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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, 1999
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)
PENNSYLVANIA 23-1501990
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
1400 WESTON WAY
P.O. BOX 2653
WEST CHESTER, PENNSYLVANIA 19380
(Address of principal executive offices) (Zip Code)
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. [ ]
The aggregate market value of the voting stock held by non-affiliates of the
Registrant, based upon the closing sale price of Series A Common Stock reported
in the NASDAQ National Market System on March 15, 2000, was approximately
$20,157,000. Solely for the purposes of calculation, all executive officers and
directors of the Company and all beneficial owners of more than 10% of the
Company's stock were considered affiliates. As of March 15, 2000, the Registrant
had outstanding 7,875,121 shares of Series A Common Stock ($.10 par value) and
2,089,019 shares of Common Stock ($.10 par value).
DOCUMENTS INCORPORATED BY REFERENCE
Certain portions of the Company's 1999 Annual Report to Shareholders are
incorporated by reference into Part II of this report. Portions of the Company's
Proxy Statement expected to be filed with the Securities and Exchange Commission
for the Annual Meeting of Shareholders expected to be held on May 15, 2000, are
incorporated by reference into Part III of this report.
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TABLE OF CONTENTS
PART I
ITEM 1. BUSINESS 3
ITEM 2. PROPERTIES 10
ITEM 3. LEGAL PROCEEDINGS 10
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 10
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS 11
ITEM 6. SELECTED FINANCIAL DATA 11
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL 11
CONDITION AND RESULTS OF OPERATIONS
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK 11
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 11
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE 11
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS 11
ITEM 11. EXECUTIVE COMPENSATION 12
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT 12
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 12
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS
ON FORM 8-K 12
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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
strategies and plans, technological developments, and other matters. The Private
Securities Litigation Reform Act of 1995 provides a safe harbor for these
forward looking statements, including statements contained in this report. In
order to comply with the terms of the safe harbor, the Company notes that a
number of factors 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 in which the Company operates.
- - 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, including successful resolution of any contract
disputes.
- - 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, including adequate financing to fund
working capital needs and the Company's acquisition strategy.
- - 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, including professional liability
and pollution claims.
- - The Company's ability to conclude and implement acquisitions of other
businesses consistent with the Company's acquisition strategy.
- - The Company's ability to retain key personnel.
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 an infrastructure redevelopment
organization that provides integrated environmental engineering solutions to
produce economic value for industrial and governmental clients. The Company's
services include development of cost-effective technologies and solutions to
environmental problems; selection of sites, assistance in obtaining governmental
permits, and the preparation of specifications and designs for constructing
remedial systems and facilities; and construction, startup and operation of
facilities. These services are made available to 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 publicly acceptable solutions.
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.
The Company's business strategy includes regular evaluation of
opportunities to acquire, make investments in, or enter into joint ventures or
other strategic alliances with, companies whose business complement the
Company's business, some of which could be material.
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 environmental consequences of past development activities and
restoring damaged resources to productive uses. Infrastructure redevelopment
helps clients decide whether and how to make positive changes in the character
or condition of their property.
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. While
the Company intends to maintain such services, it sees its long term
opportunities in infrastructure redevelopment services where the market has been
growing.
The Company provides its services by combining its professional skills
and technological resources in an integrated systems approach, which uses
technical information and program management capabilities as well as cost
control systems. The Company's service lines include infrastructure
redevelopment, federal program management, and knowledge systems and solutions.
Information about net revenues, segment profit (loss) and total assets for 1999
and 1998 is included in Note 16 to the
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Consolidated Financial Statements on page 34 of the Company's 1999 Annual Report
to Shareholders and is incorporated herein by reference.
INFRASTRUCTURE REDEVELOPMENT
The Company's infrastructure redevelopment 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 related problems, including those relating to site remediation,
redevelopment, and infrastructure operations support.
SITE REMEDIATION. Site remediation services include site assessment,
design, construction, treatment systems, and high-hazard remediation. Site
assessments help clients avoid unnecessary litigation, reduce costs, and provide
useable remediation plans. Design services provided include environmental
systems, wastewater treatment, hazardous/toxic disposal facilities, and
incinerators and landfills. Construction services include a full range of
services required to develop and implement remedial action programs. Among such
services are earthmoving, road construction, utility installation, and equipment
erection. Treatment systems services focus on innovative technologies, including
bioremediation, soil vapor extraction, soil and sediment washing, thermal
desorption, composting/biodegradation of organics, and in situ recirculating
well technology. High-hazard remediation services include unexploded ordnance
cleanup, nuclear decontamination and demolition, chemical demilitarization, and
radioactive waste site remediation.
REDEVELOPMENT. Redevelopment services include impaired property
redevelopment, ports and waterways, water and wastewater consulting and design,
water and wastewater alternate delivery and contract operations, and municipal
infrastructure support. Impaired property redevelopment comprises reuse
analysis, preparation of risk management, plans and transfer of property. Ports
and waterways services include environmental management solutions, navigation
studies/dredged material management, treatment of contaminated sediments, and
redevelopment of impaired marine properties. Water and wastewater consulting and
design include negotiation of wastewater discharge permits, planning and design
of wastewater treatment systems, and designing and implementing pollution
prevention, monitoring, and compliance programs. Water and wastewater alternate
delivery and contract services focus on design/build, facility ownership, and
operations and maintenance of water and wastewater treatment facilities.
Municipal infrastructure support services include those provided to airports,
schools, landfills, and city planning and redevelopment.
INFRASTRUCTURE OPERATIONS SUPPORT. Infrastructure operations support
services include environmental management systems, permitting and compliance
management, emissions testing, and health and safety program services.
Environmental management systems comprise business management, strategic
services, systems development, and outsourcing. Permitting and compliance
management services are provided for air quality, solid and hazardous waste,
health and safety, and natural resources. Emissions testing services include
selecting samples and analyzing for pollutants using mobile equipment
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transported to the client's site. Health and safety program services include
needs assessment, program evaluation and development, training, regulatory
compliance, exposure monitoring, contractor oversight and information
management.
FEDERAL PROGRAMS MANAGEMENT
Federal program management involves all phases of large-scale
environmental, health and safety problems of 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 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 enhance
the Company's ability to obtain and perform contracts. Subcontractors may, from
time to time, include certain competitors of the Company.
KNOWLEDGE SYSTEMS AND SOLUTIONS
Knowledge Systems and Solutions services include decision support
systems, such as Geographic Information Systems, Facilities Management Systems,
and Workflow Automation Systems to assist clients with managing geographically
distributed assets (e.g., water utilities, gas transmission companies, etc.) The
Company's data management services include records management, historical data
loading and database software solutions tailored to environmental remedial
investigation and feasibility studies. On-line products and services, such as
Internet-based virtual communities, web-based project collaborative workspaces,
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: the federal government; private industry; and state and
local 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 GOVERNMENT
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
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for other federal agencies. The Company develops comprehensive waste management
and remediation programs at many priority sites throughout the country.
The Company derived 54%, 56% and 56% of its consolidated gross revenues
from the federal government for the years ended December 31, 1997, 1998 and
1999, 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
<TABLE>
<CAPTION>
1997 1998 1999
------ ------ ------
<S> <C> <C> <C>
DOD 21% 25% 27%
EPA 20% 21% 17%
DOE 11% 8% 10%
OTHER 2% 2% 2%
------ ------ ------
54% 56% 56%
</TABLE>
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 contracts could also result in fines, 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 its significance to the Company's
consolidated revenues.
PRIVATE INDUSTRY
The Company provides a full range of services for industrial clients.
Service to industrial clients provided 30%, 26% and 27% of the Company's gross
revenues in 1997, 1998 and 1999, respectively. 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, high technology, telecommunications, and utilities.
STATE AND LOCAL GOVERNMENT
The Company provides consulting and construction redevelopment services
to many state and local governments and agencies. Services to state and local
government clients provided 16%, 18% and 17% of the Company's gross revenues in
1997, 1998 and 1999, 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
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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. 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 the Company
believes that no firm currently dominates any significant portion of those
service areas. Many of the Company's 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 $67.5 million and $61.0
million at December 31, 1999 and 1998, respectively. Additionally, the Company
derives 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 its contract backlog. Some contracts are subject to
cancellation by the customer, changes in scope of work, and delays in project
startup, therefore, the amounts reflected in backlog may not all be realized as
net revenues. 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.
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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, 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 appropriations 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 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 also subject to various state, local,
and federal licenses, laws and regulations, and believes that it is in
compliance with all material requirements.
PERSONNEL
As of December 31, 1999, the Company had approximately 1,650 employees,
many of whom had advanced degrees in a variety of technical disciplines. Of
these, 37 employees held doctorates, 381 held master's degrees, and 130 were
registered professional 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:
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- Protect the chemical, physical and biological integrity of water in
the United States (such as the Clean Water Act of 1977 and
associated state laws);
- Regulate the handling of hazardous waste and mandate state oversight
of solid waste (such as the Resource Conservation and Recovery Act
of 1976 and associated state laws);
- Regulate the identification, remediation and accountability for
hazardous waste sites (such as the Superfund Amendments and
Reauthorization Act of 1986 and associated state laws).
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. In addition, new federal and state regulations are continually
being considered which, if adopted, could materially impact the Company's
business.
The principal federal laws that affect the Company's business are:
THE COMPREHENSIVE ENVIRONMENTAL RESPONSE, COMPENSATION, AND LIABILITY
ACT OF 1980 (CERCLA OR SUPERFUND) AND SUPERFUND AMENDMENTS AND REAUTHORIZATION
ACT (SARA) OF 1986: CERCLA addresses past waste disposal practices by providing
means for identifying and remediating hazardous waste sites. The law authorizes
EPA to compel responsible parties to remediate abandoned sites. Where initial
enforcement actions would result in lengthy delays or where responsible parties
cannot readily be identified, CERCLA authorizes funds for cleanups. Congress
enacted SARA in 1986 to amend CERCLA and reauthorize Superfund. SARA strengthens
EPA's authority to conduct short- and long-term enforcement and expands state
involvement in the cleanup process. SARA also expands EPA's commitment to
research and development, training, health assessments, and public
participation. Sites considered to be most in need of remediation are ranked on
EPA's National Priorities List (NPL). By March 2000, some 1,281 federal and
nonfederal sites were listed or proposed for the NPL, and some 10,800 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, 1998, 1999 and 2000. 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
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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 currently 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 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 469,000 square
feet of office space in offices located in 24 states and the District of
Columbia. Aggregate lease payments in 1999 were $15.5 million, of which $10.2
million were subject to direct reimbursement from projects. Approximately 87,000
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 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 1999 Annual Report to Shareholders
in Notes 6 and 7 to the Consolidated Financial Statements on pages 25 to 26 and
under the headings "Company Stock Listing" and "Stock History" on the inside
back cover.
ITEM 6. SELECTED FINANCIAL DATA
Information with respect to this item is incorporated by reference
herein from the information in the Company's 1999 Annual Report to Shareholders
on page 15.
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 1999 Annual Report to Shareholders
on pages 10 to 14.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
Not Applicable.
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 1999 Annual Report to Shareholders
on pages 15 to 35.
(b) Selected Quarterly Financial Data (Unaudited) are set forth in Note
18 to the Consolidated Financial Statements contained in the Company's 1999
Annual Report to Shareholders on page 35 and are incorporated by reference
herein.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
Not Applicable.
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 15, 2000, under the headings "Election of Directors",
"Executive Management" and "Section 16(a) Beneficial Ownership Reporting
Compliance" and is incorporated herein by reference.
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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
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 certain 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.
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 1999 Annual Report to
Shareholders as described in Item 8 is incorporated herein by reference.
2. Financial Statement Schedule:
- Report of Independent Accountants
- Schedule II - Valuation and Qualifying Accounts
All other schedules are omitted because they are not applicable or the
required information is shown in the financial statements or notes
thereto.
With the exception of the consolidated financial statements and the
independent accountants' report thereon listed in the above index, the
information referred to in Items 5, 6, and 7, and the supplementary
quarterly financial information referred to in Item 8, all of which are
included in the 1999 Annual Report to Shareholders of Roy F. Weston,
Inc. and incorporated by reference into this Annual Report on Form 10-K,
the 1999 Annual Report to Shareholders is not to be deemed "filed" as
part of this report.
12
<PAGE> 14
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. Incorporated by reference to
Exhibit 3.2 to the Company's Annual Report on Form 10-K for
the year ended December 31, 1998.
4.1 Indenture between the Company and Mellon Bank, N.A. relating
to the 7% Convertible Subordinated Debentures due April 15,
2002. Incorporated by reference to Exhibit 4 to the Company's
Registration Statement on Form S-1 (Registration No. 33-13020)
("No. 33-13020").
4.2 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 Exhibit 10.3 to the Company's
Annual Report on Form 10-K for the year ended December 31,
1998.
10.4 The Company's Retirement Income Restoration Plan, as amended.
Incorporated by reference to Exhibit 10.11 to the Company's
Annual Report on Form 10-K for the year ended December 31,
1997.
10.5 The Company's Director Stock Compensation Plan. Incorporated
by reference to the Appendix to the Company's Proxy Statement
for the 1999 Annual Meeting of Shareholders dated April 7,
1999.
10.6 Elective Deferred Compensation Agreement between William L.
Robertson and the Company dated December 23, 1997.
Incorporated by reference to Exhibit 10.20 to the Company's
Annual Report on Form 10-K for the year ended December 31,
1997.
10.7 Continuing Services/Retirement Agreement between Roy F. Weston
and the Company dated July 19, 1997. Incorporated by reference
to Exhibit 10.11 to the Company's Quarterly Report on Form
10-Q for the quarter ended September 30, 1997.
10.8 Stock Pooling Agreement among the Company and certain holders
of the Company's Common Stock effective January 2, 1998.
Incorporated by reference to Exhibit 10.29 to the Company's
Annual Report on Form 10-K for the year ended December 31,
1997.
10.9 Credit Agreement between the Company and Bank of America
National Trust and Savings Association dated as of June 5,
1998. Incorporated by reference to Exhibit 10.5 to the
Company's Quarterly Report on Form 10-Q for the quarter ended
June 30, 1998.
13
<PAGE> 15
EXHIBIT NO. DESCRIPTION
10.10 First Amendment to Credit Agreement between the Company and
Bank of America National Trust and Savings Association dated
August 14, 1998. Incorporated by reference to Exhibit 10.6 to
the Company's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1998.
10.11 Second Amendment to Credit Agreement between the Company and
Bank of America National Trust and Savings Association dated
as of October 15, 1998.
10.12 Third Amendment to Credit Agreement between the Company and
Bank of America National Trust and Savings Association dated
as of March 31, 1999. Incorporated by reference to Exhibit
10.1 to the Company's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1999.
10.13 Fourth Amendment and Waiver to Credit Agreement between the
Company and Bank of America National Trust and Savings
Association dated as of November 15, 1999.
10.14 Consulting Services Agreement between the Company and
Katherine W. Swoyer effective July 1, 1998. Incorporated by
reference to Exhibit 10.3 to the Company's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1998.
10.15 Amended Employment Agreement between William L. Robertson and
the Company dated as of March 20, 2000.
10.16 Amended Employment Agreement between Patrick G. McCann and the
Company dated as of March 20, 2000.
10.17 Amended Employment Agreement between William G. Mecaughey and
the Company dated as of March 20, 2000.
10.18 Investment and Partnering Agreement between Essential
Technologies, Inc. and the Company effective December 21,
1999.
10.19 Master Services Agreement for Consulting Services between
Infrastructure Revitalization Institute and the Company dated
November 11, 1999.
10.20 Termination Agreement between International Corporate Travel
Services and the Company dated May 28, 1998. Incorporated by
reference to Exhibit 10.2 to the Company's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1998.
11 Computation of Basic and Diluted Earnings (Loss) per Share.
13 The Company's 1999 Annual Report to Shareholders.
21 Subsidiaries of the Company.
23 Consent of Independent Accountants.
27 Financial Data Schedule.
(b) Reports on Form 8-K. No reports on Form 8-K were filed during the
fourth quarter of 1999.
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., 1400 Weston Way, P.O.
Box 2653, West Chester, Pennsylvania 19380.
14
<PAGE> 16
REPORT OF INDEPENDENT ACCOUNTANTS
Board of Directors and Stockholders
Roy F. Weston, Inc.
Our report on the consolidated financial statements of Roy F. Weston,
Inc. and Subsidiaries has been incorporated by reference in this Form 10-K from
page 15 of the 1999 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 12 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.
PRICEWATERHOUSECOOPERS, LLP
February 3, 2000
15
<PAGE> 17
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, 1999:
Allowance for
Doubtful Accounts $1,882 $407 $ -- $249 $2,040
YEAR ENDED
DECEMBER 31, 1998:
Allowance for
Doubtful Accounts $1,750 $704 $ -- $572 $1,882
YEAR ENDED
DECEMBER 31, 1997:
Allowance for
Doubtful Accounts $1,510 $511 $ -- $271 $1,750
</TABLE>
16
<PAGE> 18
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: s/WILLIAM L. ROBERTSON
-------------------------------
William L. Robertson
Date: March 27, 2000
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.
NAME TITLE DATE
s/WILLIAM L. ROBERTSON Chief Executive Officer and Director March 27, 2000
- ------------------------ (Principal Executive Officer)
William L. Robertson
s/PATRICK G. MCCANN President and March 27, 2000
- ------------------------ Chief Operating Officer
Patrick G. McCann (Principal Operating Officer)
s/WILLIAM G. MECAUGHEY Vice President and March 27, 2000
- ------------------------ Chief Financial Officer
William G. Mecaughey (Principal Financial Officer)
s/RICHARD L. ARMITAGE Director March 27, 2000
- ------------------------
Richard L. Armitage
s/JESSE BROWN Director March 27, 2000
- ------------------------
Jesse Brown
s/THOMAS E. CARROLL Director March 27, 2000
- ------------------------
Thomas E. Carroll
s/THOMAS HARVEY Director March 27, 2000
- ------------------------
Thomas Harvey
s/WAYNE F. HOSKING, JR. Director March 27, 2000
- ------------------------
Wayne F. Hosking, Jr.
s/KATHERINE W. SWOYER Chairman and Director March 27, 2000
- ------------------------
Katherine W. Swoyer
17
<PAGE> 19
s/THOMAS M. SWOYER, JR. Director March 27, 2000
- ------------------------
Thomas M. Swoyer, Jr.
s/A. FREDERICK THOMPSON Director March 27, 2000
- ------------------------
A. Frederick Thompson
Director March 27, 2000
- ------------------------
Roy F. Weston
s/JAMES H. WOLFE Director March 27, 2000
- ------------------------
James H. Wolfe
18
<PAGE> 1
Exhibit 10.11
As of October 15, 1998
Roy F. Weston, Inc.
1 Weston Way
West Chester, Pennsylvania 19380
Attention: William G. Mecaughey
Re: Second Amendment to Credit Agreement
Ladies/Gentlemen:
Please refer to the Credit Agreement dated as of June 5, 1998 (as
previously amended, the "Credit Agreement") between Roy F. Weston, Inc. (the
"Company") and Bank of America National Trust and Savings Association (the
"Bank").
The Company and the Bank hereby agree that clause (ii) of the proviso
to Section 10.9 of the Credit Agreement is amended in its entirety to read as
follows:
(ii) so long as no Event of Default or Unmatured Event of Default
exists or would result therefrom, (x) the Company may make payments of
principal of, and the Company or any Subsidiary may purchase,
Subordinated Debentures in an aggregate amount not exceeding $5,000,000
in any Fiscal Year and (y) the Company may purchase or redeem shares of
its Series A common stock in an aggregate amount not exceeding $300,000
after the Effective Date.
This letter amendment (a) may be executed in counterparts and by the
parties on separate counterparts and (b) shall be governed by the laws of the
State of Illinois applicable to contracts made and to be performed entirely
within such State. Please evidence your agreement to the foregoing by signing
and returning a counterpart of this letter amendment.
Very truly yours,
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
By: s/Venita Fields
- -------------------------------------
Title:
- -------------------------------------
Agreed as of October 15, 1998
ROY F. WESTON, INC.
By: s/William G. Mecaughey
- -------------------------------------
Title:
- -------------------------------------
-1-
<PAGE> 1
Exhibit 10.13
FOURTH AMENDMENT AND WAIVER
THIS FOURTH AMENDMENT AND WAIVER dated as of November 15, 1999 (this
"Amendment") amends the Credit Agreement dated as of June 5, 1998 (as previously
amended, the "Credit Agreement") between ROY F. WESTON, INC. (the "Company") and
BANK OF AMERICA, N.A. (formerly known as Bank of America National Trust and
Savings Association) (the "Bank"). Terms defined in the Credit Agreement are,
unless otherwise defined herein or the context otherwise requires, used herein
as defined therein.
WHEREAS, the Company and the Bank have entered into the Credit
Agreement; and
WHEREAS, the parties hereto desire to amend the Credit Agreement in
certain respects and to waive certain provisions of the Credit Agreement as more
fully set forth herein;
NOW, THEREFORE, the parties hereto agree as follows:
I. SECTION Amendments. The Credit Agreement is amended as
follows:
A. Amendment to Section 2.1.1. Section 2.1.1 is amended by
deleting the reference to "$8,000,000" contained in that Section and replacing
it with "$10,000,000; provided further, that the aggregate principal amount of
all outstanding Eurodollar Loans shall not at any time exceed $8,000,000".
A. Amendment to Section 4.1. Clause (a) of Section 4.1 is
amended by adding the following before the semicolon at the end of that clause:
"provided that, if at any time the aggregate principal amount of all outstanding
Loans exceeds $8,000,000, then Floating Rate Loans in an amount equal to such
excess shall bear interest at a rate per annum equal to the Base Rate plus
2.0%".
