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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
FOR THE TRANSITION PERIOD FROM _________________TO_________________
COMMISSION FILE NUMBER 0-4643
ROY F. WESTON, INC.
(Exact name of registrant as specified in its charter)
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PENNSYLVANIA 23-1501990
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(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
1 WESTON WAY
WEST CHESTER, PENNSYLVANIA 19380-1499
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(Address of principal executive offices) (Zip Code)
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Registrant's telephone number, including area code: (610) 701-3000
Securities registered pursuant to Section 12(b) of the Act:
NONE
Securities registered pursuant to Section 12(g) of the Act:
SERIES A COMMON STOCK (PAR VALUE $.10 PER SHARE)
------------------------------------------------
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes x No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. /X/
The aggregate market value of the voting stock held by non-affiliates of the
Registrant, based upon the closing sale price of Series A Common Stock reported
in the NASDAQ National Market System on March 15, 1996, was approximately
$31,748,437. For the purposes of calculation, all executive officers and
directors of the Company and all beneficial owners of more than 10% of the
Company's stock were considered affiliates. As of March 15, 1996, the
Registrant had outstanding 7,424,227 shares of Series A Common Stock ($.10 par
value) and 2,111,634 shares of Common Stock ($.10 par value).
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Company's 1995 Annual Report to Shareholders are incorporated
by reference into Part II of this report. Portions of the Company's Proxy
Statement to be filed with the Securities and Exchange Commission for the
Annual Meeting of Shareholders to be held on May 20, 1996, are incorporated by
reference into Part III of this report.
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TABLE OF CONTENTS
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PART I
ITEM 1. BUSINESS 2
ITEM 2. PROPERTIES 10
ITEM 3. LEGAL PROCEEDINGS 11
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 11
EXECUTIVE OFFICERS OF THE REGISTRANT 12
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS 13
ITEM 6. SELECTED FINANCIAL DATA 13
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 13
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 14
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE 14
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS 14
ITEM 11. EXECUTIVE COMPENSATION 14
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT 14
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 14
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND
REPORTS ON FORM 8-K 15
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PART I
ITEM 1. BUSINESS
GENERAL
Roy F. Weston, Inc. is a professional services organization that
provides a broad range of consulting, engineering, remedial construction, and
project management services to solve environmental and health and safety
problems associated with air, water, and land pollution; hazardous material and
toxic waste treatment and disposal; workplace hazards; product use; and energy
conservation. These services are made available to governmental and industrial
clients through the Company's staff of professional and support personnel in
offices and laboratories worldwide. The Company assists its clients from the
initial identification and definition of a problem, through the planning,
evaluation, and design stages, to the implementation of cost-effective,
technologically feasible, and politically acceptable solutions. The Company's
services include laboratory analysis and evaluation of samples of hazardous,
toxic, and other environmentally significant materials; development of
cost-effective technologies and solutions to environmental problems; selection
of sites, obtaining of governmental permits and the preparation of
specifications and designs for constructing remedial systems and facilities;
and construction, startup, and operation of facilities. The Company's services
may be used individually or in combination, as required, to meet its clients'
needs.
Since its incorporation in 1957, the Company has been a pioneer in
providing solutions to environmental, health and safety problems. As
environmental concerns have grown in complexity and become the subject of
heightened public awareness and extensive governmental regulation, the
Company's strategy has been to build an organization with a high level of
sophisticated professional skills and a broad range of scientific,
technological, and management resources. The Company provides a total systems
approach that involves studying its clients' needs and designing
cost-effective, customized solutions that address those needs.
SERVICES
The Company provides its services by combining its professional skills
and technological resources in an integrated systems approach, which uses
technical information and program management capabilities as well as cost
control systems. The services performed by the Company for its clients
typically include one or more of the following: consultation with the client to
determine the nature and scope of a project; on-site collection of samples;
on-site monitoring and measurement of industrial discharges and emissions;
analysis of samples in the Company's laboratories or mobile testing units;
identification and evaluation of a problem and its impact; development and
design of a process for solving a problem; preparation of reports for obtaining
regulatory agency permits; design and preparation of drawings and
specifications for constructing a facility to effect a solution; construction
of a facility or implementation of a cleanup; and operation and maintenance of
a facility. These services comprise the following three broad categories,
which may be used individually or in combination with each other: consulting
and engineering; analytical laboratory services; and construction and
remediation.
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CONSULTING AND ENGINEERING
The Company's consulting and engineering services involve the
identification and characterization of a client's problems; the evaluation of
alternative solutions; and the selection, design, and development of a
technologically feasible, cost-effective, and politically acceptable solution.
These services use professionals from many different scientific and
technological disciplines to assess the long-term effects and the risks
associated with the ultimate environmental impact of clients' activities and
products. In performing environmental impact and risk assessments, the
Company's professionals examine the relative effectiveness of various
technological approaches for achieving permanent solutions and ensuring that
additional environmental concerns are not created in the course of solving the
primary problem.
The Company applies its skills to all phases of environmental matters,
including those relating to hazardous and toxic substances; major program
management; sustainable development services; solid waste management;
management of wastewater, groundwater, and air resources; indoor air quality;
health and safety; and energy conservation.
HAZARDOUS AND TOXIC SUBSTANCES. Services relating to hazardous and
toxic substances include the assessment of potentially hazardous waste and
toxic materials; the reduction or elimination of sources of hazardous and toxic
materials; the undertaking of remedial investigation and engineering
feasibility studies; the operation of hazardous waste treatment systems; and
consulting to obtain government environmental permits. A majority of the
Company's operations is related to hazardous and toxic substances. The Company
provides engineering for the destruction or detoxification and stabilization of
hazardous waste.
MAJOR PROGRAM MANAGEMENT. Major program management involves all phases
of large-scale environmental and health and safety problems of industry and
government. The Company has the ability to accept overall responsibility for
siting, evaluating, designing, implementing, and managing environmental
programs, and to apply its diversified services, as appropriate, in an
integrated systems approach. The Company provides the management systems and
the direct involvement of its most senior management to deal with the
complexities of the underlying environmental problems, as well as the
commitment of large numbers of personnel at geographically dispersed sites for
extended timeframes. The Company typically bids for contracts as the prime
contractor and forms subcontractor teams in those instances where
subcontractors provide expertise and staffing that will substantially enhance
the Company's ability to obtain and perform contracts. Subcontractors may
include certain competitors of the Company. Although the Company believes that
major program management will be increasingly used by industry as environmental
issues become more challenging, the primary market for major program management
services is the federal government.
SUSTAINABLE DEVELOPMENT. The Company provides advice and counsel to
government and industry to help clients assess and reduce the total
environmental impact of their processes, products, and packaging by looking at
the full product life cycle from raw materials acquisition, through design,
manufacturing, distribution, use and reuse/recycling or disposal. The Company
also provides services to integrate environmental, economic, and social
considerations in its clients' businesses and operations, intended to improve
environmental and financial performance.
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SOLID WASTE MANAGEMENT. Solid waste services include planning, decision
making, and project implementation for recycling, composting, materials
processing, source reduction, waste-to-energy and landfill programs and
facilities. The Company provides total solid waste management services,
including permitting, siting, procurement, design, construction, testing, and
operation of solid waste facilities, as well as expertise in addressing public
awareness and acceptance issues that affect the success of solid waste programs
and facilities.
MANAGEMENT OF WASTEWATER, GROUNDWATER, AND AIR RESOURCES. Wastewater
management services include industrial and municipal feasibility studies,
engineering, economic evaluations, and design and consultation regarding the
operation of wastewater treatment facilities. Wastewater treatment facilities
are required by certain industries for the treatment of polluted water
generated by various manufacturing processes and by municipalities for the
treatment of sewage. The Company provides groundwater and surface water
resource management services, including water quality monitoring and
assessment, studies of the impact of surface and subsurface activities on
aquifer systems, development of water supplies, and development of resource
management programs. Air resources management services include siting and
obtaining permits for air pollution control facilities, sampling and monitoring
emissions, regulatory compliance, and designing and monitoring of facility
construction and other systems for the removal of particulate matter, acid
gases, and other pollutants. Regulatory compliance services include reviews of
clients' facilities to determine current and future degrees of compliance with
pollution standards. Site assessment reviews involve the inspection of a
facility to identify the environmental risks and potential environmental
effects of discharges of toxic emissions.
INDOOR AIR QUALITY. The Company integrates many of its engineering
services to define and solve indoor air quality problems, including asbestos,
radon, toxic air pollutants and "sick-building syndrome." Assessment
techniques are aided by state-of-the-art electron and optical microscopy and
chemical analysis. Industrial hygiene professionals work closely with design
engineers in solving indoor air quality problems.
HEALTH AND SAFETY. Health and safety specialists coordinate industrial
hygiene, safety, training, and medical surveillance programs; conduct
inspections; and prescribe protection and compliance procedures to be used when
working with hazardous materials or in hazardous environments. "Right-to-know"
legislation has increased the demand for services that promote improved
employee safety in the workplace.
ENERGY CONSERVATION. The Company has conducted major energy
conservation engineering and management projects for industry and government,
including energy audits, coal conversion studies, alternative energy studies,
and cogeneration system studies for energy producers.
ANALYTICAL LABORATORY SERVICES
The Company offers services for the detection and measurement of
hazardous materials, toxic wastes, and other chemicals and substances found in
air, soil, and water, and in industrial wastes and emissions. Services
provided by the Company include source sampling and characterization of organic
pollutants such as pesticides, herbicides, volatile solvents, dioxins, and
PCBs, and inorganic pollutants such as asbestos, trace metals, and sulfur. The
Company monitors pollutants to assist clients in
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complying with environmental regulations and to evaluate the ongoing
environmental effects of clients' activities. The Company uses state-of-the-art
computer-assisted equipment, such as gas chromatograph/mass spectrometers, to
measure trace concentrations of pollutants. A modern microscopy laboratory
provides complete optical scanning microscopic measurements for asbestos
analysis. The Company also uses a sophisticated data management system to
track the status and results of analyses, to perform quality assurance checks,
to provide sample management and to produce data reports.
Analytical services are performed in the Company's two laboratories
located in Lionville, Pennsylvania, and University Park, Illinois. The Company
maintains a sales service center in Stockton, California. The Company is
currently certified or approved by 38 states to provide environmental analyses
and is also licensed by the Nuclear Regulatory Commission (NRC) to handle and
analyze "mixed wastes" that contain radioactive as well as chemical and
biological materials. Additionally, the Company has a laboratory in Auburn,
Alabama, certified by the American Industrial Hygiene Association (AIHA).
CONSTRUCTION AND REMEDIATION
Consistent with the Company's strategy of providing complete solutions
to its clients' problems, the Company provides remediation and construction
services which can implement the solutions designed by its consulting and
engineering group, or designed by others. The Company also provides hazardous
waste cleanup; landfill design and construction; water management systems;
wastewater system construction and operation; decommissioning and demolition of
facilities and process systems; storage tank management; and on-site thermal
treatment systems.
The Company has designed and constructed a patented mobile
low-temperature thermal desorption system (LT(3)(r)). The LT(3) is designed for
stripping volatile organic compounds (VOCs) from soil. The contaminated soils
are heated to vaporize moisture and VOCs. The resultant clean soil is then
suitable for use as on-site backfill. The Company also has designed and
constructed two high-temperature transportable thermal processing systems, the
"TIS-5" and the "TIS-20." These systems treat contaminated soils by a thermal
process and the clean soil is then suitable for use as on-site backfill. The
TIS-5 is permitted by the U. S. Environmental Protection Agency (EPA) under
applicable Toxic Substance Control Act of 1976 (TSCA) regulations to burn
certain hazardous materials and is operated in accordance with those permit
requirements. Additional operating approvals are occasionally required and
obtained from state and local authorities.
Transportable thermal incineration technology has recently come under
the same legislative and regulatory pressures as fixed unit incineration
technology. In May 1994, EPA issued a new policy which required additional
studies to be conducted before thermal incineration technology could be
selected as the remedy at a Superfund site. This policy was applied
retroactively to sites where thermal incineration technologies were already
selected. The impact on the Company's thermal business is expected to be
significant in the United States. The Company has been exploring alternative
uses for its thermal units in the international markets should regulatory and
legislative action prevent their use at domestic remediation sites. During
1994 and 1995, the Company was scheduled to incinerate soils at two remediation
sites, but both contracts wereas terminated. At one site, and additional
studies are ongoing to determine an appropriate technology, which may include
incineration.
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CUSTOMERS AND MARKETING
The Company's marketing strategy emphasizes its ability to offer a broad
range of specialized services designed to meet the needs of its clients in a
timely and cost-efficient manner. The Company has the capability to undertake
not only small tasks requiring a few professionals, but also the management,
staffing, design, and implementation of major projects that last for several
years and involve many employees in several geographic locations.
The Company's marketing efforts are directed from regional offices
nationwide to three client sectors: private industry; state and local
governments; and the federal government. Most new contracts are acquired by
senior technical and management professionals. These senior professionals are
responsible for directing contract projects, monitoring quality assurance, and
integrating the delivery of the Company's services. They also develop and
maintain long-term working relationships with clients' management. The Company
participates in industrial trade shows and technical conferences concerning
environmental and health and safety issues, and sponsors related technical
seminars.
FEDERAL
In the federal sector, the Company performs contracts for the Department
of Energy (DOE), the Environmental Protection Agency (EPA) and the Department
of Defense (DOD), as well as for other federal agencies. The Company develops
comprehensive waste management and remediation programs at many priority sites
throughout the country.
The Company derived 54%, 54%, and 57% of its consolidated gross revenues
from the federal government for the years ended December 31, 1993, 1994, and
1995, respectively. Gross revenue percentages from the DOD, EPA, and DOE for
each of the fiscal years are as follows:
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PERCENTAGES OF CONSOLIDATED GROSS REVENUES
FOR THE YEARS ENDED DECEMBER 31
1993 1994 1995
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DOD 19% 19% 24%
EPA 17% 18% 19%
DOE 17% 15% 11%
OTHER 1% 2% 3%
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54% 54% 57%
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The Company is a major provider of services to the federal government
and thus is subject to audit with respect to costs and fees charged to the
federal government. Revenues associated with federal overhead rates under
government cost reimbursable contracts are adjusted when variances are
determined on at least an annual basis. Provisions for losses on contracts are
recorded when they are identified. As a major government contractor, the
Company is required to comply with numerous, complex laws and regulations; the
failure to comply with which can give rise to sanctions or liabilities. The
Company is involved in U.S. government investigations and audits from time to
time in connection with the services it provides to the federal government and
to ascertain compliance with government contracting
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requirements. Loss or reduction in business with the federal government could
have a materially adverse affect on the Company's operations.
INDUSTRIAL
The Company provides a full range of services for industrial clients.
In addition to complying with regulatory requirements, companies are
recognizing that the environmental impact must be considered from the inception
of a product, throughout its use and final disposal. Corporate clients, which
range from small business concerns to Fortune 500 companies, are offered a wide
range of consulting and engineering, analytical, and construction and
remediation services. Market segments served include automotive; chemicals and
allied products; waste management; petroleum; forest products; utilities;
electronics; and legal and financial.
STATE AND LOCAL GOVERNMENT
The Company renders environmental consulting and infrastructure-related
activities to many state and local governments and agencies. A growing number
of cities, regional authorities, and state governments are instituting
long-range programs to update essential facilities. Because these projects
require comprehensive environmental planning and engineering, they will
continue to be an important business component. Typical projects include the
design of water supply and wastewater systems; solid waste management; asbestos
management; computer-based geographic mapping; and landfill design.
COMPETITION
The environmental and health and safety markets are very competitive and
require highly skilled, experienced technical and management personnel, and
sophisticated technological equipment requiring substantial capital investment.
Competition is based on, among other items, reputation, quality of service,
price, expertise, and local presence. In each of its specific service areas,
the Company competes with many engineering and consulting firms that are both
larger and smaller than the Company, although no firm currently dominates any
significant portion of those service areas. Some of these competitors have
greater financial resources than the Company. The Company believes it is one
of only a few companies that offer a full range of services for solving complex
environmental and health and safety concerns.
PATENTS AND TECHNOLOGY
The Company owns six patents on remediation technologies and has filed
additional patent applications. The Company also claims copyright and trade
secret protection on certain of its computer software, publications, and
technologies. The company does not believe that such patents and copyrights are
a material factor in its business.
BACKLOG
The Company's net contract backlog (excluding estimated project expenses
that are directly passed through to customers) was approximately $112.7 million
and $109.7 million at December 31, 1994 and 1995, respectively. Additionally,
the Company derives revenues from open order contracts and from
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activities related to emergency responses. As work assignments are approved
and funded, the Company includes these amounts in the net contract backlog. As
is customary in the industry, contracts are subject to cancellation by the
customer, changes in scope of work, and delays in project startup. The
Company anticipates that the majority of its backlog will be realized in the
current fiscal year.
POTENTIAL LIABILITY AND INSURANCE
A substantial portion of the Company's gross revenues is derived from
work involving hazardous materials, toxic wastes, and other pollutants. Such
efforts frequently entail significant risks of liability to the Company for
environmental damage, personal injury, and fines and costs imposed by
regulatory agencies. In addition, a substantial number of the Company's
contracts require indemnification of a client for performance claims, damages
or losses incurred during the performance of the Company's operations.
The Company has attempted to insure against liabilities it may incur in
connection with the conduct of it's business. The Company has obtained coverage
with commercial carriers to insure against pollution liability claims.
Although this insurance covers many of the Company's environmental exposures,
there are instances where project- specific pollution insurance policies are
necessary. The Company will continue to evaluate exposures associated with
each project to determine if additional coverage is necessary. The Company
continues to be partially self-insured through its subsidiary, Cardinal
Indemnity Company of North America (Cardinal), a wholly-owned insurance
company. Cardinal provides professional liability and pollution coverage for
deductible amounts of the commercial insurance coverage.
The insurance carried by the Company may not be sufficient to cover all
claims that may arise, and while insurance carriers may not continue to make
coverage available to the Company, management believes it has provided an
adequate level of insurance.
The Company has also attempted to contractually protect itself through
agreements with its clients to limit its liability and indemnify the Company,
although the Company has not always been successful in obtaining such
agreements. Most of the Company's contracts with EPA involving Superfund
monies, the contract with the DOE's Office of Civilian Radioactive Waste
Management (OCRWM), and some state contracts that employ federal Superfund
dollars contain provisions whereby the respective governmental agency agrees to
indemnify the Company for third-party claims to the extent that such claims are
not covered by insurance and appropriated funds are available, although the
Company does not receive any assurance that any such appropriated funds will be
made available. EPA has issued Final Response Action Contractor
Indemnification Guidance (the Indemnification Guidance) applicable to contracts
signed on or after October 16, 1986, the terms of which limit EPA's contractor
indemnification under certain Superfund contracts retroactively to 1986 and
prospectively, under certain circumstances. The Indemnification Guidance
states that future contracts will not provide for indemnification unless EPA is
unable to obtain responsible, competitive proposals without such an
indemnification.
The Company has also developed and implemented a quality assurance
program and a health and safety program. These programs establish certain
minimum requirements for all project work and require the development of
project quality assurance plans and health and safety plans. The objective of
the quality assurance program is to provide additional assurance that project
performance is of appropriate quality for the project requirements. The
objective of the health and safety program is to protect project
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personnel from exposure to hazardous substances and situations. The scope of
both programs includes the establishment of policy and procedures, staff
training and operational review and audit.
The Company and its employees are subject to various state, local, and
federal licenses, laws and regulations, and believes that it is in substantial
compliance with those requirements.
PERSONNEL
As of December 31, 1995, the Company employed approximately 2,650
employees, many of whom had advanced degrees in a variety of technical
disciplines. Of these, 65 employees held doctorates, 465 held master's
degrees, 188 were registered professional engineers, and 27 were diplomates of
the American Academy of Environmental Engineers. The Company's ability to
remain competitive will depend on its ability to attract and retain qualified
personnel.
REGULATION
Demand for the Company's services is principally driven by laws and
regulations, the reauthorization, modification or elimination of which could
significantly affect the Company's business. The reauthorization of several
major federal environmental laws that have a significant impact on the work of
the Company remains on the agenda of the 104th Congress. These include the
statutes that:
- Protect the chemical, physical and biological integrity of water in
the United States (the Clean Water Act of 1977 and associated laws);
- Regulate the handling of hazardous waste and mandate state oversight
of solid waste (the Resource Conservation and Recovery Act of 1976);
and,
- Regulate the identification, remediation and accountability for
hazardous waste sites (the Superfund Amendments and Reauthorization
Act of 1986).
In addition, administrative regulations mandated by the 1990 amendments
to the Clean Air Act are likely to play a significant role in the Company's
services to its industrial clients in the areas of emission and ambient air
monitoring, air quality modeling and permitting, and assistance with compliance
certification.
The principal federal laws that affect the Company's business are:
THE COMPREHENSIVE ENVIRONMENTAL RESPONSE, COMPENSATION, AND LIABILITY
ACT OF 1980 (CERCLA OR SUPERFUND) AND SUPERFUND AMENDMENTS AND REAUTHORIZATION
ACT (SARA) OF 1986: CERCLA addresses past waste disposal practices by
providing means for identifying and remediating hazardous waste sites. The law
authorizes EPA to compel responsible parties to remediate abandoned sites.
Where initial enforcement actions would result in lengthy delays, or where
responsible parties cannot readily be identified, CERCLA authorizes funds for
cleanups. Congress enacted SARA in 1986 to amend CERCLA and reauthorize
Superfund. SARA strengthens EPA's authority to conduct short- and long-term
enforcement, and expands state involvement in the cleanup process. SARA also
expands EPA's commitment to research and development, training, health
assessments and public participation.
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Sites considered to be most in need of remediation are ranked on EPA's National
Priorities List (NPL). By January 1996, some 1,230 federal and nonfederal
sites were listed or proposed for the NPL, and some 13,000 other hazardous
waste sites remained on the CERCLA inventory of potential trouble spots.
