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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
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
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.)
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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 20, 1998, was approximately
$23,665,000. Solely for the purposes of calculation, all executive officers and
directors of the Company and all beneficial owners of more than 10% of the
Company's stock were considered affiliates. As of March 20, 1998, the
Registrant had outstanding 7,791,842 shares of Series A Common Stock ($.10 par
value) and 2,089,019 shares of Common Stock ($.10 par value).
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Company's 1997 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 expected to be held on May 18, 1998, are
incorporated by reference into Part III of this report.
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TABLE OF CONTENTS
PART I
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ITEM 1. BUSINESS 3
ITEM 2. PROPERTIES 11
ITEM 3. LEGAL PROCEEDINGS 11
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 11
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS 12
ITEM 6. SELECTED FINANCIAL DATA 12
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 12
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK 12
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 12
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE 12
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS 13
ITEM 11. EXECUTIVE COMPENSATION 13
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT 13
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 13
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS
ON FORM 8-K 14
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FORWARD LOOKING STATEMENTS
From time to time, the Company, its management, or other company
representatives may make or publish statements which contain projections,
beliefs, expectations, predictions or intentions relating to anticipated
financial performance, business prospects, potential contract value, business
strategy and plans, technological developments, and other matters. The Private
Securities Litigation Reform Act of 1995 provides a safe harbor for these
forward looking statements. In order to comply with the terms of the safe
harbor, the Company notes that a number of risk factors and uncertainties could
cause the Company's actual results, experience or outcome to differ materially
from projections, beliefs, expectations, predictions or intentions expressed in
forward looking statements, including such statements included or incorporated
by reference in this report.
These risks and uncertainties, which may affect the operations,
performance, development and results of the Company's business, include, but
are not limited to, the following:
o The highly competitive marketplace for the Company's services.
o Changes in and levels of enforcement of federal, state, and local
environmental legislation and regulations.
o The Company's ability to obtain new contracts from existing as well as new
clients, and the uncertain timing of awards and contracts.
o The Company's ability to execute new projects and those currently in
backlog within reasonable cost estimates, as well as other contract
performance risks.
o Funding appropriation, funding delay, and the issuance of work orders on
government projects.
o The Company's ability to achieve any planned overhead or other cost
reductions while maintaining adequate work flow.
o The Company's ability to obtain adequate financing for its current
operations and future expansion.
o The Company's ability to execute its strategic plan through succesful
marketing activities and continued cost containment.
o The nature of the Company's work with hazardous materials, toxic wastes,
and other pollutants, and the potential for uninsured claims or claims in
excess of insurance limits.
The Company disclaims any intent or obligation to update forward
looking statements.
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PART I
ITEM 1. BUSINESS
GENERAL
Roy F. Weston, Inc. (the Company) is a professional services organization
that provides a broad range of consulting, engineering and design,
environmental construction, and facilities, program and business management
services to solve 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 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 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.
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 uses a total systems
approach that involves studying its clients' needs and providing
cost-effective, customized solutions that address those needs.
During 1997, the Company reevaluated its business strategies and areas of
emphasis. The following discussion reflects the results of this reevaluation.
SERVICES
The Company is pursuing infrastructure redevelopment as its primary market
focus. Infrastructure involves physical resources - structures, facilities,
plants and equipment, as well as land and other natural resources that are
vital to the economic life of society. Redevelopment entails undoing the
adverse consequences of past development activities and restoring damaged
resources to productive uses. Infrastructure redevelopment helps clients
decide whether and how to make positive change in the character or condition of
something they own.
Infrastructure redevelopment is being pursued by the Company for a number
of reasons. Demand for regulatory-driven environmental services, which are
still a major source of business for the Company, has been declining by 4-5%
annually. While the Company intends to maintain such services, it sees its
long term opportunities in infrastructure redevelopment services where the
market has been growing at an average rate of nearly 10% annually.
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
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capabilities as well as cost control systems. The Company's services include
consulting; construction, remediation and redevelopment; and knowledge systems
and solutions.
CONSULTING
The Company's consulting 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. The Company's
trained professionals who provide these services are drawn from many different
scientific and technological disciplines to assess the long-term effects and
the risks associated with the environmental impact of clients' activities and
products. In performing feasibility studies and 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 and
other problems, including those relating to infrastructure redevelopment, major
program management, compliance and air quality management services.
INFRASTRUCTURE REDEVELOPMENT SERVICES. Infrastructure redevelopment
consulting comprises a broad range of managerial and technical consulting
services that allow federal, municipal and industrial clients to revitalize
systems and facilities to profitable and sustainable use. Infrastructure,
including water/wastewater systems, commercial and industrial real estate,
waterways and transportation systems, are expected to require continually
increasing redevelopment to maintain economic growth, private investment and
commerce. In addition, the Company provides the ability for clients to
outsource the operation and maintenance of water and wastewater facilities that
are not part of the client's core business.
MAJOR PROGRAM MANAGEMENT. Major program management involves all phases of
large-scale environmental, health and safety problems of industry and
government. The Company has the resources and technical abilities 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 time frames. The Company typically bids for contracts as the
prime contractor and forms subcontractor teams in those instances where
subcontractors provide expertise and staffing that substantially enhance the
Company's ability to obtain and perform contracts. Subcontractors may, from
time to time, 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.
COMPLIANCE SERVICES. Compliance services include identification and
interpretation of regulations, technical assessment of environmental issues,
technology identification and evaluation, implementation planning/management,
emergency response and control, and long-term monitoring and maintenance of
compliance. Much of the compliance consulting market, driven primarily by
regulatory issues, faces increasing price-sensitivity and slow growth.
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AIR QUALITY MANAGEMENT SERVICES. The Company's air quality management
services include air quality management consulting (permitting, dispersion
modeling, and management consulting); ambient monitoring (meteorological, air
quality, and air toxics monitoring); and emission testing (continuous emission
monitoring, compliance testing performance guarantee testing, and air pollution
control design testing).
CONSTRUCTION, REMEDIATION AND REDEVELOPMENT
As part of the Company's strategy of providing complete solutions to its
clients' problems, the Company provides construction redevelopment services to
implement the solutions designed by its consulting group or designed by others.
The Company also provides infrastructure redevelopment construction,
remediation construction, impaired properties redevelopment, and high hazard
management and remediation.
INFRASTRUCTURE REDEVELOPMENT CONSTRUCTION. In infrastructure
redevelopment construction, the Company is primarily focused on two areas,
which the Company believes are likely to experience strong growth in the near
future: alternative delivery systems for water/wastewater and dredged materials
management. The emerging nature of these markets and the prospective
design-build-own-operate structure could yield significant high margin
opportunities for the Company.
REMEDIATION CONSTRUCTION. Remediation construction services include site
investigation, engineering, design, construction, cleanup, and operations and
maintenance.
IMPAIRED PROPERTIES REDEVELOPMENT. Impaired properties redevelopment is
at present a relatively small market, but a very attractive one. The Company
believes it can establish a leadership position in this emerging market where
there is no current entrenched leader. The Company expects to focus on
projects where net liabilities can be shifted to net assets through innovative
regulatory and remediation approaches.
HIGH HAZARD MANAGEMENT AND REMEDIATION. High-hazard remediation and
management services include cleanup of unexploded ordnance (UXO), humanitarian
demining, nuclear decontamination and decommissioning (D&D), chemical
demilitarization, and radioactive waste remediation. The Company's experience
and relationships position it to capitalize on the growing funding devoted to
solving these most difficult environmental problems.
KNOWLEDGE SYSTEMS AND SOLUTIONS
Knowledge Systems and Solutions services include decision support systems
(DSS), such as Geographic Information Systems (GIS), Facilities Management
Systems (FM), and Workflow Automation to assist clients with managing
geographically distributed assets (e.g., water utilities, gas transmission
companies, etc.) The Company's strategic management consulting helps clients
manage health, safety, environmental quality, and resource sustainability
issues for increased efficiency and cost effectiveness, as well as evaluate and
implement development and redevelopment options. On-line products and
services, such as Internet-based virtual communities, intranet- or
extranet-based virtual
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private networks, and other sophisticated on-line products and services help
clients more effectively collaborate, access information, and transact business
over electronic networks.
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 management,
staffing, design and implementation of major projects that may last for several
years and involve many employees in several geographic locations.
The Company's marketing efforts are directed from offices nationwide to
three client sectors: private industry; public works and local government; and
the federal government. The Company's senior professionals are responsible for
directing the execution of 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 U.S.
Department of Defense (DOD), the U.S. Environmental Protection Agency (EPA) and
the U.S. Department of Energy (DOE), 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 57%, 55% and 54% of its consolidated gross revenues
from the federal government for the years ended December 31, 1995, 1996 and
1997, respectively. Gross revenue percentages from the DOD, EPA and DOE for
each of the fiscal years are as follows:
PERCENTAGES OF CONSOLIDATED GROSS REVENUES
FOR THE YEARS ENDED DECEMBER 31
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1995 1996 1997
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DOD 24% 21% 21%
EPA 19% 18% 20%
DOE 11% 13% 11%
OTHER 3% 3% 2%
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57% 55% 54%
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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 result of its government contracting business, the
Company is, has been, and may in the future be subject to audits and
investigations by government agencies. In addition to potential damage to the
Company's business reputation, the failure by the Company to comply with the
terms of any of its government
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contracts could also result in fines, or penalties or in the Company's
suspension or debarment from future government contracts for a significant
period of time. Such fines and penalties, or the Company's suspension or
debarment could have a material adverse effect on the Company's business,
particularly in light of the importance to the Company of its work for various
government agencies.
INDUSTRY
The Company provides a full range of services for industrial clients.
Service to industrial clients provided 30% of the Company's gross revenues in
both 1996 and 1997. 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 100 companies, are
offered a wide range of consulting, construction, remediation and
redevelopment; and knowledge systems and solutions services. Market segments
served include manufacturing; chemicals and allied products, petroleum, forest
products, and utilities.
PUBLIC WORKS AND LOCAL GOVERNMENT
The Company provides consulting and construction redevelopment services to
many state and local governments and agencies. Services to public works and
local government clients provided 15% and 16% of the Company's gross revenues
in 1996 and 1997, respectively. A growing number of cities, regional
authorities, and state governments are instituting long-range programs to
update essential facilities. Because these projects require comprehensive
planning and engineering, they are expected to continue to be an important
component of the Company's business. 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 Company's 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 things, reputation, quality of service, price, expertise and local
presence. In each of its specific service areas, the Company competes with
many firms that are both larger and smaller than the Company, although no firm
currently dominates any significant portion of those service areas. Many of
these competitors have greater financial resources than the Company.
PATENTS AND TECHNOLOGY
The Company owns six patents on certain 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 $65.3 million at December
31, 1997. Additionally, the Company derives
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revenues from open order contracts and from activities related to emergency
response. 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, therefore all amounts reflected in backlog
may not be realized as revenue. 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. 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 been able to insure against most liabilities it incurs in
connection with the conduct of its 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 under the Company's commercial insurance coverage.
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.
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 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 sometimes contracts with DOE to perform remedial work at
various DOE facilities within the United States. On occasion, these contracts
may involve the handling or other disposition of radioactive materials. In
these contracts, DOE typically provides the Company with protection from
potential third party claims arising out of "nuclear
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incidents," by including an indemnification clause authorized under the Price
Anderson Act of 1988. The indemnity provides over $9 billion in "nuclear
hazards" coverage. Congress is currently considering an extension of the Price
Anderson Act, which will expire on August 1, 2002.
The Company has also developed and implemented improvements to its quality
assurance and health and safety programs. These programs establish certain
minimum requirements for all project work and provide guidance for the
development of quality assurance plans and health and safety plans on all
projects. The objective of the quality assurance program is to provide
assurance that project performance is of appropriate quality for the project
requirements. The objective of the health and safety program is to protect
project 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, 1997, the Company had approximately 1,600 employees,
many of whom had advanced degrees in a variety of technical disciplines. Of
these, 34 employees held doctorates, 284 held master's degrees, 103 were
registered professional engineers, and 17 were diplomates of the American
Academy of Environmental Engineers. The Company's ability to remain
competitive depends on its ability to attract and retain qualified personnel.
REGULATIONS
Demand for the Company's services is affected 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 Congress. These include statutes that:
o Protect the chemical, physical and biological integrity of water in the
United States (the Clean Water Act of 1977 and associated laws);
o Regulate the handling of hazardous waste and mandate state oversight of
solid waste (the Resource Conservation and Recovery Act of 1976); and,
o 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:
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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. Sites considered to be most in need of
remediation are ranked on EPA's National Priorities List (NPL). By March 1998,
some 1,259 federal and nonfederal sites were listed or proposed for the NPL,
and some 10,700 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
federal revolving loan funds through 1996 for construction grants and startup
money to build wastewater treatment plants. Additional funds were appropriated
for fiscal years 1997 and 1998. 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 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 is pursuing business opportunities related to the restoration
and development of environmentally impaired properties, sometimes referred to
as "Brownfields." To the extent it does so as an investor or lender, it and
other companies in this arena may be affected by the "Asset Conservation,
Lender Liability and Deposit Insurance Protection Act of 1996." This federal
law, and similar state laws, may limit to some degree the Company's potential
liability under CERCLA, and RCRA (and State counterparts) as related to its
brownfields work, should it ultimately need to take title to or obtain an
ownership interest in the property in connection with efforts to recover on its
loan or investment.
The Company believes that in addition to services required by CERCLA,
RCRA, CWA and CAA, other federal laws affect demand for the Company's services
in the private and public sectors. These
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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 480,000 square feet
of office space in offices located in 24 states and the District of Columbia.
Aggregate lease payments in 1997 were $15.1 million, of which $6.9 million were
subject to direct reimbursement from projects. Approximately 84,000 square
feet of such space has been subleased to third parties. These leases for
office facilities are generally for 5 years or less.
ITEM 3. LEGAL PROCEEDINGS
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 currently pending are either adequately
covered by insurance or will not result in a material adverse effect on the
financial position or results of operations of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
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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 1997 Annual Report to Shareholders in
Note 7 to the Consolidated Financial Statements on page 33 and under the
heading "Company Stock" on page 51.
ITEM 6. SELECTED FINANCIAL DATA
Information with respect to this item is incorporated by reference herein
from the information in the Company's 1997 Annual Report to Shareholders on
pages 18 and 19.
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 1997 Annual Report to Shareholders on
pages 12 to 17.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
None.
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 1997 Annual Report to Shareholders
on pages 18 to 47.
(b) Selected Quarterly Financial Data (Unaudited) are set forth in Note 16
to the Consolidated Financial Statements contained in the Company's 1997 Annual
Report to Shareholders on pages 46 and 47 and are incorporated by reference
herein.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
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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
expected to be held on May 18, 1998, under the headings "Election of
Directors", "Executive Management" and "Section 16(a) Beneficial Ownership
Reporting Compliance" and is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
Information with respect to this item is set forth in the Proxy Statement
under the heading "Executive Management" 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 "Executive Management -
Compensation Committee Interlocks and Insider Participation" and "Executive
Management - Other Relationships and Related Transactions" and is incorporated
herein by reference.
13
<PAGE> 15
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 1997 Annual Report to
Shareholders as described in Item 8 is incorporated herein by reference.
2. Financial Statement Schedule:
o Report of Independent Accountants
o 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 1997 Annual Report to Shareholders of Roy F. Weston, Inc.
and incorporated by reference into this Annual Report on Form 10-K, the
1997 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").
14
<PAGE> 16
EXHIBIT NO. DESCRIPTION
4.2 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. Incorporated
by reference to Exhibit 4.3 to the Company's Annual Report on Form
10-K for the year ended December 31, 1995.
10.1 Form of the Company's Retirement Supplement to Split Dollar Life
Insurance Agreement. Incorporated by reference to Exhibit 10(c) to the
Company's Registration Statement on Form S-1 (Registration No.
33-5914) (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 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.
10.4 Restricted Stock Agreement dated April 10, 1992, between the Company
and William J. Marrazzo. Incorporated by reference to Exhibit 10.7 to
the Company's Annual Report on Form 10-K for the year ended December
31, 1992.
10.5 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.
10.6 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.
10.7 Second Amendment to Credit Agreement dated November 7, 1996.
Incorporated by reference to Exhibit 10.7 to the Company's Annual
Report on Form 10-K for the year ended December 31, 1996.
10.8 Third Amendment to Credit Agreement dated March 18, 1997.
Incorporated by reference to Exhibit 10.8 to the Company's Annual
Report on Form 10-K for the year ended December 31, 1996.
10.9 Fourth Amendment and Joinder to Credit Agreement dated March 31, 1997.
Incorporated by reference to the Company's Quarterly Report on Form
10-Q for the quarter ended March 31, 1997.
10.10 Fifth Amendment to Credit Agreement dated as of November 13, 1997.
10.11 The Company's Retirement Income Restoration Plan, as amended.
10.12 Severance Agreement between William J. Marrazzo and the Company
effective December 3, 1996. Incorporated by reference to the
Company's Annual Report on Form 10-K for the year ended December 31,
1996.
10.13 Modification to December 3, 1996 Severance Agreement between William
J. Marrazzo and the Company effective May 1, 1997. Incorporated by
reference to the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1997.
15
<PAGE> 17
EXHIBIT NO. DESCRIPTION
- ----------- -----------
10.14 Stay Bonus Agreement between William J. Marrazzo and the Company
dated May 1, 1997. Incorporated by reference to the Company's
Quarterly Report on Form 10-Q for the quarter ended June 30, 1997.
10.15 Letter Agreement between William J. Marrazzo and the Company dated
May 22, 1997. Incorporated by reference to the Company's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1997.
10.16 Severance Agreement between Peter J. Marks and the Company dated May
22, 1997. Incorporated by reference to the Company's Quarterly Report
on Form 10-Q for the quarter ended June 30, 1997.
10.17 Severance Agreement between M. Christine Murphy and the Company dated
May 12, 1997.
10.18 Consulting Services Agreement between William L. Robertson and the
Company dated May 23, 1997. Incorporated by reference to the
Company's Quarterly Report on Form 10-Q for the quarter ended June 30,
1997.
10.19 Employment Agreement between William L. Robertson and the Company
dated as of July 14, 1997. Incorporated by reference to the Company's
Quarterly Report on Form 10-Q for the quarter ended September 30,
1997.
10.20 Elective Deferred Compensation Agreement between William L.
Robertson and the Company dated December 23, 1997.
10.21 Continuing Services/Retirement Agreement between Roy F. Weston and
the Company dated July 19, 1997. Incorporated by reference to the
Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1997.
10.22 Consulting Services Agreement between Globequest International Ltd.
and the Company for the services of Tom Harvey, dated May 23, 1997.
Incorporated by reference to the Company's Quarterly Report on Form
10-Q for the quarter ended June 30, 1997.
10.23 Consulting Services Agreement between Resource Alternatives, Inc. and
the Company for the services of Dominic J. Monetta, dated June 1,
1997. Incorporated by reference to the Company's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1997.
10.24 Travel Management Services Agreement between International Corporate
Travel Services, Inc. and the Company dated March 15, 1996.
10.25 Consulting Services Agreement between The Coventry Group, L.L.P. and
the Company dated May 2, 1997.
10.26 Consulting Services Agreement between the Coventry Group, L.L.P. and
the Company dated June 12, 1997.
10.27 Consulting/Marketing Services Agreement between Armitage Associates
L.C. and the Company dated September 1, 1997.
10.28 Consulting Services Agreement between IPAC, Inc. and the Company
dated September 1, 1997.
10.29 Stock Pooling Agreement among the Company and certain holders of the
Company's Common Stock effective January 2, 1998.
11 Computation of Basic and Diluted Earnings (Loss) per Share.
16
<PAGE> 18
EXHIBIT NO. DESCRIPTION
- ----------- -----------
13 The Company's 1997 Annual Report to Shareholders.
21 Subsidiaries of the Company.
23 Consent of Independent Accountants.
27 Financial Data Schedule.
(b) Reports on Form 8-K. On November 10, 1997 the Company filed a Form
8-K under Item 5, Other Events, which incorporated by reference the Company's
News Release dated November 10, 1997 concerning the election of two new
Directors, reductions in employee workforce and plan to improve profitability.
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
Arnold P. Borish, Esq., 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
pages 18-19 of the 1997 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 14 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 5, 1998
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, 1997:
Allowance for
Doubtful Accounts $1,510 $511 $-- $271 $1,750
YEAR ENDED
DECEMBER 31, 1996:
Allowance for
Doubtful Accounts $1,800 $291 $-- $581 $1,510
YEAR ENDED
DECEMBER 31, 1995:
Allowance for
Doubtful Accounts $1,699 $201 $-- $100 $1,800
</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: THOMAS HARVEY
Thomas Harvey
Chairman of the Board
Date: March 27, 1998
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>
THOMAS HARVEY Chairman of the Board March 27, 1998
____________________________________
Thomas Harvey
WILLIAM L. ROBERTSON President and Chief March 27, 1998
____________________________________ Executive Officer
William L. Robertson (Principal Executive
Officer)
PATRICK G. MCCANN Executive Vice President March 27, 1998
____________________________________ and Chief Operating
Patrick G. McCann Officer (Principal
Operating Officer)
WILLIAM G. MECAUGHEY Vice President and March 27, 1998
____________________________________ Chief Financial Officer
William G. Mecaughey (Principal Financial
Officer)
RICHARD ARMITAGE Director March 27, 1998
____________________________________
Richard Armitage
JESSE BROWN Director March 27, 1998
____________________________________
Jesse Brown
WAYNE F. HOSKING, JR. Director March 27, 1998
____________________________________
Wayne F. Hosking, Jr.
MAGALEN O. BRYANT Director March 27, 1998
____________________________________
Magalen O. Bryant
VICTOR E. MILLAR Director March 27, 1998
____________________________________
Victor E. Millar
</TABLE>
<PAGE> 22
<TABLE>
<CAPTION>
NAME TITLE DATE
<S> <C> <C>
DOMINIC J. MONETTA Director March 27, 1998
____________________________________
Dominic J. Monetta
KATHERINE W. SWOYER Director March 27, 1998
____________________________________
Katherine W. Swoyer
THOMAS M. SWOYER, JR. Director March 27, 1998
____________________________________
Thomas M. Swoyer, Jr.
A. FREDERICK THOMPSON Director March 27, 1998
____________________________________
A. Frederick Thompson
ROY F. WESTON Director March 27, 1998
____________________________________
Roy F. Weston
</TABLE>
<PAGE> 23
Current as of 06/11/97 Exhibit 3.2
Last amendment: 06/11/97
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> 24
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 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
2
<PAGE> 25
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> 26
ARTICLE IV - DIRECTORS
1. The business of this Company shall be managed by its Board of
Directors, the members of which 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.
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
4
<PAGE> 27
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. The Board of Directors shall have the authority, by resolution,
to fix the compensation of Directors for their services as
Directors.
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 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.
5
<PAGE> 28
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 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
6
<PAGE> 29
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 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.
7
<PAGE> 30
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 facsimile
or otherwise, by the Chairman of the Board or President and the
Secretary or Assistant Secretary and shall bear the corporate
seal. In case any officer who has executed, or whose facsimile
signature has been placed upon, any share certificate shall have
ceased to be such officer, because of death, resignation or
otherwise, before the Certificate is issued, it may be issued by
the Company with the same effect as if the officer had not
ceased to be such at the time of its issue.
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 Thousand Nine Hundred
Fifty-Three (Act No. 1), and its amendments and supplements.
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
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<PAGE> 31
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.
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
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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.
6. All engineering decisions pertaining to any project or
engineering activities in the State of Washington, or any other
state where the laws require that the Board of Directors
designate a responsible engineer, shall be made by designated
engineer in responsible charge named in the resolution of the
Board of Directors.
ARTICLE X - ANNUAL STATEMENT
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<PAGE> 33
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.
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,
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<PAGE> 34
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.
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.
12
<PAGE> 1
Exhibit 10.10
FIFTH AMENDMENT TO CREDIT AGREEMENT
This Fifth Amendment to Credit Agreement ("Amendment") dated as of
November 13, 1997 by and among Roy F. Weston, Inc. ("Weston"); the Subsidiaries
of Weston listed on the signature pages hereto (Weston and such Subsidiaries
are sometimes referred to individually as a "Borrower" and collectively as the
"Borrowers"); CoreStates Bank, N.A. ("CoreStates"), First Union National Bank,
successor by merger to First Fidelity Bank, N.A., ("First Union") and PNC Bank,
National Association ("PNC") (CoreStates, First Union and PNC are each referred
to individually as a "Bank" and collectively as the "Banks"); and CoreStates
Bank, N.A., as agent for the Banks hereunder (the "Agent").
BACKGROUND
A. Borrowers, Banks and Agent are currently parties to a certain Credit
Agreement dated March 18, 1994, as amended from time to time ("Credit
Agreement") whereby Banks established a credit facility under which loans and
letters of credit were made available from time to time for the benefit of
Borrowers. All capitalized terms used herein without further definition shall
have the meanings ascribed thereto in the Credit Agreement.
B. Borrowers and Banks have agreed upon certain modifications to the
financing arrangements set forth in the Credit Agreement and desire to set
forth their understandings in writing in this Amendment.
NOW, THEREFORE, the parties hereto, with the foregoing Background
incorporated by reference, intending to be legally bound, promise and agree as
follows:
<PAGE> 2
1. Status of Current Facility. Borrowers and Banks acknowledge and agree
that as of the date hereof there are no outstanding Loans and the aggregate face
amount of all outstanding Letters of Credit (the "Outstanding Letters of
Credit") is $5,786,002.42 (each of which outstanding Letters of Credit is set
forth on Schedule 1 attached hereto and made part hereof). Borrowers
acknowledge and agree that each of them is unconditionally obligated, without
setoff, defense, deduction or counterclaim, to reimburse Banks with respect to
any and all drawings which may from time to time be made with respect to the
Letters of Credit.
2. Amendments.
2.1 The Credit Agreement is hereby amended by deleting clause (A) in the
definition of both "Commitment Termination Date" and "Maturity Date" in Section
1.01 thereof and replacing such clause with the following:
"(A) January 15, 1998."
2.2 The Credit Agreement is hereby amended to reduce the definition of
"Total Commitments" contained in Section 1.01 thereof from $25,000,000 to
$8,857,035; provided, however, that the "Total Commitments" shall be further
reduced by the amount of the face amount of each Outstanding Letter of Credit,
other than the Specified Credit (as defined in Section 3.4 below), which
expires or is returned to Agent.
2.3 The Credit Agreement is hereby amended by modifying Subsection 2.02(A)
thereof to provide that outstanding Line Advances made after the date hereof
shall not at any time exceed $3,000,000, and in no event may any Line Advances
be requested or made available unless Borrowers have demonstrated to Agent's
reasonable satisfaction that they have no other cash on
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hand or investments not otherwise pledged or restricted as set forth, or as
otherwise described, on Schedule 2.3 attached hereto.
2.4 The Credit Agreement is hereby amended by modifying Section 2.01
thereof to provide that additional Letters of Credit may only be issued after
the date hereof under the Credit Agreement (i) if the Specified Credit (as
defined in Section 3.4 below) has been canceled and returned to the Agent, in
which case, additional Letters of Credit may be issued provided that each such
Letter of Credit is fully collateralized with additional Pledged Collateral (of
the kind described in Section 3.2 below) in the amount of such Letter of
Credit, or (ii) if the Specified Credit has not been canceled and returned to
the Agent, then additional Letters of Credit may be issued provided that the
aggregate face amount of all such issued and outstanding Letters of Credit plus
the amount of outstanding Line Advances shall not at any time exceed
$3,000,000. Notwithstanding any other provision hereof, in no event shall the
aggregate face amount of all Letters of Credit issued after the date hereof and
outstanding at any one time exceed $3,000,000.
2.5 The Credit Agreement is hereby further amended to provide that all
Loans which may be outstanding under the Credit Agreement after the date hereof
shall be Base Rate Loans and that no LIBOR Loans shall hereafter be available.