A. Addition of Section 5.4. A new Section 5.4 is added to
the Credit Agreement as follows:
5.4 Usage Fee. The Company agrees to pay to the Bank a
one-time usage fee in the amount of $50,000 on the date on which the
aggregate principal amount of all outstanding Loans exceeds $8,000,000.
A. Amendment to Section 10.9. Clause (ii) of the proviso to
Section 10.9 is restated in its entirety to read as follows: "(ii) so long as no
Event of Default or Unmatured Event of Default exists or would result therefrom,
the Company may make regularly scheduled payments of principal of Subordinated
Debentures."
<PAGE> 2
Exhibit 10.13
A. Amendment to Section 10.10. Section 10.10 is amended by
(a) deleting the word "and" at the end of clause (f); (b) relettering the
existing clause (g) as clause (h); and (c) inserting the following new clause
(g) in appropriate sequence: "(g) cash Investments in Weskem LLC in an aggregate
amount not to exceed $700,000; and".
I. SECTION Waiver. Effective on the date of this Amendment, the Bank
hereby waives the Company's non-compliance with Section 10.6.2 of the Credit
Agreement for the period of four fiscal quarters ending on September 30, 1999 so
long as the ratio described in such Section is not less than 1.5 to 1 for such
period.
I. SECTION Representations and Warranties. The Company represents and
warrants to the Bank that (a) each warranty set forth in Section 9 of the Credit
Agreement is true and correct as of the date of the execution and delivery of
this Amendment by the Company, with the same effect as if made on such date
(except to the extent such representations and warranties expressly refer to an
earlier date, in which case they were true and correct as of such earlier date),
(b) the execution and delivery by the Company of this Amendment and the
performance by the Company of its obligations under the Credit Agreement, as
amended hereby (as so amended, the "Amended Credit Agreement"), (i) are within
the corporate powers of the Company, (ii) have been duly authorized by all
necessary corporate action on the part of the Company, (iii) have received all
necessary governmental approval and (iv) do not and will not contravene or
conflict with any provision of law or of the charter, by-laws or other
organizational documents of the Company or any Subsidiary or of any agreement,
indenture, instrument or other document, or any judgment, order or decree, which
is binding on the Company or any Subsidiary and (c) the Amended Credit Agreement
is the legal, valid and binding obligation of the Company enforceable against
the Company in accordance with its terms, except as enforceability may be
limited by bankruptcy, insolvency or other similar laws of general application
affecting the enforcement of creditors' rights or by general principles of
equity limiting the availability of equitable remedies.
I. SECTION Effectiveness. The amendments set forth in Section 1 above
and the waiver set forth in Section 2 above shall become effective as of the
date of this Amendment when the Bank shall have received (a) a counterpart of
this Amendment signed by Company, (b) a confirmation in the form of Exhibit A
signed by the Company and each Guarantor and (c) an amendment fee in the amount
of $20,000.
I. SECTION Miscellaneous.
A. Continuing Effectiveness, etc. As herein amended, the
Credit Agreement shall remain in full force and effect and is hereby ratified
and confirmed in all respects. All references in the Credit Agreement and the
other Loan Documents to "Credit Agreement" or similar terms shall refer to the
Amended Credit Agreement.
A. Counterparts. This Amendment may be executed in any
number of counterparts and by the parties hereto on separate counterparts, and
each such counterpart
<PAGE> 3
Exhibit 10.13
shall be deemed to be an original but all such counterparts shall together
constitute one and the same Amendment.
A. Governing Law. This Amendment shall be a contract
made under and governed by the laws of the State of Illinois applicable to
contracts made and to be performed entirely within such State.
A. Successors and Assigns. This Amendment shall be
binding upon the Company and the Bank and their respective successors and
assigns and shall inure to the benefit of the Company and the Bank and the
respective successors and assigns of the Bank.
A. Blocked Account Agreements. If the Credit Agreement
has not terminated on or prior to January 31, 2000, the Company shall provide to
the Bank on such date copies of blocked account agreements in substantially the
form set forth in Exhibit B hereto covering all accounts of the Company or any
of its Subsidiaries maintained at Allfirst, and at any other financial
institution other than the Bank to the extent that funds in the accounts
described on Exhibit C hereto exceed $100,000 in the aggregate at any time.
A. Further Assurances. (a) If the Credit Agreement has
not terminated on or prior to January 31, 2000, the Company shall promptly
execute a mortgage in favor of the Bank, in form and substance reasonably
satisfactory to the Bank, on the property of the Company and its Subsidiaries
located in West Chester, Pennsylvania (the "Property").
(b) The Company further agrees to promptly (and, in any event, no later
than February 29, 2000) provide the following documents in connection with the
mortgage referred to above: (i) an ALTA Loan Title Insurance Policy, issued by
an insurer acceptable to the Bank, insuring the Bank's Lien on the Property and
containing such endorsements as the Bank may reasonably require; (ii) copies of
all documents of record concerning the Property as shown on the commitment for
the ALTA Loan Title Insurance Policy; (iii) original or certified copies of all
insurance policies required to be maintained with respect to the Property by the
Credit Agreement, the mortgage or any other Loan Document; and (iv) a flood
insurance policy concerning the Property, reasonably satisfactory to the Bank,
if required by the Flood Disaster Protection Act of 1973.
<PAGE> 4
Exhibit 10.13
Delivered at Chicago, Illinois, as of the day and year first above
written.
ROY F. WESTON, INC.
By: s/William G. Mecaughey
--------------------------------
Title:
--------------------------------
BANK OF AMERICA, N.A.
By: s/Edmund Lester
--------------------------------
Title:
--------------------------------
<PAGE> 5
Exhibit 10.13
EXHIBIT A
CONFIRMATION
Dated as of November 15, 1999
To: Bank of America, N.A.
Please refer to (a) the Credit Agreement dated as of June 5, 1998 (as
amended, the "Credit Agreement") among Roy F. Weston, Inc. (the "Company") and
Bank of America, N.A. (formerly known as Bank of America National Trust and
Savings Association), (b) the Fourth Amendment and Waiver dated as of the date
hereof to the Credit Agreement (the "Fourth Amendment"); (c) the Guaranty (the
"Guaranty") dated as of June 5, 1998 issued by each of the undersigned (other
than the Company) in favor of the Bank; (d) the Security Agreement (the
"Security Agreement") dated as of June 5, 1998 among each of the undersigned and
the Bank; and (e) the other Loan Documents (as defined in the Credit Agreement).
Each of the undersigned hereby confirms to the Bank
that, after giving effect to the Fourth Amendment and the transactions
contemplated thereby, each Loan Document (including the Guaranty and the
Security Agreement) to which such undersigned is a party continues in full force
and effect and is the legal, valid and binding obligation of such undersigned,
enforceable against such undersigned in accordance with its terms.
ROY F. WESTON, INC.
By:
Title:
ROY F. WESTON (DELAWARE), INC.
By:
Title:
<PAGE> 6
Exhibit 10.13
ROY F. WESTON (IPR), INC.
By:
Title:
MOORSTEIN, INC.
By:
Title:
ROY F. WESTON OF NEW YORK, INC.
By:
Title:
WESTON INTERNATIONAL HOLDINGS, INC.
By:
Title:
<PAGE> 7
Exhibit 10.13
EXHIBIT B
FORM OF BLOCKED ACCOUNT AGREEMENT
[Date]
[Bank]
[Address]
Re: [Weston or applicable Subsidiary]
Ladies and Gentlemen:
We hereby notify you that we have transferred exclusive ownership,
dominion and control of our deposit account (the "Deposit Account") listed on
Schedule I hereto to Bank of America, N.A. ("BofA") pursuant to a Security
Agreement dated as of June 5, 1998 among us, various other parties and BofA (as
amended or otherwise modified from time to time, the "Security Agreement"). We
also have granted to BofA a security interest in all cash, checks, drafts and
other similar writings for the payment of money from time to time held in the
Deposit Account.
We hereby irrevocably instruct you to make all payments to be made by
you out of or in connection with the Deposit Account in accordance with the
instructions of BofA. In this regard, we wish to note that BofA in the
accompanying Acknowledgement and Instructions has authorized you to continue to
accept instructions from us unless BofA has given you written notice (which has
not been rescinded) of the existence of a Default under and as defined in the
Security Agreement.
We also hereby notify you that BofA, subject to the immediately
preceding paragraph, shall be irrevocably entitled to exercise any and all
rights in respect of or in connection with the Deposit Account, including,
without limitation, the right to specify when payments are to be made out of or
in connection with the Deposit Account.
<PAGE> 8
Exhibit 10.13
Funds deposited into the Deposit Account will not be subject to
deduction, set-off, banker's lien or any other right in favor of any person or
entity other than BofA, except (i) that you may set off against the Deposit
Account the face amount of any check deposited in and credited to the Deposit
Account which is subsequently returned for any reason and (ii) for your
statutory security interest in items and their proceeds to the extent of deposit
credits posted therefor. Your compensation for providing the services
contemplated herein shall be as mutually agreed between you and us from time to
time and we will continue to pay such compensation, and you agree not to
terminate the Deposit Account without giving BofA at least 30 days' prior
written notice.
By signing below, you agree that this letter and the accompanying
Acknowledgement and Instructions constitute notice in writing of the security
interest of BofA in the Deposit Account and all cash, checks, drafts and similar
writings for the payment of money from time to time therein, and you hereby
consent to such notice. This Agreement may not be changed except pursuant to a
writing signed by us and BofA.
Please agree to the terms of, and acknowledge receipt of, this letter
by signing in the space provided below on two of the enclosed copies and
returning them to BofA at 231 South LaSalle Street, Chicago, Illinois 60697,
Attention Jennifer Gerdes.
Very truly yours,
[WESTON ENTITY]
By: ___________________________
Print Name:_____________________
Title:__________________________
Acknowledged and agreed to
as of November __, 1999 by:
[NAME OF INSTITUTION]
By: ___________________________
Print Name: ____________________
Title: _________________________
<PAGE> 9
Exhibit 10.13
ACKNOWLEDGEMENT AND INSTRUCTIONS
Bank of America, N.A. ("BofA") hereby acknowledges the transfer to BofA
of exclusive ownership, dominion and control of the "Deposit Account" (as
defined in the foregoing letter (the "Letter Agreement")) executed by [Weston
entity]. Pursuant to the second paragraph of the Letter Agreement, the Bank (as
defined in the Letter Agreement) may continue to accept instructions from
[Weston entity] in connection with the Deposit Account unless the Bank has
received written notice (which has not been rescinded) from BofA of the
existence of a Default under and as defined in the Security Agreement (as
defined in the Letter Agreement). Any such written notice shall be effective on
the business day received by the Bank if received before 12:00 noon (local time
at the office of the Bank where the Deposit Account is maintained) and, if not
received by such time, on the next succeeding business day. This Acknowledgement
and Instructions may not be changed except pursuant to a writing signed by BofA
and [Weston entity].
BANK OF AMERICA, N.A.
By: _______________________________
Print Name: ________________________
Title: ______________________________
<PAGE> 10
Exhibit 10.13
Schedule I
Deposit Account
<PAGE> 11
Exhibit 10.13
EXHIBIT C
ACCOUNTS
Account Number Financial Institution
<PAGE> 1
Exhibit 10.15
AMENDED EMPLOYMENT AGREEMENT
This AMENDED EMPLOYMENT AGREEMENT is dated as of March 20, 2000 (the
"Effective Date") between Roy F. Weston, Inc., a Pennsylvania corporation
("Company"), and William L. Robertson (the "Executive").
WHEREAS, Executive and Company entered in to an employment agreement
dated as of July 14, 1997, which was amended on May 19, 1998; and
WHEREAS, Executive is presently employed by Company as its Chief
Executive Officer;
WHEREAS, the parties desire to amend and restate in this Agreement the
terms and conditions of the Executive's employment by the Company as its Chief
Executive Officer; and
THEREFORE, in consideration of the mutual obligations contained in this
Agreement and the mutual benefits to be derived from those obligations, and
intending to be legally bound by this Agreement, the Executive and the Company
agree as follows:
SECTION 1. CAPACITY AND DUTIES
1.1. EMPLOYMENT; ACCEPTANCE OF EMPLOYMENT. Company hereby employs
Executive and Executive hereby accepts employment by the Company, as Chief
Executive Officer upon the terms and conditions set forth below in this
Agreement.
1.2. CAPACITY AND DUTIES.
(a) Executive shall be employed by Company as its Chief
Executive Officer, subject to the supervision of the Board of Directors (the
"Board"), and shall perform such duties and shall have such authority as set
forth in the Company's By-laws and as may from time to time be specified by the
Board. Executive shall report directly to the Company's Board and shall perform
his duties for Company principally from Company's office located in West
Chester, Pennsylvania, except for periodic travel that may be necessary or
appropriate in connection with the performance of Executive's duties under this
Agreement.
(b) Executive shall devote his full working time, energy,
skill and best efforts to the performance of his duties under this Agreement, in
a manner which will faithfully and diligently further the business and interests
of the Company and its affiliates (as defined below), and shall not be employed
by or participate or engage in or be a part of the management or operation of
any business enterprise other than the Company and its affiliates, without the
prior written consent of the Board, which consent may be granted or withheld in
the sole discretion of the Board. For purposes of this Agreement, "affiliate"
means any entity in which at least 50% of the voting power is controlled by the
Company. Nothing in this paragraph shall preclude
<PAGE> 2
Executive from serving as the Company's appointed member of the board of
directors of companies in which Company has an interest.
SECTION 2. TERM OF EMPLOYMENT
2.1. TERM. The Executive's employment under this Agreement shall
continue at will until terminated in accordance with the provisions of this
Agreement.
SECTION 3. COMPENSATION
3.1. BASIC COMPENSATION. As compensation for Executive's services under
this Agreement, Company shall pay to Executive a salary at the annual rate of
$303,194 (the "Base Salary"), payable in periodic installments in accordance
with the Company's regular payroll practices in effect from time to time. The
Base Salary shall be reviewed from time to time by the Board and/or its
Executive Committee as conditions warrant. The first such review shall take
place no later than February 2001, and future reviews shall be held not less
frequently than annually thereafter. Such review shall consider, but not be
limited to, Executive's performance as determined by the Board and/or its
Executive Committee.
3.2. INCENTIVE COMPENSATION.
(a) ANNUAL INCENTIVE PAY/BONUS. In addition to the Base Salary
provided for in Section 3.1, the Executive will participate in the Company's Pay
for Performance Incentive Compensation Program ("PFP") (formerly known as
Salary- At-Risk), with a PFP guideline incentive that will provide quarterly
incentive payments to Executive that, on an annual basis, total 30% of
Executive's Base Salary if the Company meets its annual PFP Plan (which includes
achievement of the annual operating plan budgeted Net Income Before Tax (NIBT)
amount approved by the Company's Board of Directors). Executive understands that
the Company's PFP program may be reviewed and revised and Executive shall only
be entitled to participate in the current PFP program if, and to the extent
that, the program is maintained by the Company for its management personnel
generally. While the PFP program is maintained by the Company, Executive's
performance rating under that program shall be determined by the Company's
Board. Executive will be entitled to participate in any revised incentive
program for officers of the Company, under the terms of that revised program as
approved by the Board.
(b) CHANGE IN CONTROL BONUS. Upon the consummation of any
Change in Control (as defined in Section 4.1(c) hereof) on or before July 31,
2001, pursuant to the terms of a written agreement between or among the Company
and any other Person (a "qualifying Change in Control"), Company shall pay
Executive a Change in Control bonus in cash in the amount, if any, determined
pursuant to the formula set forth on Schedule I attached hereto; provided that
such bonus shall be payable to Executive only if:
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(i) Executive is employed by the Company at the time
of consummation of the qualifying Change in Control, or
(ii) within six months before a qualifying Change in
Control, (A) the Company terminates Executive's employment, and (B) such
termination is neither For Cause nor by reason of Executive's death or
Disability, and (C) the Company was engaged in active negotiations with the
party(ies) to the qualifying Change in Control within 60 days before such
termination of Executive's employment.
Any such Change in Control bonus shall be paid within five business days after
the consummation of the Change in Control or such later date as is specified in
such Schedule I.
3.3. EXECUTIVE BENEFITS. In addition to the compensation provided for
in Sections 3.1 and 3.2 hereof, the Executive shall be entitled during the term
of his employment under this Agreement to participate in all benefit plans
maintained by the Company in which senior corporate officers are entitled to
participate. Such benefit plans currently include, among others, the Company's
Retirement Savings Plan, Supplemental Executive Retirement Plan, and Group Life,
Disability and Medical Plans. Notwithstanding anything else in this Agreement,
other than as set forth in Section 4 below, Executive shall not be eligible for
any severance or termination benefits under any Company plans, policies or
procedures providing for such benefits, including, but not limited to, the Roy
F. Weston, Inc. Employee Severance Plan and any predecessor or successor
severance plan.
3.4. VACATION. Executive shall be entitled to paid vacation in
accordance with the Company's vacation policy for officers.
3.5. EXPENSE REIMBURSEMENT. Company shall reimburse Executive for all
reasonable expenses incurred by him in connection with the performance of his
duties under this Agreement, in accordance with Company's regular reimbursement
policies in effect from time to time, and upon receipt of itemized vouchers for
such expenses and such other supporting information as Company may reasonably
require.
3.6. AUTOMOBILE. During his employment by Company, Company shall pay
Executive an automobile allowance and shall also reimburse Executive for his
gasoline and insurance costs for his automobile, all in accordance with the
Company's automobile allowance policies, which are subject to change from time
to time. Executive shall, in accordance with the Company's policies, notify
company as to the business and personal use of his automobile, so that Company
may withhold taxes, as appropriate in connection with the automobile allowance
and reimbursements.
SECTION 4. TERMINATION OF EMPLOYMENT
4.1. DEFINITIONS.
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(a) FOR CAUSE. As used in this Agreement "For Cause" shall
mean that Executive committed or engaged in an intentional act of (i) fraud,
embezzlement, dishonesty or theft in connection with his duties under this
Agreement or in the course of his employment with Company, (ii) wrongful damage
to Company's property, (iii) wrongful disclosure of Company's secret processes
or confidential information, (iv) a material breach of Executive's obligations
under this Agreement, that materially impairs Executive's performance of his
obligations under this Agreement, (v) criminal misconduct, including illegal
drug use, that materially impairs Executive's performance of his obligations
under this Agreement, (vi) a material breach of the Company's written rules or
policies that materially impairs Executive's performance of his obligations
under this Agreement, or (vii) any kind, whether or not specifically referenced
in the foregoing clauses (i)-(vi), which is materially harmful to Company. No
act, or failure to act, shall be deemed "intentional" if it was due primarily to
an error in judgment or to negligence, but shall be deemed "intentional" only if
done, or omitted to be done, by Executive not in good faith and without
reasonable belief that his act or omission was in Company's best interest.
(b) CONTROLLING PERSON. As used in this Section 4.1, a
"Controlling Person" is a "Person" (as that term is used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"))
who, directly or indirectly, is the beneficial owner (as defined in Rule 13d-3
under the Exchange Act) of securities of the Company representing 50% or more of
the combined voting power of the Company's then outstanding securities. For the
sake of clarity, when two or more Persons act as a partnership, limited
partnership, syndicate or other group for the purpose of acquiring, holding,
voting or disposing of securities of the Company, each such Person shall be
deemed to beneficially own all securities owned by each other Person
constituting such partnership, limited partnership, syndicate or group.
Notwithstanding the previous two sentences:
(i) the following Persons shall not be considered
Controlling Persons: (A) the Company and/or its wholly owned subsidiaries, (B)
any ESOP or other employee benefit plan of the Company and any trustee or other
fiduciary in such capacity holding securities under such employee plan, (C) any
entity that is owned, directly or indirectly, by the shareholders of the Company
in the same proportions as their ownership of stock in the Company, or (D)
Executive or a syndicate or group of Persons of which Executive is a part; and
(ii) No Person who is presently a party to the Stock
Pooling Agreement effective as of January 2, 1998 among the Company and certain
holders of the Company's Common Stock (the "Stock Pooling Agreement"), whether
or not the Stock Pooling Agreement remains in effect, shall be considered a
Controlling Person (provided that this shall not affect the extent to which
other Persons may, under certain circumstances be deemed to beneficially own any
securities owned by such Person).
(c) CHANGE IN CONTROL. There shall be considered to have been
a "Change in Control" of Company if:
(i) after the Effective Date of this Agreement, any
Person becomes,
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directly or indirectly, a Controlling Person;
(ii) There shall be consummated or made effective:
(A) any consolidation, merger or
recapitalization of the Company in which the Company is not the continuing or
surviving corporation or pursuant to which the Company's voting stock would be
converted into cash, securities and/or other property, other than any such
transaction in which holders of the Company's voting stock immediately before
the transaction, in the aggregate, have (or upon conversion, exercise or similar
action would have) more than 50% of the voting power of all issued and
outstanding securities of the Company or any successor or surviving corporation
after the transaction; or
(B) any sale, lease, exchange or other
transfer (in one transaction or a series of related transactions) of a majority
of the assets or earning power of the Company; or
(C) the liquidation or dissolution of the
Company; or
(iii) after the Effective Date of this Agreement,
members of the "Incumbent Board" (as defined below) cease for any reason to
constitute a majority of the Board of Directors of the Company. For this
purpose, the "Incumbent Board" shall consist of:
(A) those individuals who, on the Effective
Date of this Agreement, are Directors of the Company ("Original Incumbent
Directors"); and
(B) any new Director ("New Incumbent
Director") whose election by the Board, or whose nomination for election by the
Company's shareholders, was approved by the vote of at least two-thirds of the
Directors then still in office who either were Original Directors or whose
election or nomination for election was previously so approved; provided,
however, that any Director designated by a Person who has entered into an
agreement with the Company to effect a transaction within the purview of
Sections 4.1(c)(i) or 4.1(c)(ii) above that has not been consummated shall not
be considered a New Incumbent Director.