THE CLEAN WATER ACT (CWA): Amended in February 1987, the CWA authorized
$18 billion in federal revolving loan funds through 1994 for construction
grants and startup money to build wastewater treatment plants. Additional funds
were appropriated for fiscal years 1995 and 1996. The Company believes that
the CWA is accelerating the market for the municipal wastewater treatment plant
design and construction services provided by the Company. Controls imposed by
the CWA on toxic effluents also are stimulating industrial expenditures.
THE RESOURCE CONSERVATION AND RECOVERY ACT OF 1976 (RCRA): RCRA
controls the present and future management of newly generated hazardous wastes
by mandating that private industry - generators, transporters and disposers -
monitor and regulate their disposal of such wastes. As a result of the growing
emphasis on the minimization of industrial process wastes, the increasing
shortage of hazardous waste management facilities, and the considerable costs
associated with disposal, RCRA will continue to be a key regulatory program.
The Company believes that responding to the needs of industry under RCRA will
continue to comprise a growing part of its business.
THE CLEAN AIR ACT (CAA) AND CLEAN AIR ACT AMENDMENTS (CAAA): The CAAA
of 1990 charged EPA with promulgating more than 400 regulations and developing
guidelines and procedures in the ensuing 10 years. The sweeping provisions of
the CAAA are designed to diminish three major threats to the environment: acid
rain, urban air pollution, and air toxic emissions. The revisions also
establish a national permit program and a stronger enforcement program to make
the CAA easier to monitor and ensure compliance. The CAA and the CAAA should
continue to increase the Company's activities in emission and ambient air
monitoring, air quality modeling and permitting assistance to its industrial
clients. Compliance certification, including the development and
implementation of data management and reporting systems, should expand the
Company's services to industry.
The Company believes that in addition to services required by CERCLA,
RCRA, CWA, and CAA, other federal laws will affect demand for the Company's
services in the private and public sectors. These include the Safe Drinking
Water Act, the National Environmental Policy Act, the Nuclear Waste Policy Act,
the Toxic Substances Control Act, the Occupational Safety and Health Act, the
Intermodal Surface Transportation and Efficiency Act, the Federal Facilities
Compliance Act and the Energy Policy Act.
ITEM 2. PROPERTIES
The Company's principal offices are located on a 53-acre tract in West
Whiteland Township, Chester County, Pennsylvania, in the suburbs of
Philadelphia, and include five major buildings providing a total of
approximately 150,000 square feet of space.
The Company also leases an aggregate of approximately 670,000 square
feet of office and laboratory space in offices located in 26 states and the
District of Columbia. Aggregate lease payments in 1995 were $18.5 million, of
which $8.2 million were subject to direct reimbursement from projects. These
leases for office and laboratory facilities are generally for 5 years or less.
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ITEM 3. LEGAL PROCEEDINGS
ATLANTIC RICHFIELD CO. (ARCO) VS. TORGER L. OAAS; MONTANA POLE AND
TREATING CO.; BANK OF MONTANA; RIEDEL ENVIRONMENTAL SERVICES, INC.; ROY F.
WESTON, INC.; AND BURLINGTON NORTHERN RAILROAD, U.S. DISTRICT COURT FOR THE
DISTRICT OF MONTANA, C.A. NO. CV-90-75-BU-PGH.
In October 1991, ARCO filed a Complaint in the Montana District Court
against the Company and others alleging that the Company, who worked at the
Montana Pole and Treating site for EPA under the Technical Assistance Team
(TAT) contract in 1985, negligently performed its oversight and other duties
and caused additional environmental damage at the site. ARCO further alleges
that the Company's activities at the site constitute those of an "operator" of
a "facility" under CERCLA and related state statutes and, therefore, the
Company is jointly, severally, and strictly liable for its share of current and
future costs of evaluation and site cleanup.
The Company believes that it executed its responsibilities properly at
this site and that it otherwise has good and meritorious defenses to these
allegations and is vigorously defending the action. EPA has honored its
indemnification obligation under the TAT contract, as to both the Company's
cost to defend and as to any liability. This indemnification obligation is not
adversely affected by the Indemnification Guidance, because it is based upon a
pre-1986 contract. (See Item 1. Business - Potential Liability and Insurance.)
In November 1995, the Company and all other parties to the litigation
reached agreement on the terms of a Consent Decree resolving, among other
things, all claims asserted against the Company in the litigation. There was
no finding of liability against the Company. The Consent Decree will be filed
with the Court and then published for comment by the public. After reviewing
the comments, EPA is expected to file the Decree with Court for approval. If
approved, the action against the Company would terminate without further costs
or obligation.
The Company is subject to certain claims and lawsuits in connection with
work performed in the ordinary course of its business. In the opinion of
management, all claims currently pending are either adequately covered by
insurance or will not result in a material adverse effect on the financial
position of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
11
<PAGE> 13
EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth certain information with respect to the
Company's executive officers:
NAME AGE POSITION WITH THE COMPANY
Roy F. Weston 84 Chairman of the Board
William J. Marrazzo 46 President and Chief Executive
Officer, and Director
Peter J. Marks 54 Executive Vice President and Chief
Operating Officer, and Director
M. Christine Murphy 47 Executive Vice President and Chief
Financial Officer, and Director
Steven C. Vorndran 48 Executive Vice President of
Corporate Development, and Director
William G. Mecaughey 40 Vice President and Corporate
Controller
Officers are elected annually and hold office until their successors are
elected and qualified.
ROY F. WESTON, P.E., DEE, 84, CHAIRMAN OF THE BOARD. Mr. Weston has been the
Chairman of the Board since March 1996. He was Chairman Emeritus from October
1991 to March 1996, after serving for more than 35 years as Chairman of the
Board and Chief Executive Officer of the Company. He also served as President
from December 1989 to September 1990 and during the periods 1957 to 1972 and
1977 until 1984. Mr. Weston is the founder of Roy F. Weston, Inc. Mr. Weston
is the father of Katherine W. Swoyer, a Director; the father-in-law of A.
Frederick Thompson, a Director; grandfather of the wife of Wayne F. Hosking,
Jr., a Director, and grandfather of Thomas W. Swoyer, Jr., a Director.
WILLIAM J. MARRAZZO, 46, PRESIDENT AND CHIEF EXECUTIVE OFFICER. Mr. Marrazzo
has been the President of the Company since September 1990 and the Chief
Executive Officer since October 1991. Mr. Marrazzo is also Chairman of the
Board of Weston International Holdings, Inc., a wholly-owned subsidiary of the
Company. He served as Chief Operating Officer from 1989 to 1991 and as
Executive Vice President from 1989 to 1990. Mr. Marrazzo joined the Company in
1988 as a Vice President and a Division Manager. He served as Chairman and
President of Weston Services, Inc. from 1990 to 1991. Weston Services, Inc. was
a wholly-owned subsidiary until December 31, 1991, when it merged into the
Company. From 1980 to 1988, he was the Commissioner of the Water Department for
the City of Philadelphia, with an accountability for its complete management.
Financially independent from the City of Philadelphia, the Water Department is
one of the nation's largest water and wastewater utilities. Mr. Marrazzo has
been a Director of the Company since 1988.
PETER J. MARKS, 54, EXECUTIVE VICE PRESIDENT AND CHIEF OPERATING OFFICER. Mr.
Marks has been in his current position since November 1994, having served
previously as Manager of the Environmental and Health Sciences Division since
1989 and has been a Vice President since 1979. Mr. Marks is also a Director of
Weston International Holdings, Inc., a wholly-owned subsidiary of the Company.
Mr. Marks has been a Director of the Company since 1994.
M. CHRISTINE MURPHY, CPA, 47, EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL
OFFICER. Ms. Murphy joined the Company in September 1990. She has been the
Executive Vice President, Quality Assurance and Finance since 1990 and Chief
Financial Officer since November 1991. She is also
12
<PAGE> 14
Chairman and President of Cardinal Indemnity Company of North America; Chairman
and President of Roy F. Weston (Delaware), Inc. and Roy F. Weston (IPR), Inc.,
wholly-owned subsidiaries of the Company; and a Director of Weston
International Holdings, Inc., a wholly-owned subsidiary of the Company. From
1985 to 1989, Ms. Murphy served as the Revenue Commissioner for the City and
School District of Philadelphia. Prior to that time, she was a partner with
Arthur Young & Co., a predecessor of Ernst & Young. Ms. Murphy was with Arthur
Young & Co. from 1971 to 1985. Ms. Murphy has been a Director of the Company
since 1990. Ms. Murphy is a Director of CoreStates Bank, N.A., a wholly-owned
subsidiary of CoreStates Financial Corp.
STEVEN C. VORNDRAN, 48, EXECUTIVE VICE PRESIDENT OF CORPORATE DEVELOPMENT. Mr.
Vorndran has been in his current position since November 1994, having
previously served as Executive Vice President and Chief Operating Officer since
October 1991, as Vice President from 1989 to 1990, when he joined the Company;
and as Manager of the Federal Programs Division of the Company from 1990 to
1991. Mr. Vorndran is also President and a Director of Weston International, a
wholly-owned subsidiary of the Company. From 1982 to 1989, Mr. Vorndran was
with Westinghouse Electric Corporation, where he served as a manager
responsible for the development of thermal technologies, related engineering,
and technical functions. Mr. Vorndran has been a Director of the Company since
1991.
WILLIAM G. MECAUGHEY, CPA, 40, VICE PRESIDENT AND CORPORATE CONTROLLER. Mr.
Mecaughey joined the Company in October 1991 as Vice President and Corporate
Controller. From 1977 to 1991, Mr. Mecaughey was employed by Ernst & Young.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
Information with respect to this item is incorporated by reference
herein from the information in the Company's 1995 Annual Report to Shareholders
in Note 6 to the Consolidated Financial Statements on pages 28 and 29 and under
the heading "Stockholder Information" on page 38.
ITEM 6. SELECTED FINANCIAL DATA
Information with respect to this item is incorporated by reference
herein from the information in the Company's 1995 Annual Report to Shareholders
on page 18.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Information with respect to this item is incorporated by reference
herein from the information in the Company's 1995 Annual Report to Shareholders
on pages 15 to 18.
13
<PAGE> 15
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
(a) Information with respect to this item is incorporated by reference
herein from the information in the Company's 1995 Annual Report to Shareholders
on pages 19 to 35.
(b) Selected Quarterly Financial Data (Unaudited) are set forth in Note
14 to the Consolidated Financial Statements contained in the Company's 1995
Annual Report to Shareholders on page 35 and are incorporated by reference
herein.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS
Information with respect to this item is set forth in the Company's
definitive Proxy Statement (the "Proxy Statement") to be filed with the
Securities and Exchange Commission for the Annual Meeting of Shareholders to be
held on May 20, 1996, under the headings "Nominees for Election as Directors"
and "Compliance with Section 16(a) of the Exchange Act" and is incorporated
herein by reference. Information regarding the Company's executive officers is
included in Part I on page 12 herein.
ITEM 11. EXECUTIVE COMPENSATION
Information with respect to this item is set forth in the Proxy
Statement under the heading "Executive Management Compensation" and is
incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information with respect to the ownership of securities of the Company
by certain persons is set forth in the Proxy Statement under the heading
"Principal Shareholders" and is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information with respect to transactions with management and others is
set forth in the Proxy Statement under the headings "Compensation Committee
Interlocks and Insider Participation," "Insurance and Supplemental Retirement
Benefits," and "Other Matters" and is incorporated herein by reference.
14
<PAGE> 16
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) The following documents are filed as a part of this report:
1. Consolidated Financial Statements:
The information appearing in the Company's 1995 Annual Report to
Shareholders as described in Item 8 is incorporated herein by reference.
2. Financial Statement Schedule:
- Report of Independent Accountants
- Schedule II - Valuation and Qualifying Accounts
All other schedules are omitted because they are not applicable or the
required information is shown in the financial statements or notes
thereto.
With the exception of the consolidated financial statements and the
independent accountants' report thereon listed in the above index, the
information referred to in Items 5, 6, and 7, and the supplementary
quarterly financial information referred to in Item 8, all of which are
included in the 1995 Annual Report to Shareholders of Roy F. Weston,
Inc. and incorporated by reference into this Annual Report on Form 10-K,
the 1995 Annual Report to Shareholders is not to be deemed "filed" as
part of this report.
3. Exhibits:
The following exhibits are filed herewith unless otherwise indicated:
EXHIBIT NO. DESCRIPTION
----------- -----------
3.1 Articles of Incorporation of the Company. Incorporated by
reference to Exhibit 3(a) to the Company's Registration
Statement on Form S-1 (Registration No. 33-20834) ("No.
33-20834").
3.2 Amended By-Laws of the Company.
4.1 Indenture between the Company and Mellon Bank, N.A. relating
to the 7% Convertible Subordinated Debentures due April 15,
2002. Incorporated by reference to Exhibit 4 to the Company's
Registration Statement on Form S-1 (Registration No. 33-13020)
("No. 33-13020").
4.2 Agreement of Resignation/Appointment and Acceptance between
Mellon Bank, N.A., Security Pacific National Trust Company,
and the Company relating to the 7% Convertible Subordinated
Debentures due April 15, 2002. Incorporated by reference to
15
<PAGE> 17
EXHIBIT NO. DESCRIPTION
----------- -----------
Exhibit 4.2 to the Company's Annual Report on Form 10-K for
the year ended December 31, 1991.
4.3 Trusteeship Transfer Agreement between PNC Bank, N. A., First
Trust of New York, N.A. and the Company dated March 1, 1996,
relating to the 7% Convertible Subordinated Debentures due
April 15, 2002.
9.1 Voting Trust Agreement among certain shareholders of the
Company. Incorporated by reference to Exhibit 9(a) to the
Company's Registration Statement on Form S-1 (Registration No.
33-5914) ("No. 33-5914").
9.2 Form of Restrictive Stock Transfer Agreement among certain
shareholders of the Company. Incorporated by reference to
Exhibit 9(b) to No. 33-5914.
10.1 Form of the Company's Retirement Supplement to Split Dollar
Life Insurance Agreement. Incorporated by reference to Exhibit
10(c) to No. 33-5914.
10.2 Form of the Company's Executive Supplemental Benefit Plan -
Supplemental Retirement Agreement. Incorporated by reference
to Exhibit 10(d) to No. 33-5914.
10.3 Employment Agreement dated November 12, 1973, between Roy F.
Weston and the Company, as amended. Incorporated by reference
to Exhibit 10(e) to No. 33-5914.
10.4 Amendment #2 to the Employment Agreement dated November 12,
1973, between Roy F. Weston and the Company, as amended.
Incorporated by reference to Exhibit 10.4 to the Company's
Annual Report on Form 10-K for the year ended December 31,
1991.
10.5 The Company's Stock-Based Incentive Compensation Plan.
Incorporated by reference to Appendix A to the Company's Proxy
Statement dated April 9, 1991. Incorporated by reference to
Exhibit 10.6 to the Company's Annual Report on Form 10-K for
the year ended December 31, 1992.
10.6 Restricted Stock Agreement dated April 10, 1992, between the
Company and William J. Marrazzo, President and Chief Executive
Officer. Incorporated by reference to Exhibit 10.7 to the
Company's Annual Report on Form 10-K for the year ended
December 31, 1992.
10.7 Credit Agreement dated March 18, 1994 among Roy F. Weston,
Inc. and its subsidiaries, CoreStates Bank, N.A., First
Fidelity Bank, N.A., Mellon Bank, N.A., and PNC Bank, National
Association. Incorporated by reference to Exhibit 10.8 to the
Company's Annual Report on Form 10-K for the year ended
December 31, 1993.
10.8 First Amendment to Credit Agreement dated November 10, 1994.
Incorporated by reference to Exhibit 10.9 to the Company's
Annual Report on Form 10-K for the year ended December 31,
1994.
10.9 The Company's Retirement Income Restoration Plan.
10.10 Severance Agreement between A. Frederick Thompson and the
Company dated March 1, 1996.
11 Computation of Net Income per Share.
13 The Company's 1995 Annual Report to Shareholders.
16
<PAGE> 18
Exhibit No. Description
----------- -----------
21 Subsidiaries of the Company.
23 Consent of Independent Accountants.
27 Financial Data Schedule.
(b) Reports on Form 8-K. No reports on Form 8-K were filed during
the quarter ended December 31, 1995.
Note: Any of the exhibits listed in the foregoing index not included with
this Annual Report on Form 10-K may be obtained without charge by writing to
Mr. Steven V. Abramson, Corporate Secretary, Roy F. Weston, Inc., 1 Weston
Way, West Chester, Pennsylvania 19380-1499.
17
<PAGE> 19
REPORT OF INDEPENDENT ACCOUNTANTS
Board of Directors and Stockholders
Roy F. Weston, Inc.
Our report on the consolidated financial statements of Roy F. Weston,
Inc. and Subsidiaries has been incorporated by reference in this Form 10-K from
page 19 of the 1995 Annual Report to Shareholders of Roy F. Weston, Inc. and
Subsidiaries. In connection with our audits of such financial statements, we
have also audited the related financial statement schedule listed in the index
on page 15 of this Form 10-K.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information required to be
included therein.
COOPERS & LYBRAND L.L.P.
2400 Eleven Penn Center
Philadelphia, Pennsylvania
February 7, 1996
18
<PAGE> 20
ROY F. WESTON, INC. AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
(THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
AMOUNTS DEDUCTIONS -
BALANCE AT CHARGED TO CHARGED TO WRITE-OFF OF BALANCE
BEGINNING COSTS AND OTHER UNCOLLECTIBLE AT END OF
DESCRIPTION OF PERIOD EXPENSES ACCOUNTS ACCOUNTS PERIOD
<S> <C> <C> <C> <C> <C>
YEAR ENDED
DECEMBER 31, 1995:
Allowance for
Doubtful Accounts $1,699 $201 $ -- $ 100 $1,800
YEAR ENDED
DECEMBER 31, 1994:
Allowance for
Doubtful Accounts $1,630 $570 $ -- $ 501 $1,699
YEAR ENDED
DECEMBER 31, 1993:
Allowance for
Doubtful Accounts $1,913 $960 $ -- $1,243 $1,630
</TABLE>
19
<PAGE> 21
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange
Act of 1934, ROY F. WESTON, INC. has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized:
ROY F. WESTON, INC.
By: ROY F. WESTON
---------------------
Roy F. Weston
Chairman of the Board
Date: March 26, 1996
----------------
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated on the dates indicated.
<TABLE>
<CAPTION>
NAME TITLE DATE
<S> <C> <C>
ROY F. WESTON Chairman of the Board March 26, 1996
- ------------------------------------
Roy F. Weston
WILLIAM J. MARRAZZO President and Chief Executive Officer, March 26, 1996
- ------------------------------------ and Director
William J. Marrazzo (Principal Executive Officer)
PETER J. MARKS Executive Vice President March 26, 1996
- ------------------------------------ and Chief Operating Officer, and Director
Peter J. Marks (Principal Operating Officer)
M. CHRISTINE MURPHY Executive Vice President and March 26, 1996
- ------------------------------------ Chief Financial Officer, and Director
M. Christine Murphy (Principal Financial Officer)
WILLIAM G. MECAUGHEY Vice President and March 26, 1996
- ------------------------------------ Corporate Controller
William G. Mecaughey (Principal Accounting Officer)
JOSEPH BORDOGNA Director March 26, 1996
- ------------------------------------
Joseph Bordogna
HENRY L. DIAMOND Director March 26, 1996
- ------------------------------------
Henry L. Diamond
WAYNE F. HOSKING, JR. Director March 26, 1996
- ------------------------------------
Wayne F. Hosking, Jr.
ROBERT G. JAHN Director March 26, 1996
- ------------------------------------
Robert G. Jahn
</TABLE>
<PAGE> 22
<TABLE>
<S> <C> <C>
JAMES E. KSANSNAK Director March 26, 1996
- ------------------------------------
James E. Ksansnak
MARVIN O. SCHLANGER Director March 26, 1996
- ------------------------------------
Marvin O. Schlanger
KATHERINE W. SWOYER Director March 26, 1996
- ------------------------------------
Katherine W. Swoyer
THOMAS M. SWOYER, JR. March 26, 1996
- ------------------------------------ Director
Thomas M. Swoyer, Jr.
A. FREDERICK THOMPSON Director March 26, 1996
- ------------------------------------
A. Frederick Thompson
STEVEN C. VORNDRAN Director March 26, 1996
- ------------------------------------
Steven C. Vorndran
</TABLE>
<PAGE> 1
ROY F. WESTON, INC.
BY-LAWS
ARTICLE I - OFFICES
1. The registered office of the Company shall be at 1 Weston Way, West
Chester, Chester County, Pennsylvania.
2. The Company may also have offices at such other places as the Board of
Directors may from time to time appoint or the business of the Company
may require.
ARTICLE II - SEAL
1. The Corporate seal shall have inscribed thereon the name of the
Company, the year of its organization and the words "Corporate Seal,
Pennsylvania".
ARTICLE III - SHAREHOLDERS MEETING
1. Meetings of the shareholders shall be held at the office of the
Company at 1 Weston Way, West Chester, Chester County, Pennsylvania or
at such other place or places, either within or without the
Commonwealth of Pennsylvania, as may from time to time be selected.
2. The annual meeting of the shareholders shall be held on the second
Monday of the month of May in each year, if not a legal holiday, and
if a legal holiday, then on the next secular day following, at 11:00
a.m., or at such other date and time as shall be designated from time
to time by the Board of Directors and stated in the Notice of the
Meeting, at which they shall elect a Board of Directors and transact
such other business as may properly be brought before the meeting. If
the annual meeting shall not be called and held within six months
after the designated time, any shareholder may call such meeting.
1
<PAGE> 2
3. The presence, in person or by proxy, of shareholders entitled to cast
at least a majority of the votes which all shareholders are entitled
to cast on a particular matter(s) being considered at a meeting shall
constitute a quorum at all meetings of the shareholders except as
otherwise provided by law, by Articles of Incorporation or these
By-Laws. If, however, such quorum shall not be present at any meeting
of the shareholders, those entitled to vote thereat shall have power
to adjourn the meeting from time to time, without notice other than
announcement at the meeting, until the requisite number of shares
shall be present. In the case of any meeting called for the election
of directors, adjournment or adjournments may be taken only from day
to day, or for such longer periods not exceeding fifteen days each, as
the holders of a majority of the shares present in person or by proxy
shall direct, until such directors have been elected, and those who
attend the second of such adjourned meetings, although less than a
quorum, shall nevertheless constitute a quorum for the purpose of
electing directors.