2.6 Section 5.05(A) of the Credit Agreement is hereby amended by deleting
clauses (5), (6), (8) and (9) thereof in their entirety and replacing only
clause (5) with the following:
(5) [t]he interests in computer and office equipment
hereafter acquired by any Borrower which is/are the subject
of capitalized leases and/or operating leases representing an
aggregate equipment cost not to exceed $2,000,000,
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2.7 Section 5.14 of the Credit Agreement is hereby amended by deleting
clause (E) in its entirety.
2.8 Section 5.16 of the Credit Agreement is hereby amended by deleting
clause (2) in its entirety and replacing it with the following:
(2) So long as no Event of Default has occurred and is
continuing or would occur after giving affect thereto, (a)
the sale of TIS-5 (a transportable rotary kiln hazardous
waste incineration system); (b) the sale and subsequent
leaseback (by way of an operating lease) of specified
computer equipment (with a book value not to exceed
$1,300,000); and (c) the sale of other assets in the ordinary
course of Borrowers' business, provided that the proceeds
(cash and noncash) of all such sales are reasonably
equivalent to the fair market value of such assets at the
time of sale and that the aggregate amount of the proceeds
from all such sales from the date hereof through the Maturity
Date shall not exceed $500,000;
2.9 Section 5.23 of the Credit Agreement is hereby amended by deleting
clause (g) thereof in its entirety.
2.10 Section 5.24 of the Credit Agreement is hereby amended by deleting
clause (C) thereof in its entirety and deleting clause (D) in its entirety and
replacing it with the following:
(D) other loans from time to time in the ordinary course of
Borrowers' business to a joint venture(s) in which a Borrower
holds at least a 50% equity interest not exceeding the
principal sum of $500,000 in the aggregate as to all such
loans.
2.11 Section 5.26 of the Credit Agreement is hereby amended by deleting
clause (4) thereof and replacing it with the following:
(4) Indebtedness created to finance the acquisition of the
property hereafter acquired by any Borrower as permitted
pursuant to Section 5.05(A)(5) hereof.
2.12 Section 6.01 of the Credit Agreement is hereby amended by deleting
clause (E) in its entirety and replacing it with the following:
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(E) If any Borrower shall fail to perform, comply
with or observe any other term, covenant or agreement
contained in this Agreement on its part to be performed,
complied with or observed; provided however that with respect
to any Borrower's failure to perform, comply with, or observe
the covenants contained in Sections 5.02, 5.03, 5.04, 5.08,
5.10, 5.15 and 5.22 above, Borrowers shall have 15 days from
the earlier to occur of (1) any Borrower's having knowledge of
the occurrence of such failure to perform, comply with, or
observe any of such covenants or (2) Agent's giving such
Borrower notice of such occurrence to remedy such failure.
2.13 The Credit Agreement is hereby amended to add a new clause (i) to
Section 5.23 of the Credit Agreement to read as follows:
"Bonds issued by corporations incorporated under
the laws of the United States of America with an
investment grade of AA or better as determined by
Moody's or S&P."
2.14 The Credit Agreement is further amended to provide that in no event
may Borrowers lease equipment (whether through a capitalized lease or operating
lease) except as specifically permitted by Section 5.05(A)(5) of the Credit
Agreement, as amended.
3. Collateral.
3.1 As collateral security for all existing and future obligations and
liabilities of Borrowers to Banks, whether Line Advances, reimbursement
obligations with respect to Letters of Credit, or otherwise, principal,
interest, fees or expenses, and whether due or to become due, matured or
contingent, joint or several, (collectively, the "Bank Obligations"), each
Borrower hereby grants to Agent, for the pro rata benefit of Banks, a security
interest in and to all of its existing and future accounts receivable, together
with all books and records related thereto, and all proceeds thereof.
Borrowers represent and warrant that no other Person holds any lien or security
interest in any of any Borrower's existing or future accounts receivable (other
than Reliance Insurance Company [or its affiliates] which has issued a surety
bond or bonds on behalf of a Borrower on the projects listed on Schedule 3.1
attached hereto ["Surety Projects"] and by
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<PAGE> 6
reason of such bond asserts a prior interest by right of subrogation in
and only in those receivables arising from the Surety Projects and a security
interest [which Borrowers believe to be presently unperfected] in all other
existing and future accounts receivable of Borrowers) and covenant and agree
that they shall not grant or permit to exist any lien or security interest in
favor of any other Person in any of any Borrower's existing or future accounts
receivable. Borrowers do not believe financing statements have been executed
on behalf of Borrowers in favor of the above-described sureties and agree that
they will not execute financing statements in favor of such sureties unless
Agent has notified Borrowers that Agent has received an intercreditor agreement
from such sureties acceptable to Agent as required by paragraph 10.3 below.
3.2 As collateral security for the Bank Obligations, Borrowers hereby
pledge, assign and grant a security interest to Agent for the pro rata benefit
of Banks in and to unrestricted cash and investment property of the type listed
in Section 5.23 of the Credit Agreement (excluding clause (f) therein) totaling
on the date hereof and at all times hereafter $5,500,000, which cash and
investment property ("Pledged Collateral") shall be held in a segregated
account with Delaware Trust Capital Management or such other Person acceptable
to Agent ("Securities Depository") subject to the terms hereof and to a Pledge
Agreement to be executed and delivered to Agent contemporaneously herewith by
each Borrower having an interest in any such Pledged Collateral. Borrowers
shall also cause the Securities Depository to execute and deliver to Agent a
Control Agreement acceptable to Agent with respect to the handling and
disposition of any such Pledged Collateral.
3.3 Borrowers and Banks acknowledge that notice of nonrenewal or request
for cancellation has been sent or will be sent promptly after the date hereof
to the beneficiaries of those Letters of Credit listed on Schedule 3.3 attached
hereto and made part hereof ("Noticed
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Credits"). To the extent that any or all of the Noticed Credits are not
canceled and returned to Agent prior to November 15, 1997, additional Pledged
Collateral shall on such date be pledged to Agent under the same terms and
conditions as the Pledged Collateral granted to Agent contemporaneously
herewith, in dollar amount equal to the aggregate face amount of all Noticed
Credits not so returned.
3.4 Borrowers agree to use their best efforts to obtain the cancellation
and return as soon as possible of that certain Letter of Credit No. 519867 in
the original face amount of $3,006,700 ("Specified Credit") issued by Agent
under the Credit Agreement. If the Specified Credit or any other Outstanding
Letter of Credit, other than the Noticed Credits, is canceled and returned to
Agent, or reduced (evidenced by a writing acceptable to Agent), Pledged
Collateral in the amount of each such Letter of Credit so returned or the
amount of the reduction of each such Letter of Credit shall be returned to
Borrowers so long as no Event of Default is then outstanding under the Credit
Agreement.
3.5 Borrowers represent and warrant that the chief executive office of
each Borrower is located on Schedule 3.5 attached hereto and made part hereof.
Borrowers covenant that such office shall not be changed without at least 20
days prior written notice to Agent.
3. Collateral Audit. Agent shall be entitled to engage an independent
accounting or auditing firm to complete a collateral audit of Borrowers'
accounts receivable (the scope of which is to be determined by Agent), which
audit is to be completed by November 21, 1997 and is to be performed at
Borrowers' sole expense, it being anticipated that the cost of such audit
should be approximately $10,000.00 plus expenses. Agent shall endeavor to give
notice to Borrowers if the cost of such audit will exceed the foregoing amount,
provided that Agent's failure to give such
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<PAGE> 8
notice shall not result in any liability on the part of Agent and/or Banks nor
shall it relieve Borrowers of their obligation to pay for the entire cost of
such audit.
4. Consultant. So long as the Bank Obligations remain outstanding,
Borrowers shall continue to engage Coopers & Lybrand, or such other consultant
as Borrowers may select who may be reasonable acceptable to Banks, to assist
Borrowers in connection with their finances and business operations.
5. Business Plan. Promptly following the execution and delivery of this
Amendment, Borrowers, with the assistance of their independent consultant,
shall begin development and shall thereafter diligently work on completion of a
comprehensive business plan for their next fiscal year, which shall be
delivered to Agent on December 15, 1997.
6. Additional Reporting Requirements.
7.1 Borrowers shall, with the assistance of their independent consultant,
prepare and deliver to Agent, contemporaneously herewith, a 13-week cash flow
projection. Borrowers, with the assistance of their independent consultant,
shall update the projection monthly, on a rolling basis as of the first Friday
of each calendar month or more frequently if requested by Agent to include the
upcoming 13 week period. In addition, Borrowers shall deliver to Agent, and
each Bank, weekly, on Friday of each week, the actual cash flow results with a
comparison to the projections, for the week immediately preceding the week in
which such results are delivered.
7.2 In addition to all other reports required to be provided by Borrowers
to Agent, Borrowers shall forward to Agent, and each Bank, (a) internally
prepared monthly financial statements within 30 days following the end of each
calendar month, and (b) quarterly reporting, to be prepared with the assistance
of Borrowers' independent consultant, to include an
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<PAGE> 9
operating review of each of Borrowers' divisions, with comparison of
actual to projections, utilization rates, multipliers and backlog.
7. Waivers. Borrowers represent and warrant that these Events of Default
listed on Schedule 8 attached hereto and made part hereof are presently
outstanding under the Credit Agreement ("Existing Events of Default"). In
consideration of the amendments and undertakings set forth in this Amendment,
Banks agree to (a) waive the Existing Events of Default and (b) suspend for the
period of October 1, 1997 through January 15, 1998 the measurement of those
covenants set forth in Section 5.17 (Net Worth) and Section 5.20 (Cash, Cash
Equivalents and Marketable Securities) of the Credit Agreement. No waiver or
covenant suspension set forth in this paragraph shall apply to any period or
provision other than as expressly set forth above and nothing herein contained
shall obligate Banks to extend or provide any additional waiver or covenant
suspension.
8. Amendment Fee. In consideration of the amendments and undertakings set
forth herein, Borrowers shall pay to Agent, for the ratable benefit of each Bank
in accordance with each Bank's respective Commitment Percentage, a fully earned,
nonrefundable amendment fee of $39,365, due and payable contemporaneously with
the execution hereof.
9. Miscellaneous.
10.1 Each Borrower represents and warrants to the Banks and Agent that it
has taken all necessary corporate action to authorize the execution, delivery
and performance of this Amendment and the Pledge Agreement. This Amendment and
the Pledge Agreement are, or when executed by the Borrowers and delivered to the
Agent will be, fully executed and constitute valid and legally binding
obligations of the Borrowers, enforceable against each Borrower in accordance
with their respective terms. Each Borrower hereby ratifies, confirms and
restates each
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<PAGE> 10
of the representations and warranties of the Borrowers set forth in
Article IV of the Credit Agreement as being true and correct on the date
hereof, except as modified by the Fourth Amendment and Joinder to Credit
Agreement dated as of March 28,1997, and as set forth on Schedule 10.1 attached
hereto. Also included on Schedule 10.1 is a list of all outstanding guarantees
issued by any Borrower for the account of any other Person.
10.2 As a condition to the effectiveness of this Amendment, the Borrowers
shall cause to be delivered to Agent (for the benefit of Banks) the following
(all to be in form and substance satisfactory to Agent and its counsel);
(a) this Amendment, fully executed by each of the Borrowers, Banks and
Agent;
(b) the Pledge Agreement, fully executed by the Borrowers;
(c) the Control Agreement, executed by the Securities Depository;
(d) a certificate from the secretary of each Borrower (i) certifying true
and correct copies of the applicable Borrower's corporate resolutions
authorizing the execution, delivery and performance of this Amendment and the
Pledge Agreement and, (ii) certifying that no amendment, replacement or
termination of the Articles of Incorporation and Bylaws (or any portion
thereof) of each Borrower which accompanied the secretary's certificate dated
March 28, 1997 (which accompanied execution of the Fourth Amendment and Joinder
to Credit Agreement ("Fourth Amendment")) has occurred (other than amendments
not affecting the power or authority of any Borrower to execute, deliver or
perform under this Amendment) and that the new Incumbency Certificates for each
Borrower delivered to Agent in connection with this Amendment are unchanged
and in effect;
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<PAGE> 11
(e) an opinion of counsel from counsel to each of the Borrowers;
(f) a copy of draft internally prepared September 30, 1997 financial
statements for Borrowers (reflecting covenant compliance except as set forth on
Schedule 8 attached hereto);
(g) current projections of fourth quarter 1997 financial performance;
(h) cash flow projection as required by paragraph 7.1 above; and
(i) payment of (1) the Amendment Fee referenced in paragraph 9 above and
(2) the Commitment Fee due for the period of July 1, 1997 through the
date hereof in the agreed amount of $10,635, in good cleared funds.
10.3 As a precondition to the making of any Line Advances or the issuing
of any additional Letters of Credit, Borrowers shall cause to be delivered to
Agent an intercreditor/subordination agreement from Reliance Insurance Company
and each other entity, if any, who has or may issue surety bonds in conjunction
with the Surety Projects, in form and substance satisfactory to Agent and its
counsel, pursuant to which such entities shall subordinate all liens and
security interests they may have in and to the Collateral described in Section
3 hereof other than those accounts receivable of Borrowers relating directly to
the Surety Projects.
10.4 This Amendment may be executed in any number of counterparts, each of
which when so executed shall be deemed to be an original, and all of which
taken together shall constitute one and the same agreement.
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10.5 This Amendment and the documents, instruments and agreements executed
and delivered pursuant hereto constitute the entire agreement among the parties
relating to the specific subject matter contained in this Amendment.
10.6 This Amendment shall amend and is incorporated into the Credit
Agreement. In the event of any express inconsistency between the terms hereof
and the terms of the Credit Agreement, the terms hereof shall control. Except
as expressly amended by this Amendment, all of the terms and conditions of the
Credit Agreement remain in full force and effect.
______________________________________________________________________________
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IN WITNESS WHEREOF, the parties have caused this Fifth Amendment to Credit
Agreement to be executed by their respective duly authorized officers as of the
date first above written.
ROY F. WESTON, INC.
Attest:___________________ By:_______________________________
Name:_____________________________
Title:____________________________
ROY F. WESTON OF NEW YORK, INC.
Attest:___________________ By:_______________________________
Name:_____________________________
Title:____________________________
ROY F. WESTON (DELAWARE), INC.
Attest:___________________ By: ______________________________
Name:_____________________________
Title:____________________________
ROY F. WESTON (IPR), INC.
Attest:___________________ By:_______________________________
Name:_____________________________
Title:____________________________
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TRANS-THERMAL SYSTEMS, INC.
Attest:___________________ By:_______________________________
Name:_____________________________
Title:____________________________
ROY F. WESTON OF MISSOURI, INC.
(f/k/a Roy F. Weston of Idaho, Inc.)
Attest:___________________ By:_______________________________
Name:_____________________________
Title:____________________________
WESTON (A BUSINESS TRUST)
Attest:___________________ By:_______________________________
Name:_____________________________
Title:____________________________
WESTON ENVIRONMENTAL METRICS, INC.
(f/k/a Weston-Gulf Coast, Inc.)
Attest:___________________ By:_______________________________
Name:_____________________________
Title:____________________________
WESTON INTERNATIONAL HOLDINGS, INC.
Attest:___________________ By:_______________________________
Name:_____________________________
Title:____________________________
S-2
<PAGE> 15
WESTON OF NEW JERSEY, INC.
Attest:___________________ By:_______________________________
Name:_____________________________
Title:____________________________
WESTON INTERACTIVE, INC.
(A Delaware corporation)
Attest:___________________ By:_______________________________
Name:_____________________________
Title:____________________________
WESTON INTERNATIONAL INC.
Attest:___________________ By:_______________________________
Name:_____________________________
Title:____________________________
PNC BANK, NATIONAL ASSOCIATION
By:_______________________________
Name:_____________________________
Title:______________________________
FIRST UNION NATIONAL BANK
By:_______________________________
Name:_____________________________
Title:____________________________
S-3
<PAGE> 16
CORESTATES BANK, N.A.,
(individually and as Agent)
By:_______________________________
Name:_____________________________
Title:____________________________
S-4
<PAGE> 1
Exhibit 10.11
ROY F. WESTON, INC.
RETIREMENT INCOME RESTORATION PLAN
AS AMENDED AND RESTATED EFFECTIVE JANUARY 1, 1997
<PAGE> 2
ROY F. WESTON, INC.
RETIREMENT INCOME RESTORATION PLAN
TABLE OF CONTENTS
<TABLE>
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SECTION PAGE
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<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 4
- Disabled Participant 5
- Early Retirement Date 5
- Effective Date 5
- Eligible Employee 5
- Employee 5
- Employer 5
- ERISA 6
- Fiduciary 6
- Hours of Service 6
- Normal Annual Pension 8
- Normal Retirement Age 8
- Normal Retirement Date 8
- Participant 8
- Participating Employer 9
- Plan 9
- Plan Year 9
- Retirement 9
- Retirement Income Plan 9
- Spouse (or 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
ROY F. WESTON, INC
RETIREMENT INCOME RESTORATION PLAN
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION PAGE
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<S> <C> <C>
PLAN BENEFITS 12
4.1 Normal Retirement 12
4.2 Deferred Retirement 13
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 Voting and Meetings 22
8.3 Expenses 22
8.4 Claims Procedure 22
8.5 Other Powers and Duties 24
8.6 Rules and Decisions 25
8.7 Facility of Payment 25
8.8 Indemnification 26
MISCELLANEOUS 27
9.1 Nonguarantee of Employment 27
9.2 Nonalienation of Benefits 27
9.3 Action by Company 27
9.4 Inability to Locate Payee 28
9.5 Applicable Law 28
</TABLE>
(ii)
<PAGE> 4
ROY F. WESTON, INC.
RETIREMENT INCOME RESTORATION PLAN
INTRODUCTION
Roy F. Weston, Inc. (the "Company") 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"). The Company amended the Retirement
Income Plan to provide for the cessation of benefit accrual effective June 30,
1997. Accordingly, the Company hereby amends this Plan to provide for a
corresponding cessation of benefit accrual effective June 30, 1997 and to make
certain changes in the Plan's administrative provisions.
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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 June 30, 1997 or, if earlier, 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. A Participant's Accrued Annual Pension shall be fixed and frozen
on June 30, 1997.
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 Joint Administrative Committee of the
Roy F. Weston, Inc. Employee Benefit Plans appointed by the Company's Chief
Executive Officer.
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 Date means the first day on which all conditions have
been met which entitle the Participant to such benefit.
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.
2
<PAGE> 6
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"). For the 1997 Plan Year, Compensation
means such income paid through June 27, 1997. 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. For
the Plan Year beginning January 1, 1997, Compensation shall be limited to 50%
of the annual limit for 1997.
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
3
<PAGE> 7
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
(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. No individual who was not a Participant in the Retirement Income
Plan before July 1, 1997 shall be an Eligible Employee.
Employee means any individual employed by the Employer.
4
<PAGE> 8
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.
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
5
<PAGE> 9
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 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.
6
<PAGE> 10
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.
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. No person who was not a Participant
on June 30, 1997 shall become a Participant.
Participating Employer means any entity in which the Company owns directly
or indirectly at least 80% of the equity interests on January 1, 1997.
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 (or Surviving Spouse) means the Spouse or Surviving Spouse of the
Participant.
Taxable Wage Base means, with respect to any Plan Year, the contribution
and benefit base under the Social Security Act for that Plan
7
<PAGE> 11
Year; provided, however, for the 1997 Plan Year, the term shall mean 50% of
such amount for 1997.
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 and
before January 1, 1997 in which he/she has completed 2,000 Hours of Service
with the Employer. For the 1997 Plan Year, a Participant shall be credited
with a Year of Credited Service if he/she completes 1,000 Hours of Service with
the Employer prior to July 1, 1997. 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.
8
<PAGE> 12
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.
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<PAGE> 13
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 through June 30, 1997
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.
A Participant's Accrued Annual Pension shall be fixed and frozen as of
June 30, 1997. No Participant shall accrue any additional benefit after that
date.
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
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<PAGE> 14
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 earlier of June 30,
1997 or the date of his/her early retirement hereunder; or
(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.
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4.4 Disability Benefit.
(a) (i) A Participant who is Disabled shall continue to accrue benefits
hereunder through June 30, 1997 as if (A) the period of time between
the date of his/her Disability and the earliest of (i) his/her recovery
from Disability, (ii) June 30, 1997 and (iii) 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
earliest of (i) his/her recovery from Disability, (ii) June 30, 1997
and (iii) 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 the earlier of June 30, 1997 or his/her Normal
Retirement Date, he/she shall continue to participate subject to the
terms of the Plan.
(c) If a Disabled Participant recovers and does not resume employment with
the Employer prior to the earlier of June 30, 1997 or 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
earlier of June 30, 1997 or the date of his/her recovery.
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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, 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
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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 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.
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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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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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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 distribute such
benefits at the time and in the manner they would have been distributed if the
Plan had not terminated.
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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 and for
discharging the statutory reporting, disclosure and other duties of a "plan
administrator" under the Code, ERISA or other applicable law. The Board of
Directors shall have the authority to amend, curtail or terminate, in whole or
in part, this Plan; provided, however, the Board of Directors by duly
authorized resolution may delegate any or all of its powers under the Plan to a
committee of the Board of Directors or to any designated officer or committee
of officers of the Employer. The Administrative Committee shall have the
responsibility for the administration of this Plan as specifically described
herein; provided, however, the Administrative Committee may delegate any of its
duties or responsibilities to one or more persons or entities, as it deems
appropriate. 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 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.
8.3 Expenses. The Employer shall pay all expenses authorized and incurred
by the Administrative Committee in the administration of the Plan.
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8.4 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.
(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.
(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
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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 initial 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 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.
8.5 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;
20
<PAGE> 24
(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 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.
8.6 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.
8.7 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 or to his/her
legal representative or to a relative or friend of such person for his/her
benefit.
21
<PAGE> 25
8.8 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.
22
<PAGE> 26
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.
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 its delegee. Any
Employer other than the Company which participates in this Plan shall be deemed
to accept any action of the Board of Directors or its delegee.
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
23
<PAGE> 27
Pennsylvania, except to the extent superseded, only when required, by ERISA as
in effect from time to time.
EXECUTED this 7th day of July, 1997.
ROY F. WESTON, INC.
Attest:
By: /s/ W. L. Robertson
President
By: A. P. Borish
Secretary
(Corporate Seal)
24
<PAGE> 1
EXHIBIT 10.17
ROY F. WESTON, INC.
SEVERANCE AGREEMENT
Severance Agreement ("Agreement") made May 12, 1997
between Roy F. Weston, Inc., a Pennsylvania corporation, ("Weston") and
M. Christine Murphy ("Murphy").
BACKGROUND
Murphy is currently Weston's Executive Vice President and Chief Financial
Officer.
Weston and Murphy have a written agreement with respect to Murphy's
employment ("Full Time Employment Agreement") dated as of September 4, 1990,
which is attached hereto as Exhibit A.
Weston and Murphy have entered into (i) seven separate Non-Qualified Stock
Option Agreements covering grants made on each of June 10, 1991, March 31,
1992, February 8, 1993, February 14, 1994, February 13, 1995, February 26, 1996
and February 18, 1997, respectively, attached hereto as Exhibits B-1 through
B-7, and (ii) a Supplemental Retirement Agreement dated as of December 31,
1990, attached hereto as Exhibit C. The agreements referred to in the
preceding sentence are collectively referred to as the "Benefit Agreements".
As a result of the change in the composition of Weston's Board of
Directors, Weston and Murphy agree that it would serve the best interests of
each to provide Murphy with certain
<PAGE> 2
additional benefits in consideration of Murphy's agreement to terminate her
employment with Weston.
2
<PAGE> 3
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 May 9, 1997, Murphy shall resign from her
employment with Weston and from her position as Weston's Executive Vice
President and Chief Financial Officer.
2. Severance Benefits and Payment Conditions. In consideration of
Murphy's resignation, Murphy shall receive the severance benefits set forth
herein provided Murphy satisfies each of her agreements and undertakings under
Sections 3 and 4 hereof. Murphy's entitlements under the Benefit Agreements
and any employee benefit plan, including Weston's vacation plan, applicable to
a class of Weston employees which includes Murphy shall be as provided for
therein without regard to this Agreement, except as expressly provided under
Section 2 or 3 hereof. The severance benefits under this Agreement are as set
forth below:
(a) Salary Continuation. Weston shall pay Murphy at the rate of $15,340
per month for nine months, effective as of May 10, 1997 and ending
February 9, 1998. Weston shall make installment payments to Murphy on
its regular payroll dates during such nine-month period. If Murphy
dies before the last
3
<PAGE> 4
payment, the remaining payments shall be paid to her estate. The
salary continuation payments hereunder shall be in lieu of any benefit
or amount otherwise payable on account of employment termination under
any Weston severance plan or program or the Full Time Employment
Agreement.
(b) Automobile. Weston shall permit Murphy to use the automobile which it
currently has under lease for her use, and shall pay expenses
associated therewith that it currently pays, until November 9, 1997.
(c) Salary-At-Risk. Weston shall pay Murphy the amount she earned under
its Salary-At-Risk Program for the calendar quarters ended March 31,
1997 and June 30, 1997, if any. Weston shall make the payment on or
about the date Weston makes Salary-At-Risk payments to participating
employees.
(d) Supplemental Retirement Agreement. The annual amount payable under the
Supplemental Retirement Agreement commencing at age 65 shall be
$12,000. For purposes of the Supplemental Retirement Agreement,
Murphy's termination shall be treated as an involuntary termination
which is not for cause.
(e) Medical Benefits. Weston shall provide medical, dental and
prescription plan benefits for Murphy on the same basis as in effect
for active employees until February 9, 1998 or until she sooner elects
that such coverages cease. After such period, Murphy may elect
continuation coverage completely at her own expense as provided by law.
4
<PAGE> 5
(g) Outplacement. Weston shall provide Murphy $20,000 for outplacement
services, as designated in writing by Murphy, and if no such
designation has been furnished by Murphy by June 8, 1997, Weston shall
pay the sum of $20,000 to Murphy.
3. Murphy's Agreements and Undertakings.
(a) Cooperation Requirement. During the severance period (May 10, 1997
through February 9, 1998), at Weston's reasonable request, Murphy shall
provide Weston such information pertaining to her employment with
Weston as she may have and assist Weston to transfer her duties to such
successor or successors as Weston may designate. Weston shall
reimburse Murphy for all reasonable expenses she incurs in fulfilling
her 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
Supplemental Retirement Agreement, shall terminate and Weston shall
have all of the rights and remedies provided for in Section 10 of the
Full-Time Employment Agreement as well as restitution of payments made
or the cost of benefits provided hereunder if Murphy, without Weston's
prior written approval, either directly or indirectly, for her own
account or for the account of another person or entity, for a period of
two years from and after May 9, 1997,
(i) acquires or holds a 5% equity or profit interest in any competitor
of Weston or any "Weston affiliate"
5
<PAGE> 6
(the terms "competitor" and "Weston affiliate" are defined below in
3(b)(iii)).
(ii) solicits any environmental consulting, remediation or related
business from any person or entity that was at any time during
the two years immediately preceding May 9, 1997 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 similar in nature (in whole or
in part) to services Murphy rendered to Weston or any "Weston
affiliate" at any time during the two years immediately preceding
May 9, 1997. For this purpose a competitor is any person or
entity that performs environmental consulting, remediation or
related services.
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 covenant of Section 8 of the Full-Time Employment Agreement,
except as provided under Section 10 thereof. This Section replaces the
non-competition provision of Section 13 of Supplemental Retirement Agreement.
6
<PAGE> 7
(c) Release. Murphy and Weston shall deliver a release to each other in
the form attached hereto as Exhibit D.
4. Mutual Agreement and Undertaking. Weston and Murphy agree that each
shall refrain from any communication of any kind or in any form which could
reasonably be construed as detrimental to the other and, with respect to
Murphy's communications, detrimental to Weston's directors, officers or
employees. In the course of any legal or administrative proceedings both
parties shall at all times tell the truth. In addition, Weston agrees to
provide Murphy with a letter of reference in the form attached hereto as
Exhibit E.
