; and
(e) Upon permanent disability of Employee, as such term is defined in the
disability insurance
programs of the Company; and
(f) Upon resignation of Employee.
7. Effect of Termination.
(a) In the event of the termination of this Agreement pursuant to
paragraphs (a) and (f), the Company shall be under no obligation to
Employee, except to pay his or her accrued and unpaid Base Salary,
Bonus and paid leave payments to the date of termination, any vested
portion of the Plan and any vested but unexercised options under the
Option Plan, and Employee shall not be entitled to receive any Base
Salary or Bonus after the date of termination, any unvested portion of
the Plan, and any unvested options under the Option Plan.
(b) In the event of the termination of this Agreement pursuant to
paragraph (b), the Company shall be under no obligation to Employee,
except to pay his or her accrued and unpaid Base Salary, Bonus and
paid leave payments to the date of termination, and any vested portion
of the Plan, and Employee shall not be entitled to receive any Base
Salary or Bonus after the date of termination, any unvested portion of
the Plan, any vested but unexercised options under the Option Plan,
any unvested options under the Option Plan or any shares that have not
yet been issued upon exercise of an option under the Option Plan.
(c) In the event of the termination of this Agreement by Employee or the
Company pursuant to paragraph (c), (d) or (e) of Section 6, Employee
shall be entitled to receive all of the compensation and benefits
provided herein until the later of (i) the date the Term would have
expired absent any termination of this Agreement, or (ii) six (6)
months from the effective date of such termination (such later date
being herein referred to as the "Final Payment Date"). In the event of
any termination pursuant to Section 6 (e), any payments pursuant to
this Section 7 shall be reduced by any disability benefits received by
the Employee pursuant to any disability insurance provided by the
Company or purchased by the Employee (the cost of which is reimbursed
by the Company). If the Company and Employee shall become involved in
a dispute relating to any alleged breach of this Agreement by the
Company or Employee, and if Employee prevails (by judgment, settlement
or otherwise) in such dispute, the Company shall reimburse Employee
for all reasonable costs (including reasonable fees and disbursements
of counsel) incurred by him in connection with such dispute upon
presentation to the Company of evidence of such costs.
8. Non-compete and Other Restrictive Covenants.
(a) Employee covenants and agrees that Employee will not, at all times
during the Term and for a period of one (1) year after the termination
or expiration of this Agreement, directly or indirectly in competition
with the business of the Company or its affiliates: (i) solicit any
business or contracts from any customers of the Company or its
affiliates, any past customers of the Company or its affiliates, or
any prospective customers (as defined below) of the Company except as
necessitated by Employee's position with the Company and then only in
furtherance of the business interests of the Company or its
affiliates; (ii) induce or attempt to induce any such customer to
alter its business relationship with the Company or its affiliates
except as necessitated by Employee's position with the Company and
then only in furtherance of the business interests of the Company or
its affiliates; (iii) solicit or induce or attempt to solicit or
induce any employee of the Company or its affiliates to leave the
employ of the Company or any of its affiliates for any reason
whatsoever or hire any employee or any person who was an employee of
the Company or its affiliates within the twelve (12) month period
prior to such hiring; or (iv) engage in, participate in, represent in
any way or be connected with, as officer, director, partner, owner,
employee, agent, sales representative, distributor, independent
contractor, consultant, proprietor, stockholder (except for the
ownership of a less than five percent (5%) stock interest in a
publicly traded company) or otherwise, any business or activity
competing directly or indirectly with the business of the Company or
its affiliates (or any part thereof) anywhere in the United States
where the Company (or any subsidiary or affiliate) is engaged or has
reasonably firm plans to engage in business. Any of the obligations of
Employee under this Section 8(a) may be waived by the Company upon
written notice to that effect given to Employee.
For purposes of this Section 8(a), (A) a "prospective
customer" shall mean potential customers which the
Company or any of its affiliates has solicited concerning potential business at
any time during the one (1) year period preceding the expiration or termination
of the Term; and (B) the "business of the Company or its affiliates" shall be
deemed to be the provision of management and consulting services to government
and commercial clients and any other business or activities in which the Company
or its affiliates is engaged.
(b) Employee covenants and agrees that Employee will not, for two (2)
years after the termination or expiration of this Agreement, without
the prior written consent of the Board of Directors or a person
authorized by the Board of Directors, directly or indirectly, reveal
or disclose to third parties any information concerning or related to
the business or affairs of the Company or any of its affiliates,
including, but not limited to services, software products, marketing
plans and business strategies, which is considered confidential by the
Company and which is not, at the time in question, generally available
to the public ("Confidential Information"). The Company shall have no
obligation to specifically identify any information as to which the
protection of this Section 8(b) extends by any notice or other action,
and Employee agrees that all information not available or known to the
public relating to the business of the Company or its affiliates, and
their software, products, services, marketing plans and/or business
strategies shall be deemed Confidential Information.
(c) The covenants contained in this Section 8 shall be construed as a
series of separate and severable --------- covenants. Employee and the
Company agree that if in any proceeding, the tribunal shall refuse to
enforce fully any covenants contained herein because such covenants
cover too extensive a geographic area or too long a period of time or
for any other reason whatsoever, any such covenant shall be deemed
amended to the extent (but only to the extent) required by law. Each
party acknowledges and agrees that the services to be rendered by
Employee to the Company hereunder are of a special and unique
character. Each party shall have the right to injunctive relief, in
addition to all of its other rights and remedies at law or in equity,
to enforce the provisions of this Agreement.
(d) The obligations of Employee under this Section 8 shall survive the
termination or expiration of the Term.
9. Proprietary Rights. (a) At all times during the Term, all right,
title, and interest in all copyrightable material which Employee shall
conceive or originate, either individually or jointly with others, and
which arise out of the performance of this Agreement, will be the
property of the Company and are by this Agreement assigned to the
Company along with ownership of any and all copyrights in the
copyrightable material. At all times during the Term, Employee agrees
to execute all papers and perform all other acts necessary to assist
the Company to obtain and register copyrights on such materials in any
and all countries, and the Company agrees to pay expenses associated
with such copyright registration. Works of authorship created by
Employee for the Company in performing his responsibilities under this
Agreement during the Term shall be considered "works made for hire" as
defined in the U.S. Copyright Act. In addition, Employee hereby
assigns to the Company all proprietary rights including, but not
limited to, all patents, copyrights, trade secrets and trademarks
Employee might otherwise have, by operation of law or otherwise, in
all inventions, discoveries, works, ideas, information, knowledge and
data related to Employee's access to confidential information of the
Company during the Term.
(b) All know-how and trade secret information conceived or originated by
Employee which arises out of the performance of his obligations or
responsibilities under this Agreement during the Term shall be the
property of the Company, and all rights therein are by this Agreement
assigned to the Company.
(c) If, during the Term, Employee is engaged in or associated with the
planning or implementing of any project, program or venture involving
the Company and a third party or parties all rights in such project,
program or venture shall belong to the Company. Except as formally
approved by the Company's Board of Directors, Employee shall not be
entitled to any interest in such project, program or venture or to any
commission, finder's fee or other compensation in connection therewith
other than the compensation to be paid to Employee as provided in this
Agreement.
(d) Upon termination of the Term of this Agreement, Employee shall deliver
promptly to the Company all records, manuals, books, blank forms,
documents, letters, memoranda, notes, notebooks, reports, data,
tables, calculations, customer and prospective customer lists, and
copies of all of the foregoing, which are the property of the Company,
and all other property, trade secrets and confidential information of
the Company, including, but not limited to, all documents which in
whole or in part contain any trade secrets or confidential information
of the Company, which in any of these cases are in his possession or
under his control.
(e) At all times during the Term and thereafter, Employee further agrees
to execute and deliver any additional documents, instruments,
applications, oaths or other writings necessary or desirable to
further evidence the assignments described in this Section 9
("Supporting Documents"). If Employee fails or refuses to execute or
deliver any Supporting Documents, Employee hereby agrees for himself
and his successors, assigns, donees, executors, administrators,
transferees and personal representatives, to the fullest extent
permitted by law, that the Chief Executive Officer of the Company
shall be appointed, and the same is hereby irrevocably appointed,
Employee's attorney-in-fact with full authority to execute Supporting
Documents and perform all other acts necessary to further evidence
such assignments.