4. At each meeting of the shareholders every shareholder having the right
to vote shall be entitled to vote in person or by proxy appointed by
an instrument in writing subscribed by such shareholder and delivered
to the Secretary at the meeting. No unrevoked proxy shall be valid
after eleven months from the date of its execution, unless a longer
time is expressly provided therein, but in no event shall a proxy,
unless coupled with an interest, be voted on after three years from
the date of its execution. Shareholders shall not have the right to
vote cumulatively in the election of directors. Upon demand made by a
shareholder at any election for directors before the voting begins,
the election shall be by ballot. No share shall be voted at any
meeting upon which any installment is due and unpaid. The original
share ledger or transfer book, or a duplicate thereof kept in this
Commonwealth, shall be prima facie evidence of the right of the person
named therein to vote thereon.
5. Written notice of the annual meeting shall be mailed to each
shareholder entitled to vote thereat, at such address as appears on
the books of the Company, at least ten days prior to the meeting.
6. In advance of any meeting of shareholders, the Board of Directors may
appoint judges of election, who need not be shareholders, to act at
such meeting or any adjournment thereof. If judges of election be not
so appointed, the chairman of any such meeting may, and on the request
of any shareholder or his proxy shall, make such appointment at the
meeting. The number of judges shall be one or three. If
2
<PAGE> 3
appointed at a meeting on the request of one or more shareholders or
proxies, the majority of shares present and entitled to vote shall
determine whether one or three judges are to be appointed. On request
of the chairman of the meeting, or of any shareholder or his proxy,
the judges shall make a report in writing of any challenge or question
or matter determined by them, and execute a certificate of any fact
found by them. No person who is a candidate for office shall act as a
judge.
7. Special meetings of the shareholders may be called at any time by the
Chairman of the Board, or the Board of Directors, or the holders of
not less than one-fifth of all the shares outstanding and entitled to
vote. At any time, upon written request of any person entitled to
call a special meeting, it shall be the duty of the Secretary to call
a special meeting of the shareholders, to be held at such time as the
Secretary may fix, not less than ten nor more than sixty days after
receipt of the request.
8. Business transacted at all special meetings shall be confined to the
objects stated in the call and matters germane thereto.
9. Written notice of a special meeting of shareholders stating the time
and place and object thereof, shall be mailed, postage prepaid, to
each shareholder entitled to vote thereat at such address as appears
on the books of the Company, at least ten days before such meeting,
unless a greater period of notice is required by statute in a
particular case.
10. The officer or agent having charge of the transfer books shall make,
at least five days before each meeting of shareholders, a complete
list of the shareholders entitled to vote at the meeting, arranged in
alphabetical order, with the address of and the number of shares held
by each, which list shall be subject to inspection by any shareholder
at any time during usual business hours. Such list shall also be
produced and kept open at the time and place of the meeting, and shall
be subject to the inspection of any shareholder during the whole time
of the meeting. The original share ledger or transfer book, or a
duplicate thereof kept in this Commonwealth, shall be prima facie
evidence as to who are the shareholders entitled to examine such list
or share ledger or transfer book, or to vote in person or by proxy, at
any meeting or shareholders.
3
<PAGE> 4
ARTICLE IV - DIRECTORS
1. The business of this Company shall be managed by its Board of
Directors, which Board shall consist of at least eleven (11) members
who need not be residents of the Commonwealth of Pennsylvania or
shareholders of the Company. Subject to the preceding sentence and
the provisions of applicable law, the Board of Directors shall have
the authority to (i) determine the number of directors to constitute
the Board and (ii) if such number is increased between annual meetings
of the shareholders, fill the vacancy or vacancies thereby created.
Except as otherwise hereinbefore provided with respect to interim
vacancies, directors shall be elected by plurality vote at the annual
meeting of shareholders, and each director shall be elected for a term
extending until the next following annual meeting of shareholders and,
except in the event of death, resignation or removal, shall serve
until such director's successor shall be elected and shall qualify.
2. In addition to the powers and authorities by these By-Laws expressly
conferred upon them, the Board may exercise all such powers of the
Company and do all such lawful acts and things as are not by statute
or by the Articles or by these By-Laws directed or required to be
exercised or done by the shareholders.
3. The meetings of the Board of Directors may be held at such place
within this Commonwealth, or elsewhere, as a majority of the directors
may from time to time appoint, or as may be designated in the notice
calling the meeting.
4. Each newly-elected Board may meet at such place and time as shall be
fixed by the shareholders at the meeting at which such directors are
elected, and no notice shall be necessary to the newly elected
directors in order to legally constitute the meeting, or they may meet
at such place an time as may be fixed by the consent in writing of all
the directors.
5. Regular meetings of the Board may be held without notice at such time
and place as shall be determined by the Board.
6. Special meetings of the Board may be called by the Chairman of the
Board on one day's notice to each director, either personally or by
mail or by telegram; special meetings shall be called by the President
or Secretary in like manner on like notice on the written request of
two directors.
4
<PAGE> 5
7. A majority of the directors in office shall be necessary to constitute
a quorum for the transaction of business, and the acts of a majority
of the directors present at a meeting at which a quorum is present
shall be the acts of the Board of Directors. If all the directors
shall severally or collectively consent in writing to any action to be
taken by the Company, such action shall be as valid corporate action
as though it had been authorized at a meeting of the Board of
Directors.
8. Directors as such shall not receive any stated salary for their
services, but by resolution of the Board, a fixed sum and expenses of
attendance, if any, may be allowed for attendance at each regular or
special meeting of the Board, or committees of the Board if such
Committee meetings are held on days other than Regular or Special
Board meetings, PROVIDED that nothing herein contained shall be
construed to preclude any director from serving the Company in any
other capacity and receiving compensation therefor.
9. The Board of Directors may elect an Executive Committee consisting of
the Chairman of the Board and such additional directors as may from
time to time be designated as members thereof by resolution of the
Board of Directors, which Committee shall have, between meetings of
the Board, all of the powers of the Board except such as may not be
lawfully delegated to a committee.
In addition, the Board of Directors may form other committees of
service of the Board. Each committee member shall be a member of the
Board, and nominated by the Chairman.
10. One or more directors may participate in a meeting of the Board or of
a committee of the Board by means of conference telephone or similar
communications equipment by means of which all persons participating
in the meeting can hear each other, and any director so participating
in a meeting shall be deemed to be present at the meeting for all
purposes.
ARTICLE V - OFFICERS
1. The Executive Officers of the Company shall be chosen by the Board of
Directors and shall consist of a Chairman of the Board, a President,
one or more Vice Presidents, a Secretary and a Treasurer. The Board
of Directors may also choose one or more Vice Chairmen and Vice
Presidents and such other officers and agents as it deems necessary,
who shall hold their offices for such terms and shall have such
authority and shall perform such duties as from time to time shall be
5
<PAGE> 6
prescribed by the Board. Any two or more offices may be held by the
same person, except the combination of the Offices of President and
Secretary. It shall not be necessary for the officers to be
directors.
2. The salaries of all officers and agents of the Company shall be fixed
by the Board of Directors.
3. The officers of the Company shall hold office for one year and until
their successors are chosen and have qualified. Any officer elected
or appointed by the Board of Directors may be removed by the Board of
Directors whenever, in their judgement, the best interests of the
Company will be served thereby.
4. The Chairman of the Board shall preside at all meetings of the
shareholders and directors. The Vice Chairman (or, if more than one,
in the order designated by the Board) shall, in the absence of the
Chairman, preside at all meetings of the shareholders and directors
and shall have such other duties, responsibilities and authority as
are from time to time, assigned to him by the Chairman.
5. The President shall exercise such responsibilities as may from time to
time be assigned to him by the Chairman of the Board or the Board of
Directors, and shall, in the absence of the Chairman of the Board and
Vice Chairman, assume the responsibilities and discharge the duties of
the Chairman.
6. The Secretary shall attend all sessions of the Board and all meetings
of the shareholders and act as clerk thereof, and record all votes of
the Company and the minutes of all its transactions in a book to be
kept for that purpose; and shall perform like duties for all
committees of the Board of Directors when required. He shall give, or
cause to be given, notice of all meetings of the shareholders and of
the Board of Directors, and shall perform such other duties as may be
prescribed by the Board of Directors or Chairman of the Board, under
whose supervision he shall be. He shall keep in safe custody the
company seal of the Company, and when authorized by the Board affix
the same to any instrument requiring it. The Board may also choose
one or more Assistant Secretaries.
7. The Treasurer shall direct the financial planning, procurement, and
investment of corporate funds. He shall have responsibility for the
protection and custody of securities and financial instruments and
other assets of the Company and shall advise management about
insurance coverage, protection against property losses, and potential
6
<PAGE> 7
liability. He shall analyze financial records to forecast the future
financial position and financing requirements, and evaluate the need
for procurement of funds and investment of surplus and shall advise
management on investments and loans for short and long range financial
plans. He shall sign or countersign notes of indebtedness approved by
management.
8. The Board of Directors shall designate from among the Executive
Officers of the Company the Chief Executive Officer, the Chief
Operations Officer and the Chief Financial Officer.
9. The Chief Executive Officer shall be the Chairman of the Board or the
President of the Company, shall be appointed by the Board, and shall
have general and active management of the business of the Company and
shall see that all orders and resolutions of the Board are carried
into effect, subject however to the right of the directors to delegate
any specific powers to any other officer or officers of the Company.
He shall be an ex-officio member of all committees, and shall have the
general powers and duties of supervision and management usually vested
in the Chief Executive Officer of a Company.
10. The Chief Operations Officer shall exercise such responsibilities as
may from time to time be assigned to him by the Chief Executive
Officer or the Board of Directors.
11. The Chief Financial Officer shall exercise such responsibilities as
may from time to time be assigned to him by the Chief Executive
Officer or the Board of Directors, including the preparation of
reports which outline the Company's financial position in areas of
income, expenses, and earnings, based on past, present and future
operation. He shall direct the preparation of operating budgets and
financial forecasts, determine depreciation rates to apply to
capitalized items, prepare governmental reports, and arrange for
audits of the Company's accounts. He shall advise management on
desirable operational adjustments due to budgetary variations. He
shall render to the Chief Executive Officer and the Board of
Directors, at the regular meetings of the Board, or whenever they may
require it, an account of the financial condition of the Company. He
shall prepare all reports to the shareholders and, as authorized by
the Board of Directors, shall direct the payment of dividends on the
stock of the Company.
ARTICLE VI - VACANCIES
1. If the office of any officer or agent, one or more, becomes vacant for
7
<PAGE> 8
any reason, the Board of Directors may choose a successor or
successors, who shall hold office for the unexpired term in respect of
which such vacancy occurred.
2. Vacancies in the Board of Directors shall be filled by a majority of
the remaining members of the Board though less than a quorum, and each
person so elected shall be a director until his successor is elected
by the shareholders, who may make such election at the next annual
meeting of the shareholders or at any special meeting duly called for
that purpose and held prior thereto.
ARTICLE VII - CORPORATE RECORDS
1. There shall be kept at the registered office of the Company an
original or duplicate record of the proceedings of the shareholders
and of the directors, and the original or a copy of its By-Laws,
including all amendments or alterations thereto to date, certified by
the Secretary of the Company. An original or duplicate share register
shall also be kept at the registered office, or at the office of a
transfer agent or registrar within the Commonwealth, giving the names
of the shareholders in alphabetical order, and showing their
respective addresses, the number and classes of shares held by each,
the number and date of certificates issued for the shares, and the
number and date of cancellation of every certificate surrendered for
cancellation.
2. Every shareholder shall have a right to examine, in person or by agent
or attorney, at any reasonable time or times, for any reasonable
purpose, the share register, books or records of account, and records
of the proceedings of the shareholders and directors, and make
extracts therefrom.
ARTICLE VIII - CAPITAL STOCK
1. The share certificates of the Company shall be numbered and registered
in the share ledger and transfer books of the Company, as they are
issued. They shall be signed by the Chairman of the Board or
President and the Secretary or an Assistant Secretary and shall bear
the corporate seal.
2. Transfers of shares shall be made on the books of the Company upon
surrender of the certificates therefor, endorsed by the person named
in the certificate or by attorney, lawfully constituted in writing.
No transfer shall be made inconsistent with the provisions of Article
8 of the Uniform Commercial Code, approved the sixth day of April, One
8
<PAGE> 9
Thousand Nine Hundred Fifty-Three (Act No. 1), and its amendments and
supplements.
9
<PAGE> 10
3. The Board of Directors may fix a time, not more than seventy days,
prior to the date of any meeting of shareholders, or the date fixed
for the payment of any dividend or distribution, or the date for the
allotment of rights, or the date when any change or conversion or
exchange of shares will be made or go into effect, as a record date
for the determination of the shareholders entitled to notice of, and
to vote at, any such meeting, or entitled to receive payment of any
such dividend or distributions, or to receive any such allotment of
rights, or to exercise the rights in respect to any such change,
conversion, or exchange of shares. In such case, only such
shareholders as shall be shareholders of record on the date so fixed
shall be entitled to notice of, and to vote at, such meeting, or to
receive payment of such dividend, or to receive such allotment of
rights, or to exercise such rights as the case may be, notwithstanding
any transfer of any shares on the books of the Company after any
record date fixed as aforesaid. The Board of Directors may close the
books of the Company against transfers of shares during the whole or
any part of such period, and in such case, written or printed notice
thereof shall be mailed at least ten days before the closing thereof
to each shareholder of record at the address appearing on the records
of the Company or supplied by him to the Company for the purpose of
notice. While the stock transfer books of the Company are closed, no
transfer of shares will be made thereon. If no record date if fixed
for the determination of shareholders entitled to receive notice of,
or vote at, a shareholders meeting, transfers of shares which are
transferred on the books of the Company within ten days next preceding
the date of such meeting shall not be entitled to notice of, or vote
at, such meeting.
4. Any person claiming a share certificate to be lost or destroyed shall
make an affidavit or affirmation of that fact and advertise the same
in such manner as the Board of Directors may require, and shall give
the Company a bond of indemnity with sufficient surety to protect the
Company or any person injured by the issue of a new certificate from
any liability or expense which it or they may incur by reason of the
original certificate remaining outstanding, whereupon a new
certificate may be issued by the same tenor and for the same number of
shares as the one alleged to be lost or destroyed, but always subject
to the approval of the Board of Directors.
5. Subject to the provisions of the statutes, the Board of Directors may
declare any pay dividends upon the outstanding shares of the Company
out of its surplus from time to time and to such extent as they may
deem advisable, in cash, in property, or in shares of the Company.
10
<PAGE> 11
6. Before payment of any dividend there may be set aside out of the net
profits of the Company such sums as the directors, from time to time,
in their absolute discretion, think proper as a reserve fund to meet
contingencies, or for equalizing dividends, or for repairing or
maintaining any property of the Company, or for such other purpose as
the directors shall think conducive to the interest of the Company,
and the directors may abolish any such reserve in the manner in which
it was created.
ARTICLE IX - MISCELLANEOUS PROVISIONS
1. All checks or demands for money and notes of the Company shall be
signed by such officer or officers as the Board of Directors may from
time to time designate.
2. The fiscal year shall begin the 1st day of January each year.
3. Whenever written notice is required to be given to any person, it may
be given to such person, either personally or by sending a copy
thereof through the mail, or by telegram, charges prepaid, to his
address appearing on the books of the Company, or supplied by him to
the Company for the purpose of notice. If the notice is sent by mail
or by telegraph, it shall be deemed to have been given to the person
entitled thereto when deposited in the United States mail or with a
telegraph office for transmission to such person. Such notice shall
specify the place, day, and hour of the meeting and, in the case of a
special meeting, the general nature of the business to be transacted.
4. Whenever any written notice is required by statute, or by the Articles
or By-Laws of this Company, a waiver thereof in writing, signed by the
person or persons entitled to such notice, whether before or after the
time stated therein, shall be deemed equivalent to the giving of such
notice. Except in the case of a special meeting, neither the business
to be transacted at, nor the purpose of the meeting need be specified
in the waiver of notice of such meeting. Attendance of a person,
either in person or by proxy, at any meeting shall constitute a waiver
of notice of such meeting, except where a person attends a meeting for
the express purpose of objecting to the transaction of any business
because the meeting was not lawfully called or convened.
5. The Company shall indemnify its directors, officers, employees, and
agents to the full extent permitted by Section 410 of the Business
Corporation Law.
11
<PAGE> 12
ARTICLE X - ANNUAL STATEMENT
1. The Chairman of the Board and Board of Directors shall present at each
annual meeting a full and complete statement of the business and
affairs of the Company for the preceding year. Such statement shall
be prepared and presented in whatever manner the Board of Directors
shall deem advisable and need not be verified by a certified public
accountant.
ARTICLE XI - AMENDMENTS
1. These By-Laws may be altered, amended, or repealed by the affirmative
vote of a majority of the shares issued and outstanding and entitled
to vote thereat at any regular or special meeting of the shareholders
or by the affirmative vote of a majority of all of the directors then
in office at any regular or special meeting of the directors, if
notice of the proposed alteration, amendment, or repeal be contained
in the notice of the meeting.
ARTICLE XII - LIMITATION ON LIABILITY
1. A director shall not be personally liable for monetary damages for any
action taken on or after January 27, 1987, or for the failure to take
any action on or after the date, unless (i) the director has breached
or failed to perform the duties of his office under Section 8363 of
the Pennsylvania Directors' Liability Act (Act 145 of 1986, P.L.
1458), relating to standard of care and justifiable reliance, and (ii)
the breach or failure to perform constitutes self-dealing, willful
misconduct or recklessness. The provisions of this Section 1 of
Article XII shall not apply to (i) the responsibility or liability of
a director pursuant to any criminal statute, or (ii) the liability of
a director for the payment of taxes pursuant to local, state or
federal law. Any repeal or modification of any provision of this
Section 1 of Article XII shall be prospective only and shall not
affect, to the detriment of any director, any limitation on the
personal liability of a director of the existing at the time of such
repeal or modification.
12
<PAGE> 13
ARTICLE XIII - INDEMNIFICATION
1. The Company shall indemnify to the extent not prohibited by applicable
law, any person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative,
by reason of the fact that he is or was a director, officer, employee
or agent of the Company or is or was serving at the request of the
Company as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise,
including an employee benefit plan, against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonable incurred by him in connection with such
action, suit or proceeding, whether or not the indemnified liability
arises or arose from any threatened, pending or completed action by or
in the right of the Company. The Board of Directors may, and on
request of any such person shall be required to, determine in each
case whether the applicable standards in the Pennsylvania Directors'
Liability Act or any other applicable statute have been met, or such
determination shall be made by independent legal counsel if the Board
so directs or if the Board is not empowered by law to make such
determination. If there has been a change in control of the Company
between (1) the time of the action or failure to act giving rise to
the claim for indemnification and (2) the time such claim is made at
the option of the person seeking indemnification the permissibility of
indemnification shall be determined by special legal counsel selected
jointly by the Company and the person seeking indemnification. The
fees and expenses of such counsel shall be paid by the Company. The
obligations of the Company to indemnify a director, officer, employee
or agent under this Article XIII, including the duty to advance
expenses, shall be a contract between the Company and such person, and
no modification or repeal of any provision of this Article XIII shall
affect, to the detriment of the Director, officer, employee or agent
such obligations of the Company in connection with a claim based on
any act or failure to act occurring before such modification or
repeal.
2. Expenses incurred by an officer, director, employee or agent of the
Company in defending a civil or criminal action, suit or proceeding
shall be paid by the Company in advance of the final disposition of
such action, suit or proceeding upon receipt of an undertaking by or
on behalf of the director, officer, employee or agent to repay such
amount if it shall ultimately be determined that he is not entitled to
be indemnified by the Company.
13
<PAGE> 14
3. The indemnification and advancement of expenses provided by this
Article XIII shall not be deemed exclusive of any other right to which
one indemnified may be entitled under any agreement, vote of
shareholders or otherwise, both as to action in his official capacity
and as to action in another capacity while holding such office, and
shall inure to the benefit of the heirs, executors and administrators
of any such person.
4. The Board of Directors shall have the power to (a) authorize the
Company to purchase and maintain, at the Company's expense, insurance
on behalf of the Company and others to the extent that power to do so
has been or may be granted by statute, (b) create any fund of any
nature, whether or not under the control of a trustee, or otherwise
secure any of its indemnification obligations and (c) give other
indemnification to the extent not prohibited by statute.
14
<PAGE> 1
EXHIBIT 4.3
TRUSTEESHIP TRANSFER AGREEMENT
THIS TRUSTEESHIP TRANSFER AGREEMENT ("Agreement") dated as of
March 1, 1996 made and entered into by and among ROY F. WESTON, INC. a
Pennsylvania Corporation (the "Company"), PNC BANK, NATIONAL ASSOCIATION
("PNC"), a national banking association, and FIRST TRUST OF NEW YORK, N.A.
("First Trust"), a national banking association;
W I T N E S S E T H
WHEREAS, the Company and Mellon Bank, N.A. are parties to an
Indenture dated as of April 15, 1987 securing 7% Convertible Subordinated
Debentures, due April 15, 2002, (the "Indenture"); and
WHEREAS, Mellon resigned as Trustee as of June 10, 1991 and
Security Pacific National Trust Company ("Pacific") accepted appointment as
successor Trustee; and
WHEREAS, Pacific merged into Bank America National Trust
Company ("America") whose Corporate Trust Division was purchased by First Trust
which is now the successor Trustee; and
WHEREAS, First Trust has been asked to resign as successor Trustee; and
WHEREAS, pursuant to Section 8.08 of the Indenture the Company
may appoint a successor Trustee, subject to the condition that the holders may
appoint a different successor Trustee within one year of the appointment of the
successor Trustee by The Company; and
WHEREAS, the Company, by resolution of its board of directors,
has determined to appoint PNC as successor Trustee, pursuant to the provisions
of Section 8.08 of the Indenture, and PNC desires to accept such appointment as
successor Trustee:
NOW THEREFORE, in consideration of the mutual covenants,
undertaking and promises hereinafter, set forth and other good and valuable
consideration the receipt and sufficiency of which is hereby acknowledged, the
parties hereto agree as follows:
<PAGE> 2
1. Appointment of PNC as Successor Trustee/Acceptance by
PNC. The Company, in the exercise of the authority vested in it pursuant to
Section 8.08 of the Indenture, as of the date hereof, hereby appoints PNC as
successor Trustee, with all estates, properties, rights, powers, trusts,
duties, and obligations under the Indenture. PNC hereby represents that it is
qualified and eligible under the provisions of Section 8.10 of the Indenture to
be appointed successor Trustee and hereby accepts its appointment as successor
Trustee effective as of the date hereof.