5. 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.
6. 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 Murphy, or
any executor, administrator, heir, legatee, distributee, relative or any other
person or entity, whether or not in being, claiming under Murphy by virtue of
this Agreement, and none of the rights or benefits contemplated by this
Agreement shall be
7
<PAGE> 8
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.
7. Taxes. Weston shall withhold from payments to Murphy 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.
8. General Obligation. The rights and benefits of Murphy hereunder shall
be solely those of an unsecured creditor of Weston.
9. 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.
10. Modification. This Agreement shall not be modified or amended except
by written instrument duly executed by Weston and Murphy.
8
<PAGE> 9
11. 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.
12. 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 Murphy, to Murphy's
address as shown on Weston's books, and if to Weston, addressed to Weston's
Chief Executive Officer at Weston's principal business office located at One
Weston Way, West Chester, Pennsylvania 19380-1499 or such other address as
Weston or Murphy may designate in writing.
13. 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.
14. Binding Agreement. This Agreement shall inure to the benefit of and
be binding upon Weston and its successors and upon Murphy, her heirs and legal
representatives. This Agreement shall not be assignable by Murphy and shall be
assignable by Weston only to a person or entity which may become a successor in
9
<PAGE> 10
interest to Weston and which is bound hereby.
15. 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.
16. 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.
17. No Changes. This Agreement represents the entire agreement between the
parties with respect to the subject matter hereof and supersedes any and all
prior agreements and undertakings, written or oral.
IN WITNESS WHEREOF, Weston has caused this Agreement to be executed by its
duly authorized officers, and Murphy has hereunto set her hand and seal as of
the day and year first above written.
ATTEST: ROY F. WESTON, INC.
_____________________________ By:_____________________________
Secretary
(SEAL)
________________________________
10
<PAGE> 11
M. Christine Murphy
11
<PAGE> 1
Exhibit 10.20
ROY F. WESTON, INC.
ELECTIVE DEFERRED COMPENSATION AGREEMENT
This Elective Deferred Compensation Agreement (hereinafter called
"Agreement") is made the 23rd day of December, 1997 by and between ROY F.
WESTON, INC., a Pennsylvania corporation with its principal business office
located at One Weston Way, West Chester, Pennsylvania (hereinafter called
"Employer") and WILLIAM L. ROBERTSON (hereinafter called "Employee").
BACKGROUND
Employee is a key employee of Employer. Employee desires to defer receipt
of certain portions of his compensation. As an additional inducement to
Employee to continue to render services to Employer, Employer agrees to provide
deferred compensation benefits to Employee under the terms and subject to the
conditions hereinafter set forth.
AGREEMENT
NOW, THEREFORE, the parties hereto, intending to be legally bound hereby,
do hereby mutually agree as follows:
1. Deferral Election. For each calendar year of Employee's employment,
Employee may file with Employer an
<PAGE> 2
election in writing on the Deferral Election Form attached hereto, to defer all
or part of his compensation for such year. The election must be filed before
January 1st of the calendar year to which it pertains. Once made, an election
shall be irrevocable for the calendar year to which it pertains.
2. Accounting. Employer shall maintain a deferred compensation account
for Employee and shall add to such account the amount of compensation that
Employee elects to defer on the date that Employer otherwise would have paid
the compensation to Employee.
3. Earnings Adjustment. On a regular basis, Employer shall credit or
debit Employee's deferred compensation account as if the account were invested
in one or more investments funds determined as hereafter provided. Unless
Employer and Employee otherwise agree, the universe of available funds shall be
those which The Vanguard Group sponsors that are made available to participants
in Employer's Retirement Savings Plan. Employer shall establish procedures for
Employee to designate the specific fund or funds he desires to have applied and
for Employee to change such designation from time to time.
4. Distribution. Employer shall distribute Employee's deferred
compensation account to him in one lump sum on the earlier of a date Employer
selects (i) in January of 2001 or (ii) in the calendar month following the
month Employee's employment with Employer terminates for any reason.
2
<PAGE> 3
5. Forfeitability. Employee's right to payments hereunder shall not be
subject to forfeiture except due to Employer's insolvency.
6. Impact on Other Benefit Plans. Any amounts which Employee elects to
defer under this Agreement shall not be deemed salary or other eligible
compensation under Employer's Retirement Savings Plan. For all other fringe
benefit plans or programs, such amounts shall be deemed salary or other
eligible compensation.
7. Beneficiary Designation. Payments due hereunder after Employee's
death, if any, shall be paid to such beneficiary or such beneficiaries as
Employee designated in writing on the Beneficiary Form last delivered to
Employer and containing Employer's acknowledgement. Employee shall have the
right at any time and from time to time to change the beneficiary. If Employee
fails to make a beneficiary designation, or if the designee predeceases
Employee, the remaining payments shall be paid to Employee's spouse. If
Employee is not survived by a spouse, the payments shall be made to Employee's
estate. If payments are made to a beneficiary and the beneficiary dies before
all payments are made, the balance shall be paid to the beneficiary's estate.
8. Acceleration Election. The Board of Directors of Employer may, at its
option, at any time or from time to time, in
3
<PAGE> 4
its absolute and sole discretion, accelerate the time and the manner of
making payment of any one or more benefit installments, or may anticipate any
payments thereof, in event of any emergency or necessity affecting the personal
or family affairs of Employee or any beneficiary of Employee, if the Employee
is deceased, or if payments are to be made to an estate.
9. Minority or Disability. If Employer in its sole discretion deems any
person entitled to receive any payments under this Agreement to be unable to
care for his or her affairs because of illness or accident, or minority, any
such payments (unless a prior claim therefore shall have been made by duly
appointed Guardian, committee or other legal representative) may be made to the
spouse, child or children, parent, brother or sister of such person, or to any
third person or entity deemed by Employer to have incurred expense for such
person, in such manner and amount as Employer may determine. Any such payment
shall be a complete discharge to the extent thereof of the obligations of
Employer under this Agreement.
10. Non-Alienation of Benefits. None of the rights or benefits
contemplated under this Agreement may be sold, given away, assigned,
transferred, pledged, mortgaged, alienated, hypothecated or in any way
encumbered or disposed of by Employee, or any executor, administrator, heir,
legatee, distributee,
4
<PAGE> 5
relative or any other person or entity, whether or not in being, claiming
under Employee by virtue of this Agreement, and none of the rights, interest or
benefits contemplated by this Agreement shall be 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.
11. Taxes. Employer shall withhold from benefit payments or other
compensation payable to Employee and remit to the appropriate government
agencies such payroll taxes and income withholding as Employer determines is or
may be necessary under applicable law with respect to amounts deferred or
benefits paid under this Agreement.
12. General Obligation. The rights and benefits of Employee and any
beneficiary hereunder shall be solely those of an unsecured creditor of
Employer. No assets acquired or held by Employer shall be deemed to be held by
Employer in trust for them hereunder or to be security for the performance of
any obligation of Employer hereunder.
13. No Employment Agreement. Nothing contained herein shall be construed
as conferring upon Employee the right to continue in Employer's employ. This
Agreement is not a contract
5
<PAGE> 6
of employment.
14. Power and Authority. Employer through either its Board of Directors
or Executive Committee shall have full power and authority to interpret,
construe and administer this Agreement, and any such interpretation or
construction hereof by Employer, or other action hereunder, including the
amount or recipient of any one or more payments shall be binding and conclusive
on all persons, whether in being or not. Employer shall not be liable to any
person, whether in being or not, for any action taken or omitted in connection
with the interpretation and administration of this Agreement.
15. Waiver of Breach. 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 any 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.
16. Modification. This Agreement shall not be modified or amended except
by written instrument duly executed by Employee and Employer.
17. 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.
6
<PAGE> 7
18. Notices. Any notice required or permitted to be given under this
Agreement shall be sufficient if in writing and sent by registered or certified
mail, if to Employee, to Employee's address as shown on the books of Employer,
and if to Employer, to Employer's principal business office located at One
Weston Way, West Chester, Pennsylvania 19380-1499 or such other address as
Employer may designate in writing, or if such written notice is actually
received by the person to whom sent.
19. 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
7
<PAGE> 8
with the rules of the American Arbitration Association then in effect, and
judgment upon the award rendered in such arbitration may be entered in any
court having jurisdiction.
20. Gender and Plural. All references made and pronouns used herein shall
be construed in the singular or plural, and in such gender as the context may
require.
21. 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.
22. 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, Employer has caused this Agreement to be executed by
its duly authorized officers, and Employee has hereunto set Employee's hand and
seal as of the day and year first above written.
ATTEST: ROY F. WESTON, INC.
/s/Arnold P. Borish, Esquire By:/s/ Raymond J. Griffin
- ---------------------------- -------------------------------
Secretary Vice President, Human Resources
(SEAL)
8
<PAGE> 9
/s/ William L. Robertson
------------------------
William L. Robertson
9
<PAGE> 1
Exhibit 10.24
TRAVEL MANAGEMENT SERVICES AGREEMENT
Dated as of March 15, 1996
By and Between
INTERNATIONAL CORPORATE TRAVEL SERVICES, INC.
and
ROY F. WESTON, INC.
<PAGE> 2
TRAVEL MANAGEMENT SERVICES AGREEMENT
AGREEMENT dated as of March 15, 1996 by and between INTERNATIONAL
CORPORATE TRAVEL SERVICES, INC., a Delaware corporation ("InterCorp")
and ROY F. WESTON, INC., a Pennsylvania corporation ("Weston").
Background
A. Weston desires to continue the consolidation of travel services for its
personnel within a single travel management company in order to benefit Weston,
its employees and clients through effective cost reductions.
B. InterCorp currently provides substantial travel services to Weston and
desires to participate in and assist Weston with the aforementioned
consolidation, but on an economic basis which differs from that upon which the
parties are currently operating, all as herein provided and on the terms and
conditions hereinafter set forth.
THEREFORE, in consideration of the mutual covenants set forth herein and
INTENDING TO BE LEGALLY BOUND HEREBY, the parties agree as follows:
1. Services to be Provided. Throughout the term of this Agreement,
InterCorp will provide Weston with the following services (collectively, the
"Services"):
(a) Comprehensive and inclusive 24-hour travel agency services including
airline, rail, automobile rental, hotel and lodging reservations and
modifications, delivery of tickets, itineraries, boarding passes and
any related documentation and related counseling, security and support
services;
1
<PAGE> 3
(b) Monthly activity reports including savings reports, organized by Weston
location, designed with Weston input to enable Weston personne1 better
manage travel costs; and
(c) Participation with Weston in negotiations with trave1 service
provider/vendors in order to obtain to the fullest extent possible
improved service levels and applicable trave1 fare, automobile rental
and lodging discounts and rebates.
2. Personnel InterCorp will provide and maintain personnel appropriately
qualified and skilled with the necessary training to perform the Services,
including staff support, office space and related facilities, and will make
such personnel reasonably available in order to meet Weston's needs for the
Services.
3. InterCorp Compensation. As compensation for the Services, InterCorp
will be entitled to payments from Weston throughout the term of this Agreement
in amounts and at intervals to be determined as follows:
(a) Management Fee. An annual management fee (the "Annual Fee") will be
paid in equal monthly installments (except for the February, 1996
installment which shall be doubled to reflect payment for January,
1996), based upon the anticipated base level of travel activity for the
year in respect of which the Services are provided, as mutually
determined by Weston and InterCorp (the "Annual Base Activity Level").
For the initial three years of the term of this Agreement, the amount
of the Annual Fee shall be $550, 000.
(b) Commission Offset. All commissions, fees and other payments received
by InterCorp from any travel service vendor/provider in respect of
Weston-related travel ("Third-Party Commissions") will serve as an
offset to the Annual Fee, up to the aggregate amount of the Third-Party
Commissions paid in respect of the initial $3.5 million of air travel,
plus all vehicle rental, lodging and other commissions related to such
travel (the "Maximum Offset Amount"). Any Third-Party Commissions in
excess of the Maximum Offset Amount will be shared between the parties
as provided in Section 4 hereof. Commission payments to InterCorp will
be reported to Weston on a monthly basis, and InterCorp will, in
applying the offset to the
2
<PAGE> 4
Annual Fee, advise Weston to reduce the next monthly fee payment by an
amount equal to the Third-Party Commissions received by InterCorp for the
preceding month. InterCorp will use its best efforts promptly to collect all
outstanding Third-Party Commissions payable to it; provided, however, that
there wi11 be excluded from the Maximum Offset Amount any Third-Party
Commission paid or payable in respect of services provided prior to January 1,
1996.
(c) Adjustment Payment. In addition to the foregoing, Weston at the time
of execution of this Agreement will make a one-time payment to
InterCorp in the amount of $20,000 in consideration of the
establishment of the revised arrangements contemplated by this
agreement.
(d) Maximum Return to InterCorp. Notwithstanding any provisions in this
Agreement to the contrary, in no case will InterCorp's pre-tax net
return on gross revenues received in respect of Weston travel exceed
three percent, measured on annual basis for each year of the term of
this Agreement (the "Maximum Annual Return"). Gross Revenues are
defined as the Annual Fee, excess commissions and other fees earned by
InterCorp respecting Weston travel. To the extent such return exceeds
the Maximum Annual Return in any such year, the excess shall be
promptly repaid to Weston or credited against the Annual Fee payable in
respect of the following year. InterCorp hereby represents and warrants
to Weston that its expenses (including compensation expenses)
throughout the terms of this Agreement will be reasonable, and
InterCorp's annual financial statements will be subject to the
provisions of Section 6 hereof.
4. Gain Sharing Incentives. In an effort to maximize opportunities to
promote cost savings and service enhancements and efficiencies for Weston
travelers, in excess of the maximum offset amount the parties will share in the
manner hereinafter set forth the following elements associated with the
Services:
(a) Third-Party Commissions in excess of the Maximum Offset Amount which
are earned in respect of travel in excess of the Annua1 Base Activity
Leve1 contemplated by Section 3 of this Agreement wi11 be shared in the
ratio of 40% to Weston and 60% to
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InterCorp for the first $1 million of such excess, and in the ratio of 20%
to Weston and 80% to InterCorp thereafter;
(b) Fare rebates resulting from negotiated arrangements with travel
service vendor/providers over the term of the Agreement will be shared in the
ratio of 80% to Weston and 20% to InterCorp; provided, however, that Weston
shall have both the authority and the obligation to specify the alternative of
(i) rebates or (ii) discounts as the principal objective in InterCorp' s
negotiation of fare or charging structures with travel service vendor/providers;
and
(c) Third-Party Commissions from new sources negotiated over the term
of the Agreement (e.g., commissions on rental vehicles or lodging booked at a
"government" rate) will be shared in the ratio of 50% to each party.
5. Cash Flow Management Procedures. InterCorp will use its best efforts
in effecting travel arrangements on behalf of Weston travelers to reduce or
minimize to the fullest extent practicable the time interval between the
payment by Weston of travel costs advanced on behalf of a Weston client and the
reimbursement of such costs by the client (or receipt of credit in the case of
cancellation) or of such cost by Weston for its own account and the time of the
travel (or receipt of credit in the case of cancellation).
6. Records and Inspection. InterCorp will maintain complete and accurate
records sufficient to reflect the payment of all Third-Party Commissions and
travel rebate and discounts. Such records will be preserved for a period of at
least three years after the end of the year to which they relate. InterCorp
will permit an independent third party selected by Weston upon reasonable
request, to have full access to such records for the purposes of verifying the
reports submitted by InterCorp to Weston and InterCorp's annual pre-tax net
return as contemplated by Section 3 hereof.
7. Most Favored Client Status. If at any time and from time to time during
the term of this Agreement Intercorp obtain from travel vendor/providers on
behalf of one or more of its clients other than Weston, in circumstances or
situations comparable to those of Weston travelers, terms and conditions
(economic or other) more favorable than those then in
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effect for Weston, InterCorp will use its best efforts to obtain
comparable terms and conditions for Weston and will promptly advise Weston of
any refusal by or limitation imposed by any vendor/provider in extending to
Weston any such more favorable terms and conditions. In addition, InterCorp
will not use the volume and/or terms of travel arrangements effected on behalf
of Weston travelers as a basis for extracting concessions from travel service
vendors/providers for or on behalf of other InterCorp clients, nor will
InterCorp provide services comparable in scope or volume to those provided to
Weston to such clients on terms more favorable than those arranged for or
extended to Weston and/or Weston travelers.
8. Weston Oversight. Management oversight and responsibility for travel
services at Weston, including the Services and the Weston-InterCorp
relationship, will be concentrated in a single individual designated by
Weston's Chief Executive Officer and approved by InterCorp.
9. Terms and Termination. The term of this Agreement shall be deemed to
have commenced as of January 2, 1996 and will extend for three years,
terminating on December 3l, 1998, unless renewed for an additional period by
agreement of the parties prior to such date.
10. Annual Review. The parties hereby acknowledge that any material
modification or changes made in this Agreement and an analysis of the quality
of the services provided by InterCorp hereunder will be the subject of an
annual report to be made by Weston management to the Audit Committee of the
Board of Directors of Weston throughout the term of this Agreement.
11. Miscellaneous.
(a) Communications. All notices, requests, demands and other
communications hereunder hall be in writing and shall be deemed to have been
duly given (i) if personally delivered, (ii) sent by facsimile transmission
(with transmission confirmed), (iii) sent by overnight courier (with delivery
confirmed) or (iv) mailed by United States first-class, certified or registered
mail, postage prepaid, to the other party at the following addresses (or at such
other address as shall be given in writing by either party to other):
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(i) If to InterCorp, to:
International Corporate Travel Services, Inc.
P. O. Box 759
Frazer, PA l9355
Fax No.: 610-647-1477
Attention: Ms. Katherine Swoyer,
President
(ii) If to Weston, to:
Roy F. Weston, Inc.
One Weston Way
West Chester, PA 19380
Fax No. 610-701-3656
Attention : Robert W. Brandl
(b) Successors and Assigns. This Agreement and all rights granted and
obligations created hereby will bind and inure to the benefit of the
parties hereto and their respective successors and assigns.
(c) Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the Commonwealth of Pennsylvania applicable
to agreements made and to be performed wholly within such jurisdiction,
without regard to the conflicts of laws provisions thereof.
(d) Headings. The headings preceding the text of the sections and
subsections hereof are inserted solely for convenience of reference,
and shall not constitute part of this Agreement, nor shall they affect
its meaning, construction or effect.
(e) Amendment and Waiver. Weston and InterCorp may by mutual written
agreement amend this Agreement in any respect, and each may also extend
the time for or waive the performance of any of the obligations of the
other. To be effective, any such
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amendment or waiver must be signed by an authorized representative of the
party against whom enforcement of the case is sought.
(f) Execution in Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be termed an original and all of
which together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this agreement as of
the date first above written.
INTERNATIONAL CORPORATE TRAVEL
SERVICES, INC.
By: /s
-------------------------------
Katherine Swoyer
President
ROY F. WESTON, INC.
By: /s
-------------------------------
William J. Marrazzo
Chief Executive Officer
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EXHIBIT 10.25
CONSULTING SERVICES AGREEMENT
AGREEMENT NO. CG-97-WSTN1
THIS AGREEMENT is made and entered into as of the 2nd day of May, 1997 by and
between Roy F. Weston, Inc. ("Weston"), a Pennsylvania corporation having its
principal offices at 1 Weston Way, West Chester, Pennsylvania 19380 and The
Coventry Group, a proprietorship ("Consultant") having its principal offices at
7024 Coventry Road, Alexandria, Virginia 22306.
WHEREAS, Weston is in the business of providing environmental engineering and
consulting services to private industry and governmental clients; and
WHEREAS, Consultant is in the business of providing organizational and
strategic consulting services, and is, by reason of its knowledge, education
and expertise capable of performing the services described herein; and
WHEREAS, Weston anticipates the election of a new Board of Directors (the "New
Board of Directors") at its annual meeting of shareholders on May 23, 1997; and
WHEREAS, Weston has determined that certain of Consultant's professional
support services will be beneficial in ensuring an effective transition to the
New Board of Directors.
NOW THEREFORE, in consideration of the premises and the mutual promises
contained herein, and other good and valuable consideration, the parties agree
as follows:
ARTICLE I. SCOPE OF CONSULTING SERVICES.
1. TRANSITION SUPPORT. Consultant shall provide coordination, organization and
facilitation services (the "Professional Transition Services") for internal and
external teams that will be providing information and advice to Weston. The
Professional Transition Services shall be provided at such times and in such
manner as shall be mutually agreed by the parties and shall be conducted so as
to ensure an effective transition for the New Board of Directors. The
Professional Transition Services shall include communications
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support in order to keep all stakeholders in Weston fully informed during the
transition to the New Board of Directors. Such services shall also include
operations support. The Professional Transition Services shall be performed at
Weston's West Chester, Pennsylvania corporate campus and such other locations
as shall be directed by Weston.
Deliverable: Professional Transition Services.
Estimated Price: $25,000.
2. STRATEGIC ANALYSIS AND RECOMMENDATIONS. Consultant shall provide
coordination, organization and facilitation services for internal and external
teams that will be conducting independent information-gathering, strategic
review and analysis of Weston's current operations, strategic focus and market
position in order to assemble, analyze and prepare recommendations to the New
Board of Directors. All information shall be gathered by Consultant in
accordance with current Weston policy and in cooperation with Weston's current
chain of authority. Consultant's tasks shall include the following:
- Review of Weston's executive management functions.
- Review of national and international operations.
- Review business development practices.
- Review national Technical Resources capability.
- Review Quality Assurance and Financial functions.
In performing these tasks Consultant shall lead a team of experienced corporate
operations specialists and auditors and shall conduct such due diligence as
shall be necessary to fully inform the New Board of Directors of the
operational and financial affairs of the corporation. On or before May 23,
1997, Consultant shall prepare a report setting forth the status of the
foregoing matters and its recommendations on such matters.
Deliverable: Strategic Analysis and Recommendations Report.
Estimated Price: $50,000.
3. TIME COMMITMENT. In rendering the services set forth in this Agreement,
Consultant shall commit such time and resources as shall be necessary to
accomplish the specified deliverables.
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4. AUTHORIZED WESTON REPRESENTATIVE. Consultant shall report to William
Mecaughey (the "Weston Representative") or such other person as Weston shall
designate. All services performed by Consultant shall be at the direction of
the Weston Representative.
5. AUTHORIZED CONSULTANT REPRESENTATIVE. The Consultant Representative shall
be Monica Ellis. All work hereunder shall be performed by the persons listed
in Schedule "A" , or such other persons designated by the Consultant
Representative, subject to Weston's prior approval. All Professional
Transition Services shall be performed at the hourly rates set forth on Exhibit
"A".
ARTICLE II. TERM; TERMINATION.
The term of this Agreement shall be for the period commencing May 2, 1997 and
ending May 23, 1997. Thereafter the term may be extended month-to-month by
written agreement executed by the parties. This Agreement may be terminated by
either party upon giving thirty (30) days' written notice to the other. Weston
may terminate this Agreement at any time if Consultant breaches this Agreement
or is unable to perform hereunder. In such event, Consultant's fee shall be
pro-rated, based on the percentage of each deliverable completed and delivered.
The provisions of Articles V., VI., VIII. and XIII shall survive the
expiration or any termination of this Agreement.
ARTICLE III. CONSULTING FEE.
1. CONSULTING FEE. Weston shall pay Consultant a consulting fee in a total
amount not to exceed $75,000. The Consulting Fee for Professional Transition
Services, which shall not exceed $25,000, shall be determined by multiplying
the number of hours spent by Consultant in performing the tasks set forth in
Article I hereinabove, by Consultant's applicable hourly rate. The Consulting
Fee for the Strategic Analysis and Recommendations Report, which shall be
$50,000, shall be payable upon completion and delivery of the Deliverable.
2. EXPENSES. In the event Consultant is required to travel in connection with
the performance of its services hereunder, Weston shall reimburse Consultant
for such expenses incurred for travel and related food and lodging as are
incurred at the request of, or with the approval of Weston. Reimbursement of
such expenses shall be made in
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accordance with applicable Weston polices, and on the same basis as though
Consultant were an employee of Weston.
No entertainment is authorized under this Agreement and no entertainment
expenses shall be reimbursed to Consultant hereunder. The term "entertainment"
shall include, without limitation, the purchase of meals or refreshment for any
person other than Consultant, and the purchase of any recreational activity for
any person.
In consideration for the fees and reimbursement paid by Weston hereunder,
Consultant hereby releases Weston from any and all claims for fees and/or
expenses incurred by Consultant prior to the commencement of the term hereof.
ARTICLE IV. INVOICING AND PAYMENT.
1. INVOICES. Consultant shall submit invoices for completed services in a
form acceptable to Weston within ten (10) days following the end of each month
in which it provides its services. Invoices shall include the following
detail:
a. This Agreement number, dates of service, number of hours worked,
identification of person(s) performing services, description of deliverables
completed and computation of consulting fee earned to date.
b. A detailed list of expenses in a format reasonably acceptable to
Weston, together with copies of original documentation of such expenses.
Original invoices shall be submitted together with one copy to the Weston
Representative who shall approve such invoice upon reasonable satisfaction that
the services and deliverables described therein have been satisfactorily
completed.
2. PAYMENT. Payment shall be issued to Consultant within 30 days after
receipt and approval of Consultant's invoices. Weston shall have no obligation
to reimburse Consultant for any expenses incurred, or any services performed,
in violation of any law, Weston Business Ethics Policy or in contravention of
this Agreement.
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ARTICLE V. WORK PRODUCT.
1. OWNERSHIP OF WORK PRODUCT. All information, including, but not limited to,
all designs, processes, manuals, reports, computer data and related
information, first produced by Consultant for Weston in performing its services
hereunder shall be the sole property of Weston. All such information shall be
considered proprietary information and shall be retained and used solely in
accordance with the provisions of this Agreement. To the extent any such
information comprises work susceptible to protection under applicable copyright
laws, Consultant agrees that such work shall be deemed "work made for hire"
hereunder. In the event that such work is determined not to be "work made for
hire", this Agreement shall operate as an irrevocable assignment by Consultant
to Weston of the copyright in the work, including all right, title and interest
therein, in perpetuity.
2. INVENTIONS AND PATENTS. All inventions, improvements and discoveries,
whether patentable or not, first conceived, developed or reduced to practice by
Consultant, either alone or with others, in the course of the performance of
the services hereunder, or as a consequence of Consultant's receipt of
information hereunder, shall be the sole property of Weston. All such
inventions, improvements and discoveries shall be promptly disclosed to Weston
in writing. At Weston's request and expense, Consultant agrees to (i) assist
Weston in making application for patents on such inventions, improvement and
discoveries in the United States and any foreign countries (ii) assign all
such applications to Weston or its designee without further charges, (iii)
assist Weston in the prosecution of any patent applications and the enforcement
of any resulting patents and (iv) execute any and all documents necessary for
the accomplishment of the foregoing.
ARTICLE VI. CONFIDENTIALITY.
1. PROPRIETARY INFORMATION. All information received by Consultant in the
course of performing its services, other than information publicly available or
publicly disclosed shall be deemed "Proprietary Information." Consultant shall
receive and retain all Proprietary Information in confidence and shall not
disclose such information to any person without the express written
authorization of Weston. Consultant shall use Proprietary Information solely
for the purpose of performing its obligations hereunder and for no other
purpose. Upon termination of this Agreement, Consultant shall promptly return
all Proprietary Information to Weston, and will, if requested by Weston,
execute a certificate warranting that all Proprietary Information has been
returned to Weston in accordance with this
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Agreement. Consultant shall cause all persons identified on Schedule A
requiring access to the Proprietary Information in the course of Consultant's
performance hereunder, to agree to the confidentiality requirements of this
Article VI.
2. RELATIONSHIP WITH WESTON. Consultant may not represent that it is
associated with Weston for any marketing, commercial or promotional purposes
without the prior written permission of Weston.