(f) The obligations of Employee under this Section 9 shall survive the
termination or expiration of the Term.
10. Notice.
All notices or other communications which may be or are required to be
given, served or sent by any party to any other party pursuant to this
Agreement shall be in writing and shall be mailed by first-class,
registered or certified mail, return receipt requested, postage
prepaid, or transmitted by hand delivery, facsimile or telegram,
addressed as follows:
(a) If to the Company:
Hagler Bailly Consulting, Inc.
1530 Wilson Boulevard
Arlington, Virginia 22209
Telecopier No.: (703) 528-8573
Attention: Stephen V.R. Whitman, Vice President and General Counsel
(b) If to Employee:
Jasjeet Cheema
24000 Chestnut Way
Calabasas, California 91302
Telecopier No.: (___) ____________
Each party may designate by notice in writing a new address to which any notice
or other communication may thereafter be so given, served or sent. Each notice
or other communication which shall be mailed or transmitted in the manner
described above, shall be deemed sufficiently given, served, sent, delivered and
received for all purposes at such time as it is delivered to the addressee (with
the return receipt, the delivery receipt or the affidavit of messenger being
deemed conclusive evidence of such delivery) or at such time as delivery is
refused by the addressee upon presentation.
11. Severability.
If any part or any provision of this Agreement shall
be invalid or unenforceable under applicable law, such
part shall be ineffective to the extent of such invalidity or unenforceability
only, without in any way affecting the remaining parts of such provision or the
remaining provisions of this Agreement.
12. Survival.
It is the express intention and agreement of the parties hereto that all
covenants, agreements and statements made by any party in this
Agreement shall survive the execution and delivery of this Agreement,
and that certain covenants, agreements and statements shall survive
the termination or expiration of the Term to the extent specified in
Sections 6, 7, 8 and 9 hereof.
13. Waiver.
Neither the waiver of any of the parties hereto of any breach of or default
under any of the provisions of this Agreement, nor the failure of any
of the parties, on one or more occasion, to enforce any of the
provisions of this Agreement or to exercise any right or privilege
hereunder, shall thereafter be construed as a waiver of any subsequent
breach or default, or as a waiver of any such provisions, rights, or
privileges hereunder.
14. Binding Effect.
This Agreement shall be binding upon and shall inure
to the benefit of the parties hereto and, subject to
Section 19 hereof, their respective heirs, devisees, executors, administrators,
legal representatives, successors and assigns. As used in this Agreement, the
term "successor" shall include any person, firm, corporation or other business
entity which at any time, whether by merger, purchase or otherwise, acquires all
or substantially all of the assets or business of the Company.
15. Entire Agreement.
As of immediately prior to the Effective Time of the Merger, this
Agreement (a) represents the entire understanding and agreement among
the parties hereto with respect to the subject matter hereof and,
supersedes, cancels and terminates all other negotiations, agreements,
arrangements and understandings, oral or written, between such parties
with respect thereto, (b).constitutes the sole agreement between the
parties with respect to this subject matter, and (c) supersedes,
cancels and terminates all prior negotiations, agreements,
arrangements and understandings, oral or written, with respect to (i)
the Employee's employment with TB&A or any affiliate of TB&A, and (ii)
any other obligations or liabilities of the Employee with TB&A or any
affiliate of TB&A.
16. Amendment.
No amendment or modification of this Agreement and no waiver hereunder or
thereunder shall be valid or binding unless set forth in writing, duly
executed by the party against whom enforcement of the amendment,
modification or waiver is sought.
17. Governing Law.
This Agreement shall be subject to and governed by the laws of the
Commonwealth of Virginia (excluding the choice of law rules thereof).
18. Forum.
Subject to Section 20, at all times during the Term, (a) Employee
irrevocably submits to the exclusive jurisdiction of any Virginia
court or Federal court sitting in Virginia, in any action or
proceeding arising out of or relating to this Agreement or the
transactions contemplated hereby that is not subject to arbitration,
and Employee irrevocably agrees that all claims in respect of any such
action or proceeding may be heard and determined in such Virginia or
Federal court; (b) Employee irrevocably consents to the service of any
and all process in any such action or proceeding by the mailing of
copies of such process to Employee at his address specified in Section
10; (c) Employee irrevocably confirms that service of process out of
such courts in such manner shall be deemed due service upon him for
the purposes of such action or proceeding; (d) Employee irrevocably
waives (i) any objection he may have to the laying of venue of any
such action or proceeding in any of such courts, or (ii) any claim
that he may have that any such action or proceeding has been brought
in an inconvenient forum; and (e) Employee irrevocably agrees that a
final judgment in any such action or proceeding shall be conclusive
and may be enforced in other jurisdictions by suit on the judgment or
in any other manner provided by law. Nothing in this Section 18 shall
affect the right of any party hereto to serve legal process in
any manner permitted by law.
19. Assignment.
This Agreement shall not be assignable by either party hereto without the
prior written consent of the other party hereto, except that without
securing such consent the Company may assign its rights and
obligations hereunder to any successor entity to the Company by
operation of law or otherwise.
20. Arbitration.
In the event of any dispute between the parties under or
relating to this Agreement or otherwise relating to Employee's employment by the
Company, such dispute shall be submitted to and settled by arbitration in
Arlington, Virginia, by one arbitrator but otherwise in accordance with the
rules and regulations of the American Arbitration Association (AAA) then in
effect. The arbitrator shall have the right and authority to determine how his
or her award or decision as to each issue and matter in dispute may be
implemented or enforced. Any decision or award or decision may be entered in any
court of competent jurisdiction in the Commonwealth of Virginia or elsewhere;
and the parties hereto consent to the application by any party in interest to
any court of competent jurisdiction for confirmation or enforcement of such
award.
21. Headings.
Headings contained in this Agreement are inserted for convenience of
reference only, shall not be deemed to be a part of this Agreement for
any purpose, and shall not in any way define or affect the meaning,
construction or scope of any of the provisions hereof.
22. Execution in Counterparts.
This Agreement may be executed in one or more counterparts, each of which
shall be deemed an original hereof, and all of which together shall
constitute one and the same instrument.
23. Termination of Merger Agreement.
This Agreement shall automatically terminate and be of no force or effect
upon the termination of the Merger Agreement.
<PAGE>
17
IN WITNESS WHEREOF, the undersigned have duly executed this
Employment Agreement, or have caused this Employment Agreement to be duly
executed on their behalf, as of the day and year first hereinabove set forth.
HAGLER BAILLY CONSULTING, INC.
By: /s/ Henri-Claude Bailly
Name: Henri Claude Bailly
Title: Chief Executive Officer
JASJEET CHEEMA
/s/ JASJEET CHEEMA
<PAGE>
Exhibit 10.49
AMENDMENT NO. I
TO
REVOLVING CREDIT AGREEMENT
AMENDMENT NO. 1, dated as of March 22, 1999 (the "Amendment"), to the
Revolving Credit Agreement, dated as of November 20, 1998 (the "Revolving Credit
Agreement"), between HAGLER BAILLY, INC., a Delaware corporation (the
"Borrower"), THE LENDERS FROM TIME TO TIME A PARTY THERETO (the "Lenders") and
NATIONSBANK, N.A., a national banking association and in its separate capacity
as agent (the "Agent"). Capitalized terms used herein without definition shall
have the respective meanings specified in the Revolving Credit Agreement.