2. Assignment and Assumption. First Trust hereby
grants, gives, bargains, sells, remises, releases, conveys, confirms, assigns,
transfers and sets over to PNC as successor Trustee and its successors and
assigns without recourse all rights, powers and trusts of First Trust under the
Indenture reserving only its rights to indemnification and compensation
relating to the period it served as Trustee and in any other capacities,
whether with respect to claims not yet asserted or otherwise, and First Trust
does hereby, assign and deliver to PNC as such successor Trustee any and all
property held by First Trust as Trustee, such property set forth on Exhibit "A"
of this Agreement constituting all property held by First Trust as Trustee
under the Indenture; and PNC hereby assumes the estates, properties, rights,
powers, trusts, duties, and obligations of the Trustee under the Indenture
subject to all items and provisions therein contained.
3. Orderly Transfer of Trusteeship's Books, Records and
Information. First Trust agrees that for thirty (30) days it shall diligently
provide whatever reasonable assistance is required for the orderly transfer of
the trusteeship under the Indenture to PNC including the forwarding of mail and
tendering to PNC of any and all documents or records relating to the Indenture
including the Bonds that are in the possession of First Trust, a list of all
known holders of the Bonds ("Bondholders") and such other documentation or
information as may be reasonably requested by PNC regarding the Indenture
Documents (as defined below), the Bonds or the Bondholders, all at the
Company's expense.
4. Representations. First Trust hereby represents and
warrants to PNC and the Company that, to its best knowledge, upon the execution
and delivery of this Agreement: (i) it has delivered to PNC the closing bible
for the Original Indenture and including documents indicated in such binder as
being separately delivered in its possession, and all modifications,
alterations, amendments and supplements thereto, and copies of all
correspondence and account statements and all other documents, uniform
commercial code financing statements, notices and instruments relating to such
documents and to the Indenture in its possession (the "Indenture Documents");
(ii) all the property to be assigned to PNC pursuant to Section 2 of this
Agreement consists of the property set forth on Exhibit A of this Agreement;
and (iii) subject to Section 2 it has been paid in full for all fees and
expenses due to it for its trustee services under the Indenture through the
date of this Agreement. First Trust represents that, to the best of its
knowledge, all
- 2 -
<PAGE> 3
representations and statements made by it in this Agreement with respect to the
Indenture, the Indenture Documents and all other documents relating to the
removal of First Trust as Trustee and to the appointment of PNC as successor
Trustee were at the time of their making, and are as of the date of this
Agreement true and correct in all material respects and did not and do not
contain an untrue statement of material fact or fail to state a fact necessary
in order to make the representations made therein not misleading in light of
the circumstances under which they were or are being made.
5. Claims Against First Trust. PNC and the Company
agree to notify First Trust within thirty (30) days of the time that either PNC
or the Company is notified of any claim which alleged acts or omissions, of
First Trust or America, as Trustee under the Indenture, or any misstatement or
alleged misstatement of fact contained herein (each, a "Claim"). First Trust
agrees that upon receiving written communication from PNC or the Company as to
any Claim made against First Trust or America, First Trust shall review such
claim in light of its obligations under the Indenture. If First Trust shall
take no action upon such Claim within sixty (60) days of receipt, PNC may
proceed to take such action as it deems appropriate.
6. Notices. All notices, regards, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given when placed in the hands of a carrier for delivery, charges prepaid:
(a) If to the Company:
Roy F. Weston, Inc.
1 Weston Way
West Chester, PA 19380-1499
Attn: Bruce Flamm, Assistant Treasurer
(b) If to PNC:
PNC Bank, National Association
Corporate Trust Department
1700 Market Street
Suite 1412
Philadelphia, PA 19103
Attn: Alfred J. Perazzelli, Jr.
Fax: (215) 585-8872
- 3 -
<PAGE> 4
(c) If to First Trust:
First Trust of New York, N.A.
100 Wall Street
New York, NY 10005
Attn: Sean Cullen, Vice President
or to such other address or addresses as PNC or First Trust or Company may
communicate in writing to the other.
7. Entire Agreement. This Agreement and documents
referred to herein contain all terms and conditions agreed upon by the parties
hereto, and no other agreements, oral or otherwise, regarding the subject
matter hereof shall be deemed to exist or bind the parties hereto unless in
writing and executed by the Company, PNC and First Trust.
8. Benefit of the Agreement. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their
successors and assigns.
9. Governing Law and Severability. This Agreement shall
be governed by and construed in accordance with the laws of the Commonwealth of
Pennsylvania. The invalidity or unenforceability of any provision of this
Agreement shall not affect or impair the validity or enforceability of any
other provision of this Agreement.
10. Execution and Counterparts. This Agreement may be
executed in any number of counterparts, each of which shall be an original and
all of which shall constitute but one and the same instrument.
11, Headings. Section headings used in this Agreement
are for convenience of reference only and are not intended to be a part of the
provisions of this Agreement nor to control or affect the meanings,
construction or effect of the same.
12. Definition of Terms. For all purposes of this
Agreement, except as otherwise herein expressly provided or unless the context
otherwise requires, the terms and expressions used in this agreement shall have
the same meaning as the corresponding terms and expressions used in the Trust
Agreement.
- 4 -
<PAGE> 5
13. Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be an original but such
counterparts shall together constitute but one and the same Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first written above.
ROY F. WESTON, INC.
By: /s/ BRUCE FLAMM
---------------------------------
Title: Assistant Secretary
-------------------------------
PNC BANK, NATIONAL ASSOCIATION
By: /s/ SHEILA WALLBRIDGE
---------------------------------
Title: Assistant Vice President
-------------------------------
FIRST TRUST OF NEW YORK, N.A.
By: /s/ GEOVANNI BARRIS
---------------------------------
Title: Assistant Vice President
-------------------------------
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<PAGE> 6
EXHIBIT A
BOND FUND -0-
<PAGE> 1
ROY F. WESTON, INC.
RETIREMENT INCOME RESTORATION PLAN
EFFECTIVE JANUARY 1, 1995
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION PAGE
- ------- ----
<S> <C> <C>
INTRODUCTION 1
DEFINITIONS 2
2.1 Definitions 2
- Accrued Annual Pension 2
- Actuarial Equivalent(ce) or Actuarially
Equivalent 2
- Administrative Committee 2
- Annuity Starting Date 2
- Beneficiary 3
- Board of Directors 3
- Code 3
- Company 3
- Compensation 3
- Disabled or Disability 3
- Disabled Participant 4
- Early Retirement Date 5
- Effective Date 5
- Eligible Employee 5
- Employee 5
- Employer 5
- ERISA 5
- Fiduciary 5
- Hours of Service 6
- Normal Annual Pension 8
- Normal Retirement Age 8
- Normal Retirement Date 8
- Participant 8
- Participating Employer 8
- Plan 8
- Plan Year 9
- Retirement 9
- Retirement Income Plan 9
- Spouse (Surviving Spouse) 9
- Taxable Wage Base 9
- Terminated (or Termination) 9
- Years of Credited Service 9
- Year of Service 10
PARTICIPATION 11
3.1 Eligibility to Participate 11
3.2 Cessation of Participation 11
</TABLE>
(i)
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION PAGE
- ------- ----
<S> <C>
PLAN BENEFITS 12
4.1 Normal Retirement 12
4.2 Deferred Retirement 12
4.3 Early Retirement 13
4.4 Disability Benefit 14
4.5 Termination Benefit 15
4.6 Form of Payments 15
4.7 Death Prior to the Annuity Starting Date 15
4.8 Form of Pension Payments 16
4.9 Cash-Out 16
VESTING 18
5.1 Vesting Schedule 18
5.2 Forfeitures 18
NO FUNDING 19
6.1 General Obligation of Employer 19
AMENDMENT AND TERMINATION 20
7.1 Amendments 20
7.2 Termination or Curtailment 20
7.3 Automatic Termination or Curtailment 20
7.4 Action on Termination 20
ADMINISTRATION 21
8.1 Duties and Responsibilities of Fiduciaries;
Allocation of Responsibility Among Fiduciaries
for Plan 21
8.2 Allocation of Duties and Responsibilities 21
8.3 Membership of the Committee 22
8.4 Voting and Meetings 22
8.5 Expenses 22
</TABLE>
<PAGE> 4
<TABLE>
<S> <C> <C>
8.6 Claims Procedure 22
8.7 Other Powers and Duties 24
8.8 Rules and Decisions 25
8.9 Facility of Payment 26
8.10 Indemnification 26
8.11 Resignation or Removal of the Administrative
Committee 27
MISCELLANEOUS 28
9.1 Nonguarantee of Employment 28
9.2 Nonalienation of Benefits 28
9.3 Action by Company 28
9.4 Inability to Locate Payee 29
9.5 Applicable Law 29
APPENDIX A A-1
</TABLE>
(ii)
<PAGE> 5
ROY F. WESTON, INC.
RETIREMENT INCOME RESTORATION PLAN
INTRODUCTION
Roy F. Weston, Inc. hereby establishes the Roy F. Weston, Inc.
Retirement Income Restoration Plan (the "Plan") effective January 1, 1995 for
the benefit of a select group of its employees (the "Eligible Employees") to
restore benefits they lost due to amendment of the limitations under section
401(a)(17) of the Internal Revenue Code of 1986, as amended, (the "Code") which
became effective January 1, 1994 with respect to the amount of compensation
which may be recognized for purposes of the Roy F. Weston, Inc. Retirement
Income Plan (the "Retirement Income Plan").
1
<PAGE> 6
DEFINITIONS
2.1 Definitions. When used in this Plan, the following
initially capitalized words and phrases shall have the meanings indicated
herein:
Accrued Annual Pension means as of any applicable
date, the pension determined in accordance with the provisions of Section 4.1
that the Participant would be entitled to receive, commencing on his/her Normal
Retirement Date, based on his/her Compensation and Years of Credited Service
through the applicable date. An Accrued Annual Pension to which a Participant
is entitled shall not be increased or decreased by any amendments to the Plan
adopted on or after the date of his/her Termination.
Actuarial Equivalent(ce) or Actuarially Equivalent
means a benefit of equivalent current value to the benefit which would
otherwise have been provided on the basis of the actuarial assumptions which
apply under the Retirement Income Plan.
Administrative Committee means the Committee appointed
by the Board of Directors to administer the Plan.
Annuity Starting Date means the first day of the first
period for which an amount is payable as an annuity. In the case of a benefit
not payable as an annuity, Annuity Starting
2
<PAGE> 7
Date means the first day on which all conditions have been met which entitle
the Participant to such benefit.
3
<PAGE> 8
Beneficiary means the individual or entity designated
to receive any death benefits payable under the Plan. A Participant's
Beneficiary under the Retirement Income Plan shall be his Beneficiary under
this Plan.
Board of Directors means the board of directors of Roy
F. Weston, Inc.
Code means the Internal Revenue Code of 1986, as
amended, and includes any regulations or rulings promulgated thereunder.
Company means Roy F. Weston, Inc. and any other
business organization which succeeds to its business and elects to continue the
Plan.
Compensation means a Participant's income for a Plan
Year which would be recognized to calculate the benefit he/she earned for such
Plan Year under the Retirement Income Plan if the limitation of section
401(a)(17) of the Code applied disregarding amendments made by section 13212 of
the Omnibus Budget Reconciliation Act of 1993 ("OBRA"). Accordingly, this Plan
limits Compensation to $242,280 for 1994 and to $245,000 for 1995. For
subsequent years, the limit on Compensation shall be increased for cost of
living in accordance with section 401(a)(17) of the Code as effective prior to
OBRA.
4
<PAGE> 9
Disabled or Disability means the total incapacity of a
Participant due to a physical or mental condition arising after his/her
original date of employment which totally and permanently prevents the
Participant from engaging in any occupation or employment for remuneration or
profits, except for the purpose of rehabilitation not incompatible with a
finding of total and permanent Disability. The determination as to whether a
Participant is Disabled shall be made (a) on medical evidence by a licensed
physician designated by the Administrative Committee, (b) on evidence that the
Participant is eligible for Disability Benefits under any Long Term Disability
Plan sponsored by the Employer but administered by an independent third party,
or (c) on evidence that the Participant is eligible for Disability Benefits
under the Social Security Act in effect at the date of Disability. Disability
shall exclude disabilities arising from:
(a) Chronic or excessive use of intoxicants,
drugs, or narcotics; or
(b) Intentionally self-inflicted injury or
intentionally self-induced sickness; or
(c) A proven unlawful act or enterprise on the
part of the Participant; or
5
<PAGE> 10
(d) Military service where the Participant is
eligible to receive a government-sponsored military disability pension.
Disabled Participant means a Participant who becomes
Disabled while employed by the Employer. A Participant remains a Disabled
Participant until the cessation of his/her Disability.
Early Retirement Date means the date on which a
Participant has attained age 60 and completed at least five Years of Service.
Effective Date of this Plan means January 1, 1995,
except as otherwise provided in the Plan.
Eligible Employee means any individual employed by the
Employer on or after the date this Plan is adopted by the Board of Directors
who is eligible to participate in the Retirement Income Plan and whose
Compensation for a Plan Year commencing on or after January 1, 1994 exceeds the
limitation under section 401(a)(17) of the Code (as adjusted for cost of living
in accordance with section 13212 of the Omnibus Budget Reconciliation Act of
1993) for such Plan Year.
Employee means any individual employed by the
Employer.
6
<PAGE> 11
Employer means the Company and any Participating
Employer, which with the approval of the Board of Directors, has adopted this
Plan.
ERISA means the Employee Retirement Income Security
Act of 1974, as amended, and any regulations or rulings promulgated thereunder.
Fiduciary means the Employer, the Board of Directors
or the Administrative Committee, but only with respect to the specific
responsibilities of each with respect to Plan and only to the extent required
by ERISA.
7
<PAGE> 12
Hours of Service means:
(a) Performance of Duties. The actual hours for
which an Eligible Employee is paid or entitled to be paid for the performance
of duties by the Employer;
(b) Nonworking Paid Time. Each hour for which an
Eligible Employee is paid or entitled to be paid by the Employer directly or
indirectly (such as payments made under workers' compensation or accident and
sickness plans) on account of a period of time during which no duties are
performed (irrespective of whether the employment relationship has terminated)
due to vacation, holiday, illness, incapacity, disability, layoff, jury duty,
military duty or leave of absence; provided, however, no more than 501 Hours of
Service shall be credited to an Eligible Employee on account of any single
continuous period during which he/she performs no duties. An individual shall
be deemed to have been directly or indirectly paid by the Employer for periods
during which he/she receives payments from insurance companies, trust funds or
other entities to which the Employer pays premiums or contributes, but an
individual shall not be deemed to have been paid by reason of payments made or
due under a plan maintained solely for the purpose of complying with applicable
workers' compensation, or unemployment compensation or disability
8
<PAGE> 13
insurance laws or by reason of payments which solely reimburse an individual
for medical or medically related expenses incurred by such individual.
(c) Back Pay. Each hour for which back pay,
irrespective of mitigation of damages, is either awarded or agreed to by the
Employer; provided, however, Hours of Service credited under subsections (a)
and (b) above shall not be recredited by operation of this paragraph;
(d) Equivalencies. Unless and until changed by
the Administrative Committee, the following equivalency method for counting
Hours of Service shall be applied for Employees who are exempt under the Fair
Labor Standards Act: 45 Hours of Service for each week in which such Employee
is credited with at least one Hour of Service. Actual Hours of Service shall
be counted for Employees who are non-exempt under the Fair Labor Standards Act.
The adoption of any equivalency method for counting Hours of Service shall be
evidenced by a certified resolution of the Administrative Committee, which
shall be attached to and made part of the Plan. Such resolution shall indicate
the date from which such equivalency shall be effective. Until changed by the
Committee, the working time equivalency
9
<PAGE> 14
method of counting Hours of Service (regular and overtime hours included) shall
be used in determining Hours of Service.
(e) Miscellaneous. The Administrative Committee
shall adopt methods of determining Hours of Service when payments are made for
other than the performance of duties and of crediting such Hours of Service to
Plan Years in accordance with Regulations Section 2530.200b-2(b) and (c)
promulgated by the Secretary of Labor which are incorporated by reference into
the Plan.
Participants on military leaves of absence
who are not directly or indirectly compensated or entitled to be compensated by
the Employer or an Affiliate while on such leave, shall be credited with Hours
of Service as required by Section 9 of the Military Selective Service Act.
Notwithstanding any other provision of this Plan to
the contrary, an Eligible Employee shall not be credited with Hours of Service
more than once with respect to the same period of time.
Normal Annual Pension means the lifetime annual
pension determined in accordance with the provisions of Section 4.1.
Normal Retirement Age means the Participant's 65th
birthday.
10
<PAGE> 15
Normal Retirement Date means the first day of the
month coincident with or next following Normal Retirement Age.
Participant means an Eligible Employee who currently
is accruing benefits or has a benefit payable under the Plan.
Participating Employer means any direct or indirect
subsidiary of the Company or any other entity designated by the Board of
Directors, which has adopted this Plan with the approval of the Company.
Plan means the Roy F. Weston, Inc. Retirement Income
Restoration Plan, as herein set forth and as it may be amended hereafter.
Plan Year means the 12 consecutive month period
commencing each January 1 and ending each December 31.
Retirement means Termination of employment with the
Employer on or after Early or Normal Retirement Date.
Retirement Income Plan means the Roy F. Weston, Inc.
Retirement Income Plan as in effect on January 1, 1994 and the same as may be
amended from time to time.
Spouse (Surviving Spouse) means the Spouse or
Surviving Spouse of the Participant.
11
<PAGE> 16
Taxable Wage Base means, with respect to any Plan
Year, the contribution and benefit base under the Social Security Act for that
Plan Year.
Terminated (or Termination) means a Termination of
employment with the Employer (and all Affiliates).
Years of Credited Service refers to periods of
employment taken into account in determining a Participant's Accrued Annual
Pension or Normal Annual Pension under this Plan. An Eligible Employee shall
be credited with a Year of Credited Service for each Plan Year beginning on or
after January 1, 1994 in which he/she has completed 2,000 Hours of Service with
the Employer. For any Plan Year in which an Eligible Employee is not an
Employee for the entire Plan Year, he/she shall receive credit for a Year of
Credited Service if his/her Hours of Service for the Plan Year at least equal
the product of 166 and the number of full calendar months in such Plan Year
during which he/she was an Employee.
Year of Service means a Plan Year in which an Employee
is credited with 1,000 Hours of Service.
12
<PAGE> 17
PARTICIPATION
3.1 Eligibility to Participate. Each Eligible Employee
shall participate in the Plan.
3.2 Cessation of Participation. An Eligible Employee
shall cease to earn additional benefits upon the earliest of: (a) the date on
which he/she Retires or Terminates employment for any reason; (b) the date on
which the Board of Directors fixes for the termination of his/her active
participation; or (iii) the date on which the Plan terminates or is amended in
a manner which results in the termination of his/her active participation.
13
<PAGE> 18
PLAN BENEFITS
4.1 Normal Retirement. A Participant may retire on
his/her Normal Retirement Date. Each Participant who retires on his/her Normal
Retirement Date shall be entitled to receive the Normal Annual Pension
determined pursuant to this Section.
The Normal Annual Pension payable to a Participant
shall be the sum of the amount of benefit the Participant accrued for each Year
of Credited Service from and after the date he became eligible to participate
under the formula below:
The benefit a Participant accrues for each Year of
Credited Service shall equal the sum of (1) and (2) below, reduced by the
amount of benefit accrued with respect to such Plan Year under the Retirement
Income Plan:
(1) 1.15% of his/her Compensation
for each Plan Year up to 75% of the Taxable Wage Base in effect on the first
day of the Plan Year, rounded to the next lower $100; plus
(2) 1.5% of his/her Compensation
for each Plan Year in excess of 75% of the Taxable Wage Base in effect on the
first day of the Plan Year, rounded to the next lower $100.
14
<PAGE> 19
4.2 Deferred Retirement. A Participant who continues in
employment beyond his/her Normal Retirement Date shall continue to earn
benefits as long as he/she remains an Eligible Employee. Such a Participant
may retire on any day after his/her Normal Retirement Date and shall be
entitled to receive a deferred retirement pension commencing with the calendar
month that coincides with or next follows the month in which his/her actual
retirement occurs in an amount computed under Section 4.1 as of his/her
Termination.
4.3 Early Retirement. A Participant who has attained
Early Retirement Date and elected early retirement pursuant to the Retirement
Income Plan shall be deemed to have elected to receive an early retirement
pension after Termination under this Plan commencing at such time as payment
commences under the Retirement Income Plan. In such event he/she shall be
entitled to either:
(a) A deferred pension commencing at his/her
Normal Retirement Date equal to the Accrued Annual Pension determined on the
basis of his/her Compensation and Years of Credited Service to the date of
his/her early retirement hereunder; or
15
<PAGE> 20
(b) A pension commencing as of the first day of
any month coincident with or next following his/her Early Retirement Date which
is equal to the pension calculated under Section 4.3(a) reduced by .6% for each
month by which the commencement date of the benefit precedes the Participant's
Normal Retirement Date.