ARTICLE VII. CONFLICTS OF INTEREST
1. REPRESENTATION CONCERNING CONFLICTS. Consultant hereby warrants and
represents that to the best of its knowledge and belief there are no relevant
facts or circumstances which could give rise to an actual or potential conflict
of interest under this Agreement, and that Consultant has disclosed to Weston
all information having any relevance to an actual or potential conflict of
interest.
2. DISCLOSURE. Consultant agrees that if an actual or potential conflict of
interest is discovered after execution of this Agreement, Consultant will make
full disclosure to Weston in writing. This disclosure shall include a
description of actions which Consultant has taken or proposes to take to avoid,
mitigate or neutralize the actual or potential conflict, and all actions taken
for such purposes shall be in consultation with Weston.
3. COMMUNICATIONS WITH GOVERNMENTAL OFFICIALS. In performing these Services,
Consultant shall not communicate with any officer, representative, employee,
elected official or agency of the government of any country or any subdivision
thereof on behalf of Weston without having first obtained Weston's written
consent thereto.
4. GOVERNMENT EMPLOYMENT. If any person performing services for Consultant
under this Contract has been a United States government employee within the
last five (5) years, Consultant agrees to furnish Weston all relevant
information regarding any potential conflict of interest.
ARTICLE VIII. RECORDS RETENTION.
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Consultant shall retain all records related to this Agreement in legible form
for a period of three (3) years from date of final payment hereunder.
Consultant authorizes Weston to inspect and audit these records during business
hours upon prior notice to Consultant.
ARTICLE IX. TAXES.
Consultant shall have sole responsibility for payment of all Federal, state
(unless it provides Weston with a Non-taxable Transaction Certificate), local
and other sales, use, income and all employment and other taxes applicable to
the fees paid to Consultant hereunder. Consultant agrees to indemnify and hold
Weston harmless from and against any and all claims and liability relating to
such taxes.
ARTICLE X. INDEPENDENT CONTRACTOR.
For all purposes in performing its services, Consultant shall be deemed to be
an independent contractor and as such, shall not be entitled to any benefits
applicable to the employees of Weston. The Consultant declares that it is
engaged in an independent business, that similar services are provided for
other clients, and Weston is not Consultant's sole and only client. Consultant
shall in no manner be deemed to be an agent or representative of Weston.
Consultant shall have no authority to bind or speak for Weston except as Weston
may grant specific written authority to Consultant to do so from time to time.
ARTICLE XI. INSURANCE.
Consultant shall maintain insurance at its own expense for services performed
hereunder. Such insurance shall include, but not be limited to, Comprehensive
General Liability ($300,000 Minimum), and Automobile Liability (Bodily Injury
and Property Damage/$300,000 Minimum each). Certificates of insurance shall be
provided to Weston immediately upon request.
ARTICLE XII. WARRANTY.
Consultant warrants and represents that: (a) it possesses the expertise,
capability, equipment and personnel to properly and professionally perform the
services; (b) to the extent it is required to do so, it is properly and legally
licensed to perform the services; (c) it shall at all times in the performance
of such services comply with all applicable laws, ordinances and regulations;
(d) it shall perform all services in a good, workmanlike,
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professional, efficient and non-negligent manner; and (e) it does not, as of
the date of this Agreement, and during the period of performance under this
Agreement, shall not represent any competitor of Weston without first fully
disclosing to Weston in writing the scope of work and the name of such
competitor.
ARTICLE XIII. INDEMNIFICATION.
Consultant agrees to indemnify and hold harmless Weston, its officers,
directors, agents and employees for any loss, including reasonable and actual
attorney's fees, costs or damages that Weston may incur as a result of the
negligent acts or omissions of the Consultant or the Consultant's employees or
agents.
Neither party shall be liable to the other for incidental, indirect or
consequential damages, except where such damages arise out of the gross
negligence or willful misconduct of the other party.
ARTICLE XIV. ASSIGNMENT.
This Agreement may not be assigned by Consultant, either in whole or in part,
without the prior written consent of Weston. Any attempted assignment shall be
null and void and without force and effect.
ARTICLE XV. DISPUTES.
Any dispute arising under this Agreement not settled by agreement of the
parties, including disputes arising as a result of termination, shall be
decided by litigation in a court of competent jurisdiction. Pending any
decision, appeal, suit, or claim pursuant to this Article, Consultant shall
proceed diligently with the performance of the work authorized under this
Agreement.
ARTICLE XVI. SEVERABILITY.
Any provision or part of this Agreement held to be void or unenforceable under
any law or by any court shall be deemed stricken, and all remaining provisions
shall continue to be valid and binding upon the parties. The parties may
reform or replace such stricken provision or part thereof with a valid and
enforceable provision which expresses the intent of the stricken provision.
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ARTICLE XVII. GOVERNING LAW.
This Agreement shall be governed by and interpreted in accordance with the laws
of the Commonwealth of Pennsylvania, exclusive of the choice of law rules
thereof, as if wholly to be performed therein.
ARTICLE XVIII. ENTIRE AGREEMENT.
This Agreement constitutes the sole and exclusive agreement of the parties
hereto and supersedes any prior understandings or written or oral agreements
between the parties. This Agreement may be amended only by a writing signed by
the Authorized Representative of each party.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by
their duly authorized representatives.
THE COVENTRY GROUP ROY F. WESTON, INC.:
(CONSULTANT): (WESTON)
BY: /s/____________________ BY: /s/____________________
NAME: Monica Ellis NAME: William G Mecaughey
TITLE: PRINCIPAL TITLE: Acting Chief Financial Officer
DATE: ______________ DATE: ______________
9
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EXHIBIT 10.26
CONSULTING SERVICES AGREEMENT
AGREEMENT NO. CG - 97 - WSTN2
THIS AGREEMENT is made and entered into as of the 12th day of June, 1997 by and
between Roy F. Weston, Inc. ("Weston" or the "Company"), a Pennsylvania
corporation having its principal offices at 1 Weston Way, West Chester,
Pennsylvania 19380 and The Coventry Group, L.L.P., a Virginia limited liability
partnership ("Consultant") having its principal offices at 7024 Coventry Road,
Alexandria Virginia 22306.
WHEREAS, Weston is in the business of providing environmental engineering and
consulting services to private industry and governmental clients; and
WHEREAS, Consultant is in the business of providing organizational and
strategic consulting services, and is, by reason of its knowledge, education
and expertise capable of performing the services described herein; and
WHEREAS, Weston has determined that certain of Consultant's services as
described herein will be beneficial to its organizational and strategic
objectives.
NOW THEREFORE, in consideration of the premises and the mutual promises
contained herein, and other good and valuable consideration, the parties agree
as follows:
ARTICLE I. SCOPE OF CONSULTING SERVICES.
1. TRANSITION SUPPORT. Consultant shall provide coordination, organization and
information gathering and analysis services (the "Professional Transition
Services") to Weston. The objective of this support is to assist the Company to
structure and focus its external and internal operations in order to create a
competitive market position and to increase share value. The Professional
Transition Services shall be provided at such times and in such manner as shall
be mutually agreed by the parties and shall be conducted so as to ensure an
effective transition for the Company's new Board of Directors and executive
management. The Professional Transition Services shall include communications
support in order to keep all stakeholders in Weston fully informed in the
period following the transition to the new Board of Directors. Such services
shall also include operations support. The Professional Transition Services
shall be performed at Weston's West
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Chester, Pennsylvania corporate campus and such other locations as shall be
directed by Weston. The areas specifically addressed by this task shall include
the following:
o FINANCIAL OVERSIGHT. Consultant shall continue to provide specialists
and auditors, and shall conduct such due diligence as shall be necessary
to fully inform the Company's executive management and Board of
Directors regarding the financial affairs of the Company.
o DAYS SALES OUTSTANDING RECOMMENDATIONS. Consultant shall provide
recommendations to the Company's executive management to reduce the
number of days sales outstanding at Weston. The objective of this task
is to improve operational efficiency and effectiveness within the
organization
o MANAGEMENT REPORTING. Consultant shall conduct a review, provide
guidance, and produce recommendations that will assist the Company in
implementing effective management reporting functions.
o PERFORMANCE MEASURES. Consultant shall review and prepare
recommendations for establishing an effective system of performance
measures within the Company.
o SALARY ADMINISTRATION. Consultant shall prepare an analysis of Weston's
salary administration practices and provide recommendations that will
assist the Company in establishing more effective base salary and
incentive/reward programs that will position the company more
competitively in the marketplace.
o COMPENSATION DESIGN. Consultant shall provide as required
recommendations for compensation design to assist Weston in the design of
new programs to maximize operational effectiveness and efficiency.
o FEDERAL COSTING SURVEY AND DESIGN. The parties recognize that Weston
derives over 50% of its revenues from federal government contracts.
Consultant shall study and provide assistance and recommendations, as
required to help ensure that changes in organization and compensation do
not adversely affect cost recovery for federal contracts. The objective
of Consultant's analysis and recommendations in this task is to assist
with Weston profitability and organizational efficiency.
DELIVERABLE: PROFESSIONAL TRANSITION SERVICES.
ESTIMATED PRICE: $130,000.00.
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2. EXECUTIVE MANAGEMENT AND BOARD OF DIRECTORS SUPPORT. Consultant shall
provide the Company's executive management and Board of Directors with support
in operations, communications, external relations and related areas. As part
of this task, Consultant shall provide coordination, organization and
facilitation services for executive management and the Board of Directors.
Such services shall include, as necessary, strategic review and analysis of
the Company's current operations in order to assemble, analyze and prepare
recommendations for consideration by the Company's new Board of Directors.
All information shall be gathered by Consultant in accordance with the
Company's current policy and in cooperation with the Company's existing chain
of authority. Consultant's tasks shall also include the following.
o PROVISION OF EXECUTIVE SEARCH SERVICES. This task is to result in the
identification of a new "Executive Team" (Chief Executive Officer, Chief
Financial Officer and Chief Operating Officer).
o REVIEW OF THE COMPANY'S COMMUNICATIONS FUNCTIONS. This task shall
include a review of Weston's communications functions, and providing the
Company with communication and marketing support, media strategy,
material development and placement.
o BUSINESS DEVELOPMENT PRACTICES REVIEW AND RECOMMENDATIONS. Consultant
shall review the Company's existing business development strategies and
practices and provide recommendations and opportunities in order to
enable the Company to achieve improved results in this area. In addition
to the coordination of the above tasks, Consultant shall prepare a report
setting forth the status of, and its recommendations concerning, each
such matter.
DELIVERABLE: EXECUTIVE MANAGEMENT SUPPORT.
ESTIMATED PRICE: $101,000.00.
3. FUNDING OPTION IDENTIFICATION AND ASSISTANCE. Consultant shall assist the
Company in the identification of venture funding options in order to enable the
Company to secure additional capital and thereby achieve the objective of
gaining market share. The principal deliverable of this task shall be the
identification of ready sources of capital for consideration by the Company and
providing such guidance and facilitation services as shall be necessary to
enable the Company to obtain such capital.
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DELIVERABLE: IDENTIFICATION OF, AND ASSISTANCE IN OBTAINING CAPITAL FUNDING.
ESTIMATED PRICE: $40,000.00
4. INTERNATIONAL OPERATIONS AND BUSINESS DEVELOPMENT ASSISTANCE. In order to
assist Weston in penetrating strategically targeted international markets and
gaining an increased presence and share in those markets, Consultant shall
provide stakeholder management and other services directed to this objective.
This task shall include assisting Weston to develop and implement international
market strategies consistent with, and in ways that will enhance the value of
Weston's overall strategic priorities.
DELIVERABLE: INTERNATIONAL OPERATIONS AND BUSINESS DEVELOPMENT ASSISTANCE.
ESTIMATED PRICE: $24,000.00.
5. TIME COMMITMENT. In rendering the services set forth in this Agreement,
Consultant shall commit such time and resources as shall be necessary to
accomplish the specified deliverables
6. AUTHORIZED WESTON REPRESENTATIVE. Consultant shall report to William G.
Mecaughey (the "Weston Representative") or such other person, as Weston shall
designate. All services performed by Consultant shall be at the direction of
the Weston Representative.
7. AUTHORIZED CONSULTANT REPRESENTATIVE. The Consultant Representative shall be
Monica Ellis. All work hereunder shall be performed by the persons listed in
Schedule "A" at the hourly rates set forth therein, or such other persons
designated by the Consultant Representative, subject to Weston's prior
approval.
ARTICLE II. TERM; TERMINATION.
The term of this Agreement shall be for the period commencing May 24, 1997 and
ending August 31, 1997. Thereafter the term may be extended from month-to-month
by written agreement executed by the parties. This Agreement may be terminated
by either party upon giving thirty (30) days' written notice to the other.
Weston may terminate this Agreement at any time if Consultant breaches this
Agreement or is unable to perform hereunder. In such event, Consultant's fee
shall be pro-rated, based on the percentage of each deliverable completed and
delivered. The provisions of Articles V, VI, VIII and XIII shall survive the
expiration or any termination of this Agreement.
ARTICLE III. CONSULTING FEE.
1. CONSULTING FEE. Weston shall pay Consultant a consulting fee in a total
amount not to exceed $295,000.00. The Consulting Fee shall be determined by
multiplying the number of hours spent by Consultant in performing the tasks set
forth in Article I hereinabove by Consultant's applicable hourly rate as well
as the provision of "fixed price" deliverables noted in the scope.
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<PAGE> 5
2. EXPENSES. In the event Consultant is required to travel in connection with
the performance of its services hereunder, Weston shall reimburse Consultant
for such expenses incurred for travel and related food and lodging as are
incurred at the request of, or with the prior approval of Weston. Reimbursement
of such expenses shall be made in accordance with applicable Weston polices,
and on the same basis as though Consultant were an employee of Weston. In
consideration for the fees and reimbursement paid by Weston hereunder,
Consultant hereby releases Weston from any and all claims for fees and/or
expenses incurred by Consultant prior to the commencement of the term hereof.
ARTICLE IV. INVOICING AND PAYMENT.
1. INVOICES. Consultant shall submit invoices for completed services in a form
acceptable to Weston within ten (10) days following the end of each month in
which it provides its services. Invoices shall include the following detail:
a. This Agreement number, dates of service, number of hours worked,
identification of person(s) performing services, description of deliverables
completed and computation of consulting fee earned to date.
b. A detailed list of expenses in a format reasonably acceptable to
Weston, together with copies of original documentation of such expenses.
Original invoices shall be submitted together with one copy to the Weston
Representative who shall approve such invoice upon reasonable satisfaction that
the services and deliverables described therein have been satisfactorily
completed.
2. PAYMENT. Payment shall be issued to Consultant within 30 days after receipt
and approval of Consultant's invoices. Weston shall have no obligation to
reimburse Consultant for any expenses incurred, or any services performed, in
violation of any law, Weston Business Ethics Policy or in contravention of this
Agreement.
ARTICLE V. WORK PRODUCT.
1. OWNERSHIP OF WORK PRODUCT. All information, including, but not limited to,
all designs, processes, manuals, reports, computer data and related
information, first produced by Consultant for Weston in performing its services
hereunder shall be the sole property of Weston. All such information shall be
considered proprietary information and shall be retained and used solely in
accordance with the provisions of this Agreement. To the extent any such
information comprises work susceptible to protection under applicable copyright
laws, Consultant agrees that such work shall be deemed "work made for hire"
hereunder. In the
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<PAGE> 6
event that such work is determined not to be "work made for hire", this
Agreement shall operate as an irrevocable assignment by Consultant to Weston of
the copyright in the work, including all right, title and interest therein, in
perpetuity.
2. INVENTIONS AND PATENTS. All inventions, improvements and discoveries,
whether patentable or not, first conceived, developed or reduced to practice by
Consultant, either alone or with others, in the course of the performance of
the services hereunder, or as a consequence of Consultant's receipt of
information hereunder, shall be the sole property of Weston. All such
inventions, improvements and discoveries shall be promptly disclosed to Weston
in writing. At Weston's request and expense, Consultant agrees to (i) assist
Weston in making application for patents on such inventions, improvement and
discoveries in the United States and any foreign countries (ii) assign all such
applications to Weston or its designee without further charges, (iii) assist
Weston in the prosecution of any patent applications and the enforcement of any
resulting patents and (iv) execute any and all documents necessary for the
accomplishment of the foregoing.
ARTICLE VI. CONFIDENTIALITY.
1. PROPRIETARY INFORMATION. All information received by Consultant in the
course of performing its services, other than information publicly available or
publicly disclosed shall be deemed "Proprietary Information." Consultant shall
receive and retain all Proprietary Information in confidence and shall not
disclose such information to any person without the express written
authorization of Weston. Consultant shall use Proprietary Information solely
for the purpose of performing its obligations hereunder and for no other
purpose. Upon termination of this Agreement, Consultant shall promptly return
all Proprietary Information to Weston, and will, if requested by Weston,
execute a certificate warranting that all Proprietary Information has been
returned to Weston in accordance with this Agreement. Consultant shall cause
all persons identified on Schedule A requiring access to the Proprietary
Information in the course of Consultant's performance hereunder, to agree to
the confidentiality requirements of this Article VI.
2. RELATIONSHIP WITH WESTON. Consultant may not represent that it is associated
with Weston for any marketing, commercial or promotional purposes without the
prior written permission of Weston.
3. PROHIBITION OF CERTAIN ACTIVITIES.
a. Non-Solicitation of Employees. Consultant shall not, directly or
indirectly, from the date of this Agreement until two (2) years after
termination or expiration of this Agreement, solicit, hire or otherwise induce
any Weston employee to leave the employment of Weston; nor shall
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<PAGE> 7
Consultant induce any Weston employee to become an employee of, or otherwise
become associated with, any company or business other than Weston. This
paragraph shall apply to inducement, hiring or solicitation of any Weston
employee regardless of position.
b. Non-Solicitation of Clients. Consultant shall not, directly or
indirectly, from the date of this Agreement until two (2) years after
termination or expiration of this Agreement, solicit the trade or patronage, in
competition with Weston, of any Weston clients or of any prospective clients
with whom Weston has pending proposals. This restriction shall only apply to
clients or prospective clients with whom Consultant had direct or indirect
contact during the pendency of this Agreement.
ARTICLE VII. CONFLICTS OF INTEREST
1.REPRESENTATION CONCERNING CONFLICTS. Consultant hereby warrants and
represents that to the best of its knowledge and belief there are no relevant
facts or circumstances which could give rise to an actual or potential conflict
of interest under this Agreement, and that Consultant has disclosed to Weston
all information having any relevance to an actual or potential conflict of
interest.
2. DISCLOSURE. Consultant agrees that if an actual or potential conflict of
interest is discovered after execution of this Agreement, Consultant will make
full disclosure to Weston in writing. This disclosure shall include a
description of actions which Consultant has taken or proposes to take to avoid,
mitigate or neutralize the actual or potential conflict, and all actions taken
for such purposes shall be in consultation with Weston.
3. COMMUNICATIONS WITH GOVERNMENTAL OFFICIALS. In performing these Services,
Consultant shall not communicate with any officer, representative, employee,
elected official or agency of the government of any country or any subdivision
thereof on behalf of Weston without having first obtained Weston's written
consent thereto.
4. GOVERNMENT EMPLOYMENT. If Consultant or any person working for Consultant in
the performance of this Agreement has been a United States government employee
within the past five years, Consultant agrees to furnish Weston all relevant
information regarding any potential conflict of interest.
ARTICLE VIII. RECORDS RETENTION.
Consultant shall retain all records related to this Agreement in legible form
for a period of five (5) years from date of final payment hereunder. Consultant
authorizes Weston to inspect and audit these records during business hours upon
prior notice to Consultant.
ARTICLE IX. TAXES.
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<PAGE> 8
Consultant shall have sole responsibility for payment of all Federal, state
(unless it provides Weston with a Non-taxable Transaction Certificate), local
and other sales, use, income and all employment and other taxes applicable to
the fees paid to Consultant hereunder. Consultant agrees to indemnify and hold
Weston harmless from and against any and all claims and liability relating to
such taxes.
ARTICLE X. INDEPENDENT CONTRACTOR.
For all purposes in performing its services, Consultant shall be deemed to be
an independent contractor and as such, shall not be entitled to any benefits
applicable to the employees of Weston. The Consultant declares that it is
engaged in an independent business, that similar services are provided for
other clients, and Weston is not Consultant's sole and only client. Consultant
shall in no manner be deemed to be an agent or representative of Weston.
Consultant shall have no authority to bind or speak for Weston except as Weston
may grant specific written authority to Consultant to do so from time to time.
ARTICLE XI. INSURANCE.
Consultant shall maintain insurance at its own expense for services performed
hereunder. Such insurance shall include, but not be limited to, Comprehensive
General Liability ($300,000 Minimum), Professional Liability - Errors and
Omissions ($300,000) and Automobile Liability (Bodily Injury and Property
Damage/$300,000 Minimum each). Certificates of insurance shall be provided to
Weston immediately upon request.
ARTICLE XII. WARRANTY.
Consultant warrants and represents that: (a) it possesses the expertise,
capability, equipment and personnel to properly and professionally perform the
services; (b) to the extent it is required to do so, it is properly and legally
licensed to perform the services; (c) it shall at all times in the performance
of such services comply with all applicable laws, ordinances and regulations;
(d) it shall perform all services in a good, workmanlike, professional,
efficient and non-negligent manner; and (e) it does not, as of the date of this
Agreement, and during the period of performance under this Agreement, shall not
represent any competitor of Weston without first fully disclosing to Weston in
writing the scope of work and the name of such competitor.
ARTICLE XIII. INDEMNIFICATION.
Consultant agrees to indemnify and hold harmless Weston, its officers,
directors, agents and employees for any loss, including reasonable and actual
attorney's fees, costs or damages that Weston may incur as a result of the
negligent acts or omissions of the Consultant or the Consultant's employees or
agents.
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Neither party shall be liable to the other for incidental, indirect or
consequential damages, except where such damages arise out of the gross
negligence or willful misconduct of the other party.
ARTICLE XIV. ASSIGNMENT.
This Agreement may not be assigned by Consultant, either in whole or in part,
without the prior written consent of Weston. Any attempted assignment shall be
null and void and without force and effect.
ARTICLE XV. DISPUTES.
Any dispute arising under this Agreement not settled by agreement of the
parties, including disputes arising as a result of termination, shall be
decided by litigation in a court of competent jurisdiction. Pending any
decision, appeal, suit, or claim pursuant to this Article, Consultant shall
proceed diligently with the performance of the work authorized under this
Agreement.
ARTICLE XVI. SEVERABILITY.
Any provision or part of this Agreement held to be void or unenforceable under
any law or by- any court shall be deemed stricken, and all remaining provisions
shall continue to be valid and binding upon the parties The parties may reform
or replace such stricken provision or part thereof with a valid and enforceable
provision which expresses the intent of the stricken provision
ARTICLE XVII. GOVERNING LAW.
This Agreement shall be governed by and interpreted in accordance with the laws
of the Commonwealth of Pennsylvania, exclusive of the choice of law rules
thereof, as if wholly to be performed therein
ARTICLE XVIII. ENTIRE AGREEMENT.
This Agreement constitutes the sole and exclusive agreement of the parties
hereto and supersedes any and all prior understandings or written or oral
agreements between the parties with respect to the subject matter hereof.
Provided, however, nothing herein shall be deemed to modify or amend the terms
of, or either party's obligations under, the Consulting Services Agreement
between the parties dated May 23, 1997, identified as "Agreement No CG - 97 -
WSTN1"
This Agreement may be amended only by a writing signed by the Authorized
Representative of each party
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by
their duly authorized representatives
THE COVENTRY GROUP, L.L.P.
(CONSULTANT) BY:
____________________________
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NAME: MONICA ELLIS ROY F. WESTON, INC.
TITLE: PRINCIPAL
DATE: ______________________ BY: ____________________
NAME: WILLIAM G. MECAUGHEY
TITLE: CHIEF FINANCIAL OFFICER
DATE: ____________________
10
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SCHEDULE A
PERSONS PERFORMING THE SERVICES AND HOURLY RATES
<TABLE>
<CAPTION>
NAME HOURLY RATE
- ---- -----------
<S> <C>
Ira Weinberg $300.00
Wessell Sprecher $300.00
Kenneth Whitt $100.00
D. Hiller $250.00
J. Nunes $300.00
D. Weimer $350.00
R. Nelson (*reduced rate) $100.00
M. Ellis (*blended) $100.00
</TABLE>
11
<PAGE> 1
EXHIBIT 10.27
CONSULTING/MARKETING SERVICES AGREEMENT
Agreement No. _________
THIS AGREEMENT is made and entered into as of the 1st day of September,
1997 by and between Roy F. Weston, Inc. ("Weston" or the "Company"), a
Pennsylvania corporation having its principal offices at 1 Weston Way, West
Chester, Pennsylvania 19380 and Armitage Associates L.C. ("AALC") whose
principal address is 1550 Wilson Blvd., Suite 725, Arlington, VA 22209.
WHEREAS, Weston is in the business of providing environmental engineering
and consulting services to private industry and governmental clients; and
WHEREAS, AALC is in the business of providing consulting and marketing
services to business organizations with respect to international marketing,
international operations and international strategic planning and is, by reason
of its knowledge, education and expertise in those subjects, capable of
performing the services described herein; and
WHEREAS, Weston desires, and AALC has agreed, that AALC provide certain
services as set forth hereinafter to the Company.
NOW THEREFORE, in consideration of the premises and the mutual promises
contained herein, and other good and valuable consideration, the parties agree
as follows:
ARTICLE I. SCOPE OF CONSULTING SERVICES.
1. THE SERVICES. Subject to the terms and conditions of this Agreement,
AALC shall provide strategic, operational and marketing advice and assistance
to the international operations of Weston and its subsidiaries. Such advice
and assistance shall include strategic focus consultation and business
development activities designed to foster the growth of Weston's international
business. These services are referred to in this Agreement as the "Services".
2. AUTHORIZED WESTON REPRESENTATIVE. In performing the Services, AALC
shall report to the President of Weston International Holdings, Inc. (the
"Weston Representative") or such other person as Weston shall designate. All
Services performed
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by AALC shall be at the direction of the Weston Representative, who will be
responsible for tasking and approving all activities undertaken by AALC on
Weston's behalf. AALC shall prepare such written reports and documentation
relating to the Services as may be requested by the Weston Representative.
3. AUTHORIZED AALC REPRESENTATIVE. Richard A. Nelson, or such other
person as AALC may designate, shall serve as the authorized representative of
AALC in connection with this Agreement.
ARTICLE II. TERM; TERMINATION.
The initial term ("Initial Term") of this Agreement shall be for a twelve
(12) month period commencing September 1, 1997 and ending August 31, 1998,
provided, however, that either party may terminate this agreement, for any
reason, upon 30 days prior written notice to the other party. In the absence
of such termination, the term of this Agreement may be extended for successive
month-to-month periods after August 31, 1998, upon the mutual agreement of the
parties. Each monthly extension of the term shall be evidenced by a writing
executed by the parties. In the event of termination, AALC shall be paid for
any services rendered before termination, percentage compensation earned and
approved expenses incurred before the termination. The provisions of Articles
V, VI, VIII and XIII shall survive the expiration or any termination of this
Agreement.
ARTICLE III. COMPENSATION.
1. FEES. Weston shall pay AALC, upon submission of a monthly invoice,
fees for services in accordance with the attached "Fee Schedule and Account
Data," which is an organic part of this Agreement. This fee schedule
represents a reduced hourly and daily rate for services from AALC's normal
schedule of fees. Both parties will attempt to keep the 12 month cost of
services at no more than $40,000.00 per annum, which annual amount will not be
exceeded without the prior written approval of the Weston Representative.
Quarterly reviews of the service compensation levels and performance of AALC
will be conducted by the Weston Representative.