(d) GOOD REASON RESIGNATION. As used in this Agreement,
Executive shall be deemed to have resigned his employment by Company for "Good
Reason" if either:
(i) Executive, at any time, elects in good faith to
discontinue his employment with Company because (A) his responsibilities, duties
or authority have changed materially from their level on the effective date of
this Agreement, which change substantially reduces the rank or level,
responsibility or scope of Executive's position with Company (or its successor
in the case of a merger, consolidation, acquisition or transfer of substantially
all of its business assets) below that which he has on the effective date of
this Agreement as Company's Chief Executive Officer or (B) his salary (as
adjusted from the effective date of this Agreement) has been decreased; or
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(ii) Executive elects to discontinue his employment
with the Company because the Company has changed the principal location for the
performance of Executive's duties to a place that is more than 50 miles from
Company's current headquarters in West Chester, PA; or
(iii) Within 30 days after there is a Change in
Control of the Company, Executive delivers a notice to the Company stating that
Executive elects to discontinue his employment with the Company.
If Executive elects to end his employment by Company for a reason which
Executive believes is a Good Reason as defined by this Section 4.1(d), he shall
provide the Company with written notice of such resignation and shall state in
that notice the specific matter or matters which he asserts constitute the Good
Reason for his resignation.
(e) DISABILITY. As used in this Agreement, "Disability" or
"Disabled" shall mean a physical or mental disability which is either (i) a
total and permanent disability as defined in the principal disability benefit
plan offered by the Company to its senior officers and in effect at the time
Executive becomes disabled (whether or not Executive has elected to purchase
such disability insurance), or (ii) determined to be a total and permanent
disability by a physician who is selected by the Company and is acceptable to
Executive or his legal representative (which acceptance shall not be
unreasonably withheld).
4.2. TIME AND MANNER OF TERMINATION OR RESIGNATION. Executive's
employment by Company, including his office as Chief Executive Officer, shall be
at will. Executive's employment shall cease immediately upon Executive's death
or Disability, or upon written notice to Executive that the Company is
terminating Executive's employment For Cause. Otherwise Executive's employment
shall cease on the date selected by the party initiating termination or
resignation, which date shall be specified in a written notice to the other
party, and which (i) in the event of termination of Executive by the Company for
any reason other than For Cause, shall be thirty (30) days after delivery of
such notice unless a longer period is approved by the Company's Board in its
sole discretion, and (ii) in the event of resignation by Executive, shall be
thirty (30) days after delivery of such notice unless a longer or shorter period
is approved by the Company's Board and by Executive. The date on which
Executive's employment by Company ceases is referred to in this Agreement as the
"Employment Ending Date". As of the Employment Ending Date, if Executive is a
member of Company's Board or of the Board of Directors of any affiliate, he
shall provide Company with his written resignation from each such Board and from
his position as an officer of any affiliate.
4.3. BENEFITS PAYABLE.
(a) SEVERANCE AMOUNT. If either (1) Company terminates
Executive's employment for any reason other than For Cause, death or Disability,
or (2) Executive resigns his employment by Company for Good Reason, Executive
shall be paid his monthly salary at the time
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of such termination or resignation, for 12 months. For purposes of this Section
4.3(a) and Section 4.3(b), Executive's "monthly salary" shall be one-twelfth of
the sum of (A) Executive's highest annual base salary rate during his employment
by Company, plus (B) all other amounts, including incentive payments, that would
be deemed compensation for purposes of IRS form W-2 and that were paid to
Executive during the twelve full calendar months preceding the calendar month in
which the Employment Ending Date occurs. Company shall make the severance
payments under this Section 4.3(a) beginning with the first calendar month after
the Employment Ending Date, in accordance with Company's regular pay policies
for employees.
(b) PAYMENT FOR EXTENDED NON-COMPETE PERIOD. If either (1)
Company terminates Executive's employment for any reason other than For Cause,
death or Disability, or (2) Executive resigns his employment by Company for Good
Reason, then in addition to the other amounts payable to Executive under this
Section 4.3, and as consideration for Executive's agreement to the extended
non-compete period described in Section 5.3(b)(ii) below, Executive shall be
paid, for each of the 12 months following payment of the Severance Amount under
Section 4.3(a) above, an amount equal to his monthly salary (as defined in
Section 4.3(a)) at the time of such termination or resignation. Company shall
make the payments under this Section 4.3(b), beginning after the final payment
of the Severance Amount under Section 4.3(a), in accordance with Company's
regular pay policies for employees. Executive and Company also acknowledge and
agree that the provisions of Section 5.3 are mandatory and that, in the event
Company terminates Executive's employment for any reason other than For Cause,
death or Disability or Executive resigns his employment for Good Reason, he
shall have no right to unilaterally avoid compliance with the provisions of
Section 5.3 by foregoing the payment described in this Section 4.3(b); and
Company shall have no right to withhold such payment by unilaterally permitting
Executive to forego compliance with Section 5.3 during the extended non-compete
period.
(c) ADDITIONAL SEVERANCE BENEFITS. If severance payments are
payable to Executive under Section 4.3(a) above, the following additional
severance benefits shall be provided to Executive by Company:
(i) Company shall pay Executive the amount earned
under its PFP program (or any applicable replacement incentive program in effect
at the time of the Employment Ending Date) for the portion of the calendar
quarter to and including the Employment Ending Date. Company shall make such
payment on or about the date Company makes such payments to other participating
employees;
(ii) Company shall provide medical, dental and
prescription plan benefits for Executive, on the same cost-sharing and other
basis as is then in effect for active employees, for 24 months after the
Employment Ending Date or until Executive elects that such coverages sooner
cease. After such coverages cease in accordance with the previous sentence,
Executive may elect continuation coverage completely at his own expense as
provided by law;
(iii) Company shall provide Executive with
outplacement services at
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Company's expense at the level in effect for Executive Officers of the Company
on the Employment Ending Date.
(iv) Company shall pay Executive his automobile
allowance and reimbursement, at the level in effect on the Employment Ending
Date, for 6 months after the Employment Ending Date.
(d) LIMITATION ON SEVERANCE BENEFITS. Notwithstanding any
other provision of this Agreement to the contrary, the amounts payable to
Executive under Sections 3.2(b), 4.3(a) and 4.3(c) above, plus the value of any
other non-cash benefits, including but not limited to stock option vesting
acceleration, that would be counted in determining whether Executive is subject
to excise tax under sections 280G and 4999 of the Internal Revenue Code of 1986,
as amended (the "Code") shall not exceed the maximum amount that Company could
pay to Executive without causing Executive to be subject to such excise tax
under the Code.
(e) ADDITIONAL BENEFITS ARISING FROM CHANGE IN CONTROL. The
definition of Change in Control, as set forth in Section 4.1(c) above, shall
supersede and replace any other definition of the term "Change in Control" in
all stock option and other incentive compensation agreements between Company and
Executive, and all such agreements are hereby amended to replace any other
definition of the term "Change in Control" with the definition in Section 4.1(c)
of this Agreement.
(f) WHEN BENEFITS/PAYMENTS NOT PAYABLE. None of the severance
benefits or other payments described in this Section 4.3 shall be payable to
Executive if (i) Executive's employment with Company is terminated For Cause or
by reason of Executive's death or Disability, or (ii) Executive voluntarily ends
his employment with Company other than by resigning for Good Reason. The
compensation and benefits and the non-compete payment which the Company is
required to pay Executive pursuant to this Section 4.3, together with any
payments to which Executive may be entitled under Section 3.2, are the only
payments, compensation or benefits to which the Executive is entitled upon a
termination or resignation of employment.
(g) RELEASE. As a condition to receipt of the severance
benefits and other payments described in this Section 4.3, Executive shall
deliver an effective, executed release to Company in the form attached to this
Agreement as Exhibit "A" on or before the Employment Ending Date.
(h) COOPERATION. As a condition to receipt of the severance
benefits and other payments described in this Section 4.3, Executive shall
provide Company with such information pertaining to his employment with Company
as he may have and shall assist Company to transfer his duties to such successor
or successors as Company may designate. Company shall reimburse Executive for
all reasonable out-of-pocket expenses he incurs in fulfilling his obligation
under the preceding sentence.
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(i) ACCELERATION ELECTION. Company may, at its sole option and
in its sole and absolute discretion, at any time or from time to time,
accelerate the time and the manner of making any one or more payments required
under this Section 4.3.
(j) TAXES. Company shall withhold from payments to Executive
and remit to the appropriate government agencies such payroll taxes and income
withholding as Company determines is or may be necessary under applicable law
with respect to amounts paid to Executive under this Section 4.3.
(k) GENERAL OBLIGATION. The rights and benefits of Executive
to receive payments under this Section 4.3 shall be solely those of an unsecured
creditor of Company.
(l) ESTATE TO RECEIVE BENEFITS/PAYMENTS. In the event that
Executive becomes entitled to receive any severance benefits or payments under
Sections 3.2 or 4.3(a) (b) or (c)(i)(ii) or (iv) above, and Executive dies
before all such benefits or payments are made by Company, the balance of such
benefits or payments shall be paid to Executive's estate.
SECTION 5. RESTRICTIVE COVENANTS
5.1. CONFIDENTIALITY. Executive acknowledges a duty of confidentiality
owed to Company and shall not, at any time during or after his employment by
Company, retain in writing, use, divulge, furnish, or make accessible to anyone,
without the express authorization of the Company's Chief Executive Officer, any
trade secret, private or confidential information or knowledge of Company or any
of its affiliates obtained or acquired by him while so employed. All computer
software, address books, rolodexes, business cards, telephone lists, customer
lists, price lists, contract forms, catalogs, books, records, and files and
know-how acquired while an employee of Company, are acknowledged to be the
property of Company and shall not be duplicated, removed from Company's
possession or made use of other than in pursuit of Company's business. Upon the
Employment Ending Date, Executive shall deliver to Company, without further
demand, all copies thereof which are then in his possession or under his
control.
5.2. INVENTIONS AND IMPROVEMENTS. During the term of his employment,
Executive shall promptly communicate to Company all ideas, discoveries and
inventions which are or may be useful to Company or its business. Executive
acknowledges that all ideas, discoveries, inventions, and improvements which are
made, conceived, or reduced to practice by him and every item of knowledge
relating to Company's business interests (including potential business
interests) gained by him during his employment hereunder are the property of
Company, and Executive hereby irrevocably assigns all such ideas, discoveries,
inventions, improvements, and knowledge to Company for its sole use and benefit,
without additional compensation. The provisions of this Section shall apply
whether such ideas, discoveries, inventions, improvements or knowledge are
conceived, made or gained by him alone or with others; whether during or after
usual working hours, whether on or off the job, whether applicable to matters
directly or indirectly related to Company's business interests (including
potential business interests), and whether or not within
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the specific realm of his duties. Executive shall, upon request of Company, but
at no expense to Executive, at any time during or after his employment with
Company, sign all instruments and documents requested by Company and otherwise
cooperate with Company to protect its right to such ideas, discoveries,
inventions, improvements, and knowledge, including applying for, obtaining, and
enforcing patents and copyrights thereon in any and all countries.
5.3. NONCOMPETITION; NONSOLICITATION.
(a) Executive shall not, without Company's prior written
approval, either directly or indirectly, for his own account or for the account
of another person or entity, during the non-compete period as defined below in
this Section 5.3:
(i) acquire or hold more than a 5% ownership interest
in any competitor of Company or of any affiliate;
(ii) compete with Company or any affiliate in
soliciting any business from any person or entity that was at any time during
the two years immediately preceding the Employment Ending Date a client or
potential client of Company or any affiliate, as to which client or potential
client Company or an affiliate had rendered a significant volume of service or
had a significant amount of direct business contact for the purpose of
soliciting future business;
(iii) render services within the United States of
America or any foreign country in which Company is providing services as of the
Employment Ending Date to any competitor of Company or an affiliate, if such
services are similar in nature (in whole or in part) to services Executive
rendered to Company or any affiliate at any time during the two years
immediately preceding the Employment Ending Date; or
(iv) solicit or otherwise induce any employee of
Company or an affiliate to leave the employment of Company or the affiliate, or
induce any such employee to become an employee of, or otherwise become
associated with, any company or business other than Company or the affiliate.
This paragraph shall apply to inducement, hiring or solicitation of any employee
of Company or an affiliate, regardless of position.
As used in Sections 5.3 (a) (i) and (iii), the term "competitor of Company"
means a business that, within 12 months before the Employment Ending Date, has
actually competed with the Company for a contract or contracts that, in the
aggregate, the Company valued at in excess of $1,000,000 in net revenue. If a
"competitor of Company", or an entity that owns and/or operates a "competitor of
Company", also owns and/or operates any separate subsidiary or other separate
line of business ("separate business unit"), and that separate business unit is
not itself a competitor of the Company, the restrictions in Sections 5.3(a) (i)
and (iii) shall not apply to that separate business unit (which shall not be
deemed a "competitor of Company").
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(b) (i) The non-compete period shall be the 365 days after the
Employment Ending Date if (a) Executive's employment with Company is terminated
For Cause or by reason of Executive's Disability, or (b) Executive voluntarily
ends his employment with Company other than by resigning for Good Reason.
(ii) The non-compete period shall be the 730 days after the
Employment Ending Date if (a) Executive's employment with Company is terminated
for any reason other than For Cause or by reason of Executive's Disability or
(b) Executive resigns his employment for Good Reason.
(c) Upon the breach by Executive of his obligations under this Section
5.3, in addition to Company's right to obtain appropriate injunctive relief as
set forth in Section 5.4 of this Agreement, Company's obligation to make
payments or provide severance benefits to Executive under Section 4 of this
Agreement shall terminate immediately and Executive shall, within 10 days after
written demand by Company, repay to Company all severance payments previously
made to Executive as well as an amount equal to the cost of severance benefits
previously provided to Executive.
(d) Executive acknowledges that he is bound by the restrictions
described in this Section 5.3 upon any termination or resignation of his
employment, including termination for Cause or without Cause, or by reason of
Disability or resignation for Good Reason or without Good Reason. Executive
acknowledges that he has agreed to these provisions voluntarily; that they are
reasonably required to protect the Company; and that they are supported by
adequate consideration (including but not limited to the consideration provided
under Section 4.3(b) for the extended non-compete period described in Section
5.3(b)(ii) above).
5.4. INJUNCTIVE AND OTHER RELIEF.
(a) Executive acknowledges and agrees that his obligations
contained in this Agreement are fair and reasonable in light of the
consideration paid under this Agreement, and that damages alone shall not be an
adequate remedy for any breach by Executive of those obligations. Accordingly,
Executive expressly agrees that, in addition to any other remedies which Company
may have, Company shall be entitled to injunctive relief in any court of
competent jurisdiction for any breach or threatened breach of any of those
obligations by Executive. Nothing contained in this Agreement, including,
without limitation, Section 6.1 hereof, shall prevent or delay Company from
seeking, in any court of competent jurisdiction, specific performance or other
equitable remedies in the event of any breach or intended breach by Executive of
any of his obligations under this Agreement.
(b) Notwithstanding the equitable relief available to Company,
the Executive, in the event of a breach of his obligations contained in Section
5 hereof, understands and agrees that the uncertainties and delay inherent in
the legal process would result in a continuing breach for some period of time,
and therefore, continuing injury to Company until and unless Company can obtain
appropriate equitable relief. Therefore, in addition to such equitable relief,
Company
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shall be entitled to monetary damages for any such period of breach until the
termination of such breach, in an amount deemed reasonable to cover all actual
and consequential losses, plus all moneys received by Executive as a result of
said breach, and all costs and attorneys' fees incurred by Company in enforcing
this Agreement. If Executive should use or reveal to any other person or entity
any confidential information in violation of this Agreement, this will be
considered a continuing violation on a daily basis for so long a period of time
as such confidential information is made use of by Executive or any such other
person or entity.
SECTION 6. MISCELLANEOUS
6.1. ARBITRATION.
(a) Except as set forth in the last sentence of this Section
6.1, all disputes arising out of or relating to this Agreement which cannot be
settled by the parties shall promptly be submitted to and settled exclusively by
arbitration in West Chester, Pennsylvania in accordance with the laws of the
Commonwealth of Pennsylvania by three arbitrators, one of whom shall be
appointed by the Company, one by the Executive and the third of whom shall be
appointed by the first two arbitrators. The arbitration shall be conducted in
accordance with the rules of the American Arbitration Association, except with
respect to the selection of arbitrators which shall be as provided in this
Section 6.1. Judgment upon the award rendered by a majority decision of the
arbitrators may be entered in any court having jurisdiction thereof. The Company
shall, however, have the right to seek and obtain preliminary injunctive relief,
in a court of competent jurisdiction, for any existing or threatened violation
by Executive of Section 5 of this Agreement.
(b) The arbitrators shall award to the prevailing party in any
such arbitration or preliminary injunction proceeding, in addition to any other
appropriate relief, the costs and expenses (including reasonable attorneys fees)
incurred by that party in connection with the enforcement of that party's rights
under this Agreement, unless the arbitrators shall determine that under the
circumstances such an award would be unjust.
6.2. PRIOR EMPLOYMENT. Executive represents and warrants that he is not
a party to any other employment, non-competition or other agreement or
restriction which could interfere with his employment with Company or with his
or Company's rights and obligations under this Agreement; and that his
acceptance of employment with Company and the performance of his duties under
this Agreement will not breach the provisions of any contract, agreement, or
understanding to which he is party or any duty owed by him to any other person.
6.3. SEVERABILITY. The invalidity or unenforceability of any particular
provision or part of any provision of this Agreement shall not affect the other
provisions or parts of this Agreement, except that in the event that the Release
described in Section 4.3(e) hereof is given by Executive and is determined to be
invalid or unenforceable, such that Executive is permitted to maintain against
Company any claim purported to be released under that Release, then Company's
obligation to provide severance payments and benefits under Section 4.3 of this
Agreement shall
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be deemed null and void and Executive shall repay to Company any of those
severance payments and benefits already paid by Company. In the event that any
provision hereof is determined to be invalid or unenforceable by a court of
competent jurisdiction Executive and Company shall negotiate in good faith to
provide Company and Executive with protection as nearly equivalent to that found
to be invalid or unenforceable and if any such provision shall be so determined
to be invalid or unenforceable by reason of the duration or geographical scope
of the covenants contained therein, such duration or geographical scope, or
both, shall be considered to be reduced to a duration or geographical scope to
the extent necessary to cure such invalidity.
6.4. ASSIGNMENT. This Agreement shall not be assignable by Executive,
and shall be assignable by Company only to any person or entity which may become
a successor in interest (by purchase of assets or stock, or by merger, or
otherwise) to Company in the business or a portion of the business presently
operated by it. Subject to the foregoing, this Agreement and the rights and
obligations set forth herein shall inure to the benefit of, and be binding upon,
the parties hereto and each of their respective permitted successors, assigns,
heirs, executors and administrators.
6.5. NOTICES. All notices hereunder shall be in writing and shall be
sufficiently given if hand-delivered, sent by documented overnight delivery
service, or by registered or certified mail, postage prepaid, return receipt
requested, (confirmed by U.S. mail), addressed as set forth below or to such
other person and/or at such other address as may be furnished in writing by any
party hereto to the other. Any such notice shall be deemed to have been given as
of the date received, in the case of personal delivery, or on the date shown on
the receipt or confirmation therefor, in all other cases. Any and all service of
process and any other notice in any such action, suit or proceeding shall be
effective against any party if given as provided in this Agreement; provided
that nothing herein shall be deemed to affect the right of any party to serve
process in any other manner permitted by law.
If to Company:
1400 Weston Way
West Chester, PA 19380
Attention: Chairman of the Board of Directors
With a copy to:
F. Douglas Raymond, Esq.
Drinker Biddle and Reath
One Logan Square
18th and Cherry Sts.
Philadelphia, PA 19103
If to Executive:
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William L. Robertson
1676 Waterglen Drive
West Chester, PA 19382
6.6. ENTIRE AGREEMENT AND MODIFICATION. This Agreement constitutes the
entire agreement between the Company and the Executive with respect to the
matters contemplated herein and, unless otherwise stated in this Agreement,
supersedes all prior agreements and understandings with respect thereto. The
following agreements between Executive and the Company will remain in effect:
(a) Long Term Incentive Compensation Program for Senior Managers - Cash
Component memorandum dated July 5, 1999
(b) Stock Option Agreement for 95,000 shares granted April 1, 1999
(c) Stock Option Agreement for 100,000 shares granted July 14, 1997
(d) Stock Option Agreement for 22,000 shares granted July 14, 1997
(e) Supplemental Executive Retirement Plan dated January 1, 1998
(f) Elective Deferred Compensation Agreement dated December 23, 1997
Any amendment, modification, or waiver of this Agreement shall not be effective
unless in writing and signed by the party against whom enforcement is sought.
The failure by any party 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 a party'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.
6.7. GOVERNING LAW. This Agreement is made pursuant to, and shall be
construed and enforced in accordance with, the internal laws of the Commonwealth
of Pennsylvania (and United States federal law, to the extent applicable),
without giving effect to otherwise applicable principles of conflicts of law.
6.8. HEADINGS; COUNTERPARTS. The headings of paragraphs in this
Agreement are for convenience only and shall not affect its interpretation. This
Agreement may be executed in two or more counterparts, each of which shall be
deemed to be an original and all of which, when taken together, shall be deemed
to constitute but one and the same Agreement.
6.9. FURTHER ASSURANCES. Each of the parties hereto shall execute such
further instruments and take such other actions as any other party shall
reasonably request in order to effectuate the purposes of this Agreement.