16
<PAGE> 21
4.4 Disability Benefit.
(a) (i) A Participant who is Disabled shall
continue to accrue benefits hereunder as if (A) the period of time between the
date of his/her Disability and the earlier of (i) his/her recovery from
Disability, and (ii) the later of (1) his/her Normal Retirement Date, and (2)
the fifth anniversary of the Disability, counted as Years of Credited Service
(which he/she shall accrue at the same rate as he/she accrued immediately
before his/her Disability), and (B) as if his/her Compensation in effect in the
Plan Year when he/she became Disabled continued at the same level until the
earlier of (i) his/her recovery from Disability, and (ii) the later of (1)
his/her Normal Retirement Date, and (2) the fifth anniversary of the
Disability; or
(ii) in lieu of the benefit described in
(i), he/she may elect to receive his/her Accrued Annual Pension at any time on
or after his/her Early Retirement Date, reduced, if applicable, for early
payment as set forth in Section 4.3(b) if he/she made an election for early
commencement of benefits under the Retirement Income Plan.
(b) If a Disabled Participant recovers and
resumes employment with the Employer prior to his/her Normal
17
<PAGE> 22
Retirement Date, he/she shall continue to participate subject to the terms of
the Plan.
18
<PAGE> 23
(c) If a Disabled Participant recovers and does
not resume employment with the Employer prior to his/her Normal Retirement
Date, he/she shall no longer continue to earn benefits under the Plan and
his/her Years of Credited Service shall cease as of the date of his/her
recovery.
4.5 Termination Benefit. A Participant who Terminates
his/her employment with a vested interest in his/her Accrued Annual Pension
shall receive his/her benefit in accordance with Section 4.1 or Section 4.3, as
applicable.
4.6 Form of Payments. A Participant shall receive
his/her Accrued Annual Pension in the same form of payment as he/she elects or
as automatically applies under the Retirement Income Plan. All alternate forms
of payment shall be Actuarially Equivalent to the Normal Annual Pension.
4.7 Death Prior to the Annuity Starting Date. If a
Participant dies prior to the Annuity Starting Date, a death benefit may be
payable under the circumstances described below.
(a) On the death of a vested Participant who has
reached his/her Early Retirement Date, his/her Surviving Spouse shall be
entitled to receive immediately a monthly benefit equal to one-half (1/2) of
the Participant's Accrued Annual Pension or Normal Annual Pension determined as
of the date of his/her death,
19
<PAGE> 24
as if the Participant's Accrued Annual Pension were paid as an Actuarial
Equivalent joint and 50% survivor annuity with the Surviving Spouse as
contingent annuitant and reduced for early payment, as applicable, in
accordance with Section 4.3.
(b) On the death of a vested Participant who has
not reached his/her Early Retirement Date, but who is entitled to a vested
interest in his/her Accrued Annual Pension, his/her Surviving Spouse shall be
entitled to receive a monthly benefit, payable beginning on the Participant's
Early Retirement Date under the Plan, equal to one-half (1/2) of the
Participant's Accrued Annual Pension determined as of the date of his/her death
as if the Participant's Accrued Annual Pension were paid as an Actuarial
Equivalent joint and 50% survivor annuity with the Surviving Spouse as
contingent annuitant and reduced for early payment, as applicable, in
accordance with Section 4.3.
(c) Payment shall begin when payment to the
Participant's Surviving Spouse begins under the Retirement Income Plan.
4.8 Form of Pension Payments. Payments shall be paid
monthly as of the first of the month, except that the Administrative Committee
may direct that payments which would
20
<PAGE> 25
otherwise be less than $100 per month be made quarterly, semi-annually or
annually.
4.9 Cash-Out.
(a) Notwithstanding any other provision of this
Article IV, the Actuarial Equivalent value of the benefit payable to a
Participant whose benefit is "cashed-out" under Section 4.12 of Retirement
Income Plan shall be distributed to the Participant in one lump sum at the same
time as his/her benefit under the Retirement Income Plan is distributed.
(b) Notwithstanding any other provision of this
Article IV, the Actuarial Equivalent value of the Spouse's death benefit
payable to the Spouse of a Participant whose benefit is cashed-out pursuant to
Section 4.12 of the Retirement Income Plan shall be distributed to such Spouse
in one lump sum at the same time his/her benefit under the Retirement Income
Plan is distributed.
21
<PAGE> 26
VESTING
5.1 Vesting Schedule. A Participant's right to a Normal
Annual Pension or an Accrued Annual Pension shall be fully vested and
nonforfeitable if he/she is living and employed by the Employer or an Affiliate
on his/her Normal Retirement Age or on the date he/she becomes Disabled, if
earlier. Prior thereto, the rights and interests of a Participant in and to
his/her Accrued Annual Pension under the Plan shall become fully vested and
nonforfeitable in accordance with the vesting rules of Section 5 of the
Retirement Income Plan. A Participant's vested and nonforfeitable right to
his/her Accrued Annual Pension under this Plan shall be the same percentage as
under the Retirement Income Plan on the date of determination.
5.2 Forfeitures. Notwithstanding Section 5.1, and except
as otherwise provided under the Plan, a Participant's rights and interests in
the Plan shall be forfeited if, prior to full vesting under Section 5.1, he/she
dies before Normal Retirement Date or actual retirement date, whichever is
later.
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<PAGE> 27
NO FUNDING
6.1 General Obligation of Employer. The rights and
benefits of any Participant or Beneficiary under this Plan shall be solely
those of an unsecured creditor of the Employer. No assets acquired or held by
the Employer shall be deemed to be held by the Employer in trust for them
hereunder or be security for the performance of any obligation of the Employer
hereunder. The Employer shall be under no obligation whatsoever to fund its
obligations under this Plan.
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<PAGE> 28
AMENDMENT AND TERMINATION
7.1 Amendments. The Company, by action of the Board of
Directors, reserves the right to make from time to time any amendment or
amendments to this Plan.
7.2 Termination or Curtailment. The Company, by action
of the Board of Directors, reserves the right to terminate or curtail the Plan
in whole or in part at any time without the consent of any other person.
7.3 Automatic Termination or Curtailment. If the Company
amends the Retirement Income Plan to provide that no additional benefits shall
accrue thereunder or terminates the Retirement Income Plan, then this Plan
shall be amended or terminated, as the case my be, unless the Board of
Directors provides otherwise.
7.4 Action on Termination. If the Company terminates
this Plan or the Plan terminates as provided in Section 7.3, the Employer, in
its sole discretion, may distribute to each Participant the Actuarial
Equivalent of his Accrued Annual Pension in one lump sum, establish the
Actuarial Equivalent as an account balance or opening benefit in a successor
plan or
24
<PAGE> 29
distribute such benefits at the time and in the manner they would have been
distributed if the Plan had not terminated.
25
<PAGE> 30
ADMINISTRATION
8.1 Duties and Responsibilities of Fiduciaries;
Allocation of Responsibility Among Fiduciaries for Plan. A Fiduciary shall
have only those specific powers, duties, responsibilities and obligations as
are specifically given him/her under this Plan. In general, the Employer shall
have the sole responsibility for paying benefits provided for under the Plan.
The Board of Directors shall have the sole authority to appoint and remove the
Administrative Committee, and to amend, curtail or terminate, in whole or in
part, this Plan. The Administrative Committee shall have the sole
responsibility for the administration of this Plan as specifically described
herein. It is intended that each Fiduciary shall be responsible for the proper
exercise of his own powers, duties, responsibilities and obligations under this
Plan and generally shall not be responsible for any act or failure to act of
another Fiduciary. A Fiduciary may serve in more than one fiduciary capacity
with respect to the Plan.
8.2 Allocation of Duties and Responsibilities. The
Administrative Committee may designate persons other than its members to carry
out any of its duties and responsibilities. Any
26
<PAGE> 31
duties and responsibilities thus allocated must be described in a written
instrument.
27
<PAGE> 32
8.3 Membership of the Committee. The Administrative
Committee shall be comprised of members appointed by the Board of Directors.
The Administrative Committee shall appoint one of its members to serve as
Chairperson and one of its members to serve as Secretary. The Chairperson
shall be the agent for service of legal process on the Plan. The
Administrative Committee's members shall serve without compensation.
8.4 Voting and Meetings. The Administrative Committee
shall act by a majority vote of its members at a meeting, or by written consent
of all of its members without a meeting. The Administrative Committee shall
schedule regular meetings, although any member may call a special meeting by
giving reasonable notice to the other members.
8.5 Expenses. The Employer shall pay all expenses
authorized and incurred by the Administrative Committee in the administration
of the Plan.
8.6 Claims Procedure.
(a) Filing of Claim. Any Participant or
Beneficiary under the Plan ("Claimant") may file a written claim for a Plan
benefit with the Administrative Committee or with a person named by the
Administrative Committee to receive claims under the Plan.
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<PAGE> 33
(b) Notification on Denial of Claim. In the
event of a denial or limitation of any benefit or payment due to or requested
by any Claimant, he/she shall be given a written notification containing
specific reasons for the denial or limitation of his/her benefit. The written
notification shall contain specific reference to the pertinent Plan provisions
on which the denial or limitation of benefits is based. In addition, it shall
contain a description of any additional material or information necessary for
the Claimant to perfect a claim and an explanation of why such material or
information is necessary. Further, the notification shall provide appropriate
information as to the steps to be taken if the Claimant wishes to submit
his/her claim for review. This written notification shall be given to a
Claimant within 90 days after receipt of his/her claim by the Administrative
Committee unless special circumstances require an extension of time to process
the claim. If such an extension of time for processing is required, written
notice of the extension shall be furnished to the Claimant prior to the
termination of said 90-day period and such notice shall indicate the special
circumstances which make the postponement appropriate.
29
<PAGE> 34
(c) Right of Review. In the event of a denial or
limitation of benefits, the Claimant or his/her duly authorized representative
shall be permitted to review pertinent documents and to submit to the
Administrative Committee issues and comments in writing. In addition, the
Claimant or his/her duly authorized representative may make a written request
for a full and fair review of his/her claim and its denial by the
Administrative Committee provided, however, that such written request must be
received by the Administrative Committee (or its delegate to receive such
requests) within 60 days after receipt by the Claimant of written notification
of the denial or limitation of the claim.
(d) Decision on Review. A decision shall be
rendered by the Administrative Committee within 60 days after the receipt of
the request for review, provided that where special circumstances require an
extension of time for processing the decision, it may be postponed on written
notice to the Claimant (prior to the expiration of the inial 60 day period),
for an additional 60 days, but in no event shall the decision be rendered more
than 120 days after the receipt of such request for review. Any decision by
the Administrative Committee shall be furnished to the Claimant in writing and
in a manner calculated
30
<PAGE> 35
to be understood by the Claimant and shall set forth the specific reason(s) for
the decision and the specific Plan provision(s) on which the decision is based.
8.7 Other Powers and Duties. The Administrative
Committee shall have such duties and powers as may be necessary to discharge
its duties hereunder, including, but not by way of limitation, the following:
(a) to construe and interpret the Plan, decide
all questions of eligibility and determine the amount, manner and time of
payment of any benefits hereunder;
(b) to prescribe procedures to be followed by
Participants or Beneficiaries filing applications for benefits;
(c) to prepare and distribute information
explaining the Plan;
(d) to receive from the Employer and from
Participants and Beneficiaries such information as shall be necessary for the
proper administration of the Plan;
(e) to furnish the Employer, upon request, such
annual reports with respect to the administration of the Plan as are reasonable
and appropriate;
(f) to appoint or employ advisors including legal
and actuarial counsel to render advice with regard to any
31
<PAGE> 36
responsibility of the Administrative Committee under the Plan or to assist in
the administration of the Plan. The Administrative Committee shall have no
power to add to, subtract from or modify any of the terms of the Plan, or to
change or add to any benefits provided by the Plan, or to waive or fail to
apply any requirements of eligibility for a benefit under the Plan.
8.8 Rules and Decisions. The Administrative Committee
may adopt such rules as it deems necessary, desirable, or appropriate. All
rules and decisions of the Administrative Committee shall be uniformly and
consistently applied to all Participants in similar circumstances. When making
a determination or calculation, the Administrative Committee shall be entitled
to rely upon information furnished by a Participant or Beneficiary, the
Employer or the legal counsel of the Employer.
8.9 Facility of Payment. Whenever, in the Administrative
Committee's opinion, a person entitled to receive any payment of a benefit or
installment thereof hereunder is under a legal disability or is incapacitated
in any way so as to be unable to manage his/her financial affairs, the
Administrative Committee may direct the Employer to make payments to such
person
32
<PAGE> 37
or to his/her legal representative or to a relative or friend of such person
for his/her benefit.
8.10 Indemnification. The Employer shall indemnify each
individual who is an officer, director or Employee of the Employer and who may
be called upon or designated to perform Fiduciary duties or to exercise
Fiduciary authority or responsibility with respect to the Plan and shall save
and hold him/her harmless from any and all claims, damages, and other
liabilities, including without limitation all expenses (including attorneys'
fees and costs), judgments, fines and amounts paid in settlement and actually
and reasonably incurred by him/her in connection with any action, suit or
proceeding, resulting from his/her alleged or actual breach of such duties,
authority or responsibility, to the extent covered by the law; provided,
however, that this indemnification shall not apply with respect to any actual
breach of such duties, authority or responsibility, if the individual concerned
did not act in good faith and in the manner he/she reasonably believed to be in
(or not opposed to) the best interest of the Employer, or, with respect to any
criminal action or proceeding, had reasonable cause to believe his/her conduct
was unlawful.
33
<PAGE> 38
8.11 Resignation or Removal of the Administrative
Committee. An Administrative Committee member may resign at any time by giving
a 10-day administrative written notice to the Employer. The Board of Directors
may remove any member of the Administrative Committee by giving written notice
to him/her. Any such resignation or removal shall take effect at a date
specified on such notice, or upon delivery to the Administrative Committee if
no date is specified.
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<PAGE> 39
MISCELLANEOUS
9.1 Nonguarantee of Employment. Nothing contained in
this Plan shall be construed as a contract of employment between the Employer
and any Eligible Employee, or as a right of any Eligible Employee to be
continued in the employment of the Employer, or as a limitation of the right of
the Employer to discharge any of its Eligible Employees with or without cause.
9.2 Nonalienation of Benefits. Benefits payable under
this Plan shall not be subject in any manner to anticipation, alienation, sale,
transfer, assignment, pledge, encumbrance, charge, garnishment, execution, or
levy of any kind, either voluntary or involuntary, including any such liability
which is for alimony or other payments for the support of a Spouse or former
Spouse, or for any other relative of the Eligible Employee prior to actually
being received by the person entitled to the benefit under the terms of the
Plan. Any attempt to anticipate, alienate, sell, transfer, assign, pledge,
encumber, charge or otherwise dispose of any right to benefits payable
hereunder, shall be void to the fullest extent permitted by law.
35
<PAGE> 40
9.3 Action by Company. Any action by the Company under
this Plan shall be by a duly adopted resolution of the Board of Directors, or
by any person or persons duly authorized by a duly adopted resolution of that
Board to take such action. Any Employer that has adopted this Plan with
approval of the Board of Directors shall be deemed, by the continuing
participation of such Employer in the Plan, to accept any action of the Board
of Directors.
9.4 Inability to Locate Payee. Each person entitled to
receive benefits under the Plan shall be responsible for informing the
Administrative Committee of his/her mailing address for purposes of receiving
such benefits. If the Administrative Committee is unable to locate any person
entitled to receive benefits under the Plan, such benefits shall be forfeited.
9.5 Applicable Law. This Plan shall be construed,
interpreted, administered and enforced in accordance with the laws of the
Commonwealth of Pennsylvania, except to the extent superseded, only when
required, by ERISA as in effect from time to time.
EXECUTED this _______ day of _______________________, 1995.
ROY F. WESTON, INC.
36
<PAGE> 41
Attest:
By:
--------------------------------
President
By:
-----------------------
Secretary
(Corporate Seal)
37
<PAGE> 42
APPENDIX A
ROY F. WESTON RETIREMENT INCOME RESTORATION PLAN
PARTICIPATING EMPLOYERS
Roy F. Weston, Inc.
<PAGE> 1
EXHIBIT 10.10
ROY F. WESTON, INC.
SEVERANCE AGREEMENT
Severance Agreement ("Agreement") made effective March 1, 1996 between
Roy F. Weston, Inc., a Pennsylvania corporation, ("Weston") and A. Frederick
Thompson, Jr. ("Thompson").
BACKGROUND
Thompson currently is an employee of Weston. He resigned as Chairman
of Weston's Board of Directors effective March 1, 1996.
Weston and Thompson have a written agreement with respect to
Thompson's employment ("Employment Agreement"), which is attached hereto as
Exhibit A.
Weston and Thompson have entered into a separate Supplemental
Retirement Agreement ("Retirement Agreement") made as of December 31, 1989,
which is attached hereto as Exhibit B.
Weston and Thompson agree that it would serve the best interests of
each to provide Thompson with certain additional benefits in consideration of
Thompson's agreement to terminate his employment with Weston and in
consideration of his resignation as the Chairman of Weston's Board of
Directors.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements contained herein and intending to be legally bound
hereby, the parties hereto agree as follows:
1. Resignation Date. Effective April 1, 1996, Thompson
shall resign and no longer be a Weston employee.
<PAGE> 2
2. Severance Benefits and Payment Conditions. In
consideration of Thompson's resignation and Thompson's agreements and
undertakings under Section 3 hereof, Thompson shall receive the severance
benefits set forth herein provided Thompson satisfies each of the requirements
of Section 3 hereof. Thompson's entitlements under the Retirement Agreement
and any employee benefit plan, including Weston's vacation plan, applicable to
a class of Weston employees which includes Thompson shall be as provided for
therein without regard to this Agreement, except as expressly provided in this
Section. The severance benefits under this Agreement are as set forth below:
(a) Salary Continuation. Weston shall pay Thompson
$23,715 per month for 24 months, commencing with April of 1996 and ending with
March of 1998. If Thompson dies before the last monthly payment, the remaining
payments shall be paid to his estate.
(b) Salary-At-Risk. Weston shall pay Thompson
the amount he earned under its Salary-At-Risk Program for the calendar quarter
ended March 31, 1996. Weston shall make the payment on or about the date
Weston makes Salary-At-Risk payments to participating employees.
(c) Retirement Agreement. For purposes of the
Retirement Agreement, Thompson shall be treated as having a vested interest in
his retirement benefit as if he remained a Weston employee through his 65th
birthday, which is $91,000 per year for 15 years, payable in monthly
installments of $7,583.33
2
<PAGE> 3
for 180 months beginning with the first month following Thompson's 65th
birthday. If Thompson dies after benefits commence, the remainder of the
payments shall be made in accordance with the Retirement Agreement. If
Thompson dies before benefits commence, his designated beneficiary shall be
paid the death benefit provided for in the Retirement Agreement according to
its terms. Thompson shall have the right to elect that payments under the
Retirement Agreement begin with any month following his 60th birthday, in which
case the benefit amount payable for the 180 month period shall be reduced as
provided under the Retirement Agreement. All other terms of the Retirement
Agreement shall remain effective, except as modified in this Severance
Agreement.
(d) Medical Benefits. Weston shall provide
medical, dental and prescription plan benefits for Thompson on the same basis
as in effect for active employees for 24 months or until he sooner elects that
such coverages cease. After such 24-month period, Thompson may elect
continuation coverage completely at his own expense as provided by law.
(e) Outplacement. Weston shall provide Thompson
outplacement services at Weston's expense at the level presently in effect for
executive employees.
3. Thompson's Agreements and Undertakings.
(a) Cooperation Requirement. Thompson shall
provide Weston such information pertaining to his employment with Weston as he
may have and assist Weston to transfer his duties to
3
<PAGE> 4
such successor or successors as Weston may designate. Weston shall reimburse
Thompson for all reasonable expenses he incurs in fulfilling his obligations
under the preceding sentence.
(b) Non-Competition Requirement. Weston's
obligation to make payments or provide benefits under Section 2, including all
payments under the Retirement Agreement, shall terminate and Weston shall have
the right to restitution of payments made or the cost of benefits provided if
Thompson, without Weston's prior written approval, either directly or
indirectly, for his own account or for the account of another person or entity,
for a period of two years from and after the date his employment terminates:
(i) acquires or holds a significant
financial interest in any competitor of Weston or any "Weston affiliate" (as
defined below);
(ii) competes with Weston or any "Weston
affiliate" in soliciting any business from any person or entity that was at any
time during the two years immediately preceding April 1, 1996 a client of
Weston or any "Weston affiliate" or potential client as to whom Weston or any
"Weston affiliate" had rendered a significant volume of service or had a
significant amount of direct business contact for the purpose of soliciting
future business; or
(iii) renders services to any competitor of
Weston or any "Weston affiliate", if such services are (A) similar in nature
(in whole or in part) to services Thompson
4
<PAGE> 5
rendered to Weston or any "Weston affiliate" at any time during the two years
immediately preceding April 1, 1996.
For purposes of this Section, the term "Weston affiliate" shall mean any
business in which Weston owns directly or indirectly at least 50% of the equity
interests or 50% of the profit interests. This Section supersedes the
non-competition and non-solicitation provisions of the Employment Agreement.
This Section replaces the Non-Competition Provision of the Retirement Agreement
until April 1, 1998, at which time such provision becomes effective to and
including March 31, 1999 with respect to benefits provided under the Retirement
Agreement as modified by this Agreement.
(c) Release. Thompson shall deliver a release
to Weston in the form attached hereto as Exhibit C.
4. Acceleration Election. Weston may, at its option, at
any time or from time to time, in its absolute and sole discretion, accelerate
the time and the manner of making any one or more payments required by this
Agreement.
5. Non-Alienation. None of the rights or payments
contemplated under this Agreement may be sold, given away, assigned,
transferred, pledged, mortgaged, alienated, hypothecated or in any way
encumbered or disposed of by Thompson, or any executor, administrator, heir,
legatee, distributee, relative or any other person or entity, whether or not in
being, claiming under Thompson by virtue of this Agreement, and none of the
rights or benefits contemplated by this Agreement shall be
5
<PAGE> 6
subject to execution, attachment or similar process. Any sale, gift,
assignment, transfer, pledge, mortgage, alienation, hypothecation or
encumbrance, or other disposition of this Agreement or of such rights or
benefits contrary to the foregoing provisions, or the levy or any attachment or
similar process thereon, shall be null and void and without effect.