2. PERCENTAGE COMPENSATION. Weston further agrees to compensate AALC a
percentage of the "receipted net revenue", as defined below, from projects
generated for Weston through the efforts of AALC ("percentage compensation"),
calculated annually for a period of 5 years from the initial contract date,
including renewals or extensions which occur within that 5 year period, in
accordance with the following schedule:
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<PAGE> 3
<TABLE>
<CAPTION>
Receipted Annual Net Revenue Percentage
---------------------------- ----------
<S> <C>
$0-$999,999.00 5%
$1 million-$5 million 4%
Above $5 million 3%
</TABLE>
AALC agrees to reduce the percentage compensation to be paid by Weston by
the amount of the total fees paid by Weston under Article III (1) above for that
same annual period. As used in this Agreement, "receipted net revenue" shall
mean net revenues recorded by Weston during a calendar year and billed and
collected by Weston within 120 days of the end of such calendar year.
3. EXPENSES. All local expenses, to include local travel incurred in
the performance of its services, will be borne by AALC. Travel outside the
greater Washington D.C. metropolitan area (for purposes of this Agreement,
travel to and from West Chester, PA only will be considered local travel) will
be reimbursed by Weston in accordance with the attached "Fee Schedule and
Account Data." Prior notification of Weston and approval by Weston are required
for any expenses which will be reimbursed by Weston. Such expenses will be
billed on the monthly invoice.
ARTICLE IV. INVOICING AND PAYMENT.
1. INVOICES. AALC shall submit invoices for completed services in a form
acceptable to Weston within ten (10) days following the end of each month in
which AALC provides the Services. Invoices shall include the following detail:
a. This Agreement number, AALC's name, dates of service, and number of
hours worked each day.
b. A detailed list of expenses in a format reasonably acceptable to Weston,
together with copies of original documentation of such expenses.
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<PAGE> 4
Original invoices shall be submitted, together with one copy, to the
Weston Representative who shall approve such invoice upon reasonable
satisfaction that the Services have been satisfactorily performed.
2. PAYMENT. Payment shall be issued to AALC within 30 days after
receipt and approval of each invoice. Weston shall have no obligation to
reimburse AALC for any expenses incurred, or any services performed, in
violation of any law, Weston Business Ethics Policy or in contravention of this
Agreement.
ARTICLE V. WORK PRODUCT.
1. OWNERSHIP OF WORK PRODUCT. All information, including, but not limited
to, all designs, processes, manuals, reports, computer data and related
information, first produced by AALC for Weston in performing the Services shall
be the sole property of Weston. All such information shall be considered
proprietary information and shall be retained and used solely in accordance
with the provisions of this Agreement. To the extent any such information
comprises work susceptible to protection under applicable copyright laws, AALC
agrees that such work shall be deemed "work made for hire" hereunder. In the
event that such work is determined not to be "work made for hire," this
Agreement shall operate as an irrevocable assignment by AALC to Weston of the
copyright in the work, including all right, title and interest therein, in
perpetuity.
2. INVENTIONS AND PATENTS. All inventions, improvements and discoveries,
whether patentable or not, first conceived, developed or reduced to practice by
AALC, either alone or with others, in the course of the performance of the
Services, or as a consequence of AALC's receipt of information hereunder, shall
be the sole property of Weston. All such inventions, improvements and
discoveries shall be promptly disclosed to Weston in writing. At Weston's
request and expense, AALC agrees to (i) assist Weston in making application for
patents on such inventions, improvement and discoveries in the United States
and any foreign countries (ii) assign all such applications to Weston or
its designee without further charges, (iii) assist Weston in the prosecution of
any patent applications and the enforcement of any resulting patents and (iv)
execute any and all documents necessary for the accomplishment of the
foregoing.
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<PAGE> 5
ARTICLE VI. CONFIDENTIALITY.
1. PROPRIETARY INFORMATION. All information received by AALC in the course
of performing the Services, other than information publicly available or
publicly disclosed shall be deemed "Proprietary Information." AALC shall
receive and retain all Proprietary Information in confidence and shall not
disclose such information to any person without the express written
authorization of Weston; provided, however, that AALC may disclose such
information to experts, retained by AALC in connection with performance of the
Services, who have agreed in writing to abide by the provisions of Article VI
of this Agreement. AALC shall use Proprietary Information solely for the
purpose of performing its obligations hereunder and for no other purpose. Upon
termination of this Agreement, AALC shall promptly return all Proprietary
Information to Weston, and will, if requested by Weston, execute a certificate
warranting that all Proprietary Information has been returned to Weston in
accordance with this Agreement.
2. NON-SOLICITATION OF EMPLOYEES. AALC shall not, directly or indirectly,
from the date of this Agreement until two (2) years after termination of this
Agreement, solicit, hire or otherwise induce any Weston employee to leave the
employment of Weston; nor shall AALC induce any Weston employee to become an
employee of, or otherwise become associated with, any company or business other
than Weston, without the written approval of Weston. This paragraph shall
apply to inducement, hiring or solicitation of any Weston employee regardless
of position.
3. NON-SOLICITATION OF CLIENTS. AALC will not, directly or indirectly,
from the date of this Agreement until two (2) years after termination of this
Agreement, solicit the trade or patronage, in competition with Weston, of any
Weston clients or of any prospective clients with whom Weston has pending
proposals. This restriction shall only apply to clients or prospective clients
with whom AALC had direct or indirect contact during the pendency of this
Agreement.
ARTICLE VII. CONFLICTS OF INTEREST
1. REPRESENTATION CONCERNING CONFLICTS. AALC hereby warrants and
represents that to the best of its knowledge and belief there are no relevant
facts or circumstances which could give rise to an actual or potential conflict
of interest under this Agreement, and that AALC has disclosed to Weston all
information having any relevance to an actual or potential conflict of
interest. AALC will not enter into any arrangements with any other
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<PAGE> 6
person or entity for purposes that directly conflict with AALC's undertakings
on behalf of Weston. Ambassador Richard Armitage's interest in AALC has been
disclosed to Weston's Board of Directors, the disinterested members of which
have approved Weston's engagement of AALC under this Agreement.
2. DISCLOSURE. AALC agrees that if an actual or potential conflict of
interest is discovered after execution of this Agreement, AALC will make full
disclosure to Weston in writing. This disclosure shall include a description
of actions which AALC has taken or proposes to take to avoid, mitigate or
neutralize the actual or potential conflict, and all actions taken for such
purposes shall be in consultation with Weston.
3. COMMUNICATIONS WITH GOVERNMENTAL OFFICIALS. In performing the
Services, AALC will not engage in any lobbying activities with the United
States Government, or conduct activities that would require it to register in
the United States as an agent of any foreign principal. In performing the
Services, AALC shall not communicate with any officer, representative,
employee, elected official or agency of the government of any country or any
subdivision thereof on behalf of Weston without having first obtained the
written consent of the Weston Representative.
4. GOVERNMENT EMPLOYMENT. If AALC or any person performing work for AALC
hereunder has been a United States government employee within the past three
(3) years, AALC agrees to furnish Weston all relevant information regarding any
potential conflict of interest.
ARTICLE VIII. RECORDS RETENTION.
AALC shall retain all records documenting amounts invoiced to Weston under
this Agreement in legible form for a period of five (5) years from date of
final payment hereunder. AALC agrees that all transactions in connection with
Weston business shall be accurately reflected in its books and records. AALC
authorizes Weston to inspect and audit these records during business hours upon
prior notice to AALC. Except for documentation of amounts invoiced to Weston
described above, upon the termination or expiration of this Agreement, AALC
shall immediately deliver to Weston all documents relating in any way to the
performance of the Services.
ARTICLE IX. TAXES.
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<PAGE> 7
AALC shall have sole responsibility for payment of all Federal, state (unless
it provides Weston with a Non-taxable Transaction Certificate), local and other
sales, use, income and all employment and other taxes applicable to the fees
paid to AALC hereunder. AALC agrees to indemnify and hold Weston harmless from
and against any and all claims and liability relating to such taxes.
ARTICLE X. INDEPENDENT CONTRACTOR.
For all purposes in performing its services, AALC shall be deemed to be an
independent contractor and as such, employees of AALC who perform the Services
shall not be entitled to any benefits applicable to the employees of Weston.
AALC declares that it is engaged in an independent business, that similar
services are provided for other clients from time to time, and Weston is not
AALC's sole and only client. AALC's authority to bind or speak for Weston shall
be limited by Weston's By-Laws and applicable law, and further limited and
defined by the authority granted by the Authorized Weston Representative and
the Board of Directors from time to time.
ARTICLE XI. INSURANCE.
AALC shall maintain insurance at its own expense for services performed
hereunder. Such insurance shall include, but not be limited to, Comprehensive
General Liability ($300,000 Minimum), Professional Liability - Errors and
Omissions ($300,000) and Automobile Liability (Bodily Injury and Property
Damage/$300,000 Minimum each). Certificates of insurance shall be provided to
Weston promptly upon request.
ARTICLE XII. WARRANTY.
AALC warrants and represents that: (a) it possesses the expertise,
capability, equipment and personnel to properly and professionally perform the
services; (b) to the extent it is required to do so, it is properly and legally
licensed to perform the services; (c) it shall at all times in the performance
of such services comply with all applicable laws, ordinances and regulations;
(d) it shall perform all services in a good, professional, efficient and
non-negligent manner; and (e) it does not, as of the date of this Agreement,
and during the period of performance under this Agreement, shall not represent
any competitor of Weston without first fully disclosing to Weston in writing
the scope of work and the name of such competitor and obtaining Weston's
written consent in advance of such representation.
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<PAGE> 8
ARTICLE XIII. INDEMNIFICATION.
AALC agrees to indemnify and hold harmless Weston, its officers,
directors, agents and employees for any loss, including reasonable and actual
attorney's fees, costs or damages that Weston may incur as a result of the
negligent acts or omissions of the AALC or the AALC's employees or agents.
Neither party shall be liable to the other for incidental, indirect or
consequential damages, except where such damages arise out of the gross
negligence or willful misconduct of the other party.
ARTICLE XIV. ASSIGNMENT.
This Agreement may not be assigned by AALC, either in whole or in part,
without the prior written consent of Weston. Any attempted or purported
assignment shall be null and void and without force and effect.
ARTICLE XV. DISPUTES.
In the event that a dispute should arise between the parties concerning
fees or payments, services performed or any other alleged breach of this
Agreement by either party, all aspects of such dispute shall be submitted to
binding arbitration in the Commonwealth of Virginia by a single arbitrator in
accordance with the rules of the American Arbitration Association.
ARTICLE XVI. SEVERABILITY.
Any provision or part of this Agreement held to be void or unenforceable
under any law or by any court shall be deemed stricken, and all remaining
provisions shall continue to be valid and binding upon the parties. The
parties or the Arbitrator may reform or replace such stricken provision or part
thereof with a valid and enforceable provision which expresses the intent of
the stricken provision.
ARTICLE XVII. GOVERNING LAW.
All matters arising under and relating to the application and
interpretation of this Agreement and to the relationship of AALC and Weston
will be governed by the laws of the Commonwealth of Virginia, notwithstanding
its choice of law rules.
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<PAGE> 9
ARTICLE XVIII. ENTIRE AGREEMENT. This Agreement constitutes the sole and
exclusive agreement of the parties hereto and supersedes any prior
understandings or written or oral agreements between the parties. This
Agreement may be modified, altered or amended only by a writing signed by the
Authorized Representative of each party.
IN WITNESS WHEREOF, intending to be legally bound hereby, the parties have
caused this Agreement to be executed by their duly authorized representatives.
ARMITAGE ROY F. WESTON, INC.
ASSOCIATES L.C.
BY: /s/ BY: /s/
--------------------------- ---------------------------
NAME: Richard A. Nelson NAME: William L. Robertson
TITLE: Partner TITLE: President
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<PAGE> 10
FEE SCHEDULE AND ACCOUNT DATA
For purposes of the Agreement with Roy F. Weston, Inc. only, Armitage
Associates rates are as follows:
Hourly rates:
** Partners/Senior Associates/Associates $125 (plus expenses)
Daily rates:
** Partners/Senior Associates/Associates $900 (plus expenses)
Travel/activities outside of the Washington, D.C. metropolitan area:
** Travel, whether accompanying a client or unaccompanied, is billed at
the hourly or daily rate (whichever is less) if work is performed on behalf of
the client enroute.
** For assignments involving lodging outside of the Washington, D.C. area,
the client will provide for round-trip business-class travel and expenses as
well as work charges at the discounted daily rate. Expenses (hotel, meals,
laundry, gratuities, telephone, cable, facsimile, hotel business facilities,
taxi, rental cars, parking, express delivery postage, etc.), if incurred in
pursuit of the client's interests, are fully reimbursable. If anticipated
travel costs are substantial a partial advance may be requested.
Payments to Armitage Associates L.C. should be made directly or
transferred as follows:
** NationsBank of Virginia, N.A., 1700 North Moore Street, Arlington,
Virginia 22209
** The bank's routing (ABA) number is 056007387
** The account is under the name Armitage Associates L.C.
** The account number is 11579274
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EXHIBIT 10.28
CONSULTING SERVICES AGREEMENT
THIS AGREEMENT is made and entered into as of the 1st day of September,
1997 by and between Roy F. Weston, Inc. ("Weston" or the "Company"), a
Pennsylvania corporation having its principal offices at 1 Weston Way, West
Chester, Pennsylvania 19380 and IPAC, Inc., a Virginia corporation
("Consultant") having its principal offices at 2101 Wilson Boulevard, Suite
1000, Arlington, Virginia, 2220l.
WHEREAS, Weston is in the business of providing environmental engineering
and consulting services to private industry and government clients; and
WHEREAS, Consultant is in the business of providing organizational and
strategic consulting services, and is, by reason of its knowledge, education
and expertise capable of performing the services described herein; and
WHEREAS, Weston has determined that certain of Consultant's services as
described herein will be beneficial to its organization and strategic
objectives.
NOW THEREFORE, in consideration of the premises and the mutual promises
contained herein, and other good and valuable consideration, the parties agree
as follows:
ARTICLE I. SCOPE OF CONSULTING SERVICES.
1. FINANCIAL SUPPORT. Continuation of the financial support provided under
Agreement No. CG-97-WSTN-2 to include:
- Merger and Acquisitions
- Performance Measures
- Management Reporting
- Quick Project
- General Financial Consulting to Senior Management
2. WESTON FUND. Assist Weston in developing external financing vehicles to
enhance competitive entry into new market areas.
3. INTERNATIONAL PROJECT FINANCE. Assist Weston in identifying, winning and
financing major international projects with particular emphasis in Saudi Arabia,
Korea and Panama.
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4. SOURCES OF CAPITAL. Acquaint IPAC's private sources of capital with
Weston's capabilities and strategy in connection with items 2 and 3 above.
5. BOARD OF DIRECTORS SUPPORT. Assist Weston in recruiting outside
directors.
6. TIME COMMITMENT. In rendering the services set forth in this Agreement,
Consultant shall commit such time and resources as shall be necessary to
accomplish the specified deliverables.
7. AUTHORIZED WESTON REPRESENTATIVE. Consultant shall report to William G.
Mecaughey ( the "Weston representative") or such other person, as Weston
shall designate. All services performed by Consultant shall be at the
direction of the Weston Representative.
8. AUTHORIZED CONSULTANT REPRESENTATIVE. The Consultant Representative shall
be Wessel P. Sprecher, Jr. All work hereunder shall be performed by the
persons listed in Schedule "A" at the hourly rates set forth therein, or
such other persons designated by the Consultant Representative. subject to
Weston's prior approval.
ARTICLE II. TERM; TERMINATION.
The term of this Agreement shall be for the period commencing September 1, 1997
and ending December 31, 1997. Thereafter the term may be extended from
month-to-month by written agreement executed by parties. This Agreement may be
terminated by either party upon giving thirty (30) days' written notice to the
other. Weston may terminate this Agreement at any time if Consultant breaches
this Agreement or is unable to perform hereunder. In such event, Consultant's
fee shall be based on hours charged through the date of termination. The
provisions of Articles V, VI, VIII and XIII shall survive the expiration or any
termination of this Agreement.
ARTICLE III. CONSULTING FEE.
1. CONSULTING FEE. Weston shall pay Consultant a consulting fee in a total
amount not to exceed $200,000.00 plus out of pocket expenses such as local
travel, entertainment, postage and telephone. The Consultant Fee shall be
determined by multiplying the number of hours spent by Consultant in
performing the tasks set forth in Article I hereinabove by Consultant's
applicable hourly rate.
2. EXPENSES. In the event Consultant is required to travel in connection
with the performance of its services hereunder, Weston shall reimburse
Consultant for such expenses incurred for
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travel and related food and lodging as are incurred at the request of, or
with the prior approval of Weston. Reimbursement of such expenses shall be
made in accordance with applicable Weston polices, and on the same basis as
though Consultant were an employee of Weston.
In consideration for the fees and reimbursement paid by Weston hereunder,
Consultant hereby releases Weston from any and all claims for fees and/or
expenses incurred by Consultant prior to the commencement of the term hereof.
ARTICLE IV. INVOICING AND PAYMENT.
1. INVOICES. Consultant shall submit invoices for completed services in a
form acceptable to Weston following the end of each month in which it
provides its services. Invoices shall include the following detail:
a. This Agreement number, a description of the services provided and
computation of the consulting fee earned for the month.
b. A detailed list of expenses in a format reasonably acceptable to Weston,
together with copies of original documentation of such expenses.
Original invoices shall be submitted together with one copy to the Weston
Representative who shall approve such invoice upon reasonable satisfaction that
the services and deliverables described therein have been satisfactorily
completed.
2. PAYMENT. Payment shall be issued to Consultant within 30 days after
receipt and approval of Consultant's invoices. Weston shall have no
obligation to reimburse Consultant for any expenses incurred, or any
services performed, in violation of any law, Weston Business Ethics Policy
or in contravention of this Agreement.
ARTICLE V. WORK PRODUCT.
1. OWNERSHIP OF WORK PRODUCT. All information, including, but not limited
to, all designs, processes, manuals, reports, computer data and related
information, first produced by Consultant for Weston in performing its
services hereunder shall be the sole property of Weston. All such
information shall be considered proprietary information and shall be
retained and used solely in accordance with the provisions of this
Agreement. To the extent any such information comprises work susceptible
to protection under applicable copyright laws,
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Consultant agrees that such work shall be deemed "work made for hire"
hereunder. In the event that such work is determined not to be "work made
for hire", this Agreement shall operate as an irrevocable assignment by
Consultant to Weston of the copyright in the work, including all right,
title and therein, in perpetuity.
2. INVENTIONS AND PATENTS. All inventions improvements and discoveries,
whether patentable or not, first conceived, developed or reduced to
practice by Consultant, either alone or with others, in the course of the
performance of the services hereunder, or as a consequence of Consultant's
receipt of information hereunder, shall be the sole property of Weston.
All such inventions, improvements and discoveries shall be promptly
disclosed to Weston in writing. At Weston's request and expense,
Consultant agrees to (i) assist Weston in making application for patents
on such inventions, improvement and discoveries in the United States and
any foreign countries (ii) assign all such applications to Weston or its
designee without further charges, (iii) assist Weston in the prosecution
of any patent applications and the enforcement of any resulting patents
and (iv) execute any and all documents necessary for the accomplishment of
the foregoing.
ARTICLE VI. CONFIDENTIALITY.
1. PROPRIETARY INFORMATION. All information received by Consultant in the
course of performing its services, other than information publicly
available or publicly disclosed shall be deemed "Proprietary
Information." Consultant shall receive and retain all Proprietary
Information in confidence and shall not disclose such information to any
person without the express written authorization of Weston. Consultant
shall use proprietary Information solely for the purpose of performing its
obligation hereunder and for no other purpose. Upon termination of this
Agreement, Consultant shall promptly return all Proprietary Information to
Weston, and will, if requested by Weston, execute a certificate warranting
that all Proprietary Information has been returned to Weston in accordance
with this Agreement. Consultant shall cause all persons identified on
Schedule A requiring access to the Proprietary Information in the course
of Consultant's performance hereunder, to agree to the confidentiality
requirements of this Article VI.
2. RELATIONSHIP WITH WESTON. Consultant may not represent that it is
associated with Weston for any marketing, commercial or promotional
purposes without the prior written permission of Weston.
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3. PROHIBITION OF CERTAIN ACTIVITIES.
a. Non-Solicitation of Employees. Consultant shall not, directly
or indirectly, from the date of this Agreement until (2) years after
termination or expiration of this Agreement, solicit, hire or
otherwise induce any Weston employee to leave the employment of
Weston; nor shall Consultant induce any Weston employee to become an
employee of, or otherwise become associated with, any company or
business other than Weston. This paragraph shall apply to
inducement, hiring or solicitation of any Weston employee regardless
of position.
b. Non-Solicitation of Clients. Consultants shall not, directly
or indirectly, from the date of this Agreement, solicit the trade or
patronage, in competition with Weston, of any Weston clients or of
any prospective clients with whom Weston has pending proposals. This
restriction shall only apply to clients or prospective clients with
whom Consultant had direct or indirect contact during the pendency
of this Agreement.
ARTICLE VII. CONFLICTS OF INTEREST
1. REPRESENTATION CONCERNING CONFLICTS. Consultant hereby warrants and
represents that to the best of its knowledge and belief there are no
relevant facts or circumstances which could give rise to an actual or
potential conflict of interest under this Agreement, and that Consultant
has disclosed to Weston all information having any relevance to an actual
or potential conflict of interest.
2. DISCLOSURE. Consultant agrees that if an actual or potential conflict of
interest is discovered after execution of this Agreement, Consultant will
make full disclosure to Weston in writing. This disclosure shall include a
description of actions which Consultant has taken or proposes to take to
avoid, mitigate or neutralize the actual or potential conflict, and all
actions taken for such purposes shall be in consultation with Weston.
3. COMMUNICATIONS WITH GOVERNMENTAL OFFICIALS. In performing these Services
Consultant shall not communicate with any officer, representative,
employee, elected official or agency of the government of any country or
any subdivision thereof on behalf of Weston without having first obtained
Weston's written consent thereto.
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4. GOVERNMENT EMPLOYMENT. If Consultant or any person working for Consultant
in the performance of this Agreement has been a United States government
employee within the past five years, Consultant agrees to furnish Weston
all relevant information regarding any potential conflict of interest.
ARTICLE VIII. RECORDS RETENTION.
Consultant shall retain all records related to this Agreement in legible form
for a period of five (5) years from date of final payment hereunder. Consultant
authorizes Weston to inspect and audit these records during business hours upon
prior notice to Consultant.
ARTICLE IX. TAXES.
Consultant shall have sole responsibility for payment of all Federal, State
(unless it provides Weston with a Non-taxable Transaction Certificate), local
and other sales, uses, income and all employment and other taxes applicable to
the fees paid to Consultant hereunder. Consultant agrees to indemnify and hold
Weston harmless from and against any and all claims and liability relating to
such taxes.
ARTICLE X. INDEPENDENT CONTRACTOR.
For all purposes in performing its services, Consultant shall be deemed to be
an independent contractor and as such, shall not be entitled to any benefits
applicable to the employees of Weston. The Consultant declares that it is
engaged in an independent business, that similar services are provided for
other clients, and Weston is not Consultant's sole and only client. Consultant
shall have no authority to bind or speak for Weston except as Weston may grant
specific written authority to Consultant to do so from time to time.
ARTICLE XI. INSURANCE.
Consultant shall maintain insurance at its own expense for services performed
hereunder. Such insurance shall include, but not be limited to, Comprehensive
General Liability ($300,000 Minimum) and Automobile Liability (Bodily Injury
and Property Damage/$300,000 Minimum each). Certificate of insurance shall be
provided to Weston immediately upon request.
ARTICLE XII. WARRANTY.
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Consultant warrants and represents that: (a) it possesses the expertise,
capability;, equipment and personnel to properly and professionally perform the
services; (b) to the extent it is required to do so, it is properly and legally
licensed to perform the services; (c) it shall at all times in the performance
of such services comply with all applicable laws, ordinance and regulations;
(d) it shall perform all services in a good, workmanlike, professional,
efficient and non-negligent manner; and (e) it does not, as of the date of this
Agreement, and during the period of performance under this Agreement, shall not
represent any competitor of Weston without first fully disclosing to Weston in
writing the scope of work and the name of such competitor.
ARTICLE XIII. INDEMNIFICATION.
Consultant agrees to indemnify and hold harmless Weston, its officers,
directors, agents and employees for any loss, including reasonable and actual
attorney's fees, costs or damages that Weston may incur as a result of the
negligent acts or omissions of the Consultant or the Consultant's employees or
agents.
Neither party shall be liable to the other for incidental, indirect or
consequential damages, except where such damages arise out of the gross
negligence or willful misconduct of the other party.
ARTICLE XIV. ASSIGNMENT.
This Agreement may not be assigned by Consultant, either in whole or in part,
without the prior written consent of Weston. Any attempted assignment shall be
null and void and without force and effect.
ARTICLE XV. DISPUTES.
Any dispute arising under this Agreement not settled by agreement of the
parties, including disputes arising as a result of termination, shall be
decided by litigation in a court of competent jurisdiction. Pending any
decision, appeal, suit, or claim pursuant to this Article, Consultant shall
proceed diligently with the performance of the work authorized under this
Agreement.
ARTICLE XVI. SEVERABILITY.
Any provision or part of this Agreement held to be void or unenforceable under
any law or by any court shall be deemed stricken, and all remaining provisions
shall continue to be valid and binding upon the parties. The parties may reform
or replace such stricken provision or part thereof with a valid and enforceable
provision which expresses intent of the stricken provision.
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ARTICLE XVII. GOVERNING LAW.
This Agreement shall be governed by and interpreted in accordance with the laws
of the Commonwealth of Pennsylvania, exclusive of the choice of law rules
thereof, as if wholly to be performed therein.
ARTICLE XVIII. ENTIRE AGREEMENT.
This Agreement constitutes the sole and exclusive agreement of the parties
hereto and supersedes any and all prior understandings or written or oral
agreements between the parties with respect to the subject matter hereof.
This Agreement may be amended only by a writing signed by the Authorized
Representative of each party.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by
their duly authorized representatives.
IPAC, INC. ROY F. WESTON, INC.
(CONSULTANT) (WESTON)
BY: S/_____________________ BY: S/_____________________
NAME: W.P. SPRECHER, JR. NAME: William G. Mecaughey
TITLE: VICE PRESIDENT TITLE: Chief Financial Officer
DATE: DATE:
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SCHEDULE A
PERSONS PERFORMING THE SERVICES AND HOURLY RATES
<TABLE>
<CAPTION>
NAME HOURLY RATE
<S> <C>
David Wimer $350.00
H. James Nunes $300.00
Wessel Sprecher $300.00
Bruce Riddle $250.00
Ira Weinberg $250.00
Jeremy Taylor $200.00
Research Associate $100.00
Administrative Support $65.00
</TABLE>
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EXHIBIT 10.29
STOCK POOLING AGREEMENT
This Stock Pooling Agreement ("Agreement") is made as of the Effective
Date (as defined in Article 12.01 below) by and among ROY F. WESTON, INC., a
Pennsylvania corporation (the "Company"), and those holders of the non-publicly
traded Common Shares of the Company who have executed this Agreement and are
identified on Schedule A of this Agreement (singly, a "Pool Member" and
collectively, the "Pool Members").