WITNESSETH
WHEREAS, pursuant to the Revolving Credit Agreement, the Lenders have
provided to the Borrower a revolving credit facility, and has agreed to issue
standby letters of credit, all upon the terms and conditions specified in the
Revolving Credit Agreement;
WHEREAS, the Borrower has requested a modification to one or more terms
of the Revolving Credit Agreement, and the Lenders are willing to make such
modifications;
WHEREAS, upon the terms and subject to the conditions contained herein,
the parties hereto desire to amend the Revolving Credit Agreement; and
WHEREAS, as of the date hereof, the Lenders under the Revolving Credit
Agreement consist only of NationsBank, N.A.;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements set forth herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:
Section 1. Amendment to Section 6. 1 (g) of the Revolving Credit
Agreement. The parties hereto hereby amend the first sentence of Section 6.1(g)
of the Revolving Credit Agreement by inserting after the words "a ratio of
Consolidated Cash Flow to Consolidated Fixed Charges of not less than 2.00 to
1.00" but before the "." the following words: "; provided, however, that for and
at all times during the Fiscal Quarters ending March 31, June 30 and September
30, 1999, the Borrower and its Consolidated Subsidiaries shall maintain a ratio
of Consolidated Cash Flow to Consolidated Fixed Charges of not less than 1.75 to
1.00".
Section 2. Amendment to Section 6.2(a)(ii) of the Revolving Credit
Agreement. The parties hereto hereby amend Section 6.2(a)(ii) of the Revolving
Credit Agreement by deleting such section in its entirety and substituting
therefor the following:
"(ii) any Lien (A) which shall constitute a purchase
money security interest (excluding, for the purpose of this
clause (ii), any purchase money security interest Lien assumed
in connection with the acquisition of any Acquisition Party)
or (B) granted to or possessed by any financial institution or
insurance company (other than the Lenders) in connection with
any surety bond issued by such financial institution or
insurance company in connection with the performance of any
contract to which the Borrower or any Subsidiary is a party;
provided that the amount of all such Liens permitted by this
clause (ii) shall not exceed (in the aggregate and as to the
Borrower and its Subsidiaries, taken as a whole) $1,000,000;".
Section 3. Amendment to Section 6.2(c)(i) of the Revolving Credit
Agreement. The parties hereto hereby amend Section 6.2(c)(i) of the Revolving
Credit Agreement by deleting such section in its entirety and substituting
therefor the following:
"(i) at any time and from time to time during the
period beginning March 22, 1999 and ending March 31, 2001,
repurchase the issued and outstanding shares of capital stock
of the Borrower provided that the aggregate consideration paid
by the Borrower for all such shares so repurchased does not
exceed $20,000,000 and, provided further, that after giving
effect to any such repurchase, the Borrower shall be in
compliance with all provisions of this Agreement (including,
without limitation, all financial ratios contained in Section
6.1 hereof based on the financial statements most recently
provided by the Borrower to the Lenders);"
Section 4. Amendment to Section 6.2(b)(iv) of the Revolving Credit
Agreement. The parties hereto hereby amend Section 6.2(b)(iv) of the Revolving
Credit Agreement by deleting such section in its entirety and substituting
therefor the following:
<PAGE>
"(iv) (A) indebtedness constituting purchase money
security indebtedness or (B) indebtedness for, or
reimbursement obligations (whether contingent or accrued) in
respect of, any surety bond issued by a financial institution
or insurance company (other than the Lenders) in connection
with the performance of any contract to which the Borrower or
any Subsidiary thereof is party; provided that the amount of
all such party, indebtedness permitted by this clause (iv)
shall not exceed (in the aggregate and as to the Borrower and
its Subsidiaries, taken as a whole) $1,000,000;".
Section 5. Amendment to Section 6.2(e)(i) of the Revolving Credit
Agreement. The parties hereto hereby amend Section 6.2(e)(i) of the Revolving
Credit Agreement by deleting such section in its entirety and substituting
therefor the following:
"(i) the cash component of the Acquisition
Consideration (which shall consist of all cash, cash
equivalents, promissory notes (or other similar instruments)
issued and the assumption of debt, as provided therein) paid
for all Acquisition Parties (including foreign Acquisition
Parties permitted pursuant to clause (vi) below) (A) during
the 12-month period commencing from the Effective Date shall
not exceed, in the aggregate, the sum of (x) $40,000,000.00
less (y) the Stock Repurchase Delta, and (B) during the period
commencing from the Effective Date and ending on the date on
which all of the Obligations hereunder shall have been paid in
full shall not exceed, in the aggregate, the sum of (x)
$50,000,000.00 less (y) the Stock Repurchase Delta;"
Section 6. Definitions. Section 1.1 of the Revolving Credit Agreement is
hereby amended by inserting therein, in proper alphabetical order, the
following definition:
"Stock Repurchase Delta" means the amount by which the
aggregate purchase price paid by the Borrower for the repurchase of any
of its shares of capital stock, as permitted by Section 6.2(c)(i)
hereof, exceeds $5,000,000.
Section 7. Fee. In consideration for the amendments contained herein,
the Borrower shall pay to the Agent, for the account of the Lenders, a fee in
the amount separately agreed to in writing by the Lenders and the Borrower, and
the Borrower hereby authorizes the Agent to debit the Borrower Account in the
amount of such fee upon the execution and delivery hereof the parties hereto.
Section 8. Miscellaneous. This Amendment shall be governed by and
construed in accordance with the laws of the Commonwealth of Virginia, without
regard to principles of conflicts of laws. Except as hereby expressly amended by
this Amendment, the terms, covenants, conditions, agreements and representations
and warranties contained in the Revolving Credit Agreement are in all respects
ratified and confirmed and remade as of the date hereof and, except as amended
hereby, shall continue in full force and effect. This Amendment represents the
agreement of the parties hereto with respect to the subject matter hereof, and
there are no promises, undertakings, representations or warranties by the
Lenders relative to the subject matter hereof not expressly set forth or
referred to herein. This Amendment may be executed in any number of
counterparts, each of which shall be deemed an original and all of which
together shall be deemed one and the same instrument. The section headings and
subsection headings have been inserted for convenience of reference only and do
not constitute matters to be considered in interpreting this Amendment.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed by their respective officers as of the day and year first above
written.
HAGLER BAILLY, INC.
By: /s/ Glenn J. Dozier
Name: Glenn J. Dozier
Title: Senior Vice President and
Chief Financial Officer
NATIONSBANK, N.A., as Lender and Agent
By: /s/ James W. Gaittens
Name: James W. Gaittens
Title: Senior Vice President
<PAGE>
Exhibit 10.50
HAGLER BAILLY, INC.
EMPLOYEE INCENTIVE AND NON-QUALIFIED STOCK
OPTION AND RESTRICTED STOCK PLAN
Originally Adopted May 17, 1995
Amended and Restated, Effective as of December 31, 1996
Amended March 11, 1997
Amended July 22, 1998
Amended March 31, 1999
<PAGE>
TABLE OF CONTENTS
HAGLER BAILLY, INC.
EMPLOYEE INCENTIVE AND NON-QUALIFIED STOCK
OPTION AND RESTRICTED STOCK PLAN
Section 1. Purposes...........................................................1
Section 2. Definitions........................................................1
Section 3. Participation......................................................4
Section 4. Administration.....................................................5
Section 5. Eligibility........................................................6
Section 6. Stock Subject to the Plan..........................................6
Section 7. Terms and Conditions of Options....................................6
Section 8. Restricted Stock..................................................10
Section 9. Determination of Fair Market Value Per Share of Common Stock......11
------------------------------------------------------------
Section 10. Adjustments......................................................11
Section 11. Rights as a Stockholder..........................................11
Section 12. Time of Awarding Options.........................................12
Section 13. Modification, Extension and Renewal of Option....................12
Section 14. Purchase for Investment and Other Restrictions...................12
Section 15. Transferability..................................................13
Section 16. Other Provisions.................................................13
Section 17. Power of Board in Case of Change of Control......................13
-------------------------------------------
Section 18. Amendment of the Plan............................................13
Section 19. Application of Funds.............................................14
Section 20. No Obligation to Exercise Option.................................14
Section 21. Approval of Stockholders.........................................14
Section 22. Conditions Upon Issuance of Shares...............................14
Section 23. Reservation of Shares............................................14
Section 24. Stock Option and Stock Purchase Agreements.......................15
Section 25. Taxes, Fees, Expenses and Withholding of Taxes...................15
Section 26. Notice...........................................................15
Section 27. No Enlargement of Awardee Rights.................................16
Section 28. Information to Awardees..........................................16
Section 29. Availability of Plan.............................................16
Section 30. Invalid Provisions...............................................16
Section 3 1. Applicable Law..................................................16
Section 32. Board Action.....................................................17
<PAGE>
HAGLER BAILLY, INC.