6. Taxes. Weston shall withhold from payments to
Thompson and remit to the appropriate government agencies such payroll taxes
and income withholding as Weston determines is or may be necessary under
applicable law with respect to amounts paid under this Agreement.
7. General Obligation. The rights and benefits of
Thompson hereunder shall be solely those of an unsecured creditor of Weston.
8. Waiver of Breach. Weston's failure to insist upon
strict compliance with any of the terms, covenants or conditions hereof shall
not be deemed a waiver of such term, covenant or condition, nor shall Weston's
waiver or relinquishment of any right or power hereunder at any one or more
times be deemed a waiver or relinquishment of such right or power at any other
time or times.
9. Modification. This Agreement shall not be modified
or amended except by written instrument duly executed by Weston and Thompson.
6
<PAGE> 7
10. Severability. If any clause, sentence, paragraph,
section, or part of this Agreement shall be held by any court of competent
jurisdiction to be invalid, such judgment shall not affect, impair or
invalidate any of the other parts hereof.
11. Notices. Any notice required or permitted to be
given under this Agreement shall be sufficient if in writing and either
hand-delivered to the addressee or sent by registered or certified mail, if to
Thompson, to Thompson's address as shown on Weston's books, and if to Weston,
addressed to the Chairman of Weston's Board of Directors at Weston's principal
business office located at One Weston Way, West Chester, Pennsylvania
19380-1499 or such other address as Weston or Thompson may designate in
writing.
12. Arbitration. Any controversy or claim arising out of
or relating to this Agreement or the breach thereof shall be settled by
arbitration in the City of Philadelphia in accordance with the rules of the
American Arbitration Association then in effect. The decision of the
arbitrator shall be final and binding upon the parties, and judgment upon the
decision rendered in such arbitration may be entered in any court having
jurisdiction.
13. Captions. The captions of the various provisions
shall not be deemed a part of this Agreement and shall not be construed in any
way to limit the contents hereof but are inserted herein only for reference and
for convenience of the parties.
7
<PAGE> 8
14. Governing State Law. This Agreement may be executed
at different times in different places, but all questions concerning the
construction or validity hereof, or relating to performance hereunder, shall
be determined in accordance with the laws of the Commonwealth of Pennsylvania.
IN WITNESS WHEREOF, Weston has caused this Agreement to be executed by
its duly authorized officers, and Thompson has hereunto set his hand and seal
as of the day and year first above written.
ATTEST: ROY F. WESTON, INC.
/s/ STEVEN V. ABRAMSON By: /s/ ROY F. WESTON
- ------------------------- ---------------------------------
Secretary
(SEAL)
/s/ A. FREDERICK THOMPSON, JR.
-----------------------------------
A. Frederick Thompson, Jr.
8
<PAGE> 9
CROSS RELEASE
Roy F. Weston, Inc. ("Weston") and A. Frederick Thompson, Jr.
("Thompson") entered into a Severance Agreement made effective March 1, 1996.
To satisfy the requirement of subsection 3(c) of the Severance Agreement,
Thompson and Weston hereby grant the other the Releases set forth below:
---------------------------------
1. Release by Weston. Weston, on behalf of itself and its
subsidiaries, irrevocably and unconditionally releases and forever discharges
Thompson, his heirs, administrators and legal representatives from any and all
manner of actions, causes, matters, suits, debts, dues, accounts, bonds,
covenants, agreements, judgments, claims, controversies, guarantees,
warranties, damages, labilities, or demands of any nature whatsoever in law or
equity, whether or not known to it, which it has ever had, now has, or
hereafter can, shall or may have, for, upon, or by reason of any matter,
action, omission to act, transaction, practice, conduct, thing or cause of any
kind whatsoever from the beginning of the world to the date it executes this
Release. Such remise, release and discharge of Thompson includes, without
limitation, any and all claims under any and all federal or state statutes or
the common law and extends without limitation to any and all acts, practices or
conduct by Thompson whether or not it has knowledge of such acts, omissions,
practices, conduct or the effects thereof, or if any such effects exist or may
in the future exist as a result of any
<PAGE> 10
acts, omissions, practices, or conduct that occurred prior to the date it
executes this Release.
2. Limitation on Weston's Release. Notwithstanding the
foregoing, this Release shall not prevent Weston from enforcing its rights
under the Severance Agreement.
3. Release by Thompson. Thompson, for himself, his heirs, and
personal and legal representatives, except as provided in Section 4 hereof,
does hereby irrevocably and unconditionally release, remise and forever
discharge Weston, its subsidiaries, affiliates, divisions, officers, directors
and employees (the "Releasees"), and each of them, however denominated, past,
present and future, and their predecessors, successors and assigns, of and from
any and all manner of actions, causes, matters, suits, dues, bonds, judgments,
debts, accounts, covenants, agreements, claims, controversies, guarantees,
warranties, damages, liabilities, or demands of any nature whatsoever in law or
equity, whether or not now known to him which he ever had, now has or hereafter
can, shall or may have, for, upon, or by reason of any matter, action, omission
to act, transaction, practice, conduct, cause or thing of any kind whatsoever
from the beginning of the world to the date hereof. Such release, remise and
discharge of the Releasees includes without limitation any and all claims under
any and all federal and state statutes or common law and extends without
limitation, to any and all acts, practices or conduct by the Releasees, or the
effects thereof, whether or not Thompson now has knowledge of
2
<PAGE> 11
such acts, omissions, practices, conduct or the effects thereof, if any such
effects exist or may in the future exist as a result of any act, omission,
practice or conduct that occurred prior to the date hereof. Except as provided
in Section 4, this release shall specifically include, but not be limited to,
the following:
(a) any and all claims and matters of any kind which
arise or might arise, or which otherwise relate to Thompson's employment with
Weston or Thompson's termination of employment pursuant to the Severance
Agreement;
(b) any and all claims for wages and benefits (including
without limitation salary, stock, stock options, commissions, bonuses,
severance pay, health and welfare benefits, vacation pay and any other
fringe-type benefit);
(c) any and all claims for wrongful discharge, breach of
contract (whether written or oral, express or implied), and implied covenants
of good faith and fair dealing;
(d) any and all claims for alleged employment
discrimination on the basis of age, race, color, religion, sex, national
origin, veteran status, disability and/or handicap, in violation of any
federal, state or local statute, ordinance, judicial precedent or executive
order, including but not limited to claims for discrimination under the
following statutes: Title VII of the Civil Rights Act of 1964, 42 U.S.C.
Section 2000e et seq., the Civil Rights Act of 1866, 42 U.S.C. Section 1981,
the Age Discrimination in Employment Act, 29 U.S.C. Section 621 et seq., the
Older Workers Benefit Protection Act, the Rehabilitation Act of
3
<PAGE> 12
1972, 29 U.S.C. Section 701 et seq., the Americans with Disabilities Act, 42
U.S.C. Section 1201 et seq., and the Pennsylvania Human Relations Act, 43 P.S.
Section 951 et seq.;
(e) any and all claims under any federal or state statute
relating to employee benefits;
(f) any and all claims in tort, including but not limited
to any claims for fraud, misrepresentation, defamation, interference with
contract or prospective economic advantage, intentional infliction of emotional
distress and/or negligence;
(g) any and all claims for additional commissions,
compensation or damages of any kind; and
(h) any and all claims for attorneys' fees and costs.
4. Limitation on Thompson's Release. This Release (a) shall not
prevent Thompson from enforcing his rights under the Severance Agreement in
accordance with the terms thereof, (b) shall have no applicability to Weston's
obligations under the Retirement Agreement (as defined in the Severance
Agreement) or benefits payable under the terms of any "employee pension benefit
plan" within the meaning of the Employee Retirement Income Security Act of
1974, as amended, and (c) shall not release Weston from any obligation it might
otherwise have to indemnify Thompson and hold him harmless from any claims made
against him arising out of his activities as an officer or director of Weston,
to the same extent as Weston is or may be obligated to indemnify and hold
harmless any other officer or director.
4
<PAGE> 13
5. Review and Revocation. Thompson acknowledges that he has had
the opportunity to review this Release and to consider its terms with his
attorneys and advisors. Thompson has twenty-one (21) days from the date of
distribution of this Release to him to review it and seven (7) days after the
execution date of this Release to revoke it. This Release shall not be
effective unless and until Thompson executes it and the seven-day period has
expired.
UNDERSTOOD AND AGREED:
/s/ A. FREDERICK THOMPSON, JR. 18 March 1996
- ------------------------------------ ------------------------
A. Frederick Thompson, Jr. Date
/s/ KAREN P. BRAIN
- ------------------------------------
Witness
5
<PAGE> 14
STATE OF PENNSYLVANIA :
: SS:
COUNTY OF CHESTER :
Before me, Arlene L. Freed, on this day personally appeared A.
Frederick Thompson, Jr., known to me to be the person whose name is subscribed
to the foregoing instrument, and acknowledged to me that he executed such
instrument for the purposes and consideration therein expressed.
Given under my hand and seal of office this 18th day of March, 1996.
/s/ ARLENE L. FREED
-----------------------------------
NOTARY PUBLIC in and for
-----------------------------------
ROY F. WESTON, INC.
By: /s/ ROY F. WESTON March 18, 1996
------------------------------------- -------------------------
Date
6
<PAGE> 1
Exhibit 11
ROY F. WESTON, INC. AND SUBSIDIARIES
SCHEDULE OF COMPUTATION OF NET INCOME (LOSS) PER SHARE
<TABLE>
<CAPTION>
Years Ended December 31
1995 1994 1993
---- ---- ----
(Thousands of Dollars,
Except Share and Per Share Amounts)
<S> <C> <C> <C>
Primary
- -------
Net income (loss) $ 1,514 $ (1,103) $ 2,603
Weighted average shares 9,522,562 9,494,196 9,393,350
Net income (loss) per common share $ .16 $ (.12) $ .28
Fully Diluted
- -------------
Net income (loss) $ 1,514 $ (1,103) $ 2,603
Add:
Interest on convertible debentures, net of
applicable income taxes $ 1,030 $ 1,079 $ 1,317
Net income (loss) for fully diluted net income
per share $ 2,544 $ (24) $ 3,920
Weighted average shares used in calculating
primary net income (loss) per share 9,522,562 9,494,196 9,393,350
Add:
Shares issuable upon conversion of
convertible debentures 1,079,028 1,182,238 1,254,286
Stock options 173 -- --
Weighted average shares used in calculating
fully diluted net income (loss) per common share 10,601,763 10,676,434 10,647,636
Fully diluted net income (loss) per common share $ .24 $ -- $ .37
</TABLE>
<PAGE> 1
ROY F. WESTON, INC. AND SUBSIDIARIES
1995
FINANCIAL REVIEW
15 Management's Discussion and Analysis of
Financial Condition and Results of Operations
18 Selected Financial Data
19 Report of Independent Accountants
20 Consolidated Balance Sheets
22 Consolidated Statements of Operations
23 Consolidated Statements of Cash Flows
24 Consolidated Statements of Stockholders' Equity
26 Notes to Consolidated Financial Statements
14
<PAGE> 2
ROY F. WESTON, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following table sets forth for the years indicated the percentage
of net revenues represented by certain elements of the Company's consolidated
statements of operations. The table and subsequent discussion should be read in
conjunction with the Consolidated Financial Statements and Notes thereto.
<TABLE>
<CAPTION>
For the years ended December 31
--------------------------------------------
1995 1994 1993
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net revenues 100.0 % 100.0 % 100.0 %
- -------------------------------------------------------------------------------------------
Expenses
Direct salaries and other operating costs 84.9 % 86.2 % 84.1 %
General and administrative expenses 13.8 % 14.2 % 13.0 %
- -------------------------------------------------------------------------------------------
Income (loss) from operations 1.3 % (0.4)% 2.9 %
Other income (expense) (0.2)% (0.5)% (1.0)%
- -------------------------------------------------------------------------------------------
Income (loss) before income taxes 1.1 % (0.9)% 1.9 %
Income taxes 0.4 % (0.3)% 0.7 %
- -------------------------------------------------------------------------------------------
Net income (loss) 0.7 % (0.6)% 1.2 %
============================================
</TABLE>
The Company incurs a substantial amount of direct project costs, which
are passed through to the Company's clients, resulting principally from the use
of subcontractors on projects. Consequently, the Company measures its operating
performance on the basis of net revenues, which are determined by deducting
such direct project costs from gross revenues. Direct project costs were 33%,
31% and 32% of gross revenues in 1995, 1994 and 1993, respectively.
RESULTS OF OPERATIONS
1995 COMPARED TO 1994
Net revenues increased 3% to $206,273,000 from $200,304,000 in 1994.
Net revenues from remediation and consulting projects increased 36% and 4%,
respectively. Partially offsetting these gains was a 19% decline in analytical
services net revenues due to downward pricing pressures which have impacted the
analytical services industry. Net revenues from federal program management
services, which are large government projects with dedicated work forces,
declined 6%, as federal agencies reduced funding on certain projects. Federal
budget reductions affecting environmental regulations will likely further
diminish federal program management net revenues.
15
<PAGE> 3
ROY F. WESTON, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The Company had income from operations of $2,623,000 in 1995, compared
to a $730,000 loss from operations in 1994. The improved operating results
were primarily due to higher net revenues from remediation projects, partially
offset by significantly lower margins for analytical services. During 1995,
the Company adopted a plan to close one of its laboratory facilities and
recorded a provision of $1,300,000, consisting principally of lease termination
costs and the writedown of leasehold improvements and equipment. The Company
believes efficiencies gained by concentrating its analytical laboratory
services in its remaining two laboratories will reduce fixed costs; however,
the outlook for the analytical services industry continues to be difficult.
Operating results from consulting projects increased slightly in 1995 as a
result of higher personnel utilization. Margins for consulting work improved
in most areas, but declined in the Western United States. Operating results
from federal program management services declined from 1994 in an amount
similar to the 1995 revenue shortfall, principally due to reduced program
personnel requirements and utilization.
The smaller of the Company's two transportable thermal treatment
systems has been idle since mid-1994. The system had been committed to a
contract that was cancelled in late 1994. The Company recorded net revenues of
approximately $1,800,000 in 1995 and $1,520,000 in 1994 in connection with the
settlement of the termination claim. The Company is seeking additional projects
that will use this equipment, but anticipates 1996 treatment system
profitability to be lower than 1995.
Overall spending for 1995 general and administrative expenses remained
similar to that of the prior year. The Company increased its spending on
quality assurance and strategic planning, while realizing cost savings from
business process efficiencies. The Company is continuing to allocate
significant resources to business development activities.
Other expenses decreased 76% to $258,000 in 1995 from $1,056,000 in
1994. Other expenses were reduced by gains of $376,000 and $51,000 realized on
redemption of the Company's 7% Convertible Subordinated Debentures in 1995 and
1994, respectively. Investment income increased $193,000 in 1995 due primarily
to higher interest rates. Interest expense decreased $259,000 from 1994 due
primarily to the repurchase of 7% Convertible Subordinated Debentures and
scheduled repayments of its five-year term loan.
1994 COMPARED TO 1993
Net revenues declined 7% to $200,304,000 from $214,869,000 in 1993.
The Company's consulting projects produced 8% lower net revenues in 1994. Net
revenues in 1994 from federal program management services declined 5% due to a
decrease in direct labor. Analytical laboratory services net revenues were 7%
lower than those in 1993 primarily due to continuing downward pricing
pressures. Net revenues from remediation projects were similar to those in
1993.
The Company experienced a $730,000 loss from operations in 1994,
compared to operating income of $6,248,000 in 1993. Operating income in 1993
was reduced by a $2,000,000 charge related to an adverse court decision. The
decline in operating results was primarily due to decreased net revenues.
Direct salaries and other operating costs declined 4%, primarily due to
selective operating work force reductions. General and administrative expenses
increased less than 2% in 1994. Margins for
16
<PAGE> 4
ROY F. WESTON, INC. AND SUBSIDIARIES
consulting work were generally lower, except in the Midwestern United States.
Contribution from remediation projects was improved from 1993, which included a
sizable loss on one project.
Other expenses decreased 52% to $1,056,000 in 1994 from $2,179,000 in
1993. Other expenses were reduced by gains of $51,000 and $94,000 realized on
redemption of the Company's 7% Convertible Subordinated Debentures in 1994 and
1993, respectively. Investment income increased $707,000 due to higher average
amounts invested and higher interest rates. Interest expense decreased
$546,000 from 1993 due primarily to the repurchase of 7% Convertible
Subordinated Debentures and scheduled repayments of a five-year term loan.
OTHER
As discussed in Note 9 to the Consolidated Financial Statements, the
Company decreased the discount rate used for its defined benefit pension plans
to 7.25% at December 31, 1995 from 8.50% at December 31, 1994. This discount
rate change is expected to increase the net periodic pension cost charged to
income in 1996 by approximately $500,000 as compared to the 1995 expense of
$2,409,000.
The Financial Accounting Standards Board has issued Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation," effective for fiscal years beginning after December 15, 1995.
Statement No. 123 allows the recognition of compensation expense for grants of
stock, stock options and other equity instruments to employees based on fair
value, or, permits continued application of existing accounting rules. The
Company plans to continue to apply existing rules and will disclose the
required proforma net income and earnings per share data. The adoption of
Statement No. 123 will not have an impact on the Company's financial position
or results of operations.
Management believes that inflationary increases in its operating costs
and expenses can generally be absorbed by increased rates the Company can bill
for its services. To date, inflationary effects have had little impact on the
Company.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents increased $7,235,000 in 1995 to $12,980,000
from $5,745,000 at December 31, 1994. Marketable securities decreased
$10,179,000 in 1995 to $2,813,000 from $12,992,000 at December 31, 1994.
Operating activities provided cash of $12,789,000 in 1995 and
$1,121,000 in 1994. The Company used a portion of its cash flow from
operations to liquidate $5,436,000 and $3,648,000 of short-term and long-term
debt in 1995 and 1994, respectively.
Net cash investments in property and equipment and other assets were
$9,988,000 in 1995 and $4,858,000 in 1994. Investments in 1995 included
$2,000,000 for a minority interest in a bioremediation and infrastructure
engineering company, building improvements, computers and other equipment.
Investments in 1994 consisted principally of computers and other equipment. The
Company's capital expenditures are financed primarily through operating cash
flow.
17
<PAGE> 5
ROY F. WESTON, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The Company has a five-year term loan at a 5.85% interest rate, which
is repayable in quarterly installments of $500,000 plus interest through
January 1, 1998. The Company is required to make annual redemptions of 10% of
its 7% Convertible Subordinated Debentures in the principal amount of
$3,140,000. The 1996 requirement has been satisfied through repurchases of the
debentures during 1994 and 1995.
The Company received $1,359,000 in 1995 and $1,623,000 in 1994 from
shares of Series A common stock issued through its Employee Stock Purchase
Plan. During 1995 and 1994, the Company repurchased 298,400 and 214,705
shares, respectively, of Series A common stock for $1,512,000 and $1,297,000,
respectively. There are no current plans to issue additional stock other than
through the Employee Stock Purchase Plan and the Stock-Based Incentive
Compensation Plan.
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
For the years ended December 31
---------------------------------------------------------------------
(Thousands of dollars, except per 1995 1994 1993 1992 1991
share amounts)
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Gross revenues $ 309,858 $ 290,081 $ 314,443 $ 330,157 $ 314,992
Net revenues $ 206,273 $ 200,304 $ 214,869 $ 222,050 $ 211,279
Income (loss) from operations $ 2,623 $ (730) $ 6,248 $ 14,275 $ 11,117
Net income (loss) $ 1,514 $ (1,103) $ 2,603 $ 7,162 $ 5,122
Net income (loss) per
common share $ .16 $ (.12) $ .28 $ .79 $ .58
AT DECEMBER 31
- --------------------------------------------------------------------------------------------------------
Working capital $ 67,875 $ 74,352 $ 73,289 $ 72,659 $ 58,893
Total assets $ 163,406 $ 156,730 $ 165,699 $ 178,956 $ 150,500
Short-term debt $ 2,261 $ 2,431 $ 2,635 $ 6,555 $ 2,743
Long-term debt (less current
portion) $ 24,673 $ 29,843 $ 33,054 $ 42,083 $ 35,471
Stockholders' equity $ 82,901 $ 80,892 $ 81,719 $ 76,785 $ 67,286
</TABLE>
18
<PAGE> 6
ROY F. WESTON, INC. AND SUBSIDIARIES
REPORT OF INDEPENDENT ACCOUNTANTS
Board of Directors and Stockholders
Roy F. Weston, Inc.
We have audited the accompanying consolidated balance sheets of Roy F.
Weston, Inc. and Subsidiaries as of December 31, 1995 and 1994, and the related
consolidated statements of operations, stockholders' equity and cash flows for
each of the three years in the period ended December 31, 1995. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Roy F.
Weston, Inc. and Subsidiaries as of December 31, 1995 and 1994, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1995 in conformity with generally
accepted accounting principles.
2400 Eleven Penn Center
Philadelphia, Pennsylvania
February 7, 1996
19
<PAGE> 7
ROY F. WESTON, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31
------------------------------------
(Thousands of dollars) 1995 1994
ASSETS
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 12,980 $ 5,745
Marketable securities 2,813 12,992
Accounts receivable, trade, net of allowance for doubtful accounts 78,374 68,947
Unbilled costs and estimated earnings on contracts in process 17,935 20,586
Prepaid and refundable income taxes 1,369 1,581
Deferred income taxes 3,145 1,395
Other 2,602 3,626
- -----------------------------------------------------------------------------------------------------------------
Total current assets 119,218 114,872
- -----------------------------------------------------------------------------------------------------------------
PROPERTY AND EQUIPMENT
Land 215 215
Buildings and improvements 11,308 10,832
Furniture and equipment 58,348 54,617
Leasehold improvements 7,580 7,579
Construction in progress 1,842 253
- -----------------------------------------------------------------------------------------------------------------
Total property and equipment 79,293 73,496
Less accumulated depreciation and amortization 58,777 52,494
- -----------------------------------------------------------------------------------------------------------------
Property and equipment, net 20,516 21,002
- -----------------------------------------------------------------------------------------------------------------
OTHER ASSETS
Goodwill, net of accumulated amortization of $1,203 in 1995 and $1,055 in 1994 4,751 4,899
Deferred income taxes 1,491 1,827
Other 17,430 14,130
- -----------------------------------------------------------------------------------------------------------------
Total other assets 23,672 20,856
- -----------------------------------------------------------------------------------------------------------------
TOTAL ASSETS $ 163,406 $156,730
====================================
</TABLE>
See notes to consolidated financial statements.