WHEREAS, the capital stock of the Company consists of two series of common
stock: (1) Series A Common Shares, which currently are publicly traded on the
NASDAQ Stock Market ("Series A Shares") and (2) Common Shares, which are not
publicly traded ("Common Shares); and
WHEREAS, the Company is engaged in an effort to return to profitability
and desires to enhance its ability to raise capital in connection with
management's strategic plan; and
WHEREAS, the Company and certain of its shareholders believe that the
Company's efforts to return to profitability and to raise capital would be
assisted by reducing the potential for shareholder disagreement and by
promoting unity, stability and continuity in decision-making; and
WHEREAS, the Pool Members desire to ensure that all Common Shares now held
or hereafter acquired by them (the "Pooled Shares") be voted together on all
matters, in order to (1) promote unity among the Pool Members; (2) minimize the
potential for disruption in matters to be voted upon by shareholders of the
Company, and (3) promote stability and continuity in the management of the
Company; and
WHEREAS, the Pool Members desire to provide for certain restrictions on
the transferability of the Common Shares owned by the Pool Members; and
WHEREAS, the Board of Directors of the Company has determined that this
Agreement is in the best interest of the Company and has, therefore, approved
it;
NOW, THEREFORE, in consideration of the mutual agreements contained herein
and intending to be legally bound, the parties hereby agree as follows:
<PAGE> 2
Article 1. Voting Agreement
1.01 Shares to be voted. Each Pool Member shall complete Exhibit "A"
attached hereto with respect to the Pooled Shares held by that Pool Member,
upon which such Pool Member shall become a party to this Agreement and be
legally bound by this Agreement. Each Pool Member warrants and represents
that:
(a) he, she or it is record or beneficial owner of the number of the
Company's Common Shares set forth opposite the Pool Member's name on
Exhibit "A" attached to this Agreement, and that those shares are all of
the Common Shares of which he, she or it is the record or beneficial
owner;
(b) he, she or it has the full and complete right to vote such Common Shares
at any meeting of shareholders of the Company at which a vote of
shareholders is taken, and to execute and deliver a written consent with
respect to such shares; and
(c) no other person has any right, title or interest in or to such Common
Shares (including but not limited to any right to vote or to control or
direct the voting of such Common Shares), which would prevent such Pool
Member from carrying out any obligations imposed by this Agreement,
(d) any Common Shares of the Company which he, she or it hereafter acquires,
of record or beneficially, shall become Pooled Shares subject to all of
the terms of this Agreement.
(e) he, she or it has entered into this Agreement voluntarily and with full
knowledge of the rights and obligations created under this Agreement,
(f) he, she or it has full right and power to execute this Agreement, that
any action necessary to authorize such execution has been taken, and that
this Agreement has been duly executed and delivered and constitutes his,
her or its binding agreement, enforceable against him, her or it.
1.02. Voting of the Pooled Shares.
(a) At any meeting of the shareholders of the Company at which a vote of
shareholders is taken (and in any written consent of shareholders of the
Company in lieu of such a meeting), all of the Pooled Shares shall be
voted in accordance with the later
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to occur of: (i) the majority vote of the Pooled Shares, determined by
separate vote of the Pooled Shares (a "Pool Vote") conducted in the
manner set forth in this Article 1.02, or (ii) voting instructions
contained in a written notice (a "Pool Majority Notice") which is (A)
executed by Pool Members entitled to vote more than fifty percent (50%)
of the Pooled Shares and (B) received by the Secretary of the Company at
any time before a vote of shareholders of the Company is taken (or before
a written consent of shareholders of the Company becomes effective).
(b) At least 20 days before the date of any shareholders' meeting at which a
vote of shareholders is taken, and as far as practicable in advance of any
solicitation of action by written consent of shareholders, the Company
shall distribute to each Pool Member (1) notice of any matter on which
such vote is to be taken or written consent is to be solicited, (2) any
information which would be required to be submitted to shareholders of the
Company in connection with such vote, or solicitation of consent, and (3)
a form of ballot on which the Pool Member can record the vote of the
Common Shares of the Pool Member on the matter. Upon written request, the
Company shall also provide a Pool Member, as promptly as practicable, with
any additional information which the Company would be required to provide
upon written request to any shareholder of the Company;
(c) Within 15 days after receipt of the notice and ballot described in
Article 1.02(b) above, each Pool Member who wishes to vote in the Pool
Vote shall complete and execute the ballot and return it to the Secretary
of the Company. The ballot shall clearly indicate how the Common Shares
of the Pool Member are voted on the matters described in the notice,
including any abstention on any matter. Any Pool Member who fails to
timely return a ballot or whose ballot is not completed in accordance with
this Article 1.02(c) shall be deemed to have abstained from the Pool Vote.
(d) The Company shall tabulate the Pool Vote according to the ballots of the
Pool Members received within the time specified in Article 1.02(c) above.
The Company shall be entitled to rely on any information set forth in a
ballot, including the authenticity of any signature on the ballot, and
shall be permitted, but not required, to make any investigation or
examination beyond the face of a ballot.
(e) In any Pool Vote under this Article 1.02, no quorum or other minimum
number of Pooled Shares need be voted; and the action
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chosen by the vote of the majority of those Pooled Shares which have been
properly voted by ballot in the Pool Vote shall constitute the majority
vote of the Pooled Shares. Pooled Shares which are not voted, or
respecting which a Pool Member has abstained (or been deemed to have
abstained) shall not be counted in determining the number of Pooled
Shares voted in a Pool Vote under this Article 1.02.
(f) At the time of execution of this Agreement each Pool Member shall execute
and deliver to the Secretary of the Company, an irrevocable Proxy, in the
form attached to this Agreement as Exhibit "B", granting to the Company
(in such capacity, the "Proxyholder"), the right to vote, in any vote of
shareholders of the Company (and to provide consent of, in any
solicitation of consent from shareholders of the Company) all Common
Shares held by that Pool Member, in accordance with this Section 1.02. At
any meeting of shareholders of the Company at which a vote is taken (and
in response to any solicitation of consent of shareholders), the
Proxyholder shall cast the vote (or provide the consent) of all Pooled
Shares in accordance with the vote of the Pooled Shares, determined in
accordance with this Section 1.02; provided, however, that if, after a
Pool Vote is taken, a Pool Majority Notice is received by the Secretary of
the Company at any time before a vote of shareholders of the Company is
taken (or before a written consent of the shareholders of the Company is
effective), the Proxyholder shall cast the vote (or provide the consent)
of all Pooled Shares in accordance with the voting instructions contained
in the Pool Majority Notice, even if those instructions differ from the
vote of the Pooled Shares. If at any meeting of shareholders of the
Company, a motion is properly made for a vote of shareholders on any issue
which has not been submitted to Pool Members for a Pool Vote, the Company
shall, to the extent permitted by law, postpone such vote until a vote of
Pool Members can be held or a Pool Majority Notice can be obtained.
(g) No Pool Member shall vote (or authorize or permit the vote of) any Pooled
Shares on any matter except in conformity with this Section 1.02, and the
Company shall not recognize or treat as valid any purported vote not in
compliance with the terms of this Agreement.
(h) The Company's obligations under this Article 1.02, including the
Company's voting of the Pooled Shares as Proxyholder under Article
1.02(f), shall be purely administrative and ministerial. The Company
shall not exercise any discretion in its role as Proxyholder, but shall be
bound to vote those
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shares strictly in accordance with the terms of this Article 1.02.
Article 2. Provisions Restricting Transfer of Shares
2.01. Restrictions on Transfer.
(a) No Pool Member shall sell, assign, transfer, convey, give, donate, pledge
or otherwise encumber or dispose of any Pooled Shares or any interest
therein now held or hereafter acquired by him, her or it (collectively a
"transfer"), except by operation of law or as provided in this Agreement.
(b) Any purported transfer of Pooled Shares not in accordance with the
provisions of this Agreement shall be void and ineffectual and shall not
operate to transfer any interest or title to the purported transferee.
The Company shall not cause or permit any transfer of any of the Pooled
Shares to be registered on its books unless such transfer is made in
accordance with the terms of this Agreement. The Company shall be
protected in relying on the record of shareholders maintained by it or on
its behalf for all purposes, notwithstanding any notice of any purported
transfer to the contrary. The Company shall require any permitted
transferee of Pooled Shares (including, without limitation, a transferee
pursuant to Article 2.04) to become a party to this Agreement by an
instrument satisfactory to the Company in form and substance, as a
condition to any transfer.
2.02. Transfers by Operation of Law. If any Pooled Shares are transferred
by operation of law, (e.g. in the event of the bankruptcy or incapacity of a
Pool Member) the transferee shall receive such Pooled Shares subject to all of
the provisions of this Agreement, including but not limited to the rights
granted to the Company and others herein to acquire any such Pooled Shares.
2.03 Transfers Between Pool Members. Any Pool Member may freely transfer
any of that Pool Member's Pooled Shares to any other Pool Member (or to a trust
of which all the beneficiaries of such Pooled Shares are Pool Members or their
issue), by gift, sale or otherwise, with or without consideration, in any
manner or combination, and without the prior approval of any other Pool Member
or the Company; provided, however, that the Pooled Shares so transferred shall
remain subject to all of the terms of this Agreement, without any further
action of the Company or the Pool Members. In the event of any transfer to a
trust, the trust shall, as a condition precedent to such transfer, agree to be
bound by all of the terms of this Agreement.
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2.04. Transfer By Descent/Distribution.
(a) Any Pool Member may freely transfer any of that Pool Member's Pooled
Shares by will, without the prior approval of any other Pool Member or the
Company, and the shares of a deceased Pool Member shall pass according to
his/her will (or according to applicable intestacy laws should the Pool
Member die without a will), subject, however, to the terms of this
Agreement.
(b) Any Pool Member that is a trust or Partnership may distribute Pooled
Shares held by it to any beneficiary of the trust or partner of the
partnership, in accordance with the terms of the trust or partnership,
subject, however, to the terms of this Agreement.
2.05. Other Transfer of Pooled Shares.
(a) If any Pool Member (the "Selling Pool Member") wishes to transfer any
Pooled Shares (the "Offered Shares") other than through a transfer
permitted under Articles 2.03 or 2.04 above, that Pool Member shall first
give written notice of intention to transfer ("Notice of Sale") to the
Secretary of the Company. The Notice of Sale shall specify the number of
Offered Shares and shall state whether the Selling Pool Member wants to
receive consideration in the form of (i) cash at the price per share of
the Company's Series A Shares on the Closing Date (as defined below in
Article 2.01(d)) or (ii) an equal number of shares of the Company's Series
A Shares. The specified consideration shall be either all cash or all
Series A Shares. Within twenty (20) days after the Secretary's receipt of
the Notice of Sale, the Company will furnish a copy of the Notice of Sale
to each of the other Pool Members (the "Non-Selling Pool Members").
(b) Within 20 days after his, her or its receipt of a Notice Of Sale, (1)
each Non-Selling Pool Member who wishes to purchase any of the Offered
Shares for the specified consideration shall give written notice (the
"Pool Member Purchase Notice") to the Selling Pool Member and to the
Secretary of the Company. The Pool Member Purchase Notice shall specify
the number of the Offered Shares, which the Non-Selling Pool Member wishes
to purchase. The Pool Member Purchase Notice may specify the purchase of
all or any portion of the Offered Shares.
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(c) Each Non-Selling Shareholder who timely provides a Pool Member Purchase
Notice shall have the right to purchase the lesser of (i) the number of
Offered Shares determined by multiplying the total number of Offered
Shares by a fraction, the numerator of which shall be the total number of
Pooled Shares held by that Non-Selling Pool Member, and the denominator of
which shall be the total number of Pooled Shares held by all Non-Selling
Pool Members who timely provided Pool Member Purchase Notices; or (ii) the
number of Offered Shares set forth in that Non-Selling Pool Member's
Purchase Notice. If only one Non-Selling Pool Member timely provides a
Pool Member Purchase Notice, that Pool Member shall have the right to
purchase up to all of the Offered Shares.
(d) Closing on the sale of the Offered Shares shall be held, at 10:00 a.m.,
at the Company's headquarters on the date which is sixty-one (61) days
after the Company has received the Notice of Sale, or if that date is not
a business date on which the Company is open for business, on the first
such business date thereafter (the "Closing Date"). Any of the Offered
Shares which are not purchased by Non-Selling Pool Members shall be
purchased at the Closing by the Company.
(e) The purchase price to be paid at Closing for each Offered Share purchased
for cash shall be the closing price per share of the Series A Shares
(NASDAQ symbol: WSTNA) as published in the Wall Street Journal on the
trading day immediately before the Closing Date. The purchase price to be
paid at Closing for each Offered Share purchased for Series A Shares shall
be one Series A Share, appropriately adjusted to reflect any stock splits,
stock dividends, or other reclassifications or combinations of the Common
Shares or the Series A Shares which was not effected with respect to the
other series of Stock.
(f) If the purchaser of Offered Shares is a Pool Member the purchase price
for the Offered Shares shall be paid in cash or Series A Shares as
specified in the Notice of Sale. If the purchaser of Offered Shares is
the Company, and the Notice of Sale specifies that the consideration is to
be Series A Shares, the purchase price for the Offered Shares shall be
paid in Series A Shares. If the purchaser of the Offered Shares is the
Company, and the Notice of Sale specifies that the consideration is to be
cash, the purchase price may be paid, at the sole discretion of the
Company, in cash or Series A Shares, or any combination of cash or Series
A Shares.
(g) At Closing the Selling Pool Member shall deliver to the purchaser
certificates representing the Offered Shares, duly
7
<PAGE> 8
endorsed for transfer, free and clear of any liens, restrictions or
encumbrances (except those arising from this Agreement), and (if required
by the purchaser) with signature guaranteed, and accompanied by all
documents necessary to effect transfer of the Offered Shares and the
purchaser or purchasers shall deliver the consideration therefor required
by this Agreement.
(h) The Company shall, in a timely manner, take all legally permissible
action which is necessary for the Company to take in order to make Series
A Shares, received by a Selling Pool Member in exchange for Pooled Shares,
freely tradable to the extent permitted by law or regulation, including
the limitations of SEC Rule 144. After such exchange of Pooled Shares for
Series A Shares, however, a Selling Pool Member shall, at all times, limit
sales of such Series A Shares in accordance with the volume resale
limitations of SEC Rule 144, even if that Selling Pool Member is not
otherwise subject to the requirements of SEC Rule 144.
2.06. Permitted Transferee of Pooled Shares Subject to Agreement.
(a) Any person or entity, other than the Company, who receives Pooled Shares
in a transfer under Articles 2.02 through 2.05 above (a "Permitted
Transferee"), shall (i) receive such shares subject to all of the terms of
this Agreement, including but not limited to the Voting Agreement under
Article 1.02 and the restrictions on transfer set forth in this Article 2,
and (ii) immediately be a Pool Member, without further action by the
Company or the other Pool Members.
(b) Upon the permitted transfer of Pooled Shares, a Permitted Transferee
shall promptly notify the Secretary of the Company of the transfer, and
shall include in that notice all information concerning the transferee
listed in Exhibit "A", including the transferee's mailing address for the
purpose of receiving notices under this Agreement. Upon receipt by the
Secretary of the Company of such notice, Exhibit "A" attached to this
Agreement shall be deemed amended to provide that the Permitted Transferee
shall be listed as a Pool Member, and any Pooled Shares so transferred
shall be listed as the Pooled Shares of the Permitted Transferee and
subtracted from the Pooled Shares of the transferor.
(c) Until the Secretary of the Company has received notice from a Permitted
Transferee in accordance with Article 2.06(b) above, accompanied by a duly
executed proxy in the form of Exhibit B
8
<PAGE> 9
attached to this Agreement: (i) neither the Company nor any Pool Member
shall be required to send to the Permitted Transferee any notice or other
communication required to be sent to Pool Members under this Agreement,
including any notice of a Pool Vote, any ballot for a Pool Vote or any
Notice of Sale; (ii) a Pool Vote or transfer of Pooled Shares may proceed
under the terms of this Agreement and will be valid, without the
participation of the Permitted Transferee; and (iii) the transferee shall
have no right to vote or transfer any Pooled Shares.
(d) Any person who ceases to hold any Pooled Shares shall no longer be a Pool
Member.
Article 3. Remedies.
3.01. Equitable Relief. The parties acknowledge that the Common Shares
are unique, and that any violation of this Agreement cannot be compensated for
in damages alone. Therefore, in addition to all of the other remedies which
may be available under applicable law, any party hereto shall have the right to
equitable relief, including, without limitation, the right to enforce
specifically the terms of this Agreement by obtaining injunctive relief against
any violation or non-performance hereof.
Article 4. Governing Law.
4.01. This Agreement will be governed by and construed in accordance with
the internal laws of the Commonwealth of Pennsylvania (and United States
federal law, to the extent applicable) without giving effect to principles of
conflicts of law.
Article 5. Notices.
5.01. All notices, offers, acceptances and other communications provided
by a party to another party shall be in writing and shall be delivered by first
class, certified mail, return receipt requested, or by reputable overnight
express mail service (such as Federal Express), postage prepaid, to the Company
at the following address:
1 Weston Way
West Chester, PA 19380-1499
Attention: Corporate Secretary
and to each Pool Member at the address set forth on Exhibit "A", or at such
other address as shall have been specified in a notice
9
<PAGE> 10
given hereunder. Any notice, offer, acceptance and other communication
provided by any party to another party shall be deemed to have been received
and shall be legally effective for all purposes three business days after it is
deposited in the mail or provided to an overnight delivery carrier in the
manner set forth above in this Article 5; except however for a Pool Majority
Notice, which shall only be effective upon receipt by the secretary of the
Company.
Article 6. Legends.
6.01. Within thirty (30) days after the effective date of this Agreement,
each certificate for Common Shares held by any Pool Member shall be delivered
to the Company by each Pool Member and shall be marked with the following
legend:
The shares represented by this certificate are subject to
certain voting restrictions and transfer restrictions,
including the option to purchase given to others, and the
transfer of this certificate and the shares it represents
is restricted, all as more fully set forth in an Agreement
between this Company and certain of its shareholders
effective on _________, 1997, as it may be amended from
time to time, the terms of which are incorporated herein by
reference, and a copy of which may be inspected at the
principal office of the Company.
Article 7. Arbitration.
7.01. In the event of any dispute whatsoever arising as to the
interpretation of any provision of this Agreement or arising as to the rights,
duties or obligations of any of the parties to this Agreement in connection
with any provision of this Agreement, that dispute shall be submitted to
arbitration in Philadelphia, Pennsylvania in accordance with the rules then
obtaining of the American Arbitration Association. Any decision of the
Arbitrator(s) shall be binding on all parties in interest and judgment upon
the award rendered may be entered in any court having jurisdiction thereof.
The prevailing party in any such arbitration shall be entitled to recover, in
addition to all other appropriate relief, the cost and expenses incurred by
that party (including reasonable counsel fees) in connection with obtaining or
enforcing the arbitration award.
Article 8. Counterparts.
10
<PAGE> 11
8.01. This Agreement may be executed in any number of counterparts, each
of which, after the Effective Date, shall be deemed to be an original as
against any party whose signature appears thereon, and all of which shall
together constitute one and the same instrument. An executed counterpart of
this Agreement and all amendments hereto shall be kept at the principal office
of the Company and shall be made available for inspection by any interested
party during regular business hours.
Article 9. Assignment.
9.01 Neither the Company nor any Shareholder shall assign, transfer,
pledge or otherwise encumber or dispose of its or his rights or obligations
under this Agreement except as otherwise provided herein. Subject to the
foregoing, this Agreement shall be binding upon and inure to the benefit of the
respective parties hereto, and their personal representatives, estates,
successors, and assigns, including any transferee of the Pooled Shares subject
to this Agreement.
Article 10. Severability.
10.01. If any provision of this Agreement is held to be invalid or
unenforceable, after exhaustion of all appeals, by any award or judgment of a
tribunal of competent jurisdiction, it shall to that extent be omitted, but the
remainder of this Agreement shall not be affected by such judgment or award,
and the Agreement shall be carried out as nearly as possible according to its
original terms and intent.
Article 11. Entire Agreement; Amendment.
11.01. This writing represents the entire Agreement and understanding of
the parties with respect to the subject matter hereof and supersedes all prior
written or oral agreements, representations and understandings relating to the
subject matter hereof.
11.02. Other than as expressly set forth in this Agreement, the rights,
privileges and priorities of any of the Common Shares or Series A Shares held
by Pool Members (including but not limited to the right to call, or participate
in a call, for a special shareholders meeting) shall not be affected by this
Agreement; and the written consent of the Company and of all Pool Members shall
be required for any amendment or modification of this Agreement which would
have any such effect. Article 2.05 of this Agreement may not be amended or
modified without the consent of the Company and all Pool Members.
11
<PAGE> 12
11.03 Except as set forth in Article 11.02, this Agreement may be amended
or modified by the written consent of the holders of eighty-five (85%) of all
Pooled Shares at the time of the amendment or modification; provided, however,
that any amendment or modification that alters the rights or obligations of the
Company as set forth in this Agreement shall also require the written consent
of the Company.
Article 12. Effective Date; Termination.
12.01. This Agreement shall become effective on the date (the "Effective
Date") on which it has been (a) approved by the Company's Board of Directors;
and (b) signed by the holders of Pooled Shares entitled to cast fifty (50%)
percent or more of the votes entitled to be cast by all shareholders of the
Company in any vote of shareholders of the Company; and (c) duly executed by
the Company's Chief Executive Officer. Until the Effective Date, this
Agreement shall have no effect and shall create no rights or obligations on the
part of any signatory. If this Agreement does not become effective before
January 1, 1998, it shall be null and void for all purposes. Any holder of
Common Shares of the Company who wishes to become a Pool Member by signing this
Agreement must do so before January 1, 1998, and any holder of Common Shares
who does not execute this Agreement before January 1, 1998, may not do so and
may not become a Pool Member, other than (a) through a transfer permitted under
Article 2 above or (b) with the written approval of the Company and of Pool
Members holding more than fifty (50%) of the Pooled Shares.
12.02. This Agreement shall terminate, and be null and void thereafter, on
the earlier to occur of (a) December 31, 2002, (b) thirty (30) days after the
Company receives notice signed by Pool Members holding more than 50% of the
Pooled Shares (at the time of the notice) that those Pool Members desire to
terminate this Agreement, or (c) the date on which the votes entitled to be
cast on all Pooled Shares constitute less than fifty (50%) percent of the votes
entitled to be cast by all shareholders of the Company in any vote of
shareholders of the Company; provided, however, that within thirty (30) days
after termination of this Agreement, any Pool Member at the time of such
termination may deliver a Sale Notice to the Company, in accordance with
Article 2.05, and the Company (but not any other Pool Member) shall thereupon
be required to proceed with the purchase of the Offered Shares in accordance
with the provisions of Article 2.05 (d)(e) and (f), and no Pool Member shall
have any right or obligation to purchase any of the Offered Shares. Upon
termination of this Agreement, the Proxies given to the Company, under Article
1.02(f) above, shall terminate
12
<PAGE> 13
immediately and any Pool Vote or Pool Majority Notice shall be void and of no
effect in connection with any vote of shareholders of the Company held after
the effectiveness of such termination (and any consent of shareholders with an
effective time after such termination).
Article 13. General.
13.01. Whenever in this Agreement the Secretary of the Company is
identified the Company may, by notice twenty (20) days notice to all Pool
Members substitute in place of the Secretary any other officer of the Company.
13.02. The Company's Board of Directors, any Director of the Company
and/or any member of management of the Company may, at any time, discuss the
business of the Company with any Pool Member or group of Pool Members to (among
other reasons) informally determine the position of such Pool Member(s) on any
issue affecting the Company. Nothing in this Agreement shall obligate the
Company or any Pool Member to disclose such discussion, or the information
conveyed during such discussion, to any other Pool Member. If, at any time,
the Company, in connection with this Agreement, discloses to a Pool Member
information which could be regarded as material, non-public information
concerning the Company, the Company will so notify the Pool Member.
Thereafter, that Pool Member will treat such information as material,
non-public information and will comply with all obligations under federal and
state securities laws, including but not limited to prohibition on insider
trading.
IN WITNESS WHEREOF, the parties have executed this Agreement on the dates set
forth below.
ROY F. WESTON, INC.
By: ___________s/_____________ Date:__1/2/98____________
President and
Chief Executive Officer
COUNTERPART SIGNATURE PAGES OF THE POOL MEMBERS ARE ATTACHED HERETO
13
<PAGE> 14
EXHIBIT A
Signature Pages to Stock Pooling Agreement (the "Agreement") dated as of
the Effective Date (as defined in Article 12.01 of the Agreement) among ROY F.
WESTON, Inc. and the parties identified below.
The undersigned hereby executes and delivers the Agreement, authorizes
this signature page to be attached to a counterpart of the Agreement and agrees
to be bound by the Agreement.
NAME/TAX ID NUMBER: _____________________
SIGNATURE: ____________________________
ADDRESS: ___________________________________________
NUMBER OF COMMON SHARES: ________________
DATE: ________________
<PAGE> 15
Exhibit B
IRREVOCABLE PROXY
The undersigned agrees to, and hereby grants to Roy F. Weston, Inc. (the
"Company" or the "Proxyholder"), an irrevocable proxy, to vote and to execute
and deliver written consents with respect to, all Common Shares of the Company
now or hereafter held by the undersigned beneficially or of record (the "Common
Shares") to the same extent and with the same effect as the undersigned might
or could do under any applicable laws or regulations governing the rights and
powers of shareholders of a Pennsylvania corporation, in connection with any
matter requiring or otherwise submitted to a vote of the Company's
shareholders, including, without limitation, the election of directors,
regardless of (i) whether such vote is sought at an annual or special meeting
of the Company's shareholders, or by written consent in lieu of a meeting, or
otherwise, or (ii) whether such vote is to be cast in person, or by proxy, or
as otherwise permitted by law; provided, however, that the Proxyholder shall
vote the Common Shares in accordance with the requirements of the Stock Pooling
Agreement dated as of the Effective Date (as defined in Article 12.01 of that
Agreement), as amended or supplemented from time to time, by and among the
Company, the undersigned and certain other holders of Common Shares of the
Company (the "Stock Pooling Agreement").
The Common Shares subject to this proxy shall be voted strictly in
accordance with the provisions of the Stock Pooling Agreement by the Corporate
Secretary of the Company or other person designated by the Company's Board of
Directors; and the Proxyholder shall have no discretion to vote the Common
Shares in any manner other than as determined under the terms of the Stock
Pooling Agreement.
The undersigned hereby affirms that this proxy is being delivered to the
Company pursuant to the Stock Pooling Agreement and, as such, is coupled with
an interest and is irrevocable. Under the circumstances as provided in the
Stock Pooling Agreement, a copy of which is on file with the corporate records
of the Company, this proxy may, however, be terminated.
This proxy revokes any other proxy granted by the undersigned at any time
prior to the date hereof with respect to any of the Common Shares.
__________________________________
Date: , 1997
<PAGE> 1
Exhibit 11
ROY F. WESTON, INC. AND SUBSIDIARIES
SCHEDULE OF COMPUTATION OF (BASIC AND DILUTED EARNINGS
(LOSS) PER SHARE
<TABLE>
<CAPTION>
Years Ended December 31
1997 1995 1995
--------- ---------- ----------
(Thousands of Dollars,
Except Share and Per Share Amounts)
<S> <C> <C> <C>
Basic
Net income (loss) $ (11,425) $ (16,655) $ 1,514
Weighted average shares 9,712,752 9,562,945 9,520,110
Basic earnings (loss) per share $ (1.18) $ (1.74) $ .16
Diluted
Net income (loss) $ (11,425) $ (16,655) $ 1,514
Weighted average shares with
dilutive options 9,712,752 9,562,945 9,522,562
Diluted earnings (loss) per share $ (1.18) $ (1.74) $ .16
</TABLE>
<PAGE> 1
ROY F. WESTON, INC. AND SUBSIDIARIES
EXHIBIT 13
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
----------------------------
1997 1996 1995
- ----------------------------------------------------------------------------
<S> <C> <C> <C>
Net revenues 100.0 % 100.0 % 100.0 %
- ----------------------------------------------------------------------------
Expenses
Direct salaries and other operating costs 94.5 % 87.9 % 84.9 %
General and administrative expenses 17.8 % 15.2 % 13.8 %
Pension curtailment gain (2.7)% -- --
Restructuring charges (credits) (1.2)% 8.2 % --
Impairment of long-lived assets 0.9 % 1.8 % --
- ----------------------------------------------------------------------------
Income (loss) from operations (9.3)% (13.1)% 1.3 %
Other income (expense) 0.3 % 0.2 % (0.2)%
- ----------------------------------------------------------------------------
Income (loss) before income taxes (9.0)% (12.9)% 1.1 %
Income taxes (1.0)% (3.5)% 0.4 %
- ----------------------------------------------------------------------------
Net income (loss) (8.0)% (9.4)% 0.7 %
============================
</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 40%,
33% and 33% of gross revenues in 1997, 1996 and 1995, respectively. The
increase in 1997 is due to greater subcontracting of laboratory analysis
beginning in May 1997 as a result of divestiture of the Company's analytical
laboratories.