EMPLOYEE INCENTIVE AND NON-QUALIFIED STOCK
OPTION AND RESTRICTED STOCK PLAN
Section 1. Purposes.
The Hagler Bailly, Inc. Employee Incentive and Non-Qualified
Stock Option and Restricted Stock Plan (the "Plan") was originally adopted on
May 17, 1995. The Plan was amended and restated, effective December 31, 1996.
The plan was amended further on March 11, 1997 and again on July 22, 1998. The
purposes of the Plan are (a) to recognize and compensate selected key Employees
of Hagler Bailly, Inc. (the "Company") and its Subsidiaries who contribute to
the development and success of the Company and its Subsidiaries; (b) to maintain
the competitive position of the Company and its Subsidiaries by attracting and
retaining key Employees; and (c) to provide incentive compensation to such key
Employees based upon the Company's performance, as measured by the appreciation
in Common Stock. The Options granted pursuant to the Plan are intended to
constitute either Incentive Stock Options within the meaning of section 422 of
the Code, or non-qualified stock options, as determined by the Committee, or the
Board if no Committee has been appointed, at the time of Award. The type of
Options awarded will be specified in the Option Agreement between the Company
and the Optionee. The terms of this Plan shall be incorporated in the Option
Agreement to be executed by the Optionee.
Section 2. Definitions.
(a) "Affiliate" shall mean, with respect to a Person, a Person
that directly or indirectly controls, or is controlled by, or is under common
control with such Person.
(b) "Award" shall mean a grant of an Option or Options or an award of Restricted
Stock to an Employee pursuant to the provisions of this Plan. Each separate
grant of an Option or Options to an Employee, and each separate award of
Restricted Stock, and each group of Options which matures on a separate date, is
treated as a separate Award.
(c) "Awardee" shall mean an Employee to whom an Award is made.
(d) "Board" shall mean the Board of Directors of the Company,
as constituted from time to time.
(e) "Change of Control" shall mean a change in the control of the
Company which shall be deemed to have occurred upon the earliest to occur of the
following: (i) the date the stockholders of the Company (or the Board, if
stockholder action is not required) approve a plan or other arrangement pursuant
to which the Company will be dissolved or liquidated, or (ii) the date the
stockholders of the Company approve a definitive agreement to sell or otherwise
dispose of all or substantially all of the assets of the Company, or (iii) the
date the stockholders of the Company and the stockholders of the other
constituent corporations (or their respective boards of directors, if and to the
extent that stockholder action is not required) have approved a definitive
agreement to merge or consolidate the Company with or into another corporation,
other than, in either case, a merger or consolidation of the Company in which
the Company is the surviving entity, and in which shares of the Company's voting
capital stock outstanding immediately before such merger or consolidation are
exchanged or converted into shares which represent more than 50% of the
Company's voting capital stock after such merger or consolidation, as such
holders' ownership of voting capital stock of the Company immediately before the
merger or consolidation, or (iv) the date any Person, other than (A) the
Company, or (B) any of its Subsidiaries, or (C) any of the holders of the
capital stock of the Company, as determined on the date that this Plan is
adopted by the Board, or (D) any employee benefit plan (or related trust)
sponsored or maintained by the Company or any of its Subsidiaries or (E) any
Affiliate of any of the foregoing, shall have acquired beneficial ownership of,
or shall have acquired voting control over more than 50% of the outstanding
shares of the Company's voting capital stock (on a fully diluted basis), unless
the transaction pursuant to which such Person acquired such beneficial ownership
or control resulted from the original issuance by the Company of shares of its
voting capital stock and was approved by at least a majority of the directors
then in office.
(f) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(g) "Committee" shall mean the Committee appointed by the Board in
accordance with Section 4(a) of the Plan, if one is appointed, in which event in
connection with this Plan, the Committee shall possess all of the power and
authority of, and shall be authorized to take any and all actions required to be
taken hereunder by, and make any and all determinations required taken hereunder
by, the Board.
(g) "Common Stock" shall mean common stock of the Company, $.01 par value per
Share.
(h) "Company" shall mean Hagler Bailly, Inc., a Delaware corporation.
(i) "Covenant Not to Compete" shall mean the noncompetition covenant set forth
in Section 10 of the Stockholders Agreement or (if an Awardee is not a party
thereto) otherwise applicable to the Awardee and the Company or its
Subsidiaries.
(j) "Disability" shall mean a disability of an employee, officer or a director
which renders such employee, officer or director unable to perform the full
extent of his duties and responsibilities by reason of his illness or incapacity
which would entitle that employee, officer or director to receive Social
Security Disability Income under the Social Security Act, as amended, and the
regulations promulgated thereunder. "Disabled" shall mean having a Disability.
The determination of whether an Optionee is Disabled shall be made by the Board,
whose determination shall be conclusive; provided that, (i) if an Optionee is
bound by the terms of an Employment Agreement between the Optionee and the
Company, whether the Optionee is "Disabled" for purposes of the Plan shall be
determined in accordance with the procedures set forth in said Employment
Agreement, if such procedures are therein provided; and (ii) an Optionee bound
by such an Employment Agreement shall not be determined to be Disabled under the
Plan any earlier than he would be determined to be disabled under his Employment
Agreement.
(k) "Employee" shall mean any person employed by the Company or any of its
Subsidiaries on whose behalf wages are reported on IRS Form W-2. Additionally,
solely for purposes of deter-mining those persons eligible under the Plan to be
recipients of Awards of Options, which Options shall be limited to non-qualified
stock options or Restricted Stock, and not for the purpose of affecting the
status of the relationship between such person and the Company, the term
"Employee" shall include independent contractors of and consultants to the
Company, as well as members of the Board or of the board of directors of a
Subsidiary.
(m) "Exchange Act" shall mean The Securities Exchange Act of
1934, as amended.
(n) "Fair Market Value Per Share" shall mean the fair market
value of a share of Common Stock, as determined pursuant to Section 9 hereof.
(o) "Grant Date" means (i) the effective date of registration
under Section 12 of the Exchange Act of a class of equity securities of the
Company and (ii) each date thereafter prescribed under the Company's Articles of
Incorporation and By-laws for the election of directors which falls before the
earlier of (A) the date six months after the termination of such registration,
or (B) the tenth anniversary of the date on which this Plan is adopted by the
Board.
(p) "Incentive Stock Option" shall mean an Option which is an incentive
stock option as described in Section 422 of the Code.
(q) "Non-Employee Director" shall have the meaning set forth
in Rule 16b-3(b)(3)(i) promulgated by the Securities and Exchange Commission
under the Exchange Act, or any successor definition adopted by the Securities
and Exchange Commission.
(r) "Option(s)" shall mean an Incentive Stock Option or a
non-qualified stock option to purchase Shares that is Awarded pursuant to the
Plan.
(s) "Option Agreement" shall mean a written, or such other form or forms as the
Board or Committee (subject to the terms and conditions of this Plan) may from
time to time approve evidencing and reflecting the terms of an Option.
(t) "Optionee" shall mean an Employee to whom an Option is awarded.
(u) "Participant" shall mean each Employee of the Company or a Subsidiary
to whom an Award is granted pursuant to the Plan.
(v) "Person" shall mean an individual, partnership,
corporation, limited liability company, trust, joint venture, unincorporated
association, or other entity or association.
(w) "Plan" shall mean the Hagler Bailly, Inc. Employee
Incentive and Non-Qualified Stock Option and Restricted Stock Plan, as amended
from time to time.
(x) "Pool" shall mean the pool of Shares of Common Stock subject to the
Plan, as described in Section 6 hereof.
(y) "Restricted Stock" shall mean an Award of Shares of Common Stock that
is subject to restrictions pursuant to Section 8 hereof.
(z) "Securities Act" shall mean The Securities Act of 1933, as
amended.
(aa) "Shares" shall mean shares of Common Stock contained in the Pool, as
adjusted in accordance with Section 10 of the Plan.