6.10. 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
Executive, or any executor, administrator, heir, legatee, distributee, relative
or any other person or entity, whether or not in
14
<PAGE> 15
being, claiming under Executive by virtue of this Agreement, and none of the
rights 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.
6.11. RIGHT TO USE LIKENESS. Executive hereby grants to Company the
absolute right and permission to copyright and use, re-use and/or publish for
lawful business purposes, any photographic portraits or pictures of Executive
(and printed matter in conjunction therewith) in which Executive may be included
in whole or in part or composite, for art, advertising, or trade.
6.12. CONSULTATION WITH COUNSEL. Executive acknowledges that he has had
the opportunity to consult separately with counsel of his choice concerning this
Agreement and the meaning of the terms of this Agreement; that he has been
advised by Company to do so; and that he has entered into this Agreement
knowingly and of his own free will and volition.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
ATTEST: ROY F. WESTON, INC.
By: s/Katherine W. Swoyer
Katherine W. Swoyer, Chairman
S/William L. Robertson
Witness Executive - William L. Robertson
15
<PAGE> 16
EXHIBIT "A"
CROSS RELEASE
Roy F. Weston, Inc. ("Weston") and William L. Robertson ("Employee")
entered into an Amended Employment Agreement as of March 20, 2000 (the
"Employment Agreement"). To satisfy the requirement of Section 4.3(e) of the
Employment Agreement, Employee and Weston hereby grant the other the Releases
set forth below:
---------------------------------
1. Release by Weston. Weston, on behalf of itself and its subsidiaries,
irrevocably and unconditionally releases and forever discharges Employee, his
heirs, administrators and legal representatives from any and all manner of
actions, causes, matters, suits, debts, dues, accounts, bonds, covenants,
agreements, judgments, claims, controversies, guarantees, warranties, damages,
liabilities, or demands of any nature whatsoever in law or equity, whether or
not known to it, which it has ever had, now has, or hereafter can, shall or may
have, for, upon, or by reason of any matter, action, omission to act,
transaction, practice, conduct, thing or cause of any kind whatsoever from the
beginning of the world to the date it executes this Release. Such remise,
release and discharge of Employee includes, without limitation, any and all
claims under any and all federal or state statutes or the common law and extends
without limitation to any and all acts, practices or conduct by Employee whether
or not it has knowledge of such acts, omissions, practices, conduct or the
effects thereof, or if any such effects exist or may in the future exist as a
result of any acts, omissions, practices, or conduct that occurred prior to the
date it executes this Release.
2. Limitation on Weston's Release. Notwithstanding the foregoing, this
Release shall not prevent Weston from enforcing its rights under the Employment
Agreement.
3. Release by Employee. Employee, for himself, his heirs, and personal
and legal representatives, except as provided in Section 4 hereof, does hereby
irrevocably and unconditionally release, remise and forever discharge Weston,
its subsidiaries, affiliates, divisions, officers, directors and employees (the
"Releasees"), and each of them, however denominated, past, present and future,
and their predecessors, successors and assigns, of and from any and all manner
of actions, causes, matters, suits, dues, bonds, judgments, debts, accounts,
covenants, agreements, claims, controversies, guarantees, warranties, damages,
liabilities, or demands of any nature whatsoever in law or equity, whether or
not now known to him which he ever had, now has or hereafter can, shall or may
have, for, upon, or by reason of any matter, action, omission to act,
transaction, practice, conduct, cause or thing of any kind whatsoever from the
beginning of the world to the date hereof. Such release, remise and discharge of
the Releasees includes without limitation any and all claims under any and all
federal and state statutes or common law and extends without limitation, to any
and all acts, practices or conduct by the Releasees, or the
<PAGE> 17
effects thereof, whether or not Employee now has knowledge of such acts,
omissions, practices, conduct or the effects thereof, if any such effects exist
or may in the future exist as a result of any act, omission, practice or conduct
that occurred prior to the date hereof. Except as provided in Section 4, this
release shall specifically include, but not be limited to, the following:
(a) any and all claims and matters of any kind which arise or
might arise, or which otherwise relate to Employee's employment with Weston or
Employee's termination of employment pursuant to the Employment Agreement;
(b) any and all claims for wages and benefits (including
without limitation salary, stock, stock options, commissions, bonuses, severance
pay, health and welfare benefits, vacation pay and any other fringe-type
benefit);
(c) any and all claims for wrongful discharge, breach of
contract (whether written or oral, express or implied), and implied covenants of
good faith and fair dealing;
(d) any and all claims for alleged employment discrimination
on the basis of age, race, color, religion, sex, national origin, veteran
status, disability and/or handicap, in violation of any federal, state or local
statute, ordinance, judicial precedent or executive order, including but not
limited to claims for discrimination under the following statutes: Title VII of
the Civil Rights Act of 1964, 42 U.S.C. Section 2000e et seq., the Civil Rights
Act of 1866, 42 U.S.C. Section 1981, the Age Discrimination in Employment Act,
29 U.S.C. Section 621 et seq., the Older Workers Benefit Protection Act, the
Rehabilitation Act of 1972, 29 U.S.C. Section 701 et seq., the Americans with
Disabilities Act, 42 U.S.C. Section 1201 et seq., and the Pennsylvania Human
Relations Act, 43 P.S. Section 951 et seq.;
(e) any and all claims under any federal or state statute
relating to employee benefits;
(f) any and all claims in tort, including but not limited to
any claims for fraud, misrepresentation, defamation, interference with contract
or prospective economic advantage, intentional infliction of emotional distress
and/or negligence;
(g) any and all claims for additional commissions,
compensation or damages of any kind; and
(h) any and all claims for attorneys' fees and costs.
4. Limitation on Employee's Release. This Release (a) shall not prevent
Employee from enforcing his rights to receive severance payments and severance
benefits under Section 4 of the Employment Agreement in accordance with the
terms thereof, (b) shall have no applicability to Weston's obligations to
provide severance payments and severance benefits under Section 4 of the
Employment Agreement, and (c) shall not release Weston from (i) any obligation
it might
<PAGE> 18
otherwise have to indemnify Employee and hold him harmless from any claims made
against him arising out of his activities as an officer or director of Weston or
its affiliates, to the same extent as Weston is or may be obligated to indemnify
and hold harmless any other officer or director, and (ii) any vested retirement
benefit which by its express terms survives termination of Employee's
employment.
5. Review and Revocation. Employee acknowledges that he has had the
opportunity to review this Release and to consider its terms with his attorneys
and advisors. Employee has forty-five (45) days from the date of distribution of
this Release to him to review it and seven (7) days after the execution date of
this Release to revoke it. This Release shall not be effective unless and until
Employee executes it and the seven-day period has expired.
UNDERSTOOD AND AGREED:
s/William L. Robertson
Witness William L. Robertson
Attest: ROY F. WESTON, INC.
By: s/Arnold P. Borish By:
Secretary
(Corporate Seal)
STATE OF :
: SS:
COUNTY OF :
Before me, , on this day personally appeared ___________,
known to me to be the person whose name is subscribed to the foregoing
instrument, and acknowledged to me that he executed such instrument for the
purposes and consideration therein expressed.
Given under my hand and seal of office this day of
, .
NOTARY PUBLIC in and for
<PAGE> 19
Schedule I
A. The amount of the Change in Control bonus payable pursuant to Section 3.2(b)
of the Employment Agreement to which this Schedule I is attached shall be based
on the Per Share Price as hereinafter defined in Section B below.
B. For purposes of this Schedule I:
(1) "Per Share Price" shall mean the sum of the following amounts
received or receivable, in connection with a Change in Control, by a holder of
the Company's Common Shares or Series A Common Shares, calculated on a per share
basis (and calculated based on the highest amount received or receivable with
respect to shares of each such class):
(a) cash;
(b) securities listed for trading on any national securities
exchange or quoted on the Nasdaq Stock Market or convertible into or
exchangeable for securities that are so listed or quoted, valued at the higher
of (i) the closing price per share on the date of first public announcement that
the Company has entered into an agreement providing for such Change in Control
or (ii) the average closing price of the securities so listed or quoted for the
ten trading days immediately preceding the date the securities are issued to the
holders of the Company's Common Stock or Series A Common Stock, less the value
of any consideration payable by such holders upon the exchange or conversion of
the securities so issued (other than the surrender of the Company's Common Stock
or Series A Common Stock for conversion or exchange);
(c) the face amount of any note or similar debt instrument;
(d) the fair market value of any other property or other
consideration received or receivable by such holders, which fair market value
shall be determined by the Board of Directors of the Company (or, if applicable,
the committee thereof to which the Board of Directors may have delegated the
authority to evaluate and recommend any Change in Control transaction). If the
Board or such committee receives a fairness opinion from its investment banker
concerning the transaction, the fair market value of such other property or
other consideration, for purposes of this Paragraph B(1)(d), shall be the amount
that the investment banker has concluded is the fair market value of such other
property or other consideration, for purposes of rendering the fairness opinion;
and if that fair market value is a range of values, the fair market value for
purposes of this Paragraph B(1)(d) shall be the highest amount in that range.
The determination of the Board or committee shall be final; plus
(e) the value of any Common Shares or Series A Common Shares
retained by such holder, calculated as provided in subsection B(1)(b) above or,
if not calculable pursuant to subsection B(1)(b), then as provided in subsection
B(1)(d) above;
<PAGE> 20
Provided, however, that if the Per Share Price of a Common Share is not the same
as that of a Series A Common Share, in each case calculated as set forth above,
then for purposes of this Schedule I the Per Share Price shall be the average of
such values, calculated on a weighted average basis based on the actual number
of shares of each such class outstanding and entitled to receive such value.
2. In the event that payment of all or any portion of the Per Share
Price is conditioned upon the occurrence of events occurring after the
consummation of the Change in Control, the Company shall be obligated to make a
payment hereunder with respect to such portion of the Per Share Price only when
and if the condition to such payments shall have expired and the amount of such
portion of the Per Share Price shall have been finally determined.
C. If the Per Share Price is at least the amount referred to in the Resolution
of the Board of Directors dated March 20, 2000 concerning the Employment
Agreement to which this schedule is attached (the "bonus price amount"),
Executive shall be entitled to receive a bonus in the amount of $120,000 plus an
additional $1,866.66 for every $.01 by which the Per Share Price exceeds the
bonus price amount; provided, however, that the amount of any bonus paid
pursuant to this Schedule I and Section 3.2(b) of the Employment Agreement shall
be reduced by the amount, if any, previously paid to Executive pursuant to this
Schedule I and such Section 3.2(b) following the consummation of any prior
Change in Control.
<PAGE> 1
Exhibit 10.16
AMENDED EMPLOYMENT AGREEMENT
This AMENDED EMPLOYMENT AGREEMENT is dated as of March 20, 2000 (the
"Effective Date") between Roy F. Weston, Inc., a Pennsylvania corporation
("Company"), and Patrick G. McCann (the "Executive").
WHEREAS, Executive and Company entered in to an employment agreement dated
March 11, 1998, which was amended on May 19, 1998; and
WHEREAS, Executive is presently employed by Company as its President and
Chief Operating Officer;
WHEREAS, the parties desire to amend and restate in this Agreement the
terms and conditions of the Executive's employment by the Company as its
President and Chief Operating Officer; and
THEREFORE, in consideration of the mutual obligations contained in this
Agreement and the mutual benefits to be derived from those obligations, and
intending to be legally bound by this Agreement, the Executive and the Company
agree as follows:
SECTION 1. CAPACITY AND DUTIES
1.1. EMPLOYMENT; ACCEPTANCE OF EMPLOYMENT. Company hereby employs
Executive and Executive hereby accepts employment by the Company, as President
and Chief Operating Officer upon the terms and conditions set forth below in
this Agreement.
1.2. CAPACITY AND DUTIES.
(a) Executive shall be employed by Company as its President and
Chief Operating Officer, subject to the supervision of the Board and the
Company's Chief Executive Officer and shall perform such duties and shall have
such authority as set forth in the Company's By-laws and as may from time to
time be specified by the Board of Directors (the "Board") and the Company's
Chief Executive Officer. Executive shall report directly to the Company's Chief
Executive Officer and shall perform his duties for Company principally from
Company's office located in West Chester, Pennsylvania, except for periodic
travel that may be necessary or appropriate in connection with the performance
of Executive's duties under this Agreement.
(b) Executive shall devote his full working time, energy, skill and
best efforts to the performance of his duties under this Agreement, in a manner
which will faithfully and diligently further the business and interests of the
Company and its affiliates (as defined below),
<PAGE> 2
and shall not be employed by or participate or engage in or be a part of the
management or operation of any business enterprise other than the Company and
its affiliates, without the prior written consent of the Board or the Chief
Executive Officer, which consent may be granted or withheld in the sole
discretion of the Board or the Chief Executive Officer. For purposes of this
Agreement, "affiliate" means any entity in which at least 50% of the voting
power is controlled by the Company. Nothing in this paragraph shall preclude
Executive from serving as the Company's appointed member of the board of
directors of companies in which Company has an interest.
SECTION 2. TERM OF EMPLOYMENT
2.1. TERM. The Executive's employment under this Agreement shall continue
at will until terminated in accordance with the provisions of this Agreement.
SECTION 3. COMPENSATION
3.1. BASIC COMPENSATION. As compensation for Executive's services under
this Agreement, Company shall pay to Executive a salary at the annual rate of
$260,000 (the "Base Salary"), payable in periodic installments in accordance
with the Company's regular payroll practices in effect from time to time. The
Base Salary shall be reviewed from time to time by the Board and/or its
Executive Committee as conditions warrant. The first such review shall take
place no later than February 2001, and future reviews shall be held not less
frequently than annually thereafter. Such review shall consider, but not be
limited to, Executive's performance as determined by the Board and/or its
Executive Committee, after consultation with the Company's Chief Executive
Officer.
3.2. INCENTIVE COMPENSATION.
(a) ANNUAL INCENTIVE PAY/BONUS. In addition to the Base Salary
provided for in Section 3.1, the Executive will participate in the Company's Pay
for Performance Incentive Compensation Program ("PFP") (formerly known as
Salary-At-Risk), with a PFP guideline incentive that will provide quarterly
incentive payments to Executive that, on an annual basis, total 30% of
Executive's Base Salary if the Company meets its annual PFP Plan, which includes
achievement of the annual operating plan budgeted Net Income Before Tax (NIBT)
amount approved by the Company's Board of Directors. Executive understands that
the Company's PFP program may be reviewed and revised and Executive shall only
be entitled to participate in the current PFP program if, and to the extent
that, the program is maintained by the Company for its management personnel
generally. While the PFP program is maintained by the Company, Executive's
performance rating under that program shall be determined by the Company's Chief
Executive Officer. Executive will be entitled to participate in any revised
incentive program for officers of the Company, under the terms of that revised
program as approved by the Board.
(b) CHANGE IN CONTROL BONUS. Upon the consummation of any Change in
2
<PAGE> 3
Control (as defined in Section 4.1(c) hereof) on or before July 31, 2001
pursuant to the terms of a written agreement between or among Company and any
other Person (a " qualifying Change in Control"), Company shall pay Executive a
Change in Control bonus in cash in the amount, if any, determined pursuant to
the formula set forth on Schedule I attached hereto, provided that such bonus
shall be payable to Executive only if:
(i) Executive is employed by the Company at the time of consummation
of the qualifying Change in Control, or
(ii) within six months before a qualifying change in Control, (A)
the Company terminates Executive's employment, and (B) such termination is
neither For Cause nor by reason of Executive's death or Disability, and (C) the
Company was engaged in active negotiations with the party(ies) to the qualifying
Change in Control within 60 days before such termination of Executive's
employment.
Any such Change in Control bonus shall be paid within five business days after
the consummation of the Change in Control or such later date as is specified in
such Schedule I.
3.3. EXECUTIVE BENEFITS. In addition to the compensation provided for in
Sections 3.1 and 3.2 hereof, the Executive shall be entitled during the term of
his employment under this Agreement to participate in all benefit plans
maintained by the Company in which senior corporate officers are entitled to
participate. Such benefit plans currently include, among others, the Company's
Retirement Savings Plan, Supplemental Executive Retirement Plan, and Group Life,
Disability and Medical Plans. Notwithstanding anything else in this Agreement,
other than as set forth in Section 4 below, Executive shall not be eligible for
any severance or termination benefits under any Company plans, policies or
procedures providing for such benefits, including, but not limited to, the Roy
F. Weston, Inc. Employee Severance Plan and any predecessor or successor
severance plan.
3.4. VACATION. Executive shall be entitled to paid vacation in accordance
with the Company's vacation policy for officers.
3.5. EXPENSE REIMBURSEMENT. Company shall reimburse Executive for all
reasonable expenses incurred by him in connection with the performance of his
duties under this Agreement, in accordance with Company's regular reimbursement
policies in effect from time to time, and upon receipt of itemized vouchers for
such expenses and such other supporting information as Company may reasonably
require.
3.6. AUTOMOBILE. During his employment by Company, Company shall pay
Executive an automobile allowance and shall also reimburse Executive for his
gasoline and insurance costs for his automobile, all in accordance with the
Company's automobile allowance policies, which are subject to change from time
to time. Executive shall, in accordance with the Company's policies, notify
company as to the business and personal use of his automobile, so that Company
may withhold taxes, as appropriate in connection with the automobile allowance
and reimbursements.
3
<PAGE> 4
SECTION 4. TERMINATION OF EMPLOYMENT
4.1. DEFINITIONS.
(a) FOR CAUSE. As used in this Agreement "For Cause" shall mean that
Executive committed or engaged in an intentional act of (i) fraud, embezzlement,
dishonesty or theft in connection with his duties under this Agreement or in the
course of his employment with Company, (ii) wrongful damage to Company's
property, (iii) wrongful disclosure of Company's secret processes or
confidential information, (iv) a material breach of Executive's obligations
under this Agreement, that materially impairs Executive's performance of his
obligations under this Agreement, (v) criminal misconduct, including illegal
drug use, that materially impairs Executive's performance of his obligations
under this Agreement, (vi) a material breach of the Company's written rules or
policies that materially impairs Executive's performance of his obligations
under this Agreement, or (vii) any kind, whether or not specifically referenced
in clauses (i)-(vi) above, which is materially harmful to Company. No act, or
failure to act, shall be deemed "intentional" if it was due primarily to an
error in judgment or to negligence, but shall be deemed "intentional" only if
done, or omitted to be done, by Executive not in good faith and without
reasonable belief that his act or omission was in Company's best interest.
(b) CONTROLLING PERSON. As used in this Section 4.1, a "Controlling
Person" is a "Person" (as that term is used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") who, directly
or indirectly, is the beneficial owner (as defined in Rule 13d-3 under the
Exchange Act) of securities of the Company representing 50% or more of the
combined voting power of the Company's then outstanding securities. For the sake
of clarity, when two or more Persons act as a partnership, limited partnership,
syndicate or other group for the purpose of acquiring, holding, voting or
disposing of securities of the Company, each such Person shall be deemed to
beneficially own all securities owned by each other Person constituting such
partnership, limited partnership, syndicate or group. Notwithstanding the
previous two sentences:
(i) the following Persons shall not be considered Controlling
Persons: (A) the Company and/or its wholly owned subsidiaries, (B) any ESOP or
other employee benefit plan of the Company and any trustee or other fiduciary in
such capacity holding securities under such employee plan, (C) any entity that
is owned, directly or indirectly, by the shareholders of the Company in the same
proportions as their ownership of stock in the Company, or (D) Executive or a
syndicate or group of Persons of which Executive is a part; and
(ii) No Person who is presently a party to the Stock Pooling
Agreement effective as of January 2, 1998 among the Company and certain holders
of the Company's Common Stock (the "Stock Pooling Agreement"), whether or not
the Stock Pooling Agreement remains in effect, shall be considered a Controlling
Person (provided that this shall not affect the extent to which other Persons
may, under certain circumstances be deemed to
4
<PAGE> 5
beneficially own any securities owned by such Person).
(c) CHANGE IN CONTROL. There shall be considered to have been a
"Change in Control" of Company if:
(i) after the Effective Date of this Agreement, any Person
becomes, directly or indirectly, a Controlling Person;
(ii) There shall be consummated or made effective:
(A) any consolidation, merger or recapitalization of
the Company in which the Company is not the continuing or surviving corporation
or pursuant to which the Company's voting stock would be converted into cash,
securities and/or other property, other than any such transaction in which
holders of the Company's voting stock immediately before the transaction, in the
aggregate, have (or upon conversion, exercise or similar action would have) more
than 50% of the voting power of all issued and outstanding securities of the
Company or any successor or surviving corporation after the transaction; or
(B) any sale, lease, exchange or other transfer (in one
transaction or a series of related transactions) of a majority of the assets or
earning power of the Company; or
(C) the liquidation or dissolution of the Company; or
(iii) after the Effective Date of this Agreement, members of
the "Incumbent Board" (as defined below) cease for any reason to constitute a
majority of the Board of Directors of the Company. For this purpose, the
"Incumbent Board" shall consist of:
(A) those individuals who, on the Effective Date of this
Agreement, are Directors of the Company ("Original Incumbent Directors"); and
(B) any new Director ("New Incumbent Director") whose
election by the Board, or whose nomination for election by the Company's
shareholders, was approved by the vote of at least two-thirds of the Directors
then still in office who either were Original Directors or whose election or
nomination for election was previously so approved: provided, however, that any
Director designated by a Person who has entered into an agreement with the
Company to effect a transaction within the purview of Sections 4.1(c)(i) or
4.1(c)(ii) above that has not been consummated, shall not be considered a New
Incumbent Director.