20
<PAGE> 8
ROY F. WESTON, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
December 31
----------------------------
(Thousands of dollars) 1995 1994
LIABILITIES AND STOCKHOLDERS' EQUITY
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
CURRENT LIABILITIES
Current maturities of long-term debt $ 2,261 $ 2,431
Accounts payable and accrued expenses 12,444 11,502
Billings on contracts in process in excess of costs and estimated earnings 15,346 8,960
Employee compensation, benefits and payroll taxes 11,348 9,841
Income taxes payable 208 120
Other 9,736 7,666
- ----------------------------------------------------------------------------------------------------------------------------
Total current liabilities 51,343 40,520
- ----------------------------------------------------------------------------------------------------------------------------
LONG-TERM DEBT 24,673 29,843
- ----------------------------------------------------------------------------------------------------------------------------
OTHER LIABILITIES 4,489 5,475
- ----------------------------------------------------------------------------------------------------------------------------
CONTINGENCIES
- ----------------------------------------------------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY
Common stock, $.10 par value, 10,500,000 shares authorized; 3,193,059 shares
issued in 1995; 3,211,213 shares issued in 1994 319 321
Series A common stock, $.10 par value, 20,500,000 shares authorized;
8,028,082 shares issued in 1995; 7,668,325 shares issued in 1994 803 767
Unrealized gain (loss) on investments 514 (90)
Additional paid-in capital 54,143 52,774
Retained earnings 30,929 29,415
- ----------------------------------------------------------------------------------------------------------------------------
86,708 83,187
Less treasury stock at cost, 1,081,275 common shares in 1995 and 1994; 513,105 Series A
common shares in 1995 and 214,705 Series A common shares in 1994 3,807 2,295
- ----------------------------------------------------------------------------------------------------------------------------
Total stockholders' equity 82,901 80,892
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $163,406 $156,730
============================
</TABLE>
21
<PAGE> 9
ROY F. WESTON, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS
OF OPERATIONS
<TABLE>
<CAPTION>
For the years ended December 31
----------------------------------------------
(Thousands of dollars, except per share amounts) 1995 1994 1993
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Gross revenues $ 309,858 $ 290,081 $ 314,443
Direct project costs 103,585 89,777 99,574
- -------------------------------------------------------------------------------------------------------------------------
Net revenues 206,273 200,304 214,869
- -------------------------------------------------------------------------------------------------------------------------
Expenses
Direct salaries and other operating costs 175,177 172,587 180,600
General and administrative expenses 28,473 28,447 28,021
- -------------------------------------------------------------------------------------------------------------------------
203,650 201,034 208,621
- -------------------------------------------------------------------------------------------------------------------------
Income (loss) from operations 2,623 (730) 6,248
- -------------------------------------------------------------------------------------------------------------------------
Other income (expense)
Investment income 1,613 1,420 713
Interest expense (2,282) (2,541) (3,087)
Other 411 65 195
- -------------------------------------------------------------------------------------------------------------------------
(258) (1,056) (2,179)
- -------------------------------------------------------------------------------------------------------------------------
Income (loss) before income taxes 2,365 (1,786) 4,069
Provision (benefit) for income taxes 851 (683) 1,466
- -------------------------------------------------------------------------------------------------------------------------
Net income (loss) $ 1,514 $ (1,103) $ 2,603
==============================================
Net income (loss) per share $ .16 $ (.12) $ .28
==============================================
Weighted average shares outstanding 9,522,562 9,494,196 9,393,350
==============================================
</TABLE>
See notes to consolidated financial statements.
22
<PAGE> 10
ROY F. WESTON, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS
OF CASH FLOWS
<TABLE>
<CAPTION>
For the years ended December 31
-----------------------------------------------
(Thousands of dollars) 1995 1994 1993
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 1,514 $ (1,103) $ 2,603
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation and amortization 9,468 10,055 11,258
Provision for losses on accounts receivable 201 570 960
Provision for closure of facility 1,300 -- --
Other 515 1,264 2,146
Change in assets and liabilities:
Accounts receivable, trade (9,628) (2,082) 15,754
Unbilled costs and estimated earnings on contracts in process 2,651 (485) 11,255
Other current assets 1,024 (160) (622)
Accounts payable and accrued expenses 942 (879) (2,900)
Billings on contracts in process in excess of costs and estimated earnings 6,386 (3,387) (1,445)
Employee compensation, benefits and payroll taxes 1,507 (944) (932)
Income taxes 300 (747) (1,784)
Deferred income taxes (1,725) 203 (460)
Other current liabilities 151 (2,829) (1,452)
Other assets and liabilities (1,817) 1,645 (145)
- --------------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 12,789 1,121 34,236
- --------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of investments 18,520 33,344 12,160
Payments for purchase of investments (8,497) (34,981) (16,615)
Purchase of property and equipment (7,248) (4,432) (4,769)
Investments in other assets (2,740) (426) (579)
- --------------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used for) investing activities 35 (6,495) (9,803)
- --------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net repayments under line-of-credit -- -- (3,000)
Principal payments under long-term debt (5,436) (3,648) (10,229)
Proceeds from issuance of Series A common stock 1,359 1,623 2,352
Purchase of Series A common treasury stock (1,512) (1,297) --
- --------------------------------------------------------------------------------------------------------------------------------
Net cash used for financing activities (5,589) (3,322) (10,877)
- --------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents 7,235 (8,696) 13,556
- --------------------------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS
Beginning of year 5,745 14,441 885
- --------------------------------------------------------------------------------------------------------------------------------
End of year $ 12,980 $ 5,745 $ 14,441
===============================================
</TABLE>
See notes to consolidated financial statements.
23
<PAGE> 11
ROY F. WESTON, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Series A
Common Stock Common Stock Unrealized Gain
------------------------- ---------------------- (Loss)
(Thousands of dollars and shares) Shares Amount Shares Amount on Investments
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
At January 1, 1993 3,215 $ 322 7,047 $ 705 $ --
Shares issued under employee
stock purchase plan -- -- 226 23 --
Exercise of stock options -- -- 40 4 --
Other (2) (1) 24 2 --
Net income -- -- -- -- --
- -------------------------------------------------------------------------------------------------------------------------
At December 31, 1993 3,213 321 7,337 734 --
Shares issued under employee
stock purchase plan -- -- 329 33 --
Purchase of treasury stock -- -- -- -- --
Other (2) -- 2 -- (90)
Net loss -- -- -- -- --
- -------------------------------------------------------------------------------------------------------------------------
At December 31, 1994 3,211 321 7,668 767 (90)
Shares issued under employee
stock purchase plan -- -- 342 34 --
Purchase of treasury stock -- -- -- -- --
Other (18) (2) 18 2 604
Net income -- -- -- -- --
- -------------------------------------------------------------------------------------------------------------------------
At December 31, 1995 3,193 $ 319 8,028 $ 803 $ 514
============================================================================
</TABLE>
See notes to consolidated financial statements.
24
<PAGE> 12
ROY F. WESTON, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
Treasury Stock
----------------------------------------
Additional
Paid-in Retained Common Series A
Capital Earnings Shares Common Shares Amount Total
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 48,820 $ 27,915 (1,079) -- $ (977) $ 76,785
1,553 -- -- -- -- 1,576
299 -- -- -- -- 303
472 -- (2) -- (21) 452
-- 2,603 -- -- -- 2,603
- -----------------------------------------------------------------------------------------------------
51,144 30,518 (1,081) -- (998) 81,719
1,590 -- -- -- -- 1,623
-- -- -- (215) (1,297) (1,297)
40 -- -- -- -- (50)
-- (1,103) -- -- -- (1,103)
- -----------------------------------------------------------------------------------------------------
52,774 29,415 (1,081) (215) (2,295) 80,892
1,325 -- -- -- -- 1,359
-- -- -- (298) (1,512) (1,512)
44 -- -- -- -- 648
-- 1,514 -- -- -- 1,514
- -----------------------------------------------------------------------------------------------------
$ 54,143 $ 30,929 (1,081) (513) $ (3,807) $ 82,901
=====================================================================================================
</TABLE>
25
<PAGE> 13
ROY F. WESTON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
NOTE 1 - NATURE OF OPERATIONS
The Company provides environmental services to industry, the federal
government, and state and local government units. Environmental services
provided include consulting, construction and remediation, analytical
laboratory services and federal program management. The Company's services are
provided primarily in the United States, although it does undertake projects in
foreign nations.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The consolidated financial statements include the accounts of the
Company and its subsidiaries. All material intercompany accounts and
transactions have been eliminated in consolidation. The preparation of
financial statements in conformity with generally accepted accounting
principles requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates.
Cash Equivalents and Investments
The Company considers all highly liquid investments with a remaining
maturity of three months or less at the time of purchase to be cash
equivalents. Cash and cash equivalents consist of cash on hand, demand deposit
accounts, and investments in corporate commercial paper and U.S. Government
securities. Marketable securities are stated at fair value. Realized gains
and losses are computed based on specific identification.
Marketable equity and debt securities available for current operations
include investments in corporate commercial paper and U.S. Government debt
securities and are classified as current assets in the accompanying
consolidated balance sheets. Investments held by the Company's wholly-owned
captive insurance subsidiary include equity and bond mutual funds and are
classified as noncurrent assets in the accompanying consolidated balance
sheets.
Property and Equipment
Property and equipment are carried at cost. Depreciation is provided
primarily on the straight-line method over the assets' estimated useful lives
of 10 to 40 years for buildings and improvements and 3 to 10 years for
furniture and equipment. Leasehold improvements are amortized over the shorter
of the lease period or estimated useful life on the straight-line method.
Property and equipment leased under capital leases are recorded at the lower of
fair market value or the present value of future lease payments. Property and
equipment under these leases are amortized on a straight-line basis, generally
over the assets' estimated useful lives. When property or equipment is sold or
retired, the cost of the asset and related accumulated depreciation are removed
from the balance sheet and any gain or loss is included in results of
operations.
Goodwill
Goodwill arising from the excess of purchase price over the underlying
fair value of net assets of acquired companies is amortized on the
straight-line method over a 40-year period. The Company annually evaluates
whether changes have occurred that would require revision of the remaining
estimated useful life of goodwill. If such circumstances arise, the Company
uses an estimate of the related operation's income contribution to determine
whether the goodwill is recoverable.
Long-Lived Asset Impairment
Effective January 1, 1995, the Company adopted Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of." The provisions of
Statement No. 121 require the Company to review its long-lived assets for
impairment on an exception basis whenever events or changes in circumstances
indicate that the carrying amount of the assets may not be recoverable through
future cash flows. If it is determined that
26
<PAGE> 14
ROY F. WESTON, INC. AND SUBSIDIARIES
an impairment loss has occurred, the loss is recognized in the consolidated
statement of operations. The adoption of Statement No. 121 was not material to
the financial position or results of operations as of and for the year ended
December 31, 1995.
Income Taxes
The Company provides deferred income taxes on all temporary
differences between the tax and financial reporting bases of its assets and
liabilities.
Contract Revenue Recognition
The Company's principal business is providing professional engineering
and consulting services under cost-plus-fee, time and materials, and
fixed-price contracts. Revenues from contracts are recorded on the
percentage-of-completion method of accounting, determined by relating contract
costs incurred to date to total estimated contract costs at completion.
Estimated award fees on certain long-term federal contracts are included in
revenues at the time the amounts can be reasonably determined. Revenues
associated with U.S. Government indirect rates are adjusted when variances are
determined on at least an annual basis. Provisions for estimated contract
losses are recorded when identified.
Net Income (Loss) Per Share
Net income (loss) per share is computed by dividing net income (loss)
by the weighted average number of common shares and Series A common shares
outstanding during the period, including applicable common stock equivalents.
The conversion of subordinated debentures has not been assumed because the
result is anti-dilutive.
NOTE 3 - INVESTMENTS
Effective January 1, 1994, the Company adopted Statement of Financial
Accounting Standards No. 115, "Accounting for Certain Investments in Debt and
Equity Securities." Under this statement, the Company's investments are
classified as available-for-sale securities and recorded at current market
value with an offsetting adjustment included in stockholders' equity.
Investments in debt and equity securities at December 31 consisted of the
following:
<TABLE>
<CAPTION>
-------------------------------
(Thousands of dollars) 1995 1994
- ----------------------------------------------------------------------
<S> <C> <C>
Fair Value:
Current $ 2,813 $ 12,992
Noncurrent 5,282 4,062
- ----------------------------------------------------------------------
8,095 17,054
Gross unrealized holding gains (782) (78)
Gross unrealized holding losses 3 214
- ----------------------------------------------------------------------
Cost basis of investments $ 7,316 $ 17,190
===============================
</TABLE>
Investment activity for the years ended December 31 was as follows:
<TABLE>
<CAPTION>
(Thousands of dollars) 1995 1994
- ----------------------------------------------------------------------
<S> <C> <C>
Proceeds from sale of investments $ 18,520 $ 33,344
- ----------------------------------------------------------------------
Gross realized gains $ -- $ 166
- ----------------------------------------------------------------------
Gross realized losses $ -- $ --
- ----------------------------------------------------------------------
Change in unrealized holding gain (loss) $ 915 $ (136)
Deferred income taxes (311) 46
- ----------------------------------------------------------------------
Net change in unrealized
holding gain (loss) $ 604 $ (90)
===============================
</TABLE>
Realized gains and losses are determined on a specific identification
basis and included in investment income in the accompanying consolidated
statements of operations.
27
<PAGE> 15
ROY F. WESTON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
NOTE 4 - ACCOUNTS RECEIVABLE AND UNBILLED COSTS
AND ESTIMATED EARNINGS
Trade accounts receivable at December 31 consisted of the following:
<TABLE>
<CAPTION>
-------------------------------
(Thousands of dollars) 1995 1994
- ----------------------------------------------------------------------
<S> <C> <C>
Industrial clients $ 28,086 $ 22,717
State and municipal governments 17,683 11,866
U.S. Government agencies 33,004 34,374
Retentions 1,401 1,689
- ----------------------------------------------------------------------
80,174 70,646
Less allowance for
doubtful accounts 1,800 1,699
- ----------------------------------------------------------------------
$ 78,374 $ 68,947
===============================
</TABLE>
Unbilled costs and estimated earnings consisted of the following:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------
<S> <C> <C>
Industrial clients $ 3,485 $ 2,197
State and municipal governments 2,593 2,446
U.S. Government agencies 10,774 13,621
Retentions 1,083 2,322
- ----------------------------------------------------------------------
$ 17,935 $ 20,586
===============================
</TABLE>
The Company does not believe there is any undue credit risk in
connection with its accounts receivable.
Unbilled costs and estimated earnings can be invoiced upon attaining
certain milestones under fixed-price contracts, completion of federal
government indirect rate audits, final approval of design plans for
engineering services and completion of construction on certain projects. Billed
and unbilled retentions of $2,484,000 at December 31, 1995 include $443,000,
which is expected to be collected during 1997 and thereafter.
NOTE 5 - LINE-OF-CREDIT AGREEMENT
The Company has a $45,000,000 unsecured credit facility with a group
of banks to provide cash borrowings and letters of credit that expires in 1997.
Under the terms of the agreement, cash borrowings, which may not exceed
$25,000,000, bear interest at the prime rate or, at the Company's option, other
variable rates. The Company is subject to a 1/4% annual charge on the unused
portion of the facility. The agreement requires the Company to maintain
covenants including liquidity, debt to equity, interest coverage, minimum net
worth and fixed charge coverage. At December 31, 1995, the unused portion of
the unsecured credit facility was $40,098,000.
NOTE 6 - LONG-TERM DEBT
Long-term debt at December 31 consisted of the following:
<TABLE>
<CAPTION>
-------------------------------
(Thousands of dollars) 1995 1994
- ----------------------------------------------------------------------
<S> <C> <C>
7% Convertible Subordinated
Debentures due
April 15, 2002 $ 21,830 $ 24,830
Bank term loan, payable in
quarterly installments of $500,000
plus interest at 5.85% through
January 1, 1998 4,500 6,500
Capitalized lease obligations 604 834
Other -- 110
- ----------------------------------------------------------------------
Total debt 26,934 32,274
Less current maturities 2,261 2,431
- ----------------------------------------------------------------------
$ 24,673 $ 29,843
===============================
</TABLE>
The 7% Convertible Subordinated Debentures (the Debentures) were
issued in 1987. The Debentures are due April 15, 2002 and are convertible into
the Company's Series A common stock at a conversion price of $21.13 per share.
The Company has the option to redeem the Debentures at a redemption price of
100%.
28
<PAGE> 16
ROY F. WESTON, INC. AND SUBSIDIARIES
The Company is required to redeem annually 10% of the principal amount
of the Debentures, so as to retire 80% of the Debentures prior to maturity.
During 1995 and 1994, the Company repurchased $3,000,000 and $1,000,000
principal amount of Debentures, respectively, thus satisfying the 1995 and 1996
redemption requirements. The gains on redemption of $376,000 and $51,000 in
1995 and 1994, respectively, have been included in other income in the
consolidated statements of operations. The Debentures are unsecured and
subordinated to all senior indebtedness. The costs of issuing the Debentures
have been deferred and are being amortized over the life of the debt.
The Debenture Indenture limits the amount of dividends the Company may
declare and limits the funds the Company and its subsidiaries may use to
purchase, redeem or retire the Company's capital stock. The Indenture also
provides that the Company must maintain a minimum tangible net worth or offer
to purchase 10% of the principal amount of the Debentures issued at their
principal amount plus accrued interest.
The fair value of the Debentures based on quoted market price at
December 31, 1995 and 1994 was $17,547,000 and $17,878,000, respectively.
The bank term loan requires the Company to maintain covenants
including liquidity, debt to equity, interest coverage and minimum net worth.
The fair value of the bank term loan, based on rates currently available with
similar terms and maturities, at December 31, 1995 and 1994 was $4,277,000 and
$5,763,000, respectively.
Maturities of long-term debt are as follows:
<TABLE>
<CAPTION>
Years ending December 31 (Thousands of dollars)
- ----------------------------------------------------------------------
<S> <C>
1996 $ 2,261
1997 5,151
1998 3,762
1999 3,188
2000 3,152
Thereafter 9,420
- ----------------------------------------------------------------------
$ 26,934
==============
</TABLE>
NOTE 7 - LEASES
Capital Leases
The Company leases office equipment under capital leases expiring in
various years through 2000. The following is a schedule of future annual
minimum lease payments under capital leases:
<TABLE>
<CAPTION>
Years ending December 31 (Thousands of dollars)
- ----------------------------------------------------------------------
<S> <C>
1996 $ 311
1997 188
1998 135
1999 51
2000 13
- ----------------------------------------------------------------------
Total minimum lease payments 698
Less amount representing interest 94
- ----------------------------------------------------------------------
Present value of net minimum lease payments $ 604
==============
</TABLE>
The net book value of assets leased under capital leases aggregated
$841,000 and $1,246,000 at December 31, 1995 and 1994, respectively.
Operating Leases
The Company leases certain office facilities and equipment under
operating leases. These leases generally provide for renewal options and the
office leases include escalation clauses based on increases in real estate
taxes and operating expenses. For certain office facilities, the Company
obtains reimbursements for rental expense under long-term U.S. Government
projects.
Minimum annual lease commitments under non-cancelable leases
principally for office facilities are as follows:
<TABLE>
<CAPTION>
Years ending December 31 (Thousands of dollars)
- ----------------------------------------------------------------------
<S> <C>
1996 $ 8,413
1997 5,919
1998 4,191
1999 3,553
2000 2,435
Thereafter 17,420
- ----------------------------------------------------------------------
$ 41,931
==============
</TABLE>
29
<PAGE> 17
ROY F. WESTON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
The following is a summary of rental expense for the years ended
December 31:
<TABLE>
<CAPTION>
---------------------------------------------
(Thousands of dollars) 1995 1994 1993
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
Gross rental expense $ 18,468 $ 17,588 $ 16,610
Reimbursed as direct
project expenses (8,214) (6,987) (5,981)
- ------------------------------------------------------------------------------------
Net rental expense $ 10,254 $ 10,601 $ 10,629
=============================================
</TABLE>
NOTE 8 - COMMON STOCK
The Company's common stock and Series A common stock are equivalent
except that each share of common stock has one vote per share and each share of
Series A common stock has one-tenth of one vote per share. Subject to certain
restrictions, shares of common stock are convertible on a one-for-one basis
into Series A common stock.
The Company has a Stock-Based Incentive Compensation Plan (Option
Plan) that provides for the grant to employees of nonqualified stock options
and options designed to qualify as "incentive stock options" under the Internal
Revenue Code. An option gives the participant the right to purchase from the
Company a specified number of shares of Series A common stock for a specified
price during a specified period not exceeding 10 years. A total of 1,075,000
shares of Series A common stock have been reserved for issuance under the
Option Plan pursuant to the exercise of options. All options must have an
exercise price of not less than fair market value of the underlying shares on
the date of grant. Payment by option holders upon exercise of an option may be
made in cash, or by delivering previously owned shares of common stock, Series
A common stock or any combination thereof.