(bb) "Stock Purchase Agreement" shall mean an agreement
substantially in the form attached hereto as Exhibit B, or such other form as
the Board or Committee (subject to the terms and conditions of this Plan) may
from time to time approve, which an Optionee shall be required to execute as a
condition of purchasing Shares upon the exercise of an Option.
(cc) "Stockholders Agreement" shall mean the Stockholders Agreement dated
as of May 15, 1995 by and among the Company and its stockholders, as
amended from time to time.
(dd) "Subsidiary" shall mean a subsidiary corporation, whether now or
hereafter existing, as defined in sections 424(f) and (g) of the Code.
Section 3. Participation.
(a) In General. Participants in the Plan shall be selected by
the Board from the Employees. The Board may make Awards at any time and from
time to time to Employees. Any Award may include or exclude any Employee, as the
Board shall determine in its sole discretion.
(b) Non-Employee Directors. In the event the Company has a
class of equity securities registered under Section 12 of the Exchange Act, from
the effective date of such registration until six months after the termination
of such registration, no Awards of Options shall be made under the Plan to any
director of the Company who is a Non-Employee Director except pursuant to this
Section 3(b).
(i) Automatic Award. Awards of Options to directors of the Company who are
Non-Employee Directors shall be granted, without any further action by
the Board or Committee. as follows. Upon the effective date of the
Company's registration of a class of equity securities under Section
12 of the Exchange Act, and on each Grant Date thereafter, each
director of the Company who is a Non-Employee Director shall receive
an Award of a nonqualified stock Option to purchase 7,500 Shares.
(ii) Option Price. The price per Share payable upon the exercise of any
Option granted under this Section 3(b) shall be 100% of the Fair
Market Value of such Share on the Grant Date,
Section 4. Administration.
(a) Procedure. The Plan shall be administered by the Board.
The Board may at any time by a unanimous vote, with each Member voting, appoint
a Committee consisting of not less than two persons, each of whom is a
Non-Employee Director, to administer the Plan on behalf of the Board, subject to
such terms and conditions as the Board may prescribe. Members of the Committee
shall serve for such period of time as the Board may determine. Members of the
Board or the Committee who are eligible for Options or have been Awarded Options
may vote on any matters affecting the administration of the Plan or the Award of
any Options pursuant to the Plan, except that no such member shall act upon the
Award of an Option to himself or herself, but any such member may be counted in
determining the existence of a quorum at any meeting of the Board or Committee
during which action is taken with respect to the Award of Options to himself or
herself
From time to time the Board may increase the size of the
Committee and appoint additional members thereto, remove members (with or
without cause) and appoint new members in substitution therefor, fill vacancies
however caused, or remove all members of the Committee and thereafter directly
administer the Plan.
(b) Powers of the Board and the Committee. Subject to the
provisions of the Plan, the Board or its Committee shall have the authority, in
its discretion: (i) to make Awards; (ii) to deter-mine the Fair Market Value Per
Share; (iii) to determine the exercise price of the Options to be Awarded in
accordance with Sections 7 and 8 of the Plan; (iv) to determine the Employees to
whom, and the time or times at which, Awards shall be made, and the number of
Shares to be subject to each Award; (v) to prescribe, amend and rescind rules
and regulations relating to the Plan; (vi) to determine the terms and provisions
of each Award under the Plan, each Option Agreement and each Stock Purchase
Agreement (which need not be identical with the terms of other Awards, Option
Agreements and Stock Purchase Agreements) and, with the consent of the Optionee,
to modify or amend an outstanding Option, Option Agreement or Stock Purchase
Agreement; (vii) to accelerate the vesting or exercise date of any Award; (viii)
to interpret the Plan or any agreement entered into with respect to an Award or
exercise of Options, (ix) to authorize any person to execute on behalf of the
Company any instrument required to effectuate an Award or to take such other
actions as may be necessary or appropriate with respect to the Company's rights
pursuant to Awards or agreements relating to the Award or exercise thereof; and
(x) to make such other determinations and establish such other procedures as it
deems necessary or advisable for the administration of the Plan.
(c) Effect of the Board's or Committee's Decision. All
decisions, determinations and interpretations of the Board or the Committee
shall be final and binding with respect to all Awards under the Plan.
(d) Limitation of Liability. Notwithstanding anything herein
to the contrary (with the exception of Section 32 hereof), no member of the
Board or of the Committee shall be liable for any good faith determination, act
or failure to act in connection with the Plan or any Award hereunder.
Section 5. Eligibility.
Awards may be made only to Employees. An Employee who has
received an Award, if he or she is otherwise eligible, may receive additional
Awards.
Section 6. Stock Subject to the Plan.
Subject to the provisions of this Section 6 and the provisions
of Section 10 of the Plan, the maximum aggregate number of Shares which may be
Awarded and sold under the Plan is 5,000,000 Shares of Common Stock
(collectively, the "Pool"). Options Awarded from the Pool may be either
Incentive Stock Options or non-qualified stock options, as determined by the
Board. If an Option should expire or become unexercisable for any reason without
having been exercised in full, or if a Restricted Stock Award shall fail to
become vested, or if Shares are subsequently repurchased by the Company, the
unpurchased or repurchased Shares which were subject thereto shall, unless the
Plan shall have been terminated, be returned to the Plan and become available
for future Award under the Plan.
Section 7. Terms and Conditions of Options.
Each Option Awarded pursuant to the Plan shall be authorized
by the Board and shall be evidenced by an Option Agreement in such form as the
Board may from time to time determine. Each Option Agreement shall incorporate
by reference all other terms and conditions of the Plan, including the following
terms and conditions:
(a) Number of Shares. The number of Shares subject to the
Option, which may include fractional Shares.
(b) Option Price. The price per Share payable on the exercise
of any Option which is an Incentive Stock Option shall be stated in the Option
Agreement and shall be no less than the Fair Market Value Per Share of the
Common Stock on the date such Option is Awarded, without regard to any
restriction other than a restriction which will never lapse. Notwithstanding the
foregoing, if an Option which is an Incentive Stock Option shall be Awarded
under this Plan to any person who, at the time of the Award of such Option, owns
stock possessing more than 10% of the total combined voting power of all classes
of the Company's stock, the price per Share payable upon exercise of such
Incentive Stock Option shall be no less than 110 percent (110%) of the Fair
Market Value Per Share of the Common Stock on the date such Option is Awarded.
The price per Share payable on the exercise of an Option which is a
non-qualified stock option shall be at least $.01 per Share and shall be stated
in the Option Agreement.
(c) Consideration. The consideration to be paid for the Shares
to be issued upon the exercise of an Option, including the method of payment,
shall be determined by the Board and may consist entirely of cash, check,
promissory notes or Shares of Common Stock having an aggregate Fair Market Value
Per Share on the date of surrender equal to the aggregate exercise price of the
Shares as to which said Option shall be exercised, or any combination of such
methods of payment, or such other consideration and method of payment permitted
under any laws to which the Company is subject and which is approved by the
Board. In making its determination as to the type of consideration to accept,
the Board shall consider if acceptance of such consideration may be reasonably
expected to benefit the Company.
(i) if the consideration for the exercise of an Option is a promissory
note, it may, in the discretion of the Board, be either full recourse
or nonrecourse and shall bear interest at a per annum rate which is
not less than the applicable federal rate determined in accordance
with section 1274(d) of the Code as of the date of exercise. In such
an instance the Company may, in its sole discretion, retain the Shares
purchased upon exercise of the Option in escrow as security for
payment of the
promissory note.
(ii) if the consideration for the exercise of an Option is the surrender of
previously acquired and owned shares of Common Stock, the Optionee
will be required to make representations and warranties satisfactory
to the Company regarding his title to the shares of Common Stock used
to effect the purchase (the "Payment Shares"), including without
limitation, representations and warranties that the Optionee has good
and marketable title to such Payment Shares free and clear of any and
all liens, encumbrances, charges, equities, claims, security
interests., options or restrictions, and has full power to deliver
such Payment Shares without obtaining the consent or approval of any
person or governmental authority other than those which have already
given consent or approval in a manner satisfactory to the Company. The
per Share value of the Payment Shares shall be the Fair Market Value
Per Share of such Payment Shares on the date of exercise as determined
by the Board in its sole discretion, exercised in good faith. If such
Payment Shares were acquired upon previous exercise of Incentive Stock
Options granted within two years prior to the exercise of the Option
or acquired by the Optionee within one year prior to the exercise of
the Option, such Optionee shall be required. as a condition to using
the Payment Shares in payment of the exercise price of the Option, to
acknowledge the tax consequences of doing so, In that such previously
exercised Incentive Stock Options may have, by such action, lost their
status as Incentive Stock- Options, and the Optionee may have to
recognize ordinary income for tax purposes as a result.