(d) GOOD REASON RESIGNATION. As used in this Agreement, Executive
shall be deemed to have resigned his employment by Company for "Good Reason" if
either:
(i) Executive, at any time, elects in good faith to
discontinue his employment with Company because (A) his responsibilities, duties
or authority have changed
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<PAGE> 6
materially from their level on the effective date of this Agreement, which
change substantially reduces the rank or level, responsibility or scope of
Executive's position with Company (or its successor in the case of a merger,
consolidation, acquisition or transfer of substantially all of its business
assets) below that which he has on the effective date of this Agreement as
Company's President and Chief Operating Officer or (B) his salary (as adjusted
from the effective date of this Agreement) has been decreased; or
(ii) Executive elects to discontinue his employment with the
Company because the Company has changed the principal location for the
performance of Executive's duties to a place that is more than 50 miles from
Company's current headquarters in West Chester, PA; or
(iii) Within 30 days after there is a Change in Control of the
Company, Executive delivers a notice to the Company stating that Executive
elects to discontinue his employment with the Company.
If Executive elects to end his employment by Company for a reason which
Executive believes is a Good Reason as defined by this Section 4.1(d), he shall
provide the Company with written notice of such resignation and shall state in
that notice the specific matter or matters which he asserts constitute the Good
Reason for his resignation.
(e) DISABILITY. As used in this Agreement, "Disability" or
"Disabled" shall mean a physical or mental disability which is either (i) a
total and permanent disability as defined in the principal disability benefit
plan offered by the Company to its senior officers and in effect at the time
Executive becomes disabled (whether or not Executive has elected to purchase
such disability insurance), or (ii) determined to be a total and permanent
disability by a physician who is selected by the Company and is acceptable to
Executive or his legal representative (which acceptance shall not be
unreasonably withheld).
4.2. TIME AND MANNER OF TERMINATION OR RESIGNATION. Executive's employment
by Company, including his office as President and Chief Operating Officer, shall
be at will. Executive's employment shall cease immediately upon Executive's
death or Disability, or upon written notice to Executive that the Company is
terminating Executive's employment For Cause. Otherwise Executive's employment
shall cease on the date selected by the party initiating termination or
resignation, which date shall be specified in a written notice to the other
party, and which (i) in the event of termination of Executive by the Company for
any reason other than For Cause, shall be thirty (30) days after delivery of
such notice unless a longer period is approved by the Company's Chief Executive
Officer in his sole discretion, and (ii) in the event of resignation by
Executive, shall be thirty (30) days after delivery of such notice unless a
longer or shorter period is approved by the Company's Chief Executive Officer
and by Executive. The date on which Executive's employment by Company ceases is
referred to in this Agreement as the "Employment Ending Date". As of the
Employment Ending Date, if Executive is a member of Company's Board or of the
Board of Directors of any affiliate, he shall provide Company with his written
resignation from each such Board and from his position as an officer of any
affiliate.
6
<PAGE> 7
4.3. BENEFITS PAYABLE.
(a) SEVERANCE AMOUNT. If either (1) Company terminates Executive's
employment for any reason other than For Cause, death or Disability, or (2)
Executive resigns his employment by Company for Good Reason, Executive shall be
paid his monthly salary at the time of such termination or resignation, for 12
months. For purposes of this Section 4.3(a) and Section 4.3(b), Executive's
"monthly salary" shall be one-twelfth of the sum of (A) Executive's highest
annual Base Salary rate during his employment by Company, plus (B) all other
amounts, including incentive payments, that would be deemed compensation for
purposes of IRS form W-2 and that were paid to Executive during the Twelve full
calendar months preceding the calendar month in which the Employment Ending Date
occurs. Company shall make the severance payments under this Section 4.3(a)
beginning with the first calendar month after the Employment Ending Date, in
accordance with Company's regular pay policies for employees.
(b) PAYMENT FOR EXTENDED NON-COMPETE PERIOD. If either (1) Company
terminates Executive's employment for any reason other than For Cause, death or
Disability, or (2) Executive resigns his employment by Company for Good Reason,
then in addition to the other amounts payable to Executive under this Section
4.3, and as consideration for Executive's agreement to the extended non-compete
period described in Section 5.3(b)(ii) below, Executive shall be paid, for each
of the 12 months following payment of the Severance Amount under Section 4.3(a)
above, an amount equal to his monthly salary (as defined in Section 4.3(a)) at
the time of such termination or resignation. Company shall make the payments
under this Section 4.3(b), beginning after the final payment of the Severance
Amount under Section 4.3(a), in accordance with Company's regular pay policies
for employees. Executive and Company also acknowledge and agree that the
provisions of Section 5.3 are mandatory and that, in the event Company
terminates Executive's employment for any reason other than For Cause, death or
Disability or Executive resigns his employment for Good Reason, he shall have no
right to unilaterally avoid compliance with the provisions of Section 5.3 by
foregoing the payment described in this Section 4.3(b); and Company shall have
no right to withhold such payment by unilaterally permitting Executive to forego
compliance with Section 5.3 during the extended non-compete period.
(c) ADDITIONAL SEVERANCE BENEFITS. If severance payments are payable
to Executive under Section 4.3(a) above, the following additional severance
benefits shall be provided to Executive by Company:
(i) Company shall pay Executive the amount earned under its
PFP program (or any applicable replacement incentive program in effect at the
time of the Employment Ending Date) for the portion of the calendar quarter to
and including the Employment Ending Date. Company shall make such payment on or
about the date Company makes such payments to other participating employees;
(ii) Company shall provide medical, dental and prescription
plan
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<PAGE> 8
benefits for Executive, on the same cost-sharing and other basis as is then in
effect for active employees, for 24 months after the Employment Ending Date or
until Executive elects that such coverages sooner cease. After such coverages
cease in accordance with the previous sentence, Executive may elect continuation
coverage completely at his own expense as provided by law;
(iii) Company shall provide Executive with outplacement
services at Company's expense at the level in effect for Executive Officers of
the Company on the Employment Ending Date.
(iv) Company shall pay Executive his automobile allowance and
reimbursement, at the level in effect on the Employment Ending Date, for 6
months after the Employment Ending Date.
(d) LIMITATION ON SEVERANCE BENEFITS. Notwithstanding any other
provision of this Agreement to the contrary, the amounts payable to Executive
under Sections 3.2(b), 4.3(a) and 4.3(c) above, plus the value of any other
non-cash benefits, including but not limited to stock option vesting
acceleration, that would be counted in determining whether Executive is subject
to excise tax under sections 280G and 4999 of the Internal Revenue Code of 1986,
as amended (the "Code") shall not exceed the maximum amount that Company could
pay to Executive without causing Executive to be subject to such excise tax
under the Code.
(e) ADDITIONAL BENEFITS ARISING FROM CHANGE IN CONTROL. The
definition of Change in Control, as set forth in Section 4.1(c) above, shall
supersede and replace any other definition of the term "Change in Control" in
all stock option and other incentive compensation agreements between Company and
Executive, and all such agreements are hereby amended to replace any other
definition of the term "Change in Control" with the definition in Section 4.1(c)
of this Agreement.
(f) WHEN SEVERANCE BENEFITS/PAYMENTS NOT PAYABLE. None of the
severance benefits or other payments described in this Section 4.3 shall be
payable to Executive if (i) Executive's employment with Company is terminated
For Cause or by reason of Executive's death or Disability, or (ii) Executive
voluntarily ends his employment with Company other than by resigning for Good
Reason. The compensation and benefits and the non-compete payment which the
Company is required to pay Executive pursuant to this Section 4.3, together with
any payments to which Executive may be entitled under Section 3.2, are the only
payments, compensation or benefits to which the Executive is entitled upon a
termination or resignation of employment.
(g) RELEASE. As a condition to receipt of the severance benefits and
other payments described in this Section 4.3, Executive shall deliver an
effective, executed release to Company in the form attached to this Agreement as
Exhibit "A" on or before the Employment Ending Date.
(h) COOPERATION. As a condition to receipt of the severance benefits
and other
8
<PAGE> 9
payments described in this Section 4.3, Executive shall provide Company with
such information pertaining to his employment with Company as he may have and
shall assist Company to transfer his duties to such successor or successors as
Company may designate. Company shall reimburse Executive for all reasonable
out-of-pocket expenses he incurs in fulfilling his obligation under the
preceding sentence.
(i) ACCELERATION ELECTION. Company may, at its sole option and in
its sole and absolute discretion, at any time or from time to time, accelerate
the time and the manner of making any one or more payments required under this
Section 4.3.
(j) TAXES. Company shall withhold from payments to Executive and
remit to the appropriate government agencies such payroll taxes and income
withholding as Company determines is or may be necessary under applicable law
with respect to amounts paid to Executive under this Section 4.3.
(k) GENERAL OBLIGATION. The rights and benefits of Executive to
receive payments under this Section 4.3 shall be solely those of an unsecured
creditor of Company.
(l) ESTATE TO RECEIVE BENEFITS/PAYMENTS. In the event that Executive
becomes entitled to receive any severance benefits or payments under Sections
3.2 or 4.3 (a)(b) or (c)(i)(ii) or (iv) above, and Executive dies before all
such payments are made by Company, the balance of such benefits or payments
shall be paid to Executive's estate.
SECTION 5. RESTRICTIVE COVENANTS
5.1. CONFIDENTIALITY. Executive acknowledges a duty of confidentiality
owed to Company and shall not, at any time during or after his employment by
Company, retain in writing, use, divulge, furnish, or make accessible to anyone,
without the express authorization of the Company's Chief Executive Officer, any
trade secret, private or confidential information or knowledge of Company or any
of its affiliates obtained or acquired by him while so employed. All computer
software, address books, rolodexes, business cards, telephone lists, customer
lists, price lists, contract forms, catalogs, books, records, and files and
know-how acquired while an employee of Company, are acknowledged to be the
property of Company and shall not be duplicated, removed from Company's
possession or made use of other than in pursuit of Company's business. Upon the
Employment Ending Date, Executive shall deliver to Company, without further
demand, all copies thereof which are then in his possession or under his
control.
5.2. INVENTIONS AND IMPROVEMENTS. During the term of his employment,
Executive shall promptly communicate to Company all ideas, discoveries and
inventions which are or may be useful to Company or its business. Executive
acknowledges that all ideas, discoveries, inventions, and improvements which are
made, conceived, or reduced to practice by him and every item of knowledge
relating to Company's business interests (including potential business
interests) gained by him during his employment hereunder are the property of
Company, and Executive hereby irrevocably assigns all such ideas, discoveries,
inventions, improvements, and knowledge to
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<PAGE> 10
Company for its sole use and benefit, without additional compensation. The
provisions of this Section shall apply whether such ideas, discoveries,
inventions, improvements or knowledge are conceived, made or gained by him alone
or with others; whether during or after usual working hours, whether on or off
the job, whether applicable to matters directly or indirectly related to
Company's business interests (including potential business interests), and
whether or not within the specific realm of his duties. Executive shall, upon
request of Company, but at no expense to Executive, at any time during or after
his employment with Company, sign all instruments and documents requested by
Company and otherwise cooperate with Company to protect its right to such ideas,
discoveries, inventions, improvements, and knowledge, including applying for,
obtaining, and enforcing patents and copyrights thereon in any and all
countries.
5.3. NONCOMPETITION; NONSOLICITATION.
(a) Executive shall not, without Company's prior written approval,
either directly or indirectly, for his own account or for the account of another
person or entity, during the non-compete period as defined below in this Section
5.3:
(i) acquire or hold more than a 5% ownership interest in any
competitor of Company or of any affiliate;
(ii) compete with Company or any affiliate in soliciting any
business from any person or entity that was at any time during the two years
immediately preceding the Employment Ending Date a client or potential client of
Company or any affiliate, as to which client or potential client Company or an
affiliate had rendered a significant volume of service or had a significant
amount of direct business contact for the purpose of soliciting future business;
(iii) render services within the United States of America or
any foreign country in which Company is providing services as of the Employment
Ending Date to any competitor of Company or an affiliate, if such services are
similar in nature (in whole or in part) to services Executive rendered to
Company or any affiliate at any time during the two years immediately preceding
the Employment Ending Date; or
(iv) solicit or otherwise induce any employee of Company or an
affiliate to leave the employment of Company or the affiliate, or induce any
such employee to become an employee of, or otherwise become associated with, any
company or business other than Company or the affiliate. This paragraph shall
apply to inducement, hiring or solicitation of any employee of Company or an
affiliate, regardless of position.
As used in Sections 5.3 (a) (i) and (iii), the term "competitor of Company"
means a business that, within 12 months before the Employment Ending Date, has
actually competed with the Company for a contract or contracts that, in the
aggregate, the Company valued at in excess of $1,000,000 in net revenue. If a
"competitor of Company", or an entity that owns and/or operates a "competitor of
Company", also owns and/or operates any separate subsidiary or other separate
line of business ("separate business unit"), and that separate business unit is
not itself a competitor
10
<PAGE> 11
of the Company, the restrictions in Sections 5.3(a) (i) and (iii) shall not
apply to that separate business unit (which shall not be deemed a "competitor of
Company").
(b) (i) The non-compete period shall be the 365 days after the
Employment Ending Date if (a) Executive's employment with Company is terminated
For Cause or by reason of Executive's Disability, or (b) Executive voluntarily
ends his employment with Company other than by resigning for Good Reason.
(ii) The non-compete period shall be the 730 days after the
Employment Ending Date if (a) Executive's employment with Company is terminated
for any reason other than For Cause or by reason of Executive's Disability or
(b) Executive resigns his employment for Good Reason.
(c) Upon the breach by Executive of his obligations under this
Section 5.3, in addition to Company's right to obtain appropriate injunctive
relief as set forth in Section 5.4 of this Agreement, Company's obligation to
make payments or provide severance benefits to Executive under Section 4 of this
Agreement shall terminate immediately and Executive shall, within 10 days after
written demand by Company, repay to Company all severance payments previously
made to Executive as well as an amount equal to the cost of severance benefits
previously provided to Executive.
(d) Executive acknowledges that he is bound by the restrictions
described in this Section 5.3 upon any termination or resignation of his
employment, including termination for Cause or without Cause, or by reason of
Disability or resignation for Good Reason or without Good Reason. Executive
acknowledges that he has agreed to these provisions voluntarily; that they are
reasonably required to protect the Company; and that they are supported by
adequate consideration (including but not limited to the consideration provided
under Section 4.3(b) for the extended non-compete period described in Section
5.3(b)(ii) above).
5.4. INJUNCTIVE AND OTHER RELIEF.
(a) Executive acknowledges and agrees that his obligations contained
in this Agreement are fair and reasonable in light of the consideration paid
under this Agreement, and that damages alone shall not be an adequate remedy for
any breach by Executive of those obligations. Accordingly, Executive expressly
agrees that, in addition to any other remedies which Company may have, Company
shall be entitled to injunctive relief in any court of competent jurisdiction
for any breach or threatened breach of any of those obligations by Executive.
Nothing contained in this Agreement, including, without limitation, Section 6.1
hereof, shall prevent or delay Company from seeking, in any court of competent
jurisdiction, specific performance or other equitable remedies in the event of
any breach or intended breach by Executive of any of his obligations under this
Agreement.
(b) Notwithstanding the equitable relief available to Company, the
Executive, in the event of a breach of his obligations contained in Section 5
hereof, understands and agrees
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<PAGE> 12
that the uncertainties and delay inherent in the legal process would result in a
continuing breach for some period of time, and therefore, continuing injury to
Company until and unless Company can obtain appropriate equitable relief.
Therefore, in addition to such equitable relief, Company shall be entitled to
monetary damages for any such period of breach until the termination of such
breach, in an amount deemed reasonable to cover all actual and consequential
losses, plus all moneys received by Executive as a result of said breach, and
all costs and attorneys' fees incurred by Company in enforcing this Agreement.
If Executive should use or reveal to any other person or entity any confidential
information in violation of this Agreement, this will be considered a continuing
violation on a daily basis for so long a period of time as such confidential
information is made use of by Executive or any such other person or entity.
SECTION 6. MISCELLANEOUS
6.1. ARBITRATION.
(a) Except as set forth in the last sentence of this Section 6.1,
all disputes arising out of or relating to this Agreement which cannot be
settled by the parties shall promptly be submitted to and settled exclusively by
arbitration in West Chester, Pennsylvania in accordance with the laws of the
Commonwealth of Pennsylvania by three arbitrators, one of whom shall be
appointed by the Company, one by the Executive and the third of whom shall be
appointed by the first two arbitrators. The arbitration shall be conducted in
accordance with the rules of the American Arbitration Association, except with
respect to the selection of arbitrators which shall be as provided in this
Section 6.1. Judgment upon the award rendered by a majority decision of the
arbitrators may be entered in any court having jurisdiction thereof. The Company
shall, however, have the right to seek and obtain preliminary injunctive relief,
in a court of competent jurisdiction, for any existing or threatened violation
by Executive of Section 5 of this Agreement.
(b) The arbitrators shall award to the prevailing party in any such
arbitration or preliminary injunction proceeding, in addition to any other
appropriate relief, the costs and expenses (including reasonable attorneys fees)
incurred by that party in connection with the enforcement of that party's rights
under this Agreement, unless the arbitrators shall determine that under the
circumstances such an award would be unjust.
6.2. PRIOR EMPLOYMENT. Executive represents and warrants that he is not a
party to any other employment, non-competition or other agreement or restriction
which could interfere with his employment with Company or with his or Company's
rights and obligations under this Agreement; and that his acceptance of
employment with Company and the performance of his duties under this Agreement
will not breach the provisions of any contract, agreement, or understanding to
which he is party or any duty owed by him to any other person.
6.3. SEVERABILITY. The invalidity or unenforceability of any particular
provision or part of any provision of this Agreement shall not affect the other
provisions or parts of this Agreement, except that in the event that the Release
described in Section 4.3(e) hereof is given by Executive
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<PAGE> 13
and is determined to be invalid or unenforceable, such that Executive is
permitted to maintain against Company any claim purported to be released under
that Release, then Company's obligation to provide severance payments and
benefits under Section 4.3 of this Agreement shall be deemed null and void and
Executive shall repay to Company any of those severance payments and benefits
already paid by Company. In the event that any provision hereof is determined to
be invalid or unenforceable by a court of competent jurisdiction Executive and
Company shall negotiate in good faith to provide Company and Executive with
protection as nearly equivalent to that found to be invalid or unenforceable and
if any such provision shall be so determined to be invalid or unenforceable by
reason of the duration or geographical scope of the covenants contained therein,
such duration or geographical scope, or both, shall be considered to be reduced
to a duration or geographical scope to the extent necessary to cure such
invalidity.
6.4. ASSIGNMENT. This Agreement shall not be assignable by Executive, and
shall be assignable by Company only to any person or entity which may become a
successor in interest (by purchase of assets or stock, or by merger, or
otherwise) to Company in the business or a portion of the business presently
operated by it. Subject to the foregoing, this Agreement and the rights and
obligations set forth herein shall inure to the benefit of, and be binding upon,
the parties hereto and each of their respective permitted successors, assigns,
heirs, executors and administrators.
6.5. NOTICES. All notices hereunder shall be in writing and shall be
sufficiently given if hand-delivered, sent by documented overnight delivery
service, or by registered or certified mail, postage prepaid, return receipt
requested, (confirmed by U.S. mail), addressed as set forth below or to such
other person and/or at such other address as may be furnished in writing by any
party hereto to the other. Any such notice shall be deemed to have been given as
of the date received, in the case of personal delivery, or on the date shown on
the receipt or confirmation therefor, in all other cases. Any and all service of
process and any other notice in any such action, suit or proceeding shall be
effective against any party if given as provided in this Agreement; provided
that nothing herein shall be deemed to affect the right of any party to serve
process in any other manner permitted by law.
If to Company:
1400 Weston Way
West Chester, PA 19380
Attention: Chief Executive Officer
With a copy to:
F. Douglas Raymond, Esq.
Drinker Biddle and Reath
One Logan Square
18th and Cherry Sts.
Philadelphia, PA 19103
If to Executive:
13
<PAGE> 14
Patrick G. McCann
172 Jericho Valley Dr.
Wrightstown, PA 18940
6.6. ENTIRE AGREEMENT AND MODIFICATION. This Agreement constitutes the
entire agreement between the Company and the Executive with respect to the
matters contemplated herein and, unless otherwise stated in this Agreement,
supersedes all prior agreements and understandings with respect thereto. The
following agreements between Executive and the Company will remain in effect:
(a) Long Term Incentive Compensation Program for Senior Managers - Cash
Component memorandum dated July 5, 1999
(b) Stock Option Agreement for 60,000 shares granted April 1, 1999
(c) Stock Option Agreement for 60,000 shares granted November 17, 1997
(d) Stock Option Agreement for 3,600 shares granted February 18, 1997
(e) Stock Option Agreement for 18,000 shares granted October 7, 1996
(f) Supplemental Executive Retirement Plan dated January 1, 1997
Any amendment, modification, or waiver of this Agreement shall not be effective
unless in writing and signed by the party against whom enforcement is sought.
The failure by any party 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 a party'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.
6.7. GOVERNING LAW. This Agreement is made pursuant to, and shall be
construed and enforced in accordance with, the internal laws of the Commonwealth
of Pennsylvania (and United States federal law, to the extent applicable),
without giving effect to otherwise applicable principles of conflicts of law.
6.8. HEADINGS; COUNTERPARTS. The headings of paragraphs in this Agreement
are for convenience only and shall not affect its interpretation. This Agreement
may be executed in two or more counterparts, each of which shall be deemed to be
an original and all of which, when taken together, shall be deemed to constitute
but one and the same Agreement.
6.9. FURTHER ASSURANCES. Each of the parties hereto shall execute such
further instruments and take such other actions as any other party shall
reasonably request in order to effectuate the purposes of this Agreement.