Option activity under the Option Plan is summarized as follows:
<TABLE>
<CAPTION>
-------------------------------
Number Option Price
of Shares per Share
- --------------------------------------------------------------------------
<S> <C> <C>
Outstanding at January 1, 1993 404,420 $ 7.75-$ 10.50
Granted 190,000 $ 14.50
Exercised (39,100) $ 7.75
Cancelled (15,400) $ 7.75-$ 14.50
- --------------------------------------------------------------------------
Outstanding at December 31, 1993 539,920 $ 7.75-$ 14.50
Granted 147,400 $ 6.63
Exercised - -
Cancelled (79,300) $ 6.63-$ 14.50
- --------------------------------------------------------------------------
Outstanding at December 31, 1994 608,020 $ 6.63-$ 14.50
Granted 96,000 $ 4.44-$ 5.19
Exercised - -
Cancelled (73,300) $ 5.19-$ 14.50
- --------------------------------------------------------------------------
Outstanding at December 31, 1995 630,720 $ 4.44-$ 14.50
===============================
Exercisable at December 31, 1995 317,920 $ 6.63-$ 14.50
- --------------------------------------------------------------------------
</TABLE>
In addition, a restricted stock award of 20,000 shares was made to an
officer during 1992. At December 31, 1995 there were 329,980 shares available
for further grants under the Option Plan.
The Company also has an Employee Stock Purchase Plan (Purchase Plan),
which provides for the purchase of Series A common stock by eligible employees.
The Purchase Plan is designed to qualify as a noncompensatory employee stock
purchase plan as defined in Section 423 of the Internal Revenue Code. A total
of 2,025,000 shares of Series A common stock have been reserved for issuance
under the Purchase Plan. The price per share of Series A common stock is equal
to 85% of the lower of the closing market price of Series A common stock on the
first trading day of each semi-annual purchase period, or the last trading day
of such purchase period. During the years ended December 31, 1995, 1994, and
1993, respectively, 341,603, 329,500 and 226,017 shares were issued under the
Purchase Plan at prices ranging from $3.93 per share to $8.93 per share.
30
<PAGE> 18
ROY F. WESTON, INC. AND SUBSIDIARIES
NOTE 9 - EMPLOYEE BENEFIT PLANS
The Company has a defined benefit pension plan (Retirement Plan)
covering substantially all of its employees. The benefits are based on a
career average formula, which provides credit for each year based on that
year's compensation and hours of service. The Company's funding policy is to
contribute annually not less than the minimum required by applicable law and
regulation nor more than the maximum amount that can be deducted for federal
income tax purposes. Retirement Plan assets consist of investments in both
fixed income and equity instruments.
The following table sets forth the Retirement Plan's funded status and
amounts recognized in the Company's financial statements at December 31:
<TABLE>
<CAPTION>
(Thousands of dollars) 1995 1994
- ----------------------------------------------------------------------
<S> <C> <C>
Actuarial present value of
accumulated plan benefits:
Accumulated benefit obligation,
including vested benefits of $24,567
in 1995 and $15,285 in 1994 $ (25,965) $ (17,246)
- ----------------------------------------------------------------------
Projected benefit obligation (31,053) (20,664)
Plan assets at fair value 20,955 16,076
- ----------------------------------------------------------------------
Projected benefit obligation in
excess of plan assets (10,098) (4,588)
Unrecognized net obligation at
transition being recognized
over 21 years 389 422
Unrecognized net loss from
past experience different
from that assumed 4,828 63
Unrecognized prior service cost (107) (122)
Additional liability (22) -
- ----------------------------------------------------------------------
Accrued pension cost $ (5,010) $ (4,225)
===============================
</TABLE>
Net pension cost for the years ended December 31 includes the
following components:
<TABLE>
<CAPTION>
---------------------------------------------
(Thousands of dollars) 1995 1994 1993
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost $ 1,754 $ 2,405 $ 2,173
Interest cost on projected
obligation 1,918 1,633 1,305
Actual return on plan assets (4,041) 559 (1,535)
Net amortization and deferral 2,441 (1,676) 519
- ------------------------------------------------------------------------------------
Net pension cost $ 2,072 $ 2,921 $ 2,462
=============================================
</TABLE>
The projected benefit obligation was determined using an assumed rate
of compensation increase of 5% at December 31, 1995 and December 31, 1994 and
weighted average discount rates of 7.25% at December 31, 1995 and 8.50% at
December 31, 1994. The change in the weighted average discount rate had the
effect of increasing the projected benefit obligation by $6,712,000 at December
31, 1995. The expected long-term rate of return on assets was 9.25% at
December 31, 1995 and December 31, 1994.
The Company has an Employees' Savings Plan which provides that the
Company will supplement an employee's contribution (which may not exceed 12% of
compensation). The Company has agreed to contribute to the Plan an amount equal
to 50% of the first 6% of an employee's contributions. Company contributions
resulted in charges to earnings of $2,453,000, $2,581,000 and $2,527,000 for
the years ended December 31, 1995, 1994 and 1993, respectively.
The Company has three nonqualified supplementary retirement plans. The
Pension Restoration Plan provides additional retirement benefits to those
executives whose compensation exceeds that includable under the Retirement
Plan. The Company's Executive Supplemental Benefit Plan provides certain
executive officers supplemental retirement benefits upon their retirement from
the Company or preretirement death benefits. The amount of these benefits is
based upon years of participation in the plan multiplied by an annual
retirement benefit amount, which is
31
<PAGE> 19
ROY F. WESTON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
determined by the Company. The Company's Supplemental Split Dollar Life
Insurance Plan provides certain other officers and key employees with a lump
sum retirement benefit, upon retirement from the Company, of $5,000 plus an
additional $5,000 for each year of participation in excess of 10 years, or a
preretirement death benefit of $200,000. The Company has purchased life
insurance contracts on the lives of the participants. The Company owns the
contracts and is the beneficiary of contracts on the lives of the Executive
Supplemental Benefit Plan participants. The amount of coverage is designed to
provide sufficient proceeds to recover the costs of the plan. The cash value
of the life insurance contracts, included in other assets in the accompanying
consolidated balance sheets, was $4,345,000 and $3,589,000 at December 31, 1995
and 1994, respectively. Premiums for the years ended December 31, 1995, 1994
and 1993 for these plans were $682,000, $674,000 and $684,000, respectively.
The following table sets forth the supplemental plans' funded status
and amounts recognized in the Company's financial statements at December 31:
<TABLE>
<CAPTION>
-------------------------------
(Thousands of dollars) 1995 1994
- ----------------------------------------------------------------------
<S> <C> <C>
Actuarial present value of
accumulated plan benefits:
Accumulated benefit obligation,
including vested benefits of
$1,248 in 1995 and $1,084 in 1994 $ (2,310) $ (2,183)
- ----------------------------------------------------------------------
Projected benefit obligation (2,505) (2,183)
Plan assets at fair value -- --
Projected benefit obligation in
excess of plan assets (2,505) (2,183)
Unrecognized net obligation at
transition being recognized
over 15 years 109 127
Unrecognized net loss from
past experience different from
that assumed 1,093 960
Additional liability (1,034) (1,087)
- ----------------------------------------------------------------------
Accrued supplemental
pension liability $ (2,337) $ (2,183)
===============================
</TABLE>
Net supplemental pension cost for the years ended December 31 includes the
following components:
<TABLE>
<CAPTION>
---------------------------------------------
(Thousands of dollars) 1995 1994 1993
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost $ 77 $ 85 $ 105
Interest cost on projected
obligation 179 163 140
Return on plan assets -- -- --
Amortization 81 102 85
- ------------------------------------------------------------------------------------
Net supplemental
pension cost $ 337 $ 350 $ 330
=============================================
</TABLE>
The projected benefit obligation was determined using weighted average
discount rates of 7.25% at December 31, 1995 and 8.50% at December 31, 1994.
The change in the weighted average discount rate had the effect of increasing
the projected benefit obligation by $300,000 at December 31, 1995.
The Company maintains medical and dental plans for its eligible
employees on a primarily self-funded basis. Claims in excess of specified
individual and aggregate amounts are covered by insurance. Costs and premiums
in the financial statements for the years ended December 31, 1995, 1994 and
1993 for these plans were $3,978,000, $3,998,000 and $4,579,000, respectively.
The Company provides health care benefits to retirees based on the
cost of such benefits in the year of retirement. The benefits are funded on a
cash basis. Effective January 1, 1993, the Company implemented Statement of
Financial Accounting Standards No. 106, "Employers' Accounting for
Postretirement Benefits Other than Pensions" to account for these medical
benefits.
32
<PAGE> 20
ROY F. WESTON, INC. AND SUBSIDIARIES
The net periodic cost for postretirement health care benefits for the
years ended December 31 includes the following components:
<TABLE>
<CAPTION>
(Thousands of dollars) 1995 1994
- ----------------------------------------------------------------------
<S> <C> <C>
Service cost $ 51 $ 152
Interest cost 74 122
Amortization of transition obligation 74 74
Amortization of unrecognized net gain (93) --
- ----------------------------------------------------------------------
$ 106 $ 348
=============================
</TABLE>
The amounts recognized in the Company's balance sheets at December 31, were as
follows:
<TABLE>
<CAPTION>
(Thousands of dollars) 1995 1994
- ----------------------------------------------------------------------
<S> <C> <C>
Accumulated postretirement
benefit obligation:
Retirees $ (725) $ (893)
Fully eligible active plan participants (8) (5)
Other active plan participants (328) (784)
- ----------------------------------------------------------------------
(1,061) (1,682)
Unrecognized net gain (828) (211)
Unrecognized net obligation 1,258 1,332
- ----------------------------------------------------------------------
Accrued postretirement benefit liability $ (631) $ (561)
=============================
</TABLE>
The accumulated postretirement benefit obligation was determined using
weighted average discount rates of 7.25% at December 31, 1995 and 8.50% at
December 31, 1994. A cost increase of 12% for covered health care benefits was
assumed for 1995. The rate was assumed to decrease ratably to 5.5% after 8
years and remain at that level thereafter. The effect of a one percentage
point increase in the assumed health care cost trend rate for each future year
would increase the aggregate of service cost and interest cost by approximately
1% and the accumulated postretirement benefit obligation by approximately 5%.
NOTE 10 - CONTINGENCIES
As collateral for performance on contracts, the Company is
contingently liable at December 31, 1995 in the amount of $4,902,000, under
standby letters of credit.
A substantial portion of the Company's gross revenues is derived from
work involving hazardous materials, toxic wastes and other pollutants. Such
efforts frequently entail significant risks of liability for environmental
damage, personal injury, and fines and costs imposed by regulatory agencies. A
substantial number of the Company's contracts require indemnification of a
client for performance claims, damages or losses unless such injury or damage
is solely the result of the client's negligence or willful acts. The Company
has been able to insure against most liabilities it may incur in this regard.
The Company has obtained coverage with commercial carriers to insure
against pollution liability claims. Although this insurance covers many of the
Company's environmental exposures, there are instances where project-specific
pollution insurance policies are necessary. The Company will continue to
evaluate exposures associated with each project to determine if additional
coverage is necessary. The Company continues to be partially self-insured
through its subsidiary, Cardinal Indemnity Company of North America, a captive
insurance company. Cardinal provides professional liability and pollution
coverage for deductible amounts of the commercial insurance coverage.
33
<PAGE> 21
ROY F. WESTON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
While the insurance carried by the Company may not be sufficient to
cover all claims that may arise, and while insurance carriers may not continue
to make coverage available to the Company, management believes it has provided
an adequate level of insurance coverage.
During 1993, a trial court issued summary judgment against the Company
and awarded damages of $3,200,000 in connection with litigation of a contract
dispute. In response to this adverse decision, the Company recorded a charge of
$2,000,000 in the year ended December 31, 1993 to increase its provision for
the ultimate outcome, pending resolution of its appeal. In 1994 the Appeals
Court denied the Company's appeal of the trial court decision. Subsequent
payment of the damage award had no impact on the Company's results of
operations.
Performance of a 1993 remediation contract was subject to several
delays and in 1994 was partially terminated for convenience by the client. The
Company submitted a claim for its costs incurred as a result of the delays and
termination. The Company recorded net revenues aggregating approximately
$1,520,000 in the year ended December 31, 1994 as an estimate of the amount to
be received in settlement of its claim and an additional $1,800,000 in the
year ended December 31, 1995 when negotiation of the claim was completed.
The Company is subject to certain claims and lawsuits in connection
with work performed in the ordinary course of its business. In the opinion of
management, such claims and lawsuits will not have a material effect on the
financial position or results of operations of the Company.
NOTE 11 - INCOME TAXES
The components of the provision (benefit) for income taxes are as
follows:
<TABLE>
<CAPTION>
---------------------------------------------
(Thousands of dollars) 1995 1994 1993
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
Current
Federal $ 2,371 $ (799) $ 1,965
State 204 (133) (41)
- ------------------------------------------------------------------------------------
2,575 (932) 1,924
- ------------------------------------------------------------------------------------
Deferred
Federal (1,533) 27 (356)
State (191) 222 (102)
- ------------------------------------------------------------------------------------
(1,724) 249 (458)
- ------------------------------------------------------------------------------------
$ 851 $ (683) $ 1,466
=============================================
</TABLE>
Temporary differences which give rise to deferred tax assets and
liabilities at December 31 are as follows:
<TABLE>
<CAPTION>
-----------------------------
(Thousands of dollars) 1995 1994
- ------------------------------------------------------------------------------------
<S> <C> <C>
Deferred tax assets:
Uncollectible accounts $ 719 $ 673
Other accruals 922 152
Pensions 1,686 2,386
Self insurance 1,726 1,456
Depreciation 914 668
Facility closure 579 --
State tax loss carryforwards 467 471
Other 616 714
- ------------------------------------------------------------------------------------
$ 7,629 $ 6,520
- ------------------------------------------------------------------------------------
Deferred tax liabilities:
Amortization $ (921) $ (861)
Retainage (842) (1,018)
Award fees (140) (711)
Other (425) (237)
- ------------------------------------------------------------------------------------
(2,328) (2,827)
Valuation allowance (665) (471)
- ------------------------------------------------------------------------------------
Net deferred income taxes $ 4,636 $ 3,222
=============================
</TABLE>
34
<PAGE> 22
ROY F. WESTON, INC. AND SUBSIDIARIES
A valuation allowance has been established for deferred tax assets
relating to state income tax benefits since it is more likely than not that
these assets will not be realized.
The reconciliations of the effective tax rate to that based on the
federal statutory rate for the years ended December 31 are as follows:
<TABLE>
<CAPTION>
-------------------------------------------
1995 1994 1993
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C>
Statutory rate 34.0 % 34.0 % 34.0 %
State income taxes,
net of federal taxes 0.4 (3.3) (2.3)
Amortization of goodwill 2.1 2.8 1.3
Travel-related meals 4.9 5.9 1.0
Tax exempt interest -- (5.8) (3.2)
Other, net (5.4) 4.7 5.2
- --------------------------------------------------------------------------------------
Effective tax rate 36.0 % 38.3 % 36.0 %
==========================================
</TABLE>
NOTE 12 - MAJOR CUSTOMER INFORMATION
Gross revenues from contracts with the U.S. Government and its
agencies amounted to $176,909,000, $157,529,000 and $170,324,000 for the years
ended December 31, 1995, 1994 and 1993, respectively. Included in these totals
are revenues of $60,287,000, $53,062,000 and $54,207,000 from contracts with
the U. S. Environmental Protection Agency; $34,978,000, $44,436,000 and
$52,272,000 from contracts with the U.S. Department of Energy; and $75,452,000,
$55,967,000 and $60,585,000 from contracts with the U. S. Department of
Defense.
NOTE 13 - SUPPLEMENTAL CASH FLOW INFORMATION
Cash payments for income taxes were $3,402,000, $91,000 and $3,710,000
in the years ended December 31, 1995, 1994 and 1993, respectively. The Company
received refunds of previously paid income taxes aggregating $1,106,000 and
$276,000 in the years ended December 31, 1995 and 1994, respectively.
Cash payments for interest were $2,187,000, $2,500,000 and $2,996,000
in the years ended December 31, 1995, 1994 and 1993, respectively.
Capital lease obligations of $96,000, $233,000 and $280,000 were
incurred during the years ended December 31, 1995, 1994 and 1993, respectively,
when the Company entered into leases for office equipment.
NOTE 14 - QUARTERLY FINANCIAL DATA (UNAUDITED)
Quarterly financial information for 1995 and 1994 is presented in the
following tables:
<TABLE>
<CAPTION>
(Thousands of dollars, First Second Third Fourth
except per share data) Quarter Quarter Quarter Quarter
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1995
Gross revenues $ 75,601 $ 76,403 $ 79,737 $ 78,117
Net revenues $ 52,724* $ 52,631 $ 52,618* $ 48,300
Income (loss)
from operations $ 1,120 $ 1,338 $ 1,352 $ (1,187)**
Net income (loss) $ 572 $ 962 $ 748 $ (768)
Net income (loss)
per share $ .06 $ .10 $ .08 $ (.08)
- ----------------------------------------------------------------------------------------------------
1994
Gross revenues $ 72,191 $ 69,860 $ 75,531 $ 72,499
Net revenues $ 50,028 $ 50,057 $ 51,086 $ 49,133***
Income (loss)
from operations $ 598 $ (650) $ 232 $ (910)
Net income (loss) $ 103 $ (546) $ 9 $ (669)
Net income (loss)
per share $ .01 $ (.06) $ - $ (.07)
- ----------------------------------------------------------------------------------------------------
</TABLE>
* Includes approximately $600 and $1,200 in the first and third quarters,
respectively, representing completion of a remediation contract negotiation.
** Includes a $1,300 provision for the closing of a laboratory facility,
consisting principally of lease termination costs and the writedown of
leasehold improvements and equipment.
*** Includes approximately $1,650 representing refined estimates of contract
realization on two remediation projects.
35
<PAGE> 23
ROY F. WESTON, INC. AND SUBSIDIARIES
STOCKHOLDER INFORMATION
TRANSFER AGENT AND REGISTRAR
American Stock Transfer
and Trust Company
40 Wall Street
New York, New York 10005
CERTIFIED PUBLIC ACCOUNTANTS
Coopers & Lybrand L.L.P.
2400 Eleven Penn Center
Philadelphia, Pennsylvania 19103
ANNUAL MEETING
The annual meeting of stockholders will be held
on Monday, May 20, 1996, 11:00 a.m., at WESTON headquarters:
Roy F. Weston, Inc.
1 Weston Way
West Chester, Pennsylvania 19380-1499
COMPANY INFORMATION
News media representatives and others seeking
general business information about the Company
may contact:
Corporate Communications Director
Roy F. Weston, Inc.
1 Weston Way
West Chester, Pennsylvania 19380-1499
Telephone: (610) 701-3442
FINANCIAL INFORMATION
Analysts, investors and others seeking information about WESTON's financial
performance or copies of financial reports, including the SEC Form 10-K, may
contact the Company. As a cost-saving measure, the Company no longer sends
quarterly reports. If you wish to receive quarterly information, please contact
the Company. Requests should be directed to:
Steven V. Abramson
Corporate Secretary
Roy F. Weston, Inc.
1 Weston Way
West Chester, Pennsylvania 19380-1499
Telephone: (610) 701-5115
COMPANY STOCK
The Company's Series A common stock is traded in the NASDAQ National
Market System under the symbol "WSTNA." There is no established public trading
market for the Company's common stock. The following table sets forth the
range of high and low per share closing prices for the Series A common stock as
reported by NASDAQ:
<TABLE>
<CAPTION>
---------------------------------------
High Low
- --------------------------------------------------------
<S> <C> <C>
1994
First Quarter $ 10.25 $ 6.50
Second Quarter $ 8.50 $ 5.88
Third Quarter $ 6.50 $ 5.13
Fourth Quarter $ 7.38 $ 5.38
- --------------------------------------------------------
1995
First Quarter $ 6.00 $ 4.38
Second Quarter $ 5.56 $ 4.38
Third Quarter $ 5.88 $ 4.38
Fourth Quarter $ 6.25 $ 5.13
- --------------------------------------------------------
</TABLE>
At December 31, 1995, there were 2,659 holders of record of Series A
common stock and 21 holders of common stock. The Company has not paid any cash
dividends since 1978. The Board of Directors intends to retain earnings for
the foreseeable future for the expansion of the Company's business.
[RECYCLE LOGO]
(C) 1996 Roy F. Weston, Inc.
38
<PAGE> 1
Exhibit 21
LIST OF SUBSIDIARY COMPANIES
<TABLE>
<CAPTION>
State of Incorporation
----------------------
<S> <C>
Cardinal Indemnity Company of North America Vermont
Roy F. Weston (Delaware), Inc. Delaware
Weston International Holdings, Inc. (d/b/a Weston International) Delaware
Roy F. Weston of New York, Inc. New York
Roy F. Weston (IPR), Inc. Delaware
</TABLE>
<PAGE> 1
Exhibit 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration
statements of Roy F. Weston, Inc. and Subsidiaries on Forms S-8 (File Nos.
33-56755, 33-56757 and 33-60981) of our reports dated February 7, 1996 on our
audits of the consolidated financial statements and financial statement
schedule of Roy F. Weston, Inc. and Subsidiaries as of December 31, 1995 and
1994 and for the years ended December 31, 1995, 1994, and 1993 which reports
are either included in or incorporated by reference into this Annual Report on
Form 10-K.
COOPERS & LYBRAND L.L.P.
2400 Eleven Penn Center
Philadelphia, Pennsylvania
March 26, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET OF DECEMBER 31, 1995 AND THE CONSOLIDATED STATEMENT
OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1995 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 12,980
<SECURITIES> 2,813
<RECEIVABLES> 96,309<F1>
<ALLOWANCES> 1,800
<INVENTORY> 0
<CURRENT-ASSETS> 119,218
<PP&E> 79,293
<DEPRECIATION> 58,777
<TOTAL-ASSETS> 163,406
<CURRENT-LIABILITIES> 51,343
<BONDS> 24,673
0
0
<COMMON> 1,122
<OTHER-SE> 81,779
<TOTAL-LIABILITY-AND-EQUITY> 163,406
<SALES> 0
<TOTAL-REVENUES> 309,858
<CGS> 0
<TOTAL-COSTS> 307,235
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 201
<INTEREST-EXPENSE> 2,282
<INCOME-PRETAX> 2,365
<INCOME-TAX> 851
<INCOME-CONTINUING> 1,514
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,514
<EPS-PRIMARY> .16
<EPS-DILUTED> 0
<FN>
<F1>INCLUDES 17,935 OF UNBILLED COSTS AND ESTIMATED EARNINGS THEREON
</FN>
</TABLE>