(d) Form of Option. The Option Agreement will state whether
the Option Awarded is an Incentive Stock Option or a non-qualified stock option,
and will constitute a binding determination as to the form of Option Awarded.
(e) Exercise of Options. Any Option Awarded hereunder shall be
exercisable at such times and under such conditions as shall be set forth in the
Option Agreement (as may be determined by the Board and as shall be permissible
under the terms of the Plan), which may include performance criteria with
respect to the Company and/or the Optionee, and as shall be permissible under
the terms of the Plan. Notwithstanding the foregoing, any Option awarded under
Section 3(b) hereunder shall be immediately exercisable in full,
An Option may be exercised in accordance with the provisions of this Plan
as to all or any portion of the Shares then exercisable under an
Option from time to time during the term of the Option. An Option may
not be exercised for a fraction of a Share.
An Option shall be deemed to be exercised when
written notice of such exercise has been given to the
Company at its principal executive office in accordance with the terms of the
Option Agreement by the person entitled to exercise the Option and full payment
for the Shares with respect to which the Option is exercised has been received
by the Company, accompanied by any agreements required by the terms of the Plan
and/or Option Agreement, including an executed Stock Purchase Agreement. Full
payment may consist of such consideration and method of payment allowable under
Section 7 of the Plan. No adjustment shall be made for a dividend or other right
for which the record date is prior to the date the Option is exercised, except
as provided in Section 10 of the Plan.
As soon as practicable after any proper exercise of an Option in
accordance with the provisions of the Plan, the Company shall, without
transfer or issue tax to the Optionee, deliver to the Optionee at the
principal executive office of the Company or such other place as shall
be mutually agreed upon between the Company and the Optionee, a
certificate or certificates representing the Shares for which the
Option shall have been exercised.
Exercise of an Option in any manner shall result in a decrease in the
number of Shares which thereafter may be available, both for purposes
of the Plan and for sale under the Option, by the number of Shares as
to which the Option is exercised,
(f) Term and Vesting of Options.
(i) Notwithstanding any other provision of this Plan, no Option shall be
(A) Awarded under this Plan after ten (10) years from the date on
which this Plan is adopted by the Board, or (B) exercisable more than
ten (10) years from the date of Award; provided, however, that if an
Option that is intended to be an Incentive Stock Option shall be
Awarded under this Plan to any person who, at the time of the Award of
such Option, owns stock possessing more than 10% of the total combined
voting power for all classes of the Company's stock, the foregoing
clause (B) shall be deemed modified by substituting "five (5) years"
for the term "ten (10) years"
that appears therein.
(ii) No Option Awarded to any Optionee shall be
treated as an Incentive Stock Option, to the extent such
Option would cause the aggregate Fair Market Value Per Share (determined as of
the date of Award of each such Option) of the Shares with respect to which
Incentive Stock Options are exercisable by such Optionee for the first time
during any calendar year to exceed $100,000. For purposes of determining-whether
Incentive Stock Option would cause such aggregate Fair Market Value Per Share to
exceed the $100,000 limitation, such Incentive Stock Options shall be taken into
account in the order Awarded. For proposes of this subsection, Incentive Stock
Options include all Incentive Stock Options under all plans of the Company that
are Incentive Stock Option plans within the meaning of section 422 of the Code.
Except as provided in Section 7(g)(iv), Options Awarded
hereunder shall mature and become exercisable in whole or in part, in accordance
with such vesting schedule as the Board shall determine, which schedule shall be
stated in the Option Agreement. Notwithstanding the preceding sentence, Options
awarded pursuant to Section 3(b) hereunder shall be fully vested at grant.
Options may be exercised in any order elected by the Optionee whether or not the
Optionee holds any unexercised Options under this Plan or any other plan of the
Company.
(g) Termination of Options.
(i) Unless sooner terminated as provided in this Plan, each Option shall
be exercisable for such period of time as shall be determined by the
Board and set forth in the Option Agreement, and shall be void and
unexercisable thereafter.
(ii) Except as otherwise provided herein or by the terms of any Award, no
Option shall be exercisable after termination of the Optionee's
employment with or other engagement by the Company for any reason.
(iii)Except as otherwise provided herein of by the terms of any Award,
upon the Disability or death of an Optionee while in the employ of the
Company, Options held by such Optionee which arc exercisable oil the
date of Disability or death shall be exercisable for a period of
twelve (12) months commencing on the date of the Optionee's Disability
or death. by the Optionee or his legal guardian or representative or.
in the case of death, by his executor(s) or administrator(s),
(iv) Options may be terminated at any time by agreement between the Company
and the Optionee.
(h) Forfeiture. Notwithstanding any other provision of this
Plan, if an Optionee shall engage in any activity in breach of the Covenant Not
to Compete, all Options held by such Optionee which have not yet been exercised
shall terminate immediately upon the commencement thereof. Notwithstanding any
other provision of this Plan, if the Optionee's employment or engagement is
terminated for "cause" (as such term is defined in the Optionee's employment
agreement or non-disclosure agreement with the Company, if any) or if the Board
makes a determination that the Optionee:
(i) has engaged in any type of disloyalty to the Company, including
without limitation, fraud, embezzlement, theft, or dishonesty in the
course of his employment or engagement, or has otherwise breached any
fiduciary duty owed to the Company;
(ii) has been convicted of a felony;
(iii)has disclosed trade secrets or confidential information of the
Company;
(iv) has breached any agreement with or duty to the Company in respect of
confidentiality, non-disclosure, non-competition or otherwise, all
unexercised Options shall terminate upon the date of such a finding,
or, if earlier, the date of termination of employment or engagement
for "cause."
In the event of such a finding, in addition to immediate
termination of all unexercised Options, the Optionee shall forfeit all Shares
for which the Company has not yet delivered share certificates to the Optionee
and the Company shall refund to the Optionee the Option purchase price paid to
it, if any, in the same form as it was paid (or in cash at the Company's
discretion). Notwithstanding anything herein to the contrary, the Company may
withhold delivery of share certificates pending the resolution of any inquiry
that could lead to a finding resulting in forfeiture.
Section 8. Restricted Stock.
(a) Administration. Shares of Restricted Stock may be issued
either alone or in addition to other Awards granted under the Plan. The Board
shall determine the persons to whom, and the time or times at which, grants of
Restricted Stock will be made, the number of Shares to be Awarded. the price (if
any) to be paid by the recipient of Restricted Stock, the time or times within
which such Awards may be subject to forfeiture, and all other conditions of the
Awards.
The Board may condition the vesting of Restricted Stock upon
the attainment of specified performance goals or Such other factors as the Board
may determine, in its sole discretion, at the time of the Award.
The provisions of Restricted Stock Awards need not be the same with
respect to each recipient.
(b) Awards. The prospective recipient of a Restricted Stock
Award shall not have any rights with respect to such Award, unless and until
such recipient has executed an agreement evidencing the Award and has delivered
a fully executed copy thereof to the Company, and has otherwise complied with
the applicable terms and conditions of such Award. The purchase price for shares
of Restricted Stock may be zero.
Each Employee receiving a Restricted Stock Award shall be
required, as a condition precedent to receipt of such Award, to execute a
joinder or other counterpart to the Stockholders Agreement.
(c) Restrictions and Conditions. Except as provided in this
Section 8(c), the Employee shall have, with respect to the Shares of Restricted
Stock, all of the rights of a shareholder of the Company, including the right to
vote the shares, and the right to receive any cash dividends. The Board, in its
sole discretion, as deter-mined at the time of Award, may permit or require the
payment of cash dividends in respect of Shares of Restricted Stock Awarded under
the Plan to be deferred and, if the Board so determines, reinvested in
additional Shares of Restricted Stock to the extent Shares are available under
Section 6 of the Plan.