6.10. 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
Executive, or any executor,
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<PAGE> 15
administrator, heir, legatee, distributee, relative or any other person or
entity, whether or not in being, claiming under Executive by virtue of this
Agreement, and none of the rights 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.
6.11. RIGHT TO USE LIKENESS. Executive hereby grants to Company the
absolute right and permission to copyright and use, re-use and/or publish for
lawful business purposes, any photographic portraits or pictures of Executive
(and printed matter in conjunction therewith) in which Executive may be included
in whole or in part or composite, for art, advertising, or trade.
6.12. CONSULTATION WITH COUNSEL. Executive acknowledges that he has had
the opportunity to consult separately with counsel of his choice concerning this
Agreement and the meaning of the terms of this Agreement; that he has been
advised by Company to do so; and that he has entered into this Agreement
knowingly and of his own free will and volition.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
ATTEST: ROY F. WESTON, INC.
By: s/William L. Robertson
- ---------------------------- ----------------------------
William L. Robertson, CEO
s/Patrick G. McCann
- ---------------------------- -------------------------------
Witness Executive - Patrick G. McCann
15
<PAGE> 16
EXHIBIT "A"
CROSS RELEASE
Roy F. Weston, Inc. ("Weston") and Patrick G. McCann ("Employee") entered
into an Amended Employment Agreement as of March 20, 2000 (the "Employment
Agreement"). To satisfy the requirement of Section 4.3(e) of the Employment
Agreement, Employee and Weston hereby grant the other the Releases set forth
below:
---------------------------------
1. Release by Weston. Weston, on behalf of itself and its subsidiaries,
irrevocably and unconditionally releases and forever discharges Employee, his
heirs, administrators and legal representatives from any and all manner of
actions, causes, matters, suits, debts, dues, accounts, bonds, covenants,
agreements, judgments, claims, controversies, guarantees, warranties, damages,
liabilities, or demands of any nature whatsoever in law or equity, whether or
not known to it, which it has ever had, now has, or hereafter can, shall or may
have, for, upon, or by reason of any matter, action, omission to act,
transaction, practice, conduct, thing or cause of any kind whatsoever from the
beginning of the world to the date it executes this Release. Such remise,
release and discharge of Employee includes, without limitation, any and all
claims under any and all federal or state statutes or the common law and extends
without limitation to any and all acts, practices or conduct by Employee whether
or not it has knowledge of such acts, omissions, practices, conduct or the
effects thereof, or if any such effects exist or may in the future exist as a
result of any acts, omissions, practices, or conduct that occurred prior to the
date it executes this Release.
2. Limitation on Weston's Release. Notwithstanding the foregoing, this
Release shall not prevent Weston from enforcing its rights under the Employment
Agreement.
3. Release by Employee. Employee, for himself, his heirs, and personal and
legal representatives, except as provided in Section 4 hereof, does hereby
irrevocably and unconditionally release, remise and forever discharge Weston,
its subsidiaries, affiliates, divisions, officers, directors and employees (the
"Releasees"), and each of them, however denominated, past, present and future,
and their predecessors, successors and assigns, of and from any and all manner
of actions, causes, matters, suits, dues, bonds, judgments, debts, accounts,
covenants, agreements, claims, controversies, guarantees, warranties, damages,
liabilities, or demands of any nature whatsoever in law or equity, whether or
not now known to him which he ever had, now has or hereafter can, shall or may
have, for, upon, or by reason of any matter, action, omission to act,
transaction, practice, conduct, cause or thing of any kind whatsoever from the
beginning of the world to the date hereof. Such release, remise and discharge of
the Releasees includes without limitation any and all claims under any and all
federal and state statutes or common law and extends without limitation, to any
and all acts, practices or conduct by the Releasees, or the effects thereof,
whether or not Employee now has knowledge of such acts, omissions, practices,
conduct or the effects thereof, if any such effects exist or may in the future
exist as a result of any
<PAGE> 17
act, omission, practice or conduct that occurred prior to the date hereof.
Except as provided in Section 4, this release shall specifically include, but
not be limited to, the following:
(a) any and all claims and matters of any kind which arise or might
arise, or which otherwise relate to Employee's employment with Weston or
Employee's termination of employment pursuant to the Employment Agreement;
(b) any and all claims for wages and benefits (including without
limitation salary, stock, stock options, commissions, bonuses, severance pay,
health and welfare benefits, vacation pay and any other fringe-type benefit);
(c) any and all claims for wrongful discharge, breach of contract
(whether written or oral, express or implied), and implied covenants of good
faith and fair dealing;
(d) any and all claims for alleged employment discrimination on the
basis of age, race, color, religion, sex, national origin, veteran status,
disability and/or handicap, in violation of any federal, state or local statute,
ordinance, judicial precedent or executive order, including but not limited to
claims for discrimination under the following statutes: Title VII of the Civil
Rights Act of 1964, 42 U.S.C. Section 2000e et seq., the Civil Rights Act of
1866, 42 U.S.C. Section 1981, the Age Discrimination in Employment Act, 29
U.S.C. Section 621 et seq., the Older Workers Benefit Protection Act, the
Rehabilitation Act of 1972, 29 U.S.C. Section 701 et seq., the Americans with
Disabilities Act, 42 U.S.C. Section 1201 et seq., and the Pennsylvania Human
Relations Act, 43 P.S. Section 951 et seq.;
(e) any and all claims under any federal or state statute relating
to employee benefits;
(f) any and all claims in tort, including but not limited to any
claims for fraud, misrepresentation, defamation, interference with contract or
prospective economic advantage, intentional infliction of emotional distress
and/or negligence;
(g) any and all claims for additional commissions, compensation or
damages of any kind; and
(h) any and all claims for attorneys' fees and costs.
4. Limitation on Employee's Release. This Release (a) shall not prevent
Employee from enforcing his rights to receive severance payments and severance
benefits under Section 4 of the Employment Agreement in accordance with the
terms thereof, (b) shall have no applicability to Weston's obligations to
provide severance payments and severance benefits under Section 4 of the
Employment Agreement, and (c) shall not release Weston from (i) any obligation
it might otherwise have to indemnify Employee and hold him harmless from any
claims made against him arising out of his activities as an officer or director
of Weston or its affiliates, to the same extent as Weston is or may be obligated
to indemnify and hold harmless any other officer or director, and
<PAGE> 18
(ii) any vested retirement benefit which by its express terms survives
termination of Employee's employment.
5. Review and Revocation. Employee acknowledges that he has had the
opportunity to review this Release and to consider its terms with his attorneys
and advisors. Employee has forty-five (45) days from the date of distribution of
this Release to him to review it and seven (7) days after the execution date of
this Release to revoke it. This Release shall not be effective unless and until
Employee executes it and the seven-day period has expired.
UNDERSTOOD AND AGREED:
s/Patrick G. McCann
- ------------------------------ ---------------------------
Witness Patrick G. McCann
Attest: ROY F. WESTON, INC.
By: s/Arnold P. Borish By:
------------------------- ----------------------------------
Secretary
(Corporate Seal)
STATE OF
--------------------------------------:
: SS:
COUNTY OF
--------------------------------------:
Before me, ------------------ , on this day personally appeared
- -----------, known to me to be the person whose name is subscribed to the
foregoing instrument, and acknowledged to me that he executed such instrument
for the purposes and consideration therein expressed.
Given under my hand and seal of office this day of , .
--- ----------- -------
--------------------------------
NOTARY PUBLIC in and for
--------------------------------
<PAGE> 19
Schedule I
A. The amount of the Change in Control bonus payable pursuant to Section 3.2(b)
of the Employment Agreement to which this Schedule I is attached shall be based
on the Per Share Price as hereinafter defined in Section B below.
B. For purposes of this Schedule I:
(1) "Per Share Price" shall mean the sum of the following amounts received
or receivable, in connection with a Change in Control, by a holder of the
Company's Common Shares or Series A Common Shares, calculated on a per share
basis (and calculated based on the highest amount received or receivable with
respect to shares of each such class):
(a) cash;
(b) securities listed for trading on any national securities
exchange or quoted on the Nasdaq Stock Market or convertible into or
exchangeable for securities that are so listed or quoted, valued at the higher
of (i) the closing price per share on the date of first public announcement that
the Company has entered into an agreement providing for such Change in Control
or (ii) the average closing price of the securities so listed or quoted for the
ten trading days immediately preceding the date the securities are issued to the
holders of the Company's Common Stock or Series A Common Stock, less the value
of any consideration payable by such holders upon the exchange or conversion of
the securities so issued (other than the surrender of the Company's Common Stock
or Series A Common Stock for conversion or exchange);
(c) the face amount of any note or similar debt instrument;
(d) the fair market value of any other property or other
consideration received or receivable by such holders, which fair market value
shall be determined by the Board of Directors of the Company (or, if applicable,
the committee thereof to which the Board of Directors may have delegated the
authority to evaluate and recommend any Change in Control transaction). If the
Board or such committee receives a fairness opinion from its investment banker
concerning the transaction, the fair market value of such other property or
other consideration, for purposes of this Paragraph B(1)(d), shall be the amount
that the investment banker has concluded is the fair market value of such other
property or other consideration, for purposes of rendering the fairness opinion;
and if that fair market value is a range of values, the fair market value for
purposes of this Paragraph B(1)(d) shall be the highest amount in that range.
The determination of the Board or committee shall be final; plus
(e) the value of any Common Shares or Series A Common Shares
retained by such holder, calculated as provided in subsection B(1)(b) above (or,
if not calculable pursuant to subsection B(1)(b), then as provided in subsection
B(1)(d) above);
<PAGE> 20
Provided, however, that if the Per Share Price of a Common Share is not the same
as that of a Series A Common Share, in each case calculated as set forth above,
then for purposes of this Schedule I the Per Share Price shall be the average of
such values, calculated on a weighted average basis based on the actual number
of shares of each such class outstanding and entitled to receive such value.
2. In the event that payment of all or any portion of the Per Share Price
is conditioned upon the occurrence of events occurring after the consummation of
the Change in Control, the Company shall be obligated to make a payment
hereunder with respect to such portion of the Per Share Price only when and if
the condition to such payments shall have expired and the amount of such portion
of the Per Share Price shall have been finally determined.
C. If the Per Share Price is at least the amount referred to in the Resolution
of the Board of Directors dated March 20, 2000 concerning the Employment
Agreement to which this schedule is attached (the "bonus price amount"),
Executive shall be entitled to receive a bonus in the amount of $105,000 plus an
additional $1,633.33 for every $.01 by which the Per Share Price exceeds the
bonus price amount; provided, however, that the amount of any bonus paid
pursuant to this Schedule I and Section 3.2(b) of the Employment Agreement shall
be reduced by the amount, if any, previously paid to Executive pursuant to this
Schedule I and such Section 3.2(b) following the consummation of any prior
Change in Control.
<PAGE> 1
Exhibit 10.17
AMENDED EMPLOYMENT AGREEMENT
This AMENDED EMPLOYMENT AGREEMENT is dated as of March 20, 2000 (the
"Effective Date") between Roy F. Weston, Inc., a Pennsylvania corporation
("Company"), and William G. Mecaughey (the "Executive").
WHEREAS, Executive and Company entered in to an employment agreement dated
as of September 27, 1999; and
WHEREAS, Executive is presently employed by Company as its Corporate Vice
President, Chief Financial Officer and Treasurer;
WHEREAS, the parties desire to amend and restate in this Agreement the
terms and conditions of the Executive's employment by the Company as its
Corporate Vice President, Chief Financial Officer and Treasurer; and
THEREFORE, in consideration of the mutual obligations contained in this
Agreement and the mutual benefits to be derived from those obligations, and
intending to be legally bound by this Agreement, the Executive and the Company
agree as follows:
SECTION 1. CAPACITY AND DUTIES
1.1. EMPLOYMENT; ACCEPTANCE OF EMPLOYMENT. Company hereby employs
Executive and Executive hereby accepts employment by the Company, as Corporate
Vice President, Chief Financial Officer and Treasurer, upon the terms and
conditions set forth below in this Agreement.
1.2. CAPACITY AND DUTIES.
(a) Executive shall be employed by Company as its Corporate Vice
President, Chief Financial Officer and Treasurer, subject to the supervision of
the Board of Directors (the "Board") and the Company's Chief Executive Officer,
and shall perform such duties and shall have such authority as set forth in the
Company's By-laws and as may from time to time be specified by the Board and the
Company's Chief Executive Officer. Executive shall report directly to the
Company's Chief Executive Officer and shall perform his duties for Company
principally from Company's office located in West Chester, Pennsylvania, except
for periodic travel that may be necessary or appropriate in connection with the
performance of Executive's duties under this Agreement.
(b) Executive shall devote his full working time, energy, skill and
best efforts to the performance of his duties under this Agreement, in a manner
which will faithfully and diligently further the business and interests of the
Company and its affiliates (as defined below),
<PAGE> 2
and shall not be employed by or participate or engage in or be a part of the
management or operation of any business enterprise other than the Company and
its affiliates, without the prior written consent of the Board or the Chief
Executive Officer, which consent may be granted or withheld in the sole
discretion of the Board or the Chief Executive Officer. For purposes of this
Agreement, "affiliate" means any entity in which at least 50% of the voting
power is controlled by the Company. Nothing in this paragraph shall preclude
Executive from serving as the Company's appointed member of the board of
directors of companies in which Company has an interest.
SECTION 2. TERM OF EMPLOYMENT
2.1. TERM. The Executive's employment under this Agreement shall continue
at will until terminated in accordance with the provisions of this Agreement.
SECTION 3. COMPENSATION
3.1. BASIC COMPENSATION. As compensation for Executive's services under
this Agreement, Company shall pay to Executive a salary at the annual rate of
$147,680 (the "Base Salary"), payable in periodic installments in accordance
with the Company's regular payroll practices in effect from time to time. The
Base Salary shall be reviewed from time to time by the Board and/or its
Executive Committee as conditions warrant. The first such review shall take
place no later than February 2001, and future reviews shall be held not less
frequently than annually thereafter. Such review shall consider, but not be
limited to, Executive's performance as determined by the Board and/or its
Executive Committee, after consultation with the Company's Chief Executive
Officer.
3.2. INCENTIVE COMPENSATION.
(a) ANNUAL INCENTIVE PAY/BONUS. In addition to the Base Salary
provided for in Section 3.1, the Executive will participate in the Company's Pay
for Performance Incentive Compensation Program ("PFP") (formerly known as
Salary- At-Risk), with a PFP guideline incentive that will provide quarterly
incentive payments to Executive that, on an annual basis, total 17.5% of
Executive's Base Salary if the Company meets its annual PFP Plan (which includes
achievement of the annual operating plan budgeted Net Income Before Tax (NIBT)
amount approved by the Company's Board of Directors). Executive understands that
the Company's PFP program may be reviewed and revised and Executive shall only
be entitled to participate in the current PFP program if, and to the extent
that, the program is maintained by the Company for its management personnel
generally. While the PFP program is maintained by the Company, Executive's
performance rating under that program shall be determined by the Company's Chief
Executive Officer. Executive will be entitled to participate in any revised
incentive program for officers of the Company, under the terms of that revised
program as approved by the Board.
(b) CHANGE IN CONTROL BONUS. Upon the consummation of any Change in
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Control (as defined in Section 4.1(c) hereof) on or before July 31, 2001
pursuant to the terms of a written agreement between or among Company and any
other Person (a "qualifying Change in Control"), Company shall pay Executive a
Change in Control bonus in cash in the amount, if any, determined pursuant to
the formula set forth on Schedule I attached hereto; provided that such bonus
shall be payable to Executive only if:
(i) Executive is employed by the Company at the time of
consummation of the qualifying Change in Control, or
(ii) within six months before a qualifying Change in Control,
(A) the Company terminates Executive's employment, and (B) such termination is
neither For Cause nor by reason of Executive's death or Disability, and (C) the
Company was engaged in active negotiations with the party(ies) to the qualifying
Change in Control within 60 days before such termination of Executive's
employment.
Any such Change in Control bonus shall be paid within five business days after
the consummation of the Change in Control or such later date as is specified in
such Schedule I.
3.3. EXECUTIVE BENEFITS. In addition to the compensation provided for in
Sections 3.1 and 3.2 hereof, the Executive shall be entitled during the term of
his employment under this Agreement to participate in all benefit plans
maintained by the Company in which senior corporate officers are entitled to
participate. Such benefit plans currently include, among others, the Company's
Retirement Savings Plan, Supplemental Executive Retirement Plan, and Group Life,
Disability and Medical Plans. Notwithstanding anything else in this Agreement,
other than as set forth in Section 4 below, Executive shall not be eligible for
any severance or termination benefits under any Company plans, policies or
procedures providing for such benefits, including, but not limited to, the Roy
F. Weston, Inc. Employee Severance Plan and any predecessor or successor
severance plan.
3.4. VACATION. Executive shall be entitled to paid vacation in accordance
with the Company's vacation policy for officers.
3.5. EXPENSE REIMBURSEMENT. Company shall reimburse Executive for all
reasonable expenses incurred by him in connection with the performance of his
duties under this Agreement, in accordance with Company's regular reimbursement
policies in effect from time to time, and upon receipt of itemized vouchers for
such expenses and such other supporting information as Company may reasonably
require.
3.6. AUTOMOBILE. During his employment by Company, Company shall pay
Executive an automobile allowance and shall also reimburse Executive for his
gasoline and insurance costs for his automobile, all in accordance with the
Company's automobile allowance policies, which are subject to change from time
to time. Executive shall, in accordance with the Company's policies, notify
company as to the business and personal use of his automobile, so that Company
may withhold taxes, as appropriate in connection with the automobile allowance
and reimbursements.
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<PAGE> 4
SECTION 4. TERMINATION OF EMPLOYMENT
4.1. DEFINITIONS.
(a) FOR CAUSE. As used in this Agreement "For Cause" shall mean that
Executive committed or engaged in an intentional act of (i) fraud, embezzlement,
dishonesty or theft in connection with his duties under this Agreement or in the
course of his employment with Company, (ii) wrongful damage to Company's
property, (iii) wrongful disclosure of Company's secret processes or
confidential information, (iv) a material breach of Executive's obligations
under this Agreement, that materially impairs Executive's performance of his
obligations under this Agreement, (v) criminal misconduct, including illegal
drug use, that materially impairs Executive's performance of his obligations
under this Agreement, (vi) a material breach of the Company's written rules or
policies that materially impairs Executive's performance of his obligations
under this Agreement, or (vii) any kind, whether or not specifically referenced
in the foregoing clauses (i) - (vi), which is materially harmful to Company. No
act, or failure to act, shall be deemed "intentional" if it was due primarily to
an error in judgment or to negligence, but shall be deemed "intentional" only if
done, or omitted to be done, by Executive not in good faith and without
reasonable belief that his act or omission was in Company's best interest.
(b) CONTROLLING PERSON. As used in this Section 4.1, a "Controlling
Person" is a "Person" (as that term is used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") who, directly
or indirectly, is the beneficial owner (as defined in Rule 13d-3 under the
Exchange Act) of securities of the Company representing 50% or more of the
combined voting power of the Company's then outstanding securities. For the sake
of clarity, when two or more Persons act as a partnership, limited partnership,
syndicate or other group for the purpose of acquiring, holding, voting or
disposing of securities of the Company, each such Person shall be deemed to
beneficially own all securities owned by each other Person constituting such
partnership, limited partnership, syndicate or group. Notwithstanding the
previous two sentences:
(i) the following Persons shall not be considered Controlling
Persons: (A) the Company and/or its wholly owned subsidiaries, (B) any ESOP or
other employee benefit plan of the Company and any trustee or other fiduciary in
such capacity holding securities under such employee plan, (C) any entity that
is owned, directly or indirectly, by the shareholders of the Company in the same
proportions as their ownership of stock in the Company, or (D) Executive or a
syndicate or group of Persons of which Executive is a part; and
(ii) No Person who is presently a party to the Stock Pooling
Agreement effective as of January 2, 1998 among the Company and certain holders
of the Company's Common Stock (the "Stock Pooling Agreement"), whether or not
the Stock Pooling Agreement remains in effect, shall be considered a Controlling
Person (provided that this shall not affect the extent to which other Persons
may, under certain circumstances be deemed to
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<PAGE> 5
beneficially own any securities owned by such Person).
(c) CHANGE IN CONTROL. There shall be considered to have been a
"Change in Control" of Company if:
(i) after the Effective Date of this Agreement, any Person
becomes, directly or indirectly, a Controlling Person;
(ii) There shall be consummated or made effective:
(A) any consolidation, merger or recapitalization of
the Company in which the Company is not the continuing or surviving corporation
or pursuant to which the Company's voting stock would be converted into cash,
securities and/or other property, other than any such transaction in which
holders of the Company's voting stock immediately before the transaction, in the
aggregate, have (or upon conversion, exercise or similar action would have) more
than 50% of the voting power of all issued and outstanding securities of the
Company or any successor or surviving corporation after the transaction; or
(B) any sale, lease, exchange or other transfer (in one
transaction or a series of related transactions) of a majority of the assets or
earning power of the Company; or
(C) the liquidation or dissolution of the Company; or
(iii) after the Effective Date of this Agreement, members of
the "Incumbent Board" (as defined below) cease for any reason to constitute a
majority of the Board of Directors of the Company. For this purpose, the
"Incumbent Board" shall consist of:
(A) those individuals who, on the Effective Date of this
Agreement, are Directors
of the Company ("Original Incumbent Directors"); and
(B) any new Director ("New Incumbent Director") whose
election by the Board, or whose nomination for election by the Company's
shareholders, was approved by the vote of at least two-thirds of the Directors
then still in office who either were Original Directors or whose election or
nomination for election was previously so approved: provided, however, that any
Director designated by a Person who has entered into an agreement with the
Company to effect a transaction within the purview of Sections 4.1(c)(i) or
4.1(c)(ii) above that has not been consummated, shall not be considered a New
Incumbent Director.