RESULTS OF OPERATIONS
1997 COMPARED TO 1996
Net revenues decreased 19% to $142,359,000 from $176,530,000 in 1996.
Consulting net revenues continued to be impacted by reduced levels of available
business. Non-dedicated-site federal government projects and industrial
projects accounted for 52% and 33%, respectively, of the decline in net
revenues. Net revenues from analytical services declined $13,100,000 as the
Company completed the sale of its analytical laboratory assets in May 1997.
Construction and remediation net revenues were lower in 1997 due primarily to
the lack of an active thermal incineration project.
12
<PAGE> 2
ROY F. WESTON, INC. AND SUBSIDIARIES
The Company had losses from operations of $13,216,000 in 1997 and $23,181,000
in 1996. The 1997 loss was reduced by a gain of $3,899,000 from curtailment of
the Company's defined benefit pension plan and by restructuring credits of
$1,668,000 resulting from the sales of the net assets of two subsidiaries.
Included in the 1997 loss were charges of $1,245,000 for the writedown of
financial and project software costs; approximately $3,400,000 related to
reductions in the Company's workforce, changes in senior management, and
election of new directors in May 1997; and approximately $1,000,000 for excess
office lease space. The 1996 loss included restructuring charges of
$14,421,000 consisting principally of asset writedowns and other expenses
associated with a plan to withdraw from the analytical laboratory business,
costs to close or reduce the size of certain office facilities, and severance
costs associated with workforce reductions. Also, 1996 included a charge of
$3,146,000 to recognize the impairment in value of transportable thermal
treatment systems and a minority interest in a bioremediation company.
Margins were lower in 1997 as staff and cost reductions did not fully offset
revenue declines. Margins were lower for both consulting and construction and
remediation activities. Operations personnel utilization was slightly higher
for the full year 1997 than in 1996, reflecting improvement in the second half
of the year. Margins were lower in 1997 than in 1996, reflecting the
continuing impacts of significant competition, heightened by industry
consolidation and the impact of cost overruns on certain construction and
remediation projects.
General and administrative expenses declined $1,596,000, or 6%, in 1997,
although increasing to 17.8% of net revenues from 15.2% in 1996. Expenditures
in 1997 included approximately $2,500,000 for reductions to the Company's
administrative workforce and changes to its Board of Directors and senior
management. Expenditures in 1996 included $944,000 relating to severance
benefits for two of the Company's former senior officers.
The Company had an effective income tax benefit rate of 11% in 1997
compared to an effective income tax benefit rate of 27% in 1996. This rate
change was due to a 1997 income tax charge of $3,000,000 to provide for the
uncertain realizability of a portion of the Company's deferred tax assets. The
charge increased the Company's basic net loss per share by $.31, or 26% of its
1997 basic net loss per share.
The Company had other income of $341,000 in 1997 compared to $381,000 in 1996.
The Company realized gains of $21,000 and $273,000 on redemptions of $186,000
and $3,715,000 of its 7% Convertible Subordinated Debentures in 1997 and 1996,
respectively. Interest expense decreased $328,000 from 1996 due primarily to
the repurchase of 7% Convertible Subordinated Debentures and scheduled
repayments of a five-year term loan.
-13-
<PAGE> 3
ROY F. WESTON, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
1996 COMPARED TO 1995
Net revenues decreased 14% to $176,530,000 in 1996 from $206,273,000 in 1995.
Consulting net revenues, which declined 14%, were impacted by a diminished
level of available business. A 28% decline in remediation net revenues
was due to a reduced level of work for the Company's transportable thermal
treatment systems due, in part, to funding delays and the recognition of
$1,800,000 in 1995 representing completion of a remediation project contract
negotiation. Net revenues from analytical services declined 12% as reduced
sample volumes more than offset a modest improvement in pricing. Net revenues
from federal program management services declined 6%.
The Company had a loss from operations of $23,181,000 in 1996 compared to
income from operations of $2,623,000 in 1995. The 1996 loss included
restructuring charges of $14,421,000 and an impairment charge of $3,146,000.
Consulting margins were significantly lower in 1996 as staff and cost
reductions did not fully offset the revenue decline. Consulting personnel
utilization was 7% lower than in 1995. Lower net revenues also were the main
factor in a large decline in consulting and remediation project margins. While
analytical laboratory services margins improved somewhat in 1996, they remained
negative. Federal program management results decreased only slightly from
1995.
General and administrative expenses declined $1,532,000, or 5%, in 1996,
although increasing to 15.2% of net revenues from 13.8% in 1995. Expenditures
in 1996 included $944,000 relating to severance benefits for two of the
Company's senior officers.
The Company had an effective income tax benefit rate of 27% in 1996 compared to
an effective income tax rate of 36% in 1995. This change in rates, which had
the impact of increasing the Company's 1996 net loss by $2,063,000, or $.22 per
share, was a result of the writedown of certain intangible assets that provided
no tax benefit and an increase in the Company's valuation reserve relating to
deferred state income tax benefits.
The Company had other income of $381,000 in 1996 compared to other expenses of
$258,000 in 1995. The Company realized gains of $273,000 and $376,000 on
redemptions of $3,715,000 and $3,000,000 of its 7% Convertible Subordinated
Debentures in 1996 and 1995, respectively. Investment income increased
$352,000 in 1996 due primarily to gains recognized on the sale of certain
mutual fund investments. Interest expense decreased $331,000 from 1995 due
primarily to the repurchase of 7% Convertible Subordinated Debentures and
scheduled repayments of its five-year term loan.
-14-
<PAGE> 4
ROY F. WESTON, INC. AND SUBSIDIARIES
OTHER
The Company had contract backlog of $65,300,000 at December 31, 1997. In
addition to backlog, the Company can generate additional revenues from open
order contracts and activities related to emergency responses, which are
excluded from contract backlog until approved and funded. Contracts are
subject to cancellation by the client, changes in the scope of work, and delays
in project startup. The maintenance of adequate contract backlog is dependent
on continued generation of new contract bookings. In 1997, new contract
bookings were $142,000,000, a 22% decline from 1996. New contract bookings
have declined in each of the last four years.
The Company has determined that substantially all of its financial and project
accounting and reporting system software will require significant revisions in
order to continue to function after January 1, 2000. The cost of revising
these systems has not been precisely determined, but is expected to range
between $1,000,000 and $1,500,000. The Company plans to replace its affected
systems with new software packages that will be customized to the Company's
requirements. The new software, which is expected to cost approximately
$2,500,000, is planned to be substantially in place by the beginning of 1999.
The cost of the new system will be capitalized and amortized over five years.
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131, "Disclosures about Segments of an
Enterprise and Related Information." The statement will be effective for the
Company's 1998 annual financial statements. Statement No. 131 established
standards for reporting information about operating segments and related
disclosures about products, geographic areas and major customers. The Company
has not yet determined what effect Statement No. 131 will have on its
reporting. Statement No. 131 affects disclosure only and will not impact
reported earnings, cash flow or financial position.
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 $889,000 in 1997 to $10,767,000 from
$9,878,000 at December 31, 1996. Marketable securities decreased $3,448,000 in
1997 to $4,168,000 from $7,616,000 at December 31, 1996.
-15-
<PAGE> 5
ROY F. WESTON, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Operating activities provided cash of $2,275,000 in 1997 and $9,629,000 in
1996. The Company used a portion of its cash flow from operations to liquidate
$2,411,000 and $6,187,000 of short-term and long-term debt in 1997 and 1996,
respectively.
Net cash investments in property and equipment and other assets were $2,780,000
in 1997 and $3,440,000 in 1996. Investments in 1997 and 1996 consisted
primarily of computers and other equipment. The Company plans to invest
$4,000,000 to $6,000,000 of capital in 1998. The Company's capital
expenditures are financed primarily through operating cash flow.
The Company is required to make annual redemptions of 10% of its 7% Convertible
Subordinated Debentures in the principal amount of $3,140,000 by April 15 of
each year. Repurchases of $2,229,000 need to be made to satisfy the 1998
requirement. The final payment on the Company's five-year term loan was made
on January 2, 1998.
During 1997, the Company agreed to an amendment to its uncollateralized credit
facility, which reduced the maximum amount of the facility, increased the
amount available for cash borrowings, and imposed additional covenants,
including minimum net worth and minimum cash, cash equivalents, and marketable
securities. As a result of losses incurred during 1997, the Company was not in
compliance with the net worth covenant. In connection with a waiver of the
covenant violation, the Company agreed to an additional amendment to the
facility, which reduced the maximum amount to $8,786,000 and the amount
available for cash borrowings to $3,000,000. The amendment further requires
the Company to collateralize its outstanding letters of credit with cash and to
collateralize any cash borrowings by a pledge of substantially all of its
accounts receivable. Also, redemptions of the Company's 7% Convertible
Subordinated Debentures are restricted.
The amendment has been extended through April 15, 1998. Effective February 19,
1998, the restriction on repurchase of Convertible Subordinated Debentures has
been removed and the Company's access to cash borrowings under the facility has
been suspended. The Company is currently negotiating to obtain a new credit
facility for letters of credit and cash borrowings of at least $10,000,000. It
is expected that a new facility will be in place by April 1998.
The Company received $583,000 in 1997 and $971,000 in 1996 from sales of shares
of Series A common stock through its Employee Stock Purchase Plan. During 1997
and 1996, the Company repurchased 23,000 and 256,900 shares, respectively, of
Series A common stock for $84,000 and $1,199,000, respectively.
-16-
<PAGE> 6
ROY F. WESTON, INC. AND SUBSIDIARIES
FORWARD LOOKING STATEMENTS
From time to time, the Company, its management, or other Company
representatives may make or publish statements that contain projections,
beliefs, expectations, predictions or intentions relating to anticipated
financial performance, business prospects, potential contract value, business
strategy and plans, technological developments, and other matters. The Private
Securities Litigation Reform Act of 1995 provides a safe harbor for these
forward looking statements. In order to comply with the terms of the safe
harbor, the Company notes that a number of risk factors and uncertainties could
cause the Company's actual results, experience or outcome to differ materially
from projections, beliefs, expectations, predictions or intentions expressed in
forward looking statements.
These risks and uncertainties, which may affect the operations, performance,
development and results of the Company's business, include, but are not limited
to, the following:
- The highly competitive marketplace for the Company's services.
- Changes in and levels of enforcement of federal, state and local
environmental legislation and regulations.
- The Company's ability to obtain new contracts from existing as well as
new clients, and the uncertain timing of awards and contracts.
- The Company's ability to execute new projects and those currently in
backlog within reasonable cost estimates, as well as other contract
performance risks.
- Funding appropriation, funding delay, and the issuance of work orders
on government projects.
- The Company's ability to achieve any planned overhead or other cost
reductions while maintaining adequate work flow.
- The Company's ability to obtain adequate financing for its current
operations and future expansion.
- The Company's ability to execute its strategic plan through successful
marketing activities and continued cost containment.
- The nature of the Company's work with hazardous materials, toxic
wastes, and other pollutants, and the potential for uninsured claims
or claims in excess of insurance limits.
The Company disclaims any intent or obligation to update forward looking
statements.
17
<PAGE> 7
ROY F. WESTON, INC. AND SUBSIDIARIES
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
For the years ended December 31
--------------------------------------------------------------
(Thousands of dollars, except per 1997 1996 1995 1994 1993
share amounts)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Gross revenues $238,103 $263,388 $309,858 $290,081 $314,443
Net revenues $142,359 $176,530 $206,273 $200,304 $214,869
Income (loss) from operations $(13,216) $(23,181) $ 2,623 $ (730) $ 6,248
Net income (loss) $(11,425) $(16,655) $ 1,514 $ (1,103) $ 2,603
Basic earnings (loss) per share $ (1.18) $ (1.74) $ .16 $ (.12) $ .28
- ----------------------------------------------------------------------------------------------------------
* Includes restructuring and impairment charges aggregating $17,567.
AT DECEMBER 31
- ----------------------------------------------------------------------------------------------------------
Working capital $ 46,239 $ 58,956 $ 67,875 $ 74,352 $ 73,289
Total assets $125,248 $141,472 $163,406 $156,730 $165,699
Short-term debt $ 2,914 $ 2,159 $ 2,261 $ 2,431 $ 2,635
Long-term debt (less current
portion) $ 15,884 $ 18,922 $ 24,673 $ 29,843 $ 33,054
Stockholders' equity $ 55,367 $ 66,090 $ 82,901 $ 80,892 $ 81,719
- ----------------------------------------------------------------------------------------------------------
</TABLE>
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, 1997 and 1996, and the related
consolidated statements of operations, cash flows and stockholders' equity for
each of the three years in the period ended December 31, 1997. 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
18
<PAGE> 8
ROY F. WESTON, INC. AND SUBSIDIARIES
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, 1997 and 1996, and the consolidated
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1997 in conformity with generally accepted
accounting principles.
Coopers & Lybrand, L.L.P.
2400 Eleven Penn Center
Philadelphia, Pennsylvania
February 5, 1998
-19-
<PAGE> 9
ROY F. WESTON, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31
------------------
<S> <C> <C>
(Thousands of dollars) 1997 1996
ASSETS
- -----------------------------------------------------------------------------------------------
CURRENT ASSETS
Cash and cash equivalents $10,767 $9,878
Marketable securities 4,168 7,616
Accounts receivable, trade, net of allowance for doubtful accounts 54,497 65,480
Unbilled costs and estimated earnings on contracts in process 20,920 18,151
Prepaid and refundable income taxes 1,000 2,719
Deferred income taxes 3,104 5,584
Other 2,643 2,438
- -----------------------------------------------------------------------------------------------
Total current assets 97,099 111,866
- -----------------------------------------------------------------------------------------------
PROPERTY AND EQUIPMENT
Land 215 215
Buildings and improvements 11,625 11,350
Furniture and equipment 38,803 55,763
Leasehold improvements 2,849 8,929
Construction in progress 8 17
- -----------------------------------------------------------------------------------------------
Total property and equipment 53,500 76,274
Less accumulated depreciation and amortization 43,248 64,884
- -----------------------------------------------------------------------------------------------
Property and equipment, net 10,252 11,390
- -----------------------------------------------------------------------------------------------
OTHER ASSETS
Goodwill, net of accumulated amortization of $4,076 in 1997
and $4,014 in 1996 1,878 1,940
Deferred income taxes 5,125 3,168
Other 10,894 13,108
- -----------------------------------------------------------------------------------------------
Total other assets 17,897 18,216
- -----------------------------------------------------------------------------------------------
TOTAL ASSETS $125,248 $141,472
==================
</TABLE>
See notes to consolidated financial statements.
-20-
<PAGE> 10
ROY F. WESTON, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
December 31
----------------
(Thousands of dollars) 1997 1996
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
- --------------------------------------------------------------------------------------------------------
CURRENT LIABILITIES
Current maturities of long-term debt $ 2,914 $ 2,159
Accounts payable and accrued expenses 13,879 11,869
Billings on contracts in process in excess of costs and estimated earnings 14,275 12,233
Employee compensation, benefits and payroll taxes 8,721 13,326
Income taxes payable 59 220
Other 11,012 13,103
- --------------------------------------------------------------------------------------------------------
Total current liabilities 50,860 52,910
- --------------------------------------------------------------------------------------------------------
LONG-TERM DEBT 15,884 18,922
- --------------------------------------------------------------------------------------------------------
OTHER LIABILITIES 3,137 3,550
- --------------------------------------------------------------------------------------------------------
CONTINGENCIES
- --------------------------------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY
Common stock, $.10 par value, 10,500,000 shares authorized;
3,170,494 shares issued in 1997; 3,192,909 shares issued in 1996 317 319
Series A common stock, $.10 par value, 20,500,000 shares
authorized; 8,581,821 shares issued in 1997; 8,319,352
shares issued in 1996 858 832
Unrealized gain on investments 733 541
Additional paid-in capital 55,700 55,130
Retained earnings 2,849 14,274
- --------------------------------------------------------------------------------------------------------
60,457 71,096
Less treasury stock at cost, 1,081,275 common shares in 1997
and 1996; 792,805 Series A common shares in 1997 and
769,805 Series A common shares in 1996 5,090 5,006
- --------------------------------------------------------------------------------------------------------
Total stockholders' equity 55,367 66,090
- --------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $125,248 $141,472
==================
</TABLE>
-21-
<PAGE> 11
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) 1997 1996 1995
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Gross revenues $238,103 $ 263,388 $ 309,858
Direct project costs 95,744 86,858 103,585
- -------------------------------------------------------------------------------------------------------
Net revenues 142,359 176,530 206,273
- -------------------------------------------------------------------------------------------------------
Expenses
Direct salaries and other operating costs 134,552 155,203 175,177
General and administrative expenses 25,345 26,941 28,473
Pension curtailment gain (3,899) -- --
Restructuring charges (credits) (1,668) 14,421 --
Impairment of long-lived assets 1,245 3,146 --
- -------------------------------------------------------------------------------------------------------
155,575 199,711 203,650
- -------------------------------------------------------------------------------------------------------
Income (loss) from operations (13,216) (23,181) 2,623
- -------------------------------------------------------------------------------------------------------
Other income (expense)
Investment income 1,844 1,965 1,613
Interest expense (1,623) (1,951) (2,282)
Other 120 367 411
- -------------------------------------------------------------------------------------------------------
341 381 (258)
- -------------------------------------------------------------------------------------------------------
Income (loss) before income taxes (12,875) (22,800) 2,365
Provision (benefit) for income taxes (1,450) (6,145) 851
- -------------------------------------------------------------------------------------------------------
Net income (loss) $(11,425) $ (16,655) $ 1,514
===========================================
Basic earnings (loss) per share $(1.18) $ (1.74) $ .16
===========================================
Weighted average shares outstanding
- basic 9,712,752 9,562,945 9,520,110
===========================================
Diluted earnings (loss) per share $(1.18) $ (1.74) $ .16
===========================================
Weighted average shares outstanding
- diluted 9,712,752 9,562,945 9,522,562
===========================================
</TABLE>
See notes to consolidated financial statements.
22
<PAGE> 12
ROY F. WESTON, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the years ended December 31
------------------------------------
(Thousands of dollars) 1997 1996 1995
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $(11,425) $(16,655) $1,514
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation and amortization 5,396 7,833 9,468
Provision for losses on accounts receivable 511 291 201
Pension curtailment gain (3,899) -- --
Restructuring charges -- 14,421 1,300
Impairment of long-lived assets 1,245 3,146 --
Other (174) (1,040) 515
Change in assets and liabilities:
Accounts receivable, trade 10,472 12,803 (9,628)
Unbilled costs and estimated earnings on contracts
in process (2,769) (216) 2,651
Other current assets (60) 164 1,024
Accounts payable and accrued expenses 2,010 (36) 942
Billings on contracts in process in excess of costs
and estimated earnings 2,042 (3,113) 6,386
Employee compensation, benefits
and payroll taxes (4,605) 1,488 1,507
Income taxes 1,558 (1,338) 300
Deferred income taxes 424 (4,130) (1,725)
Other current liabilities (1,927) (2,166) 151
Other assets and liabilities 3,476 (1,823) (1,817)
- ---------------------------------------------------------------------------------------------------
Net cash provided by operating activities 2,275 9,629 12,789
- ---------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of investments 15,381 21,663 18,520
Payments for purchase of investments (12,075) (24,539) (8,497)
Purchase of property and equipment (2,670) (3,052) (7,248)
Investments in other assets (110) (388) (2,740)
- ---------------------------------------------------------------------------------------------------
Net cash provided by (used for) investing activities 526 (6,316) 35
- ---------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments under long-term debt (2,411) (6,187) (5,436)
Proceeds from issuance of Series A common stock 583 971 1,359
Purchase of Series A common treasury stock (84) (1,199) (1,512)
- ---------------------------------------------------------------------------------------------------
Net cash used for financing activities (1,912) (6,415) (5,589)
- ---------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents 889 (3,102) 7,235
- ---------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS
Beginning of year 9,878 12,980 5,745
- ---------------------------------------------------------------------------------------------------
End of year $10,767 $9,878 $12,980
==================================
</TABLE>
See notes to consolidated financial statements.
23
<PAGE> 13
ROY F. WESTON, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
<TABLE>
<CAPTION>
Series A
Common Stock Common Stock Unrealized Gain
------------ ------------ (Loss) on
(Thousands of dollars and shares) Shares Amount Shares Amount Investments
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
At January 1, 1995 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
Shares issued under employee
stock purchase plan -- -- 291 29 --
Purchase of treasury stock -- -- -- -- --
Other -- -- -- -- 27
Net loss -- -- -- -- --
- -----------------------------------------------------------------------------
At December 31, 1996 3,193 319 8,319 832 541
Shares issued under employee
stock purchase plan -- -- 240 24 --
Purchase of treasury stock -- -- -- -- --
Other (23) (2) 23 2 192
Net loss -- -- -- -- --
- -----------------------------------------------------------------------------
At December 31, 1997 3,170 $317 8,582 $858 $733
=========================================
</TABLE>
See notes to consolidated financial statements.
24
<PAGE> 14
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>
$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
942 -- -- -- -- 971
-- -- -- (257) (1,199) (1,199)
45 -- -- -- -- 72
-- (16,655) -- -- -- (16,655)
- -------------------------------------------------------------------------
55,130 14,274 (1,081) (770) (5,006) 66,090
559 -- -- -- -- 583
-- -- -- (23) (84) (84)
11 -- -- -- -- 203
-- (11,425) -- -- -- (11,425)
- -------------------------------------------------------------------------
$55,700 $2,849 (1,081) (793) $(5,090) $ 55,367
=========================================================================
</TABLE>
25
<PAGE> 15
ROY F. WESTON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Nature of Operations
The Company provides infrastructure redevelopment services to industry, the
federal government, and public works and local government markets. Services
provided include consulting; construction, remediation, and redevelopment;
federal program management; and knowledge systems and solutions. The Company's
services are provided primarily in the United States, although services in
foreign nations are performed.
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.
-26-
<PAGE> 16
ROY F. WESTON, INC. AND SUBSIDIARIES
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 subsidiaries 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 applicable business' financial contribution to determine whether the
goodwill is recoverable.
LONG-LIVED ASSET IMPAIRMENT
The Company has 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 an impairment loss has occurred, the loss is recognized in the
consolidated statement of operations.
INCOME TAXES
The Company provides deferred income taxes on all temporary differences between
the tax and financial reporting bases of its assets and liabilities. A
valuation allowance is recorded to reduce deferred tax assets to the amount
that is expected to more likely than not be realized.
-27-
<PAGE> 17
ROY F. WESTON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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.
STOCK-BASED COMPENSATION
The Company has elected not to adopt Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based Compensation," but continues to
use Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees," to account for its stock-based compensation programs, including its
Stock-Based Incentive Compensation Plan and Employee Stock Purchase Plan.
Under Opinion No. 25, no compensation expense is recognized for grants of stock
options if the exercise price is not less than market value at the date of
grant, and employee stock purchase plans that qualify under Section 423 of the
Internal Revenue Code are considered noncompensatory. Proforma disclosures
required under Statement No. 123 are included in Note 9 to the consolidated
financial statements.
EARNINGS (LOSS) PER SHARE
The Company has adopted Statement of Financial Accounting Standards No. 128,
"Earnings per Share," in the fourth quarter of 1997. Basic and diluted
earnings (loss) per share are presented in the accompanying statements of
operations for each of the three years ended December 31, 1997, 1996 and 1995.
Since the Company's convertible subordinated debentures and substantially all
of its stock options are anti-dilutive, there is no change from amounts
previously reported as net income (loss) per share.
-28-
<PAGE> 18
ROY F. WESTON, INC. AND SUBSIDIARIES
Note 3 - Restructuring and Impairment Charges
During the third quarter of 1996, the Company adopted plans to withdraw from
the analytical laboratory business, close or reduce the size of certain office
facilities, and reduce the size of its workforce. The Company recorded
restructuring charges aggregating $14,421,000, consisting principally of
writedown of assets, severance costs for terminated employees, costs of idle
facilities, and estimated loss on disposal of the analytical laboratory
business. At December 31, 1997 and 1996, respectively, the Company had
accruals aggregating $1,433,000 and $5,426,000, respectively, included as other
current liabilities in the accompanying consolidated balance sheets, for costs,
principally lease payments at December 31, 1997, to be incurred in future
periods as a result of the restructuring.
During 1997, the Company completed the sale of net assets of its analytical
laboratory business and the sale of another subsidiary. The proceeds from
these transactions exceeded amounts anticipated in recording the 1996
restructuring charge. The excess is included as restructuring credits in the
accompanying consolidated statement of operations for the year ended December
31, 1997.
In addition, the Company recorded impairment charges of $1,245,000 and
$3,146,000 in 1997 and 1996, respectively, in accordance with Statement of
Financial Accounting Standards No. 121. The impairment charges reduced the
carrying value of the Company's financial and project software in 1997 and its
thermal incineration assets and a minority interest in a bioremediation company
in 1996 to their estimated fair values.
-29-
<PAGE> 19
ROY F. WESTON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 4 - Investments
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) 1997 1996
- -------------------------------------------------------------------
<S> <C> <C>
Fair Value:
Current $ 4,168 $ 7,616
Noncurrent 4,344 3,775
- -------------------------------------------------------------------
8,512 11,391
Gross unrealized holding gains (1,130) (847)
Gross unrealized holding losses 19 27
- -------------------------------------------------------------------
Cost basis of investments $ 7,401 $10,571
===================
</TABLE>
Investment activity for the years ended December 31 was as follows:
<TABLE>
<CAPTION>
---------------------------------------------
(Thousands of dollars) 1997 1996 1995
<S> <C> <C> <C>
- ----------------------------------------------------------------------------------------------
Proceeds from sale of investments $15,381 $21,663 $18,520
- ----------------------------------------------------------------------------------------------
Gross realized gains $ 270 $294 $ --
- ----------------------------------------------------------------------------------------------
Gross realized losses $ -- $ (15) $ --
- ----------------------------------------------------------------------------------------------
Change in unrealized holding gain $ 291 $ 41 $ 915
Deferred income taxes (99) (14) (311)
- ----------------------------------------------------------------------------------------------
Net change in unrealized holding gain $ 192 $ 27 $ 604
=============================================
</TABLE>
Realized gains and losses are determined on a specific identification basis and
included in investment income in the accompanying consolidated statements of
operations.
30
<PAGE> 20
ROY F. WESTON, INC. AND SUBSIDIARIES
Note 5 - Accounts Receivable and Unbilled Costs and Estimated Earnings
Trade accounts receivable at December 31 consisted of the following:
<TABLE>
<CAPTION>
-------------------------------
(Thousands of dollars) 1997 1996
- ----------------------------------------------------------------------
<S> <C> <C>
Industrial clients $15,185 $19,880
State and municipal governments 12,304 15,020
U.S. Government agencies 28,393 31,380
Retentions 365 710
- ----------------------------------------------------------------------
56,247 66,990
Less allowance for
doubtful accounts 1,750 1,510
- ----------------------------------------------------------------------
$54,497 $65,480
===============================
Unbilled costs and estimated earnings consisted of the following:
- ----------------------------------------------------------------------
Industrial clients $5,447 $3,459
State and municipal governments 5,260 5,215
U.S. Government agencies 9,695 7,852
Retentions 518 1,625
- ----------------------------------------------------------------------
$20,920 $18,151
===============================
</TABLE>
The Company does not believe there is any undue credit risk in connection with
realization of 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 $883,000 at December 31, 1997 include $712,000, which is expected
to be collected during 1999 and thereafter.