Section 9. Determination of Fair Market Value Per Share of Common Stock.
(a) Except to the extent otherwise provided in this Section 9,
the Fair Market Value Per Share of Common Stock shall be determined by the Board
in its sole discretion.
(b) Notwithstanding the provisions of Section 9(a), in the
event that shares of Common Stock are traded in the over-the-counter market, the
Fair Market Value Per Share of Common Stock shall be the mean of the bid and
asked prices for a share of Common Stock on the relevant valuation date as
reported in The Wall Street Journal (or, if not so reported, as otherwise
reported by the National Association of Securities Dealers Automated Quotations
("NASDAQ") System), as applicable or, if there is no trading on such date, on
the next trading date. In the event shares of Common Stock are listed on a
national or regional securities exchange or traded through the NASDAQ National
Market, the Fair Market Value of a share of Common Stock shall be the closing
price for a share of Common Stock on the exchange or on the NASDAQ National
Market. as reported in The Wall Street Journal on the relevant valuation date,
or if there is no trading on that date, on the next trading date.
Section 10. Adjustments.
(a) Subject to required action by the stockholders, If any,
the number of Shares as to which Awards may be made under this Plan and the
number of Shares subject to outstanding Options and the Option prices thereof
shall be adjusted proportionately for any increase or decrease in the number of
outstanding Shares of Common Stock of the Company resulting from stock splits,
reverse stock splits. stock dividends, reclassifications and recapitalizations,
merger, consolidation, exchange of shares, or rights offered to purchase shares
of Common Stock at a price substantially below Fair Market Value Per Share or
any similar change affecting Common Stock.
(b) No fractional Shares shall be issuable on account of any action
mentioned in Section 10(a), and the aggregate number of Shares into which Shares
then covered by the Award, when changed as the result of such action, shall be
reduced to the number of whole Shares resulting from such action, unless the
Board, in its sole discretion, shall determine to issue scrip certificates with
respect to any fractional Shares, which scrip certificates, in such event, shall
be in a form and have such terms and conditions as the Board in its discretion
shall prescribe.
Section 11. Rights as a Stockholder.
A recipient of an Option Award shall have no rights as a
stockholder of the Company and shall neither have the right to vote nor receive
dividends with respect to any Shares subject to an Option until such Option has
been exercised and a certificate with respect to the Shares purchased upon such
exercise has been issued to him. A recipient of a Restricted Stock Award shall
have all rights as a stockholder with respect to the Shares of Restricted Stock
Awarded from and after the later to occur of (i) the date of the Award (as
determined under Section 12 hereof) or (ii) the date the Awardee makes payment
of the purchase price, if any, designated by the Board as a condition of such
Award.
Section 12. Time of Awarding Options.
The date of an Award shall, for all purposes, be the date
which the Board specifies when the Board makes its determination that an Award
is made or if none is specified, then the date of the Board's determination.
Notice of the determination shall be given to each Employee to whom an Award is
made within a reasonable time after the date of such Award.
Section 13. Modification, Extension and Renewal of Option.
Subject to the terms and conditions of the Plan, the Board may
modify, extend or renew an Award, or accept the surrender of an Award (to the
extent not theretofore exercised). Notwithstanding the foregoing, (a) no
modification of an Award which adversely affects the Awardee shall be made
without the consent of the Awardee, and (b) no Incentive Stock Option may be
modified, extended or renewed if such action would cause it to cease to be an
"Incentive Stock Option" within the meaning of section 422 of the Code, unless
the Optionee specifically acknowledges and consents to the tax consequences of
such action.
Section 14. Purchase for Investment and Other Restrictions.
(a) The obligation of the Company to issue Shares to an
Awardee upon the exercise of an Option or as part of a Restricted Stock Award
granted under the Plan is conditioned upon (i) the Company obtaining any
required permit or order from appropriate governmental agencies, authorizing the
Company to issue such Shares. and (ii) such issuance complying with all relevant
provisions of the law, including, without limitation, the Securities Act, the
Exchange Act, the rules and regulations promulgated thereunder.
(b) At the option of the Board, the obligation of the Company
to issue Shares to an Awardee upon the exercise of an Option granted, or upon a
Restricted Stock Award made, under the Plan may be conditioned upon obtaining
appropriate representations, warranties, restrictions and agreements of the
Awardee as set forth in the applicable Stock Purchase Agreement. Among other
representations, warranties, restrictions and agreements, the Awardee may be
required to represent and agree that the purchase of Shares shall be for
investment, and not with a view to the public resale or distribution thereof,
unless the Shares are registered under the Securities Act and the issuance and
sale of the Shares complies with all other laws, rules and regulations
applicable thereto. Unless the issuance of such Shares is registered under the
Securities Act, the Awardee shall acknowledge that the Shares purchased are not
registered under the Securities Act and may not be sold or otherwise transferred
unless the Shares have been registered under the Securities Act in connection
with the sale or other transfer thereof, or that counsel satisfactory to the
Company has issued an opinion satisfactory to the Company that the sale or other
transfer of such Shares is exempt from registration under the Securities Act,
and unless said sale or transfer is in compliance with all other applicable
laws, rules and regulations, including all applicable federal and state
securities laws, rules and regulations. Additionally, the Shares, when issued,
shall be subject to other transfer restrictions, rights of first refusal and
rights of repurchase as set forth in Stockholders Agreement. Unless the Shares
subject to an Award are registered under the Securities Act, the certificates
representing such Shares issued shall contain the following legend in
substantially the following form:
THE SHAR.ES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED OR ANY APPLICABLE STATE SECURITIES LAWS.
THESE SHARES HAVE NOT BEEN ACQUIRED WITH A VIEW TO DISTRIBUTION OR RESALE, AND
MAY NOT BE SOLD, ASSIGNED, EXCHANGED, MORTGAGED, PLEDGED, HYPOTHECATED OR
OTHERWISE TRANSFERRED OR DISPOSED OF, BY GIFT OR OTHERWISE, OR IN ANY WAY
ENCUMBERED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT FOR SUCH SHARES UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND ANY APPLICABLE STATE SECURITIES LAWS, OR
A SATISFACTORY OPINION OF COUNSEL SATISFACTORY TO HAGLER BAILLY, INC. THAT
REGISTRATION IS NOT REQUIRED UNDER SUCH ACT AND UNDER APPLICABLE STATE
SECURITIES LAWS.
Section 15. Transferability.
No Option shall be assignable or transferable otherwise than
by will or by the laws of descent and distribution. During the lifetime of the
Optionee, his Options shall be exercisable only by such Optionee, or, in the
event of his or her legal incapacity or Disability, then by the Optionee's legal
guardian or representative.
Section 16. Other Provisions.
The Option Agreement and Stock Purchase Agreement may contain
such other provisions as the Board in its discretion deems advisable and which
are not inconsistent with the provisions of this Plan, including, without
limitation, restrictions upon or conditions precedent to the exercise of the
Option.
Section 17. Power of Board in Case of Change of Control.
Notwithstanding anything to the contrary set forth in this
Plan (with the exception of Section 32 hereof), in the event of a Change of
Control, the Board shall have the right to accelerate the vesting of all
unmatured Options or Restricted Stock Awards. In addition, in the event of a
Change of Control of the Company by reason of a merger, consolidation or tax
free reorganization or sale of all or substantially all of the assets of the
Company, the Board shall have the right to terminate this Plan and to (a)
exchange all Options or Restricted Stock Awards for options to purchase common
stock in the successor corporation or (b) distribute to each Awardee cash and/or
other property in an amount equal to and in the same form as the Optionee would
have received from the successor corporation if the Optionee had owned the
Shares subject to the Option rather than the Option at the time of the Change of
Control, The form of payment or distribution to the Optionee pursuant to this
Section shall be determined by the Board.
Section 18. Amendment of the Plan.