(d) GOOD REASON RESIGNATION. As used in this Agreement, Executive
shall be deemed to have resigned his employment by Company for "Good Reason" if
either:
(i) Executive, at any time, elects in good faith to
discontinue his employment with Company because (A) his responsibilities, duties
or authority have changed
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<PAGE> 6
materially from their level on the effective date of this Agreement, which
change substantially reduces the rank or level, responsibility or scope of
Executive's position with Company (or its successor in the case of a merger,
consolidation, acquisition or transfer of substantially all of its business
assets) below that which he has on the effective date of this Agreement as
Company's Corporate Vice President, Chief Financial Officer and Treasurer or (B)
his salary (as adjusted from the effective date of this Agreement) has been
decreased; or
(ii) Executive elects to discontinue his employment with the
Company because the Company has changed the principal location for the
performance of Executive's duties to a place that is more than 50 miles from
Company's current headquarters in West Chester, PA; or
(iii) Within 30 days after there is a Change in Control of the
Company, Executive delivers a notice to the Company stating that Executive
elects to discontinue his employment with the Company.
If Executive elects to end his employment by Company for a reason which
Executive believes is a Good Reason as defined by this Section 4.1(d), he shall
provide the Company with written notice of such resignation and shall state in
that notice the specific matter or matters which he asserts constitute the Good
Reason for his resignation.
(e) DISABILITY. As used in this Agreement, "Disability" or
"Disabled" shall mean a physical or mental disability which is either (i) a
total and permanent disability as defined in the principal disability benefit
plan offered by the Company to its senior officers and in effect at the time
Executive becomes disabled (whether or not Executive has elected to purchase
such disability insurance), or (ii) determined to be a total and permanent
disability by a physician who is selected by the Company and is acceptable to
Executive or his legal representative (which acceptance shall not be
unreasonably withheld).
4.2. TIME AND MANNER OF TERMINATION OR RESIGNATION. Executive's employment
by Company, including his office as Corporate Vice President, Chief Financial
Officer and Treasurer, shall be at will. Executive's employment shall cease
immediately upon Executive's death or Disability, or upon written notice to
Executive that the Company is terminating Executive's employment For Cause.
Otherwise Executive's employment shall cease on the date selected by the party
initiating termination or resignation, which date shall be specified in a
written notice to the other party, and which (i) in the event of termination of
Executive by the Company for any reason other than For Cause, shall be thirty
(30) days after delivery of such notice unless a longer period is approved by
the Company's Chief Executive Officer in his sole discretion, and (ii) in the
event of resignation by Executive, shall be thirty (30) days after delivery of
such notice unless a longer or shorter period is approved by the Company's Chief
Executive Officer and by Executive. The date on which Executive's employment by
Company ceases is referred to in this Agreement as the "Employment Ending Date".
As of the Employment Ending Date, if Executive is a member of Company's Board or
of the Board of Directors of any affiliate, he shall provide Company with his
written resignation from each such Board and from his position as an officer of
any affiliate.
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4.3. BENEFITS PAYABLE.
(a) SEVERANCE AMOUNT. If either (1) Company terminates Executive's
employment for any reason other than For Cause, death or Disability, or (2)
Executive resigns his employment by Company for Good Reason, Executive shall be
paid his monthly salary at the time of such termination or resignation, for 9
months. For purposes of this Section 4.3(a) and Section 4.3(b), Executive's
"monthly salary" shall be one-twelfth of the sum of (A) Executive's highest
annual base salary rate during his employment by Company, plus (B) all other
amounts, including incentive payments, that would be deemed compensation for
purposes of IRS form W-2 and that were paid to Executive during the twelve full
calendar months preceding the calendar month in which the Employment Ending Date
occurs. Company shall make the severance payments under this Section 4.3(a)
beginning with the first calendar month after the Employment Ending Date, in
accordance with Company's regular pay policies for employees.
(b) PAYMENT FOR EXTENDED NON-COMPETE PERIOD. If either (1) Company
terminates Executive's employment for any reason other than For Cause, death or
Disability, or (2) Executive resigns his employment by Company for Good Reason,
then in addition to the other amounts payable to Executive under this Section
4.3, and as consideration for Executive's agreement to the extended non-compete
period described in Section 5.3(b)(ii) below, Executive shall be paid, for each
of the 9 months following payment of the Severance Amount under Section 4.3(a)
above, an amount equal to his monthly salary (as defined in Section 4.3(a)) at
the time of such termination or resignation. Company shall make the payments
under this Section 4.3(b), beginning after the final payment of the Severance
Amount under Section 4.3(a), in accordance with Company's regular pay policies
for employees. Executive and Company also acknowledge and agree that the
provisions of Section 5.3 are mandatory and that, in the event Company
terminates Executive's employment for any reason other than For Cause, death or
Disability or Executive resigns his employment for Good Reason, he shall have no
right to unilaterally avoid compliance with the provisions of Section 5.3 by
foregoing the payment described in this Section 4.3(b); and Company shall have
no right to withhold such payment by unilaterally permitting Executive to forego
compliance with Section 5.3 during the extended non-compete period.
(c) ADDITIONAL SEVERANCE BENEFITS. If severance payments are payable
to Executive under Section 4.3(a) above, the following additional severance
benefits shall be provided to Executive by Company:
(i) Company shall pay Executive the amount earned under its
PFP program (or any applicable replacement incentive program in effect at the
time of the Employment Ending Date) for the portion of the calendar quarter to
and including the Employment Ending Date. Company shall make such payment on or
about the date Company makes such payments to other participating employees;
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(ii) Company shall provide medical, dental and prescription
plan benefits for Executive, on the same cost-sharing and other basis as is then
in effect for active employees, for 18 months after the Employment ending Date
or until Executive elects that such coverages sooner cease. After such coverages
cease in accordance with the previous sentence, Executive may elect continuation
coverage completely at his own expense as provided by law;
(iii) Company shall provide Executive with outplacement
services at Company's expense at the level in effect for Executive Officers of
the Company on the Employment Ending Date.
(iv) Company shall pay Executive his automobile allowance and
reimbursement, at the level in effect on the Employment Ending Date, for 6
months after the Employment Ending Date.
(d) LIMITATION ON SEVERANCE BENEFITS. Notwithstanding any other
provision of this Agreement to the contrary, the amounts payable to Executive
under Sections 3.2(b), 4.3(a) and 4.3(c) above, plus the value of any other
non-cash benefits, including but not limited to stock option vesting
acceleration, that would be counted in determining whether Executive is subject
to excise tax under sections 280G and 4999 of the Internal Revenue Code of 1986,
as amended (the "Code") shall not exceed the maximum amount that Company could
pay to Executive without causing Executive to be subject to such excise tax
under the Code.
(e) ADDITIONAL BENEFITS ARISING FROM CHANGE IN CONTROL. The
definition of Change in Control, as set forth in Section 4.1(c) above, shall
supersede and replace any other definition of the term "Change in Control" in
all stock option and other incentive compensation agreements between Company and
Executive, and all such agreements are hereby amended to replace any other
definition of the term "Change in Control" with the definition in Section 4.1(c)
of this Agreement.
(f) WHEN SEVERANCE BENEFITS/PAYMENTS NOT PAYABLE. None of the
severance benefits or other payments described in this Section 4.3 shall be
payable to Executive if (i) Executive's employment with Company is terminated
For Cause or by reason of Executive's death or Disability, or (ii) Executive
voluntarily ends his employment with Company other than by resigning for Good
Reason. The compensation and benefits and the non-compete payment which the
Company is required to pay Executive pursuant to this Section 4.3, together with
any payments to which Executive may be entitled under Section 3.2, are the only
payments, compensation or benefits to which the Executive is entitled upon a
termination or resignation of employment.
(g) RELEASE. As a condition to receipt of the severance benefits and
other payments described in this Section 4.3, Executive shall deliver an
effective, executed release to Company in the form attached to this Agreement as
Exhibit "A" on or before the Employment Ending Date.
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(h) COOPERATION. As a condition to receipt of the severance benefits
and other payments described in this Section 4.3, Executive shall provide
Company with such information pertaining to his employment with Company as he
may have and shall assist Company to transfer his duties to such successor or
successors as Company may designate. Company shall reimburse Executive for all
reasonable out-of-pocket expenses he incurs in fulfilling his obligation under
the preceding sentence.
(i) ACCELERATION ELECTION. Company may, at its sole option and in
its sole and absolute discretion, at any time or from time to time, accelerate
the time and the manner of making any one or more payments required under this
Section 4.3.
(j) TAXES. Company shall withhold from payments to Executive and
remit to the appropriate government agencies such payroll taxes and income
withholding as Company determines is or may be necessary under applicable law
with respect to amounts paid to Executive under this Section 4.3.
(k) GENERAL OBLIGATION. The rights and benefits of Executive to
receive payments under this Section 4.3 shall be solely those of an unsecured
creditor of Company.
(l) ESTATE TO RECEIVE BENEFITS/PAYMENTS. In the event that Executive
becomes entitled to receive any severance benefits or payments under Sections
3.2 or 4.3(a) (b) or (c)(i)(ii) or (iv) above, and Executive dies before all
such benefits or payments are made by Company, the balance of such benefits or
payments shall be paid to Executive's estate.
SECTION 5. RESTRICTIVE COVENANTS
5.1. CONFIDENTIALITY. Executive acknowledges a duty of confidentiality
owed to Company and shall not, at any time during or after his employment by
Company, retain in writing, use, divulge, furnish, or make accessible to anyone,
without the express authorization of the Company's Chief Executive Officer, any
trade secret, private or confidential information or knowledge of Company or any
of its affiliates obtained or acquired by him while so employed. All computer
software, address books, rolodexes, business cards, telephone lists, customer
lists, price lists, contract forms, catalogs, books, records, and files and
know-how acquired while an employee of Company, are acknowledged to be the
property of Company and shall not be duplicated, removed from Company's
possession or made use of other than in pursuit of Company's business. Upon the
Employment Ending Date, Executive shall deliver to Company, without further
demand, all copies thereof which are then in his possession or under his
control.
5.2. INVENTIONS AND IMPROVEMENTS. During the term of his employment,
Executive shall promptly communicate to Company all ideas, discoveries and
inventions which are or may be useful to Company or its business. Executive
acknowledges that all ideas, discoveries, inventions, and improvements which are
made, conceived, or reduced to practice by him and every item of knowledge
relating to Company's business interests (including potential business
interests) gained
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by him during his employment hereunder are the property of Company, and
Executive hereby irrevocably assigns all such ideas, discoveries, inventions,
improvements, and knowledge to Company for its sole use and benefit, without
additional compensation. The provisions of this Section shall apply whether such
ideas, discoveries, inventions, improvements or knowledge are conceived, made or
gained by him alone or with others; whether during or after usual working hours,
whether on or off the job, whether applicable to matters directly or indirectly
related to Company's business interests (including potential business
interests), and whether or not within the specific realm of his duties.
Executive shall, upon request of Company, but at no expense to Executive, at any
time during or after his employment with Company, sign all instruments and
documents requested by Company and otherwise cooperate with Company to protect
its right to such ideas, discoveries, inventions, improvements, and knowledge,
including applying for, obtaining, and enforcing patents and copyrights thereon
in any and all countries.
5.3. NONCOMPETITION; NONSOLICITATION.
(a) Executive shall not, without Company's prior written approval,
either directly or indirectly, for his own account or for the account of another
person or entity, during the non-compete period as defined below in this Section
5.3:
(i) acquire or hold more than a 5% ownership interest in any
competitor of Company or of any affiliate;
(ii) compete with Company or any affiliate in soliciting any
business from any person or entity that was at any time during the two years
immediately preceding the Employment Ending Date a client or potential client of
Company or any affiliate, as to which client or potential client Company or an
affiliate had rendered a significant volume of service or had a significant
amount of direct business contact for the purpose of soliciting future business;
(iii) render services within the United States of America or
any foreign country in which Company is providing services as of the Employment
Ending Date to any competitor of Company or an affiliate, if such services are
similar in nature (in whole or in part) to services Executive rendered to
Company or any affiliate at any time during the two years immediately preceding
the Employment Ending Date; or
(iv) solicit or otherwise induce any employee of Company or an
affiliate to leave the employment of Company or the affiliate, or induce any
such employee to become an employee of, or otherwise become associated with, any
company or business other than Company or the affiliate. This paragraph shall
apply to inducement, hiring or solicitation of any employee of Company or an
affiliate, regardless of position.
As used in Sections 5.3 (a) (i) and (iii), the term "competitor of Company"
means a business that, within 12 months before the Employment Ending Date, has
actually competed with the Company for a contract or contracts that, in the
aggregate, the Company valued at in excess of $1,000,000 in net revenue. If a
"competitor of Company", or an entity that owns and/or operates a
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"competitor of Company", also owns and/or operates any separate subsidiary or
other separate line of business ("separate business unit"), and that separate
business unit is not itself a competitor of the Company, the restrictions in
Sections 5.3(a) (i) and (iii) shall not apply to that separate business unit
(which shall not be deemed a "competitor of Company").
(b) (i) The non-compete period shall be the 274 days after the
Employment Ending Date if (a) Executive's employment with Company is terminated
For Cause or by reason of Executive's Disability, or (b) Executive voluntarily
ends his employment with Company other than by resigning for Good Reason.
(ii) The non-compete period shall be the 548 days after the
Employment Ending Date if (a) Executive's employment with Company is terminated
for any reason other than For Cause or by reason of Executive's Disability or
(b) Executive resigns his employment for Good Reason.
(c) Upon the breach by Executive of his obligations under this
Section 5.3, in addition to Company's right to obtain appropriate injunctive
relief as set forth in Section 5.4 of this Agreement, Company's obligation to
make payments or provide severance benefits to Executive under Section 4 of this
Agreement shall terminate immediately and Executive shall, within 10 days after
written demand by Company, repay to Company all severance payments previously
made to Executive as well as an amount equal to the cost of severance benefits
previously provided to Executive.
(d) Executive acknowledges that he is bound by the restrictions
described in this Section 5.3 upon any termination or resignation of his
employment, including termination for Cause or without Cause, or by reason of
Disability or resignation for Good Reason or without Good Reason. Executive
acknowledges that he has agreed to these provisions voluntarily; that they are
reasonably required to protect the Company; and that they are supported by
adequate consideration (including but not limited to the consideration provided
under Section 4.3(b) for the extended non-compete period described in Section
5.3(b)(ii) above).
5.4. INJUNCTIVE AND OTHER RELIEF.
(a) Executive acknowledges and agrees that his obligations contained
in this Agreement are fair and reasonable in light of the consideration paid
under this Agreement, and that damages alone shall not be an adequate remedy for
any breach by Executive of those obligations. Accordingly, Executive expressly
agrees that, in addition to any other remedies which Company may have, Company
shall be entitled to injunctive relief in any court of competent jurisdiction
for any breach or threatened breach of any of those obligations by Executive.
Nothing contained in this Agreement, including, without limitation, Section 6.1
hereof, shall prevent or delay Company from seeking, in any court of competent
jurisdiction, specific performance or other equitable remedies in the event of
any breach or intended breach by Executive of any of his obligations under this
Agreement.
11
<PAGE> 12
(b) Notwithstanding the equitable relief available to Company, the
Executive, in the event of a breach of his obligations contained in Section 5
hereof, understands and agrees that the uncertainties and delay inherent in the
legal process would result in a continuing breach for some period of time, and
therefore, continuing injury to Company until and unless Company can obtain
appropriate equitable relief. Therefore, in addition to such equitable relief,
Company shall be entitled to monetary damages for any such period of breach
until the termination of such breach, in an amount deemed reasonable to cover
all actual and consequential losses, plus all moneys received by Executive as a
result of said breach, and all costs and attorneys' fees incurred by Company in
enforcing this Agreement. If Executive should use or reveal to any other person
or entity any confidential information in violation of this Agreement, this will
be considered a continuing violation on a daily basis for so long a period of
time as such confidential information is made use of by Executive or any such
other person or entity.
SECTION 6. MISCELLANEOUS
6.1. ARBITRATION.
(a) Except as set forth in the last sentence of this Section 6.1,
all disputes arising out of or relating to this Agreement which cannot be
settled by the parties shall promptly be submitted to and settled exclusively by
arbitration in West Chester, Pennsylvania in accordance with the laws of the
Commonwealth of Pennsylvania by three arbitrators, one of whom shall be
appointed by the Company, one by the Executive and the third of whom shall be
appointed by the first two arbitrators. The arbitration shall be conducted in
accordance with the rules of the American Arbitration Association, except with
respect to the selection of arbitrators which shall be as provided in this
Section 6.1. Judgment upon the award rendered by a majority decision of the
arbitrators may be entered in any court having jurisdiction thereof. The Company
shall, however, have the right to seek and obtain preliminary injunctive relief,
in a court of competent jurisdiction, for any existing or threatened violation
by Executive of Section 5 of this Agreement.
(b) The arbitrators shall award to the prevailing party in any such
arbitration or preliminary injunction proceeding, in addition to any other
appropriate relief, the costs and expenses (including reasonable attorneys fees)
incurred by that party in connection with the enforcement of that party's rights
under this Agreement, unless the arbitrators shall determine that under the
circumstances such an award would be unjust.
6.2. PRIOR EMPLOYMENT. Executive represents and warrants that he is not a
party to any other employment, non-competition or other agreement or restriction
which could interfere with his employment with Company or with his or Company's
rights and obligations under this Agreement; and that his acceptance of
employment with Company and the performance of his duties under this Agreement
will not breach the provisions of any contract, agreement, or understanding to
which he is party or any duty owed by him to any other person.
6.3. SEVERABILITY. The invalidity or unenforceability of any particular
provision or part of
12
<PAGE> 13
any provision of this Agreement shall not affect the other provisions or parts
of this Agreement, except that in the event that the Release described in
Section 4.3(e) hereof is given by Executive and is determined to be invalid or
unenforceable, such that Executive is permitted to maintain against Company any
claim purported to be released under that Release, then Company's obligation to
provide severance payments and benefits under Section 4.3 of this Agreement
shall be deemed null and void and Executive shall repay to Company any of those
severance payments and benefits already paid by Company. In the event that any
provision hereof is determined to be invalid or unenforceable by a court of
competent jurisdiction Executive and Company shall negotiate in good faith to
provide Company and Executive with protection as nearly equivalent to that found
to be invalid or unenforceable and if any such provision shall be so determined
to be invalid or unenforceable by reason of the duration or geographical scope
of the covenants contained therein, such duration or geographical scope, or
both, shall be considered to be reduced to a duration or geographical scope to
the extent necessary to cure such invalidity.
6.4. ASSIGNMENT. This Agreement shall not be assignable by Executive, and
shall be assignable by Company only to any person or entity which may become a
successor in interest (by purchase of assets or stock, or by merger, or
otherwise) to Company in the business or a portion of the business presently
operated by it. Subject to the foregoing, this Agreement and the rights and
obligations set forth herein shall inure to the benefit of, and be binding upon,
the parties hereto and each of their respective permitted successors, assigns,
heirs, executors and administrators.
6.5. NOTICES. All notices hereunder shall be in writing and shall be
sufficiently given if hand-delivered, sent by documented overnight delivery
service, or by registered or certified mail, postage prepaid, return receipt
requested, (confirmed by U.S. mail), addressed as set forth below or to such
other person and/or at such other address as may be furnished in writing by any
party hereto to the other. Any such notice shall be deemed to have been given as
of the date received, in the case of personal delivery, or on the date shown on
the receipt or confirmation therefor, in all other cases. Any and all service of
process and any other notice in any such action, suit or proceeding shall be
effective against any party if given as provided in this Agreement; provided
that nothing herein shall be deemed to affect the right of any party to serve
process in any other manner permitted by law.
If to Company:
1400 Weston Way
West Chester, PA 19380
Attention: Chief Executive Officer
13
<PAGE> 14
With a copy to:
F. Douglas Raymond, Esq.
Drinker Biddle and Reath
One Logan Square
18th and Cherry Sts.
Philadelphia, PA 19103
If to Executive:
William G. Mecaughey
120 E. Whitetail Ridge
Glenmoore, PA 19343
6.6. ENTIRE AGREEMENT AND MODIFICATION. This Agreement constitutes the
entire agreement between the Company and the Executive with respect to the
matters contemplated herein and, unless otherwise stated in this Agreement,
supersedes all prior agreements and understandings with respect thereto. The
following agreements between Executive and the Company will remain in effect:
(a) Long Term Incentive Compensation Program for Senior Managers - Cash
Component memorandum dated July 5, 1999
(b) Stock Option Agreement for 30,000 shares granted April 1, 1999
(c) Stock Option Agreement for 25,000 shares granted November 17, 1997
(d) Stock Option Agreement for 1765 shares granted November 17, 1997
(e) Stock Option Agreement for 2000 shares granted February 18, 1997
(f) Stock Option Agreement for 2000 shares granted February 26, 1996
(g) Stock Option Agreement for 1600 shares granted February 13, 1995
(h) Stock Option Agreement for 1600 shares granted February 14, 1994
(i) Supplemental Executive Retirement Plan dated January 1, 1997
Any amendment, modification, or waiver of this Agreement shall not be effective
unless in writing and signed by the party against whom enforcement is sought.
The failure by any party 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 a party'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.
6.7. GOVERNING LAW. This Agreement is made pursuant to, and shall be
construed and enforced in accordance with, the internal laws of the Commonwealth
of Pennsylvania (and United States federal law, to the extent applicable),
without giving effect to otherwise applicable principles of conflicts of law.
6.8. HEADINGS; COUNTERPARTS. The headings of paragraphs in this Agreement
are for convenience only and shall not affect its interpretation. This Agreement
may be executed in two
14
<PAGE> 15
or more counterparts, each of which shall be deemed to be an original and all of
which, when taken together, shall be deemed to constitute but one and the same
Agreement.
6.9. FURTHER ASSURANCES. Each of the parties hereto shall execute such
further instruments and take such other actions as any other party shall
reasonably request in order to effectuate the purposes of this Agreement.
6.10. 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
Executive, or any executor, administrator, heir, legatee, distributee, relative
or any other person or entity, whether or not in being, claiming under Executive
by virtue of this Agreement, and none of the rights 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.
6.11. RIGHT TO USE LIKENESS. Executive hereby grants to Company the
absolute right and permission to copyright and use, re-use and/or publish for
lawful business purposes, any photographic portraits or pictures of Executive
(and printed matter in conjunction therewith) in which Executive may be included
in whole or in part or composite, for art, advertising, or trade.
6.12. CONSULTATION WITH COUNSEL. Executive acknowledges that he has had
the opportunity to consult separately with counsel of his choice concerning this
Agreement and the meaning of the terms of this Agreement; that he has been
advised by Company to do so; and that he has entered into this Agreement
knowingly and of his own free will and volition.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
ATTEST: ROY F. WESTON, INC.
By: s/William L.Robertson
- ------------------------------ ----------------------------------
William L. Robertson, CEO
s/William G. Mecaughey
- ------------------------------ ----------------------------------
Witness Executive - William G. Mecaughey
15
<PAGE> 16
EXHIBIT "A"
CROSS RELEASE
Roy F. Weston, Inc. ("Weston") and William G. Mecaughey ("Employee")
entered into an Amended Employment Agreement as of March 20, 2000 (the
"Employment Agreement"). To satisfy the requirement of Section 4.3(e) of the
Employment Agreement, Employee and Weston hereby grant the other the Releases
set forth below:
---------------------------------
1. Release by Weston. Weston, on behalf of itself and its subsidiaries,
irrevocably and unconditionally releases and forever discharges Employee, his
heirs, administrators and legal representatives from any and all manner of
actions, causes, matters, suits, debts, dues, accounts, bonds, covenants,
agreements, judgments, claims, controversies, guarantees, warranties, damages,
liabilities, or demands of any nature whatsoever in law or equity, whether or
not known to it, which it has ever had, now has, or hereafter can, shall or may
have, for, upon, or by reason of any matter, action, omission to act,
transaction, practice, conduct, thing or cause of any kind whatsoever from the
beginning of the world to the date it executes this Release. Such remise,
release and discharge of Employee includes, without limitation, any and all
claims under any and all federal or state statutes or the common law and extends
without limitation to any and all acts, practices or conduct by Employee whether
or not it has knowledge of such acts, omissions, practices, conduct or the
effects thereof, or if any such effects exist or may in the future exist as a
result of any acts, omissions, practices, or conduct that occurred prior to the
date it executes this Release.
2. Limitation on Weston's Release. Notwithstanding the foregoing, this
Release shall not prevent Weston from enforcing its rights under the Employment
Agreement.
3. Release by Employee. Employee, for himself, his heirs, and personal and
legal representatives, except as provided in Section 4 hereof, does hereby
irrevocably and unconditionally release, remise and forever discharge Weston,
its subsidiaries, affiliates, divisions, officers, directors and employees (the
"Releasees"), and each of them, however denominated, past, present and future,
and their predecessors, successors and assigns, of and from any and all manner
of actions, causes, matters, suits, dues, bonds, judgments, debts, accounts,
covenants, agreements, claims, controversies, guarantees, warranties, damages,
liabilities, or demands of any nature whatsoever in law or equity, whether or
not now known to him which he ever had, now has or hereafter can, shall or may
have, for, upon, or by reason of any matter, action, omission to act,
transaction, practice, conduct, cause or thing of any kind whatsoever from the
beginning of the world to the date hereof. Such release, remise and discharge of
the Releasees includes without limitation any and all claims under any and all
federal and state statutes or common law
<PAGE> 17
and extends without limitation, to any and all acts, practices or conduct by the
Releasees, or the effects thereof, whether or not Employee now has knowledge of
such acts, omissions, practices, conduct or the effects thereof, if any such
effects exist or may in the future exist as a result of any act, omission,
practice or conduct that occurred prior to the date hereof. Except as provided
in Section 4, this release shall specifically include, but not be limited to,
the following:
(a) any and all claims and matters of any kind which arise or might
arise, or which otherwise relate to Employee's employment with Weston or
Employee's termination of employment pursuant to the Employment Agreement;
(b) any and all claims for wages and benefits (including without
limitation salary, stock, stock options, commissions, bonuses, severance pay,
health and welfare benefits, vacation pay and any other fringe-type benefit);
(c) any and all claims for wrongful discharge, breach of contract
(whether written or oral, express or implied), and implied covenants of good
faith and fair dealing;
(d) any and all claims for alleged employment discrimination on the
basis of age, race, color, religion, sex, national origin, veteran status,
disability and/or handicap, in violation of any federal, state or local statute,
ordinance, judicial precedent or executive order, including but not limited to
claims for discrimination under the following statutes: Title VII of the Civil
Rights Act of 1964, 42 U.S.C. Section 2000e et seq., the Civil Rights Act of
1866, 42 U.S.C. Section 1981, the Age Discrimination in Employment Act, 29
U.S.C. Section 621 et seq., the Older Workers Benefit Protection Act, the
Rehabilitation Act of 1972, 29 U.S.C. Section 701 et seq., the Americans with
Disabilities Act, 42 U.S.C. Section 1201 et seq., and the Pennsylvania Human
Relations Act, 43 P.S. Section 951 et seq.;
(e) any and all claims under any federal or state statute relating
to employee benefits;
(f) any and all claims in tort, including but not limited to any
claims for fraud, misrepresentation, defamation, interference with contract or
prospective economic advantage, intentional infliction of emotional distress
and/or negligence;
(g) any and all claims for additional commissions, compensation or
damages of any kind; and
(h) any and all claims for attorneys' fees and costs.
4. Limitation on Employee's Release. This Release (a) shall not prevent
Employee from enforcing his rights to receive severance payments and severance
benefits under Section 4 of the Employment Agreement in accordance with the
terms thereof, (b) shall have no applicability
<PAGE> 18
to Weston's obligations to provide severance payments and severance benefits
under Section 4 of the Employment Agreement, and (c) shall not release Weston
from (i) any obligation it might otherwise have to indemnify Employee and hold
him harmless from any claims made against him arising out of his activities as
an officer or director of Weston or its affiliates, to the same extent as Weston
is or may be obligated to indemnify and hold harmless any other officer or
director, and (ii) any vested retirement benefit which by its express terms
survives termination of Employee's employment.
5. Review and Revocation. Employee acknowledges that he has had the
opportunity to review this Release and to consider its terms with his attorneys
and advisors. Employee has forty-five (45) days from the date of distribution of
this Release to him to review it and seven (7) days after the execution date of
this Release to revoke it. This Release shall not be effective unless and until
Employee executes it and the seven-day period has expired.
UNDERSTOOD AND AGREED:
s/William G. Mecaughey
- --------------------------- --------------------------------
Witness William G. Mecaughey
Attest: ROY F. WESTON, INC.
By: s/Arnold P. Borish By:
--------------------------- --------------------------------
Secretary
(Corporate Seal)
STATE OF
-------------------------------------- :
: SS:
COUNTY OF
-------------------------------------- :
Before me, ------, on this day personally appeared -----------, known to
me to be the person whose name is subscribed to the foregoing instrument, and
acknowledged to me that he executed such instrument for the purposes and
consideration therein expressed.
Given under my hand and seal of office this ------- day of -------,----- .
-------------------------------------
NOTARY PUBLIC in and for
----------------------------
<PAGE> 19
Schedule I
A. The amount of the Change in Control bonus payable pursuant to Section 3.2(b)
of the Employment Agreement to which this Schedule I is attached shall be based
on the Per Share Price as hereinafter defined in Section B below.
B. For purposes of this Schedule I:
(1) "Per Share Price" shall mean the sum of the following amounts received
or receivable, in connection with a Change in Control, by a holder of the
Company's Common Shares or Series A Common Shares, calculated on a per share
basis (and calculated based on the highest amount received or receivable with
respect to shares of each such class):
(a) cash;
(b) securities listed for trading on any national securities
exchange or quoted on the Nasdaq Stock Market or convertible into or
exchangeable for securities that are so listed or quoted, valued at the higher
of (i) the closing price per share on the date of first public announcement that
the Company has entered into an agreement providing for such Change in Control
or (ii) the average closing price of the securities so listed or quoted for the
ten trading days immediately preceding the date the securities are issued to the
holders of the Company's Common Stock or Series A Common Stock, less the value
of any consideration payable by such holders upon the exchange or conversion of
the securities so issued (other than the surrender of the Company's Common Stock
or Series A Common Stock for conversion or exchange);
(c) the face amount of any note or similar debt instrument;
(d) the fair market value of any other property or other
consideration received or receivable by such holders, which fair market value
shall be determined by the Board of Directors of the Company (or, if applicable,
the committee thereof to which the Board of Directors may have delegated the
authority to evaluate and recommend any Change in Control transaction). If the
Board or such committee receives a fairness opinion from its investment banker
concerning the transaction, the fair market value of such other property or
other consideration, for purposes of this Paragraph B(1)(d), shall be the amount
that the investment banker has concluded is the fair market value of such other
property or other consideration, for purposes of rendering the fairness opinion;
and if that fair market value is a range of values, the fair market value for
purposes of this Paragraph B(1)(d) shall be the highest amount in that range.
The determination of the Board or committee shall be final; plus
<PAGE> 20
(e) the value of any Common Shares or Series A Common Shares
retained by such holder, calculated as provided in subsection B(1)(b) above (or,
if not calculable pursuant to subsection B(1)(b), then as provided in subsection
B(1)(d) above);
Provided, however, that if the Per Share Price of a Common Share is not the same
as that of a Series A Common Share, in each case calculated as set forth above,
then for purposes of this Schedule I the Per Share Price shall be the average of
such values, calculated on a weighted average basis based on the actual number
of shares of each such class outstanding and entitled to receive such value.
2. In the event that payment of all or any portion of the Per Share Price
is conditioned upon the occurrence of events occurring after the consummation of
the Change in Control, the Company shall be obligated to make a payment
hereunder with respect to such portion of the Per Share Price only when and if
the condition to such payments shall have expired and the amount of such portion
of the Per Share Price shall have been finally determined.
C. If the Per Share Price is at least the amount referred to in the Resolution
of the Board of Directors dated March 20, 2000 concerning the Employment
Agreement to which this schedule is attached (the "bonus price amount"),
Executive shall be entitled to receive a bonus in the amount of $37,500 plus an
additional $583.33 for every $.01 by which the Per Share Price exceeds the bonus
price amount; provided, however, that the amount of any bonus paid pursuant to
this Schedule I and Section 3.2(b) of the Employment Agreement shall be reduced
by the amount, if any, previously paid to Executive pursuant to this Schedule I
and such Section 3.2(b) following the consummation of any prior Change in
Control.
<PAGE> 1
Exhibit 10.18
INVESTMENT AND PARTNERING AGREEMENT
This Investment and Partnering Agreement ("Investment") is entered into
effective as of the 21st day of December, 1999 between Essential Technologies,
Inc. ("Essential"), a Maryland corporation, and Roy F. Weston, Inc. ("Weston"),
a Pennsylvania corporation.
RECITALS
Weston has offered to transfer to Essential certain assets of Weston, as
described in Sections 1.1, 1.2 and 1.3 below (the "Assets"), purchase certain
Stock Purchase Warrants from Essential, as described in Section 1.4 below, and
enter into a strategic alliance partner relationship with Essential, as
described in Section 1.5 below, all on the terms and conditions set forth in
this Agreement. Essential has agreed to accept such offer.
NOW THEREFORE, with intent to be legally bound, and in consideration of the
mutual agreements and covenants set forth herein, the parties agree as follows:
ARTICLE I
ASSET TRANSFERS
1.1 Transfer and Sale of GlobeNet Assets.
(a) Weston hereby transfers, sells and assigns to Essential, and Essential
purchases and accepts, all of Weston's right, title and interest in the
following assets ("the GlobeNet Assets"):
(i) the domain name, software, source code, databases, and the content
existing as of the date of this Agreement and used by Weston in the operation of
its GlobeNet World Wide Website located at http://www.iso14000.net ("GlobeNet")
(ii) all of Weston's GlobeNet subscriber lists;
(iii) the servers, routers and other hardware described in Exhibit "A" to
this Agreement;
(iv) the registered trademark described in Exhibit "B" to this Agreement;
and
(v) the other assets described in Exhibit "C" to this Agreement.
Page 1 of 11
<PAGE> 2
Exhibit 10.18
(b) Weston hereby assigns to Essential, and Essential hereby assumes and accepts
all of Weston's rights and liabilities under the contracts attached to this
Agreement as Exhibit "D" (the "Contracts"), except for liabilities for, and
arising from, those obligations that were required to be performed by Weston
under the Contracts before the date of this Agreement. Attached as Exhibit "E"
to this Agreement are the consents, obtained from all necessary parties ("Third
Parties"), approving the assignment and assumption described in the preceding
sentence, and releasing Weston from all such assigned and assumed liabilities.
Weston shall indemnify, defend and hold harmless Essential from and against all
loss, cost, damage and expense arising out of (i) Weston's ownership or
operation of the GlobeNet assets before the date of this Agreement, or (ii) any
obligations which were required to be performed by Weston under the Contracts
before the date of this Agreement. Essential shall indemnify, defend and hold
harmless Weston from and against all loss, cost, damage and expense arising out
of (i) Essential's ownership or operation of the GlobeNet assets from and after
the date of this Agreement and (ii) any obligations which are required to be
performed by Essential (as assignee of Weston's rights and obligations) under
the Contracts on and after the date of this Agreement.
(c) Weston warrants only that it has title to the GlobeNet assets and that title
to those assets is hereby transferred to Essential free and clear of any lien or
encumbrance. Essential acknowledges that the GlobeNet assets are sold by Weston
"AS IS". WESTON MAKES NO WARRANTY, EXPRESS OR IMPLIED, INCLUDING BUT NOT LIMITED
TO ANY WARRANTY OF MERCHANTABILITY OR WARRANTY OF FITNESS FOR A PARTICULAR
PURPOSE, CONCERNING THE GLOBENET ASSETS.
1.2 KS2 Business Plan. Weston agrees that Essential may use, develop and pursue
the Weston KS2 Business Plan attached to this Agreement as Exhibit F, in any
manner that Essential chooses; provided, however, that, (a) except as set forth
in the paragraph below, Essential shall not be entitled to use any Weston name
or trademark in any manner or respect, without the express written consent of
Weston, which consent may be withheld in Weston's sole discretion, and (b)
Essential may not use or disclose to any person any confidential financial
information concerning Weston that is set forth in the KS2 Business Plan.
Weston may continue to use, develop and pursue the attached KS2 business plan in
any manner that Weston chooses, provided, however, that Weston shall have no
right to use the domain names described in Section I below, without the express
written consent of Essential, which consent may be withheld in Essential's sole
discretion. The KS2 Business Plan shall be provided to Essential "AS IS".
Nothing herein shall grant, or be construed to grant to Essential, any rights in
or to the name "KS2" or "Knowledge Solutions Systems" or any use thereof without
the prior written consent of Weston. WESTON MAKES NO WARRANTY, EXPRESS OR
IMPLIED, INCLUDING BUT NOT LIMITED TO ANY WARRANTY OF MERCHANTABILITY OR
WARRANTY OF FITNESS FOR A
Page 2 of 11
<PAGE> 3
Exhibit 10.18
PARTICULAR PURPOSE, CONCERNING THE KS2 BUSINESS PLAN OR THE DOMAIN NAMES
DESCRIBED IN SECTION I below. Essential shall indemnify, defend and hold
harmless Weston from and against all loss, cost, damage and expense arising out
of (i) Essential's use, development and pursuit of the KS2 Business Plan.
1.3 TeamLink Builder Software. Weston shall furnish Essential with one copy of
Weston's TeamLink builder software and hereby provides the following
non-exclusive license to Essential with respect to that copy of the TeamLink
builder software ("TeamLink"):
1.3.1 WESTON grants to Essential a non-exclusive license to use TeamLink,
subject to the terms and conditions set forth herein.
1.3.2 The term of the license shall continue until terminated by either party;
provided however, WESTON shall have the right to terminate the license in the
event Essential enters into liquidation, if a receiver is appointed of all or
any part of its assets, or if it becomes insolvent, or if it becomes unable to
pay its debts as they become due. WESTON further shall have the right to
terminate the license immediately upon written notice in the event Essential is
in material breach of any of its obligations under this license or this
Agreement. If this license is terminated, Essential shall, on the effective date
of such termination cease using TeamLink and shall promptly deliver to WESTON
all copies of the software and all related documentation in its possession, or
shall provide evidence satisfactory to WESTON that all such copies have been
destroyed.
1.3.3 This license and the rights granted hereunder shall not be assigned,
sublicensed, encumbered by security interest or otherwise transferred by
Essential without the prior written consent of WESTON, which consent shall not
be unreasonably withheld.
1.3.4 The parties acknowledge that monetary damages may not be an adequate
remedy if Essential breaches its obligations under this license, since such
breach may result in irreparable harm. The parties therefore agree that in the
event of any such breach, WESTON shall be entitled to appropriate injunctive
relief, in addition to any and all other remedies at law.
1.3.5 Essential shall maintain complete and accurate records containing all data
reasonably necessary for verification of its compliance with the terms of this
license. WESTON or its authorized representatives shall have the right, during
regular business hours, and upon three days' advance notice, to inspect
Essential's books, records and computers to audit and verify compliance with the
terms of this license.
1.3.6 The copy of the TeamLink builder software licensed to Essential under this
Agreement is provided "AS IS". WESTON MAKES NO WARRANTY, EXPRESS OR
Page 3 of 11
<PAGE> 4
Exhibit 10.18
IMPLIED, INCLUDING BUT NOT LIMITED TO ANY WARRANTY OF MERCHANTABILITY OR
WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE, CONCERNING THE TEAMLINK BUILDER
SOFTWARE. Weston shall not be required to provide Essential with any support,
upgrades or other services concerning the TeamLink builder software. Essential
shall indemnify, defend and hold harmless Weston from and against all loss,
cost, damage and expense arising out of Essential's use of the TeamLink builder
software.
1.4 Stock Purchase Warrant. From the effective date of this agreement and during
each calendar quarter of 2000, Weston may purchase from Essential a Stock
Purchase Warrant for 25,000 shares of Essential common stock, subject to the
terms and conditions set forth in the form of Stock Purchase Warrant attached to
this Agreement as Exhibit G (the "Warrant form"). The purchase price for each
such quarterly purchase shall be $50,000. Weston may exercise its right to make
such quarterly purchase by providing Essential with written notice, not later
than ten days before the end of the calendar quarter, of Weston's election to
make such quarterly purchase, accompanied by Weston's check payable to Essential
in the amount of $50,000. Within ten days after receipt of Weston's notice and
check, Essential shall provide Weston with a fully executed Stock Purchase
Warrant, in the form of the Warrant form; provided, however, that if any of the
capital events specified in Section 4 of the Warrant shall occur after the date
hereof and before the issuance of the Warrant, the number of shares of stock or
other securities, or the exercise price of the Warrant, shall be adjusted as
needed to ensure that Weston is affected by such capital event in the same
manner as it would have been affected if the Warrant had been issued before the
occurrence of such capital event.
If Weston fails to notify Essential of Weston's election to purchase any
quarterly Stock Purchase Warrant permitted under this Section 1.4, Weston shall
have no further right to purchase the Stock Purchase Warrant for that quarter,
but Weston shall retain the right to purchase the remaining Stock Purchase
Warrants for the remaining quarters during 2000. In no event shall Weston have
the right to purchase more than 4 such warrants, covering an aggregate of
100,000 shares of Essential common stock (as adjusted in accordance with the
last sentence of the immediately preceding paragraph).
1.5 Strategic Alliance Partner Relationship. Within 30 days after the date of
this Agreement, Weston and Essential will enter into a strategic partner
relationship in accordance with the documents attached to this Agreement as
Exhibit K.
1.6 Essential Note. On the date of this Agreement, Essential shall provide
Weston with Essential's executed Promissory Note, for the principal amount of
$30,000, in the form attached to this Agreement as Exhibit H, in return for the
equipment described in Exhibit A attached to this Agreement.
Page 4 of 11
<PAGE> 5
Exhibit 10.18
1.7 Domain Names.Weston hereby transfers to Essential all of Weston's right,
title and interest, if any, in the domain names listed on Exhibit I to this
Agreement. Weston agrees to execute such documents as necessary to effect the
transfer of such Domain Names to Essential as may be required. Weston makes no
warranty that it has good and marketable title to such domain names or that it
has any interest in those names. Weston's interest in those names, if any, is
conveyed to Essential "AS IS". WESTON MAKES NO WARRANTY, EXPRESS OR IMPLIED,
INCLUDING BUT NOT LIMITED TO ANY WARRANTY OF MERCHANTABILITY OR WARRANTY OF
FITNESS FOR A PARTICULAR PURPOSE, CONCERNING THE DOMAIN NAMES LISTED IN EXHIBIT
I.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF WESTON TO ESSENTIAL
2.1 Authorization. Weston has by proper corporate proceedings duly authorized
the execution, delivery and performance of this Agreement and all instruments
and agreements required to be given pursuant to this Agreement.
2.2 Good Standing. Weston is a corporation organized and legally existing