31
<PAGE> 21
ROY F. WESTON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 6 - Line of Credit Agreement
The Company has an $8,786,000 credit facility to provide cash borrowings and
letters of credit, which expires on April 15, 1998. Under the terms of the
agreement, cash borrowings, which may not exceed $3,000,000, bear interest at
the prime rate and are collateralized by a pledge of substantially all of the
Company's accounts receivable. The Company is subject to a 3/8% annual charge
on the unused portion of the facility and must maintain covenants including
adjusted leverage ratio and liquidity ratio.
The Company had no outstanding cash borrowings under the credit facility at
December 31, 1997 and had letters of credit outstanding, which are
collateralized by cash deposits, aggregating $2,954,000. At December 31, 1997,
the unused portion of the credit facility was $5,832,000. The Company is
currently negotiating with lenders to extend or replace the existing credit
facility.
Note 7 - Long-Term Debt
Long-term debt at December 31 consisted of the following:
<TABLE>
<CAPTION>
----------------
(Thousands of dollars) 1997 1996
- ---------------------------------------------------------------------------
<S> <C> <C>
7% Convertible Subordinated Debentures due
April 15, 2002 $17,929 $18,115
Bank term loan, payable in quarterly installments of
$500,000 plus interest at 5.85% through
January 1, 1998 500 2,500
Capitalized lease obligations 369 466
- ---------------------------------------------------------------------------
Total debt 18,798 21,081
Less current maturities 2,914 2,159
- ---------------------------------------------------------------------------
$15,884 $18,922
================
</TABLE>
The 7% Convertible Subordinated Debentures (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%.
32
<PAGE> 22
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
1997 and 1996, the Company repurchased $186,000 and $3,715,000 principal amount
of Debentures, respectively, thus satisfying the 1997 and a portion of the 1998
redemption requirements. Debentures aggregating $2,229,000 need to be
repurchased by April 15, 1998. The gains on redemption of $21,000 and $273,000
in 1997 and 1996, respectively, have been included in other income in the
consolidated statements of operations. The Debentures are uncollateralized 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,
1997 and 1996 was $16,226,000 and $15,534,000, respectively.
Maturities of long-term debt are as follows:
Years Ending December 31 (Thousands of dollars)
- -------------------------------------------------------------------------------
<TABLE>
<S> <C>
1998 $ 2,914
1999 $ 3,224
2000 $ 3,212
2001 $ 3,168
2002 $ 6,280
- -------------------------------------------------------------------------------
$ 18,798
===========================
</TABLE>
33
<PAGE> 23
ROY F. WESTON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 8 - 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 noncancelable leases principally for
office facilities are as follows:
<TABLE>
<CAPTION>
Years ending December 31 (Thousands of dollars)
- -------------------------------------------------------------------------
<S> <C>
1998 $ 3,917
1999 $ 3,094
2000 $ 2,042
2001 $ 1,567
2002 $ 657
Thereafter $14,616
- -------------------------------------------------------------------------
$25,893
=======
</TABLE>
The following is a summary of rental expense for the years ended December 31:
<TABLE>
---------------------------------
(Thousands of dollars) 1997 1996 1995
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Gross rental expense $15,068 $18,331 $18,468
Reimbursed as direct project expenses (6,897) (6,585) (8,214)
- ------------------------------------------------------------------------------
Net rental expense $8,171 $11,746 $10,254
=================================
</TABLE>
Note 9 - 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.
34
<PAGE> 24
ROY F. WESTON, INC. AND SUBSIDIARIES
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. Options granted under the Option Plan have all had a life of 10 years
and generally vest at the rate of 20% on each of the first five anniversary
dates of the 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 of Option Price Weighted Average
Shares per Share Price per Share
- --------------------------------------------------------------------------------------
<S> <C> <C> <C>
Outstanding at January 1, 1995 608,020 $6.63 - $14.50 $9.51
Granted 96,000 $4.44 - $ 5.19 $5.13
Exercised -- -- --
Canceled (73,300) $5.19 - $14.50 $8.76
- --------------------------------------------------------------------------------------
Outstanding at December 31, 1995 630,720 $4.44 - $14.50 $8.93
Granted 159,600 $4.00 - $ 4.75 $4.61
Exercised -- -- --
Canceled (134,420) $4.75 - $14.50 $8.85
- --------------------------------------------------------------------------------------
Outstanding at December 31, 1996 655,900 $4.00 - $14.50 $7.89
Granted 689,016 $2.75 - $ 4.25 $3.84
Exercised -- -- --
Canceled (492,300) $3.75 - $14.50 $8.14
- --------------------------------------------------------------------------------------
Outstanding at December 31, 1997 852,616 $2.75 - $14.50 $4.47
==================================================
Exercisable at December 31, 1995 317,920 $6.63 - $14.50 $9.21
Exercisable at December 31, 1996 346,580 $4.44 - $14.50 $9.05
Exercisable at December 31, 1997 120,600 $4.00 - $14.50 $7.13
- --------------------------------------------------------------------------------------
</TABLE>
35
<PAGE> 25
ROY F. WESTON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
At December 31, 1997, 108,084 shares were available for further grants under
the Option Plan. The weighted average remaining contractual life of options
outstanding at December 31, 1997 was 8.79 years.
Options granted during 1997 include options for 435,000 shares, which will vest
if the fair market value of the Company's Series A common stock attains certain
thresholds and remains at or above the prescribed market price for at least 90
days. There are five incremental thresholds, and 20% of the options will vest
as each condition is met. On February 16, 1998, these options were amended to
provide for full vesting 9 years from the date of grant, if not vested or
terminated at an earlier date. Also included in 1997 grants are options for
22,216 shares at an exercise price of $4.25 per share. These options replaced
options for 124,300 shares originally issued in 1990, 1992 and 1993 at exercise
prices ranging from $7.75 to $14.50 per share.
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 2,425,000 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, 1997, 1996 and
1995, respectively, 240,054, 291,120 and 341,603 shares were issued under the
Purchase Plan at prices ranging from $2.34 per share to $4.04 per share.
Statement of Financial Accounting Standards No. 123, which the Company has
elected not to adopt, would require the determination of compensation cost for
awards under the Option Plan and issuances under the Purchase Plan based on
their fair value. If the 1995, 1996 and 1997 awards and issuances had been
accounted for in accordance with Statement No. 123, the Company's proforma net
income (loss) and basic earnings (loss) per share for the years ended December
31 would approximate the amounts below:
36
<PAGE> 26
ROY F. WESTON, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
(Thousands of dollars, --------------------------------------------
except per share amounts) 1997 1996 1995
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net income (loss) $(11,823) $(16,834) $1,369
Basic earnings (loss) per share $ (1.22) $ (1.76) $ .14
- ---------------------------------------------------------------------------------------
</TABLE>
The impacts of applying Statement No. 123 in the proforma disclosure are not
indicative of future amounts. Statement No. 123 does not apply to awards and
issuances prior to 1995, and additional awards and issuances in future years
are anticipated.
Fair values used in calculating the proforma disclosures under Statement No.
123 were determined using the Black-Scholes option pricing model. Significant
assumptions used and results follow:
<TABLE>
<CAPTION>
-------------------------------------------
1997 1996 1995
- -------------------------------------------------------------------------------------
<S> <C> <C> <C>
Risk-free interest rates 6.28% - 6.78% 6.28% - 7.33% 7.75%
Volatility 59% - 96% 48% - 59% 63%
Dividends None None None
Fair value $2.19 - $3.85 $2.82 - $3.43 $4.09
- --------------------------------------------------------------------------------------
</TABLE>
Note 10 - 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 Company has elected to freeze benefits under the Retirement Plan effective
July 1, 1997, resulting in the recognition of a curtailment gain of $3,899,000
in accordance with Statement of Financial Accounting Standards No. 88,
"Employers' Accounting for Settlements and Curtailments of Defined Benefit
Pension Plans and for Termination Benefits."
37
<PAGE> 27
ROY F. WESTON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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) 1997 1996
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Actuarial present value of accumulated plan benefits:
Accumulated benefit obligation, including vested benefits
of $31,996 in 1997 and $27,970 in 1996 $(32,947) $(28,998)
- ----------------------------------------------------------------------------------------------------------------
Projected benefit obligation (32,947) (33,942)
Plan assets at fair value 34,264 26,209
- ----------------------------------------------------------------------------------------------------------------
Projected benefit obligation less than
(in excess of) plan assets 1,317 (7,733)
Unrecognized net obligation at transition being
recognized over 21 years -- 357
Unrecognized net loss (gain) from past experience different
from that assumed (474) 2,513
Unrecognized prior service cost -- (93)
- ----------------------------------------------------------------------------------------------------------------
Prepaid (accrued) pension cost $843 $(4,956)
===============================
</TABLE>
Net pension cost for the years ended December 31 includes the following
components:
<TABLE>
<CAPTION>
---------------------------------------------------
(Thousands of dollars) 1997 1996 1995
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost $979 $2,352 $1,754
Interest cost on projected obligation 2,435 2,421 1,918
Actual return on plan assets (5,843) (2,798) (4,041)
Net amortization and deferral 3,352 1,165 2,441
- ----------------------------------------------------------------------------------------------------------------
Net pension cost $923 $3,140 $2,072
===================================================
</TABLE>
The projected benefit obligation was determined using an assumed rate of
compensation increase of 5% at December 31, 1997 and December 31, 1996 and
weighted average discount rates of 7.25% at December 31, 1997 and 7.50% at
December 31, 1996. The change in the weighted average discount rate had the
effect of increasing the projected benefit obligation by $1,491,000 at December
31, 1997. The expected long-term rate of return on assets was 9.25% at December
31, 1997 and December 31, 1996.
38
<PAGE> 28
ROY F. WESTON, INC. AND SUBSIDIARIES
The Company has an Employees' Savings Plan (Savings Plan) which provides that
the Company will supplement an employee's contribution (which may not exceed
12% of compensation). Employees are eligible to participate in the Savings
Plan at the beginning of the quarter after their date of hire but do not
receive the supplement until the quarter after completion of one year of
service. The Company has agreed to contribute to the Savings Plan an amount
equal to 50% of the first 6% of an employee's contributions. Company
contributions resulted in charges to earnings of $1,951,000, $2,335,000 and
$2,453,000 for the years ended December 31, 1997, 1996 and 1995, respectively.
In addition, effective July 1, 1997, the Company began making an additional
contribution to the Plan. The additional contribution, which aggregated
$879,000 in 1997, is made for the benefit of all eligible employees and is not
dependent on an employee contribution.
The Company also has 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 with 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 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 $5,041,000 and $5,013,000 at
December 31, 1997 and 1996, respectively. Premiums for the years ended
December 31, 1997, 1996 and 1995 for these plans were $555,000, $646,000 and
$682,000, respectively.
The following table sets forth the supplemental plans' funded status and
amounts recognized in the Company's financial statements at December 31:
39
<PAGE> 29
ROY F. WESTON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
-------------------
(Thousands of dollars) 1997 1996
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
Actuarial present value of accumulated plan benefits:
Accumulated benefit obligation, including vested benefits
of $2,346 in 1997 and $1,661 in 1996 $(3,068) $(2,740)
- -----------------------------------------------------------------------------------------------
Projected benefit obligation (3,068) (2,932)
Plan assets at fair value -- --
- -----------------------------------------------------------------------------------------------
Projected benefit obligation in excess of plan assets (3,068) (2,932)
Unrecognized net obligation at transition being recognized
over 15 years 73 91
Unrecognized net loss from past experience different from
that assumed 963 1,123
Additional liability (1,122) (1,081)
- -----------------------------------------------------------------------------------------------
Accrued supplemental pension liability $(3,154) $(2,799)
===================
</TABLE>
Net supplemental pension cost for the years ended December 31 includes the
following components:
<TABLE>
<CAPTION>
--------------------------------------
(Thousands of dollars) 1997 1996 1995
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost $ 76 $105 $ 77
Interest cost on projected obligation 220 200 179
Return on plan assets -- -- --
Amortization 85 117 81
- -------------------------------------------------------------------------------------------------
Net supplemental pension cost $381 $422 $337
======================================
</TABLE>
In addition, the Company recorded charges of $129,000 and $134,000 in 1997 and
1996, respectively, for vested benefits of former executives in accordance with
Statement of Financial Accounting Standards No. 88.
40
<PAGE> 30
ROY F. WESTON, INC. AND SUBSIDIARIES
The projected benefit obligation was determined using weighted average discount
rates of 7.25% at December 31, 1997 and 7.50% at December 31, 1996. The change
in the weighted average discount rate had the effect of increasing the
projected benefit obligation by $67,000 at December 31, 1997.
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, 1997, 1996 and 1995 for
these plans were $3,181,000, $3,363,000 and $3,978,000, 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.
The net periodic cost for postretirement health care benefits for the years
ended December 31 includes the following components:
<TABLE>
<CAPTION>
-------------------------------
(Thousands of dollars) 1997 1996 1995
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost $ 51 $ 24 $ 51
Interest cost 68 54 74
Amortization of transition obligation 74 74 74
Amortization of unrecognized net gain (79) (106) (93)
- -------------------------------------------------------------------------------
$114 $ 46 $106
===============================
</TABLE>
The amounts recognized in the Company's balance sheets at December 31, were as
follows:
<TABLE>
<CAPTION>
--------------------
(Thousands of dollars) 1997 1996
- ------------------------------------------------------------------
<S> <C> <C>
Accumulated postretirement
benefit obligation:
Retirees $ (689) $ (645)
Active plan participants (311) (131)
- ------------------------------------------------------------------
(1,000) (776)
Unrecognized net gain (800) $(1,048)
Unrecognized net obligation 1,110 1,184
- ------------------------------------------------------------------
Accrued postretirement benefit liability $ (690) $ (640)
====================
</TABLE>
41
<PAGE> 31
ROY F. WESTON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The accumulated postretirement benefit obligation was determined using weighted
average discount rates of 7.25% at December 31, 1997 and 7.50% at December 31,
1996. A cost increase of 10% for covered health care benefits was assumed for
1997. The rate was assumed to decrease ratably to 5.5% after 6 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 less than 1% and the
accumulated postretirement benefit obligation by approximately 4%.
Note 11 - Contingencies
As collateral for performance on contracts, the Company is contingently liable
at December 31, 1997 in the amount of $2,954,000, 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.
42
<PAGE> 32
ROY F. WESTON, INC. AND SUBSIDIARIES
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.
Performance of a 1993 remediation contract was subject to several delays and in
1994 the contract 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
$1,800,000 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 adverse effect on
the financial position or results of operations of the Company.
Note 12 - Income Taxes
The components of the provision (benefit) for income taxes are as follows:
<TABLE>
<CAPTION>
-----------------------------------
(Thousands of dollars) 1997 1996 1995
- ----------------------------------------------------------------
<S> <C> <C> <C>
Current
Federal $(1,905) $(2,061) $ 2,371
State 30 46 204
- ----------------------------------------------------------------
(1,875) (2,015) 2,575
- ----------------------------------------------------------------
Deferred
Federal 425 (4,729) (1,533)
State -- 599 (191)
- ----------------------------------------------------------------
425 (4,130) (1,724)
- ----------------------------------------------------------------
$(1,450) $(6,145) $ 851
===================================
</TABLE>
43
<PAGE> 33
ROY F. WESTON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Temporary differences that give rise to deferred tax assets and
liabilities at December 31 are as follows:
<TABLE>
<CAPTION>
-------------------------
(Thousands of dollars) 1997 1996
- --------------------------------------------------------------------
<S> <C> <C>
Deferred tax assets:
Uncollectible accounts $ -- $ 603
Net operating loss carryforwards 5,331 --
Other accruals 702 665
Pensions 1,400 1,957
Self insurance 2,202 2,008
Depreciation 423 3,042
Facility closure 2,571 2,841
State tax loss carryforwards 2,156 1,193
Other 1,773 539
- --------------------------------------------------------------------
$16,558 $12,848
- --------------------------------------------------------------------
Deferred tax liabilities:
Amortization $ (24) $ (726)
Retainage (635) (435)
Award fees (168) (140)
Other (577) (263)
- --------------------------------------------------------------------
(1,404) (1,564)
Valuation allowance (6,925) (2,532)
- --------------------------------------------------------------------
Net deferred income taxes $ 8,229 $ 8,752
=========================
</TABLE>
At December 31, 1997, the Company has federal net operating loss carryforwards
of approximately $15,678,000 principally expiring in 2012. The Company's net
deferred tax assets include substantial amounts of net operating loss
carryforwards. Failure to achieve forecasted amounts of taxable income in
future periods could affect the ultimate realization of net deferred tax
assets. A valuation allowance has been established for certain deferred tax
assets since, based on the weight of available evidence, it is more likely than
not that a portion of 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>
-------------------------
1997 1996 1995
- ----------------------------------------------------------------------------
<S> <C> <C> <C>
Statutory rate 34.0% 34.0% 34.0%
Valuation allowance (23.3) -- --
State income taxes, net of federal taxes (0.2) (1.9) 0.4
Amortization of goodwill (0.2) (4.2) 2.1
Travel-related meals (0.8) (0.5) 4.9
Other, net 1.8 (0.4) (5.4)
- ----------------------------------------------------------------------------
Effective tax rate 11.3% 27.0% 36.0%
=========================
</TABLE>
44
<PAGE> 34
ROY F. WESTON, INC. AND SUBSIDIARIES
NOTE 13 - MAJOR CUSTOMER INFORMATION
Gross revenues from contracts with the U.S. Government and its agencies
amounted to $129,338,000, $145,207,000 and $176,909,000 for the years ended
December 31, 1997, 1996 and 1995, respectively. Included in these totals are
revenues of $50,146,000, $55,488,000 and $75,452,000 from contracts with the
U.S. Department of Defense; $47,285,000, $46,285,000 and $60,287,000 from
contracts with the U.S. Environmental Protection Agency; and $25,379,000,
$35,230,000 and $34,978,000 from contracts with the U.S. Department of Energy.
NOTE 14 - SUPPLEMENTAL CASH FLOW INFORMATION
Cash payments for income taxes were $192,000, $101,000 and $3,402,000 in the
years ended December 31, 1997, 1996 and 1995, respectively. The Company
received refunds of previously paid income taxes aggregating $3,672,000,
$759,000 and $1,106,000 in the years ended December 31, 1997, 1996 and 1995,
respectively.
Cash payments for interest were $1,464,000, $1,859,000 and $2,187,000 in the
years ended December 31, 1997, 1996 and 1995, respectively.
Capital lease obligations of $128,000, $334,000 and $96,000 were incurred
during the years ended December 31, 1997, 1996 and 1995, respectively, when the
Company entered into leases for office equipment.
NOTE 15 - RELATED PARTY TRANSACTIONS
The Company uses the services of a travel agency that is owned by one of its
directors. Under an agreement entered into in early 1996, the Company pays the
travel agency a monthly fee and receives rebates from the travel agency of the
commissions that are earned from providers of transportation and other
travel-related services. Net payments to the travel agency included in general
and administrative expense in the accompanying consolidated statements of
operations in 1997 and 1996 were $280,000 and $286,000, respectively.
Also, in 1997 the Company entered into consulting contracts with several of its
directors. Fees charged under these consulting contracts aggregated $349,000
in 1997.
45
<PAGE> 35
ROY F. WESTON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 16 - Quarterly Financial Data (Unaudited)
Quarterly financial information for 1997 and 1996 is presented in the following
tables:
<TABLE>
First
(Thousands of dollars, except per share data) Quarter
- ---------------------------------------------------------
<S> <C>
1997
Gross revenues $61,480
Net revenues $39,618
Income (loss) from operations $ 417*
Net income (loss) $ 396
Basic earnings (loss) per share $ .04
- ---------------------------------------------------------
1996
Gross revenues $67,586
Net revenues $47,089
Income (loss) from operations $ (19)
Net income (loss) $ 17
Basic earnings (loss) per share $ --
- ---------------------------------------------------------
</TABLE>
* Includes restructuring credits of $1,071 in the first quarter and $597 in
the second quarter relating to proceeds from asset sales exceeding amounts
anticipated in recording a 1996 restructuring charge.
** Includes a pension curtailment gain of $3,899.
*** Includes an impairment charge of $1,245 relating to unamortized financial
and project software.
+ Includes an income tax charge of $3,000 to provide for the uncertain
realizability of a portion of the Company's deferred tax assets.
++ Includes a restructuring charge of $14,421 consisting principally of a
writedown of assets and other expenses associated with a plan to withdraw
from the analytical laboratory business, costs to close or reduce the size
of certain office facilities, and severance cost for workforce reductions,
and an impairment charge of $3,146 to recognize impairment in value of
thermal incineration assets and a minority interest in a bioremediation
company.
46
<PAGE> 36
ROY F. WESTON, INC. AND SUBSIDIARIES
<TABLE>
Second Third Fourth
(Thousands of dollars, except per share data) Quarter Quarter Quarter
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1997
Gross revenues $55,777 $ 60,463 $60,383
Net revenues $34,091 $ 36,225 $32,425
Income (loss) from operations $(8,100) * $ 1,460** $(6,993) ***
Net income (loss) $(5,394) $ 1,042 $(7,469) +
Basic earnings (loss) per share $ (.56) $ .11 $ (.76)
- ------------------------------------------------------------------------------------------------
1996
Gross revenues $66,186 $ 63,482 $66,134
Net revenues $46,250 $ 42,276 $40,915
Income (loss) from operations $ (973) $(22,780) ++ $ 591
Net income (loss) $ (670) $(16,603) $ 601
Basic earnings (loss) per share $ (.07) $ (1.73) $ .06
- ------------------------------------------------------------------------------------------------
</TABLE>
47
<PAGE> 37
ROY F. WESTON, INC. AND SUBSIDIARIES
BOARD OF DIRECTORS
Tom Harvey (1)
Chairman of the Board, Roy F. Weston, Inc., and
Chief Executive Officer, Global Environment & Technology Foundation
Ambassador Richard L. Armitage (2)
President, Armitage Associates, L.C.
Jesse Brown
President and Chief Executive Officer, Brown and Associates
Magalen O. Bryant (2)
Private Investor
Wayne F. Hosking Jr., Esq.
Government Relations Director, Roy F. Weston, Inc.
Victor E. Millar
Chairman, The Columbus Group
Dominic J. Monetta, D.P.A. (1)
President, Resource Alternatives, Inc.
Katherine W. Swoyer (1), (2)
Vice Chair, Roy F. Weston, Inc., and
President, International Corporate Travel Services, Inc.
Thomas M. Swoyer, Jr.
Client Service Manager, Roy F. Weston, Inc.
A. Frederick Thompson, Ph.D., P.E. (2)
Program Director, Environmental Technology,
National Science Foundation
Roy F. Weston, P.E., DEE (1), (2)
Chairman Emeritus, Roy F. Weston, Inc.
Committees:
(1) Member, Executive Committee
(2) Member, Audit Committee
48
<PAGE> 38
ROY F. WESTON, INC. AND SUBSIDIARIES
SENIOR MANAGEMENT
William L. Robertson
President and Chief Executive Officer
Patrick G. McCann
Chief Operating Officer
William G. Mecaughey, CPA
Vice President, Chief Financial Officer, and Treasurer
Arnold P. Borish, Esq.
Vice President, General Counsel, and Corporate Secretary
John R. Brooks
Vice President and Manager, Construction, Remediation
and Redevelopment Group
John D. DiFilippo, P.E.
Vice President and Manager, Southern Division
Raymond J. Griffin
Vice President and Manager, Human Resources
Vincent A. Laino, Jr.
Vice President and Chief Information Officer
Thomas C. Lewis, CPA
Vice President and Manager, Knowledge Systems and
Solutions Group
W. Dennis Moran, P.E.
Vice President, Roy F. Weston, Inc., and President,
Weston International
Edmund B. Pettiss, Jr.
Vice President and Manager, Marketing
Alan Solow, CHP
Vice President and Manager, Federal Sector
John W. Thorsen, P.E.
Vice President and Manager, Northern Division
49
<PAGE> 39
ROY F. WESTON, INC. AND SUBSIDIARIES
OFFICE LOCATIONS
CORPORATE HEADQUARTERS
Roy F. Weston, Inc.
1 Weston Way
West Chester, PA 19380-1499
Phone: (610) 701-3000
Fax: (610) 701-3186
Website: http://www.rfweston.com
OFFICE LOCATIONS
ALABAMA, Auburn
CALIFORNIA, Concord, Sherman Oaks
COLORADO, Denver
CONNECTICUT, Hartford
GEORGIA, Atlanta, Norcross
ILLINOIS, Chicago, Vernon Hills
MARYLAND, Rockville
MASSACHUSETTS, Boston
MICHIGAN, Detroit, Okemos
NEW HAMPSHIRE, Manchester
NEW JERSEY, Edison
NEW MEXICO, Albuquerque
NEW YORK, Carle Place, New York, Valhalla
NORTH CAROLINA, Raleigh
OHIO, Cincinnati
OREGON, Portland
PENNSYLVANIA, Philadelphia, WestChester
TENNESSEE, Oak Ridge
TEXAS, Austin, Houston, San Antonio
WASHINGTON, Seattle
WASHINGTON, DC
PROJECT OFFICES WORLDWIDE
50
<PAGE> 40
ROY F. WESTON, INC. AND SUBSIDIARIES
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 sales prices for the Series A common stock as reported
by NASDAQ:
<TABLE>
<CAPTION>
-------------------
High Low
- -------------------------------------------------
<S> <C> <C>
1997
First Quarter $4.38 $3.50
Second Quarter $3.88 $2.13
Third Quarter $6.38 $2.50
Fourth Quarter $5.38 $3.75
- -------------------------------------------------
1996
First Quarter $5.50 $4.00
Second Quarter $5.50 $4.50
Third Quarter $4.88 $3.75
Fourth Quarter $4.38 $3.25
- -------------------------------------------------
</TABLE>
At December 31, 1997, there were 2,434 holders of record of Series A common
stock and 24 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.
51
<PAGE> 41
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 10005-2392
Certified Public Accountants
Coopers & Lybrand L.L.P.
2400 Eleven Penn Center
Philadelphia, Pennsylvania 19103-2962
Annual Meeting
The annual meeting of stockholders will be held on Monday, May 18, 1998,
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
Roy F. Weston, Inc.
1 Weston Way
West Chester, Pennsylvania 19380-1499
Telephone: (610) 701-3182
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:
William G. Mecaughey, CPA
Chief Financial Officer and Treasurer
Roy F. WESTON, Inc.
1 WESTON Way
West Chester, Pennsylvania 19380-1499
Telephone: (610) 701-4556
52
<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
Moorstein, 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 5, 1998 on our audits of
the consolidated financial statements and financial statement schedule of Roy
F. Weston, Inc. and Subsidiaries as of December 31, 1997 and 1996 and for the
years ended December 31, 1997, 1996, and 1995 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 27, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated balance sheet of December 31,1997 and the consolidated statement of
income for the year ended December 31,1997 and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 10,767
<SECURITIES> 4,168
<RECEIVABLES> 75,417<F1>
<ALLOWANCES> 1,750
<INVENTORY> 0
<CURRENT-ASSETS> 97,099
<PP&E> 53,500
<DEPRECIATION> 43,248
<TOTAL-ASSETS> 125,248
<CURRENT-LIABILITIES> 50,860
<BONDS> 15,884
<COMMON> 1,175
0
0
<OTHER-SE> 54,192
<TOTAL-LIABILITY-AND-EQUITY> 125,248
<SALES> 0
<TOTAL-REVENUES> 238,103
<CGS> 0
<TOTAL-COSTS> 251,319
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 511
<INTEREST-EXPENSE> 1,623
<INCOME-PRETAX> (12,875)
<INCOME-TAX> (1,450)
<INCOME-CONTINUING> (11,425)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (11,425)
<EPS-PRIMARY> (1.18)
<EPS-DILUTED> (1.18)
<FN>
F1 - Includes $20,920 of unbilled costs and estimated earnings thereon.
</FN>
</TABLE>