Insofar as permitted by law and the Plan. the Board may from
time to time suspend. terminate or discontinue the Plan or revise or amend it in
any respect whatsoever ,vith respect to any Shares at the time not subject to an
Option; provided, however, that without approval of the stockholders, no such
revision or amendment may change the aggregate number of Shares for which
Options may be awarded hereunder, change the designation of the class of
Employees eligible to receive Options or decrease the price at which Options may
be awarded.
Any other provision of this Section 18 notwithstanding, the
Board specifically is authorized to adopt any amendment to this Plan deemed by
the Board to be necessary or advisable to assure that the Incentive Stock
Options or the non-qualified stock options available under the Plan continue to
be treated as such, respectively, under all applicable laws.
Section 19. Application of Funds.
The proceeds received by the Company from the sale of Shares
pursuant to the exercise of Options or the purchase of Restricted Stock shall be
used for general corporate purposes or such other purpose as may be determined
by the Board.
Section 20. No Obligation to Exercise Option.
The Awarding of an Option shall impose no obligation upon the
Optionee to exercise such Option.
Section 21. Approval of Stockholders.
This Plan shall become effective on the date that It is
adopted by the Board; provided, however, that it shall become limited to a
non-qualified stock option plan if it is not approved by the holders of a
majority of the Company's outstanding voting stock within one year (365 days) of
its adoption by the Board. The Board may make Awards hereunder prior to approval
of the Plan or any material amendments thereto by the holders of a majority of
the Company's outstanding voting stock; provided, however, that any and all
Options so Awarded automatically shall be converted into non-qualified stock
options if the Plan is not approved by such stockholders within 365 days of its
adoption or material amendment.
Section 22. Conditions Upon Issuance of Shares.
Shares shall not be issued pursuant to the exercise of an
Option or Award of Restricted Stock unless the exercise of such Option and the
issuance and delivery of such Shares pursuant thereto or the issuance of
Restricted Stock shall comply with all relevant provisions of law, including,
without limitation, the Securities Act, the Exchange Act, the rules and
regulations promulgated thereunder, and the requirements of any stock exchange
upon which the Shares may then be listed, arid shall be further subject to the
approval of counsel for the Company with respect to such compliance.
Section 23. Reservation of Shares.
The Company, during the term of this Plan, shall at all times
reserve and keep available such number of Shares as shall be sufficient to
satisfy the requirements of the Plan.
The Company, during the term of this Plan, shall use its best
efforts to seek to obtain from appropriate regulatory agencies any requisite
authorization in order to issue and sell such number of Shares as shall be
sufficient to satisfy the requirements of the Plan. The inability of the Company
to obtain from any such regulatory agency having jurisdiction the requisite
authorizations deemed by the Company's counsel to be necessary for the lawful
issuance and sale of any Shares hereunder, or the inability of the Company to
confirm to its satisfaction that any issuance and sale of any Shares hereunder
will meet applicable legal requirements, shall relieve the Company of any
liability in respect to the failure to issue or sell such Shares as to which
such requisite authority shall not have been obtained.
Section 24. Stock Option and Stock Purchase Agreements.
Options shall be evidenced by an Option Agreement in such form
or forms as the Board shall approve from time to time. Upon the exercise of an
Option, the Optionee shall sign and deliver to the Company a Stock Purchase
Agreement in such form or forms as the Board shall approve from time to time.
Section 25. Taxes, Fees, Expenses and Withholding of Taxes.
(a) The Company shall pay all original issue and transfer
taxes (but not income taxes, if any) with respect to the Award of Options and/or
the issue and transfer of Shares pursuant to the exercise thereof, and all other
fees arid expenses necessarily incurred by the Company in connection therewith,
and will from time to time use its best efforts to comply with all laws and
regulations which, in the opinion of counsel for the Company, shall be
applicable thereto.
(b) The Award of Options or Restricted Stock hereunder and the
issuance of Shares pursuant to the exercise of Options is conditioned upon the
Company's reservation of the right to withhold in accordance with any applicable
law, from any compensation or other amounts payable to the Awardee, any taxes
required to be withheld under federal, state or local law as a result of the
Award or exercise of such Option or the sale of the Shares issued upon exercise
thereof. To the extent that compensation or other amounts, if any, payable to
the Awardee is insufficient to pay any taxes required to be so withheld, the
Company may, in its sole discretion, require the Awardee (or such other person
entitled herein to exercise the Option), as a condition of the exercise of an
Option, to pay in cash to the Company an amount sufficient to cover such tax
liability or otherwise to make adequate provision for the Company's satisfaction
of its withholding obligations under federal, state and local law.
Section 26. Notice.
Any notice to be given to the Company pursuant to the
provisions of this Plan shall be addressed to the Company in care of its
Secretary (or such other person as the Company may designate from time to time)
at its principal executive office, and any notice to be given to an Awardee
shall be delivered personally or addressed to him or her at the address given
beneath his or her signature on his or her Option Agreement, or at such other
address as such Awardee or his or her permitted transferee (upon the transfer of
the Shares) may hereafter designate in writing to the Company. Any such notice
shall be deemed duly given on the date and at the time delivered via personal,
courier or recognized overnight delivery service or, if sent via telecopier, on
the date and at the time telecopied with confirmation of delivery or, if mailed,
on the date five (5) days after the date of the mailing (which shall be by
regular, registered or certified mail). Delivery of a notice by telecopy (with
confirmation) shall be permitted and shall be considered delivery of a notice
notwithstanding that it is not an original that is received. It shall be the
obligation of each Optionee and each permitted transferee holding Shares
purchased upon exercise of an Option to provide the Secretary of the Company, by
letter mailed as provided herein, with written notice of his or her direct
mailing address.
Section 27. No Enlargement of Awardee Rights.
This Plan is purely voluntary on the part of the Company, and
the continuance of the Plan shall not be deemed to constitute a contract between
the Company and any Awardee, or to be consideration for or a condition of the
employment or service of any Awardee. Nothing contained in this Plan shall be
deemed to give any Awardee the right to be retained in the employ or service of
the Company or any Subsidiary, or to interfere with the right of the Company or
any such corporation to discharge or retire any Awardee thereof at any time
subject to applicable law. No Awardee shall have any right to or interest in
Awards authorized hereunder prior to the Award thereof to such Awardee, and upon
such Award he shall have only such rights and interests as are expressly
provided herein, subject, however, to all applicable provisions of the Company's
Certificate of Incorporation, as the same may be amended from time to time.
Section 28. Information to Awardees.
The Company, upon request, shall provide without charge to
each Awardee copies of such annual and periodic reports as are provided by the
Company to its stockholders generally.
Section 29. Availability of Plan.
A copy of this Plan shall be delivered to the Secretary of the
Company and shall be shown by him to any eligible person making reasonable
inquiry concerning it.
Section 30. Invalid Provisions.
In the event that any provision of this Plan is found to be invalid or
otherwise unenforceable under any applicable law, such invalidity or
unenforceability shall not be construed as rendering any other provisions
contained herein as invalid or unenforceable, and all such other provisions
shall be given full force and effect to the same extent as though the invalid or
unenforceable provision was not contained herein.
Section 3 1. Applicable Law.
This Plan shall be governed by and construed in accordance with the laws of
the State of Delaware.
Section 32. Board Action.
Notwithstanding anything to the contrary set forth in this Plan, any and all
actions of the Board or Committee, as the case may be, taken under or in
connection with this Plan and any agreements, instruments, documents,
certificates or other writings entered into, executed, granted, issued and/or
delivered pursuant to the terms hereof, shall be subject to and limited by any
and all votes, consents, approvals, waivers or other actions of all or certain
stockholders of the Company or other persons required pursuant to (i) the
Company's Certificate of Incorporation (as the same may be amended and/or
restated from time to time), (ii) the Company's Bylaws (as the same may be
amended and/or restated from time to time), and (iii) any other agreement,
instrument, document or writing now or hereafter existing, between or among the
Company and its stockholders or other persons (as the same may be amended from
time to time).
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
in thousands
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-mos
<FISCAL-YEAR-END> Dec-31-1999
<PERIOD-START> Jan-01-1999
<PERIOD-END> Mar-31-1999
<CASH> 12,334
<SECURITIES> 0
<RECEIVABLES> 64,028
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0
0
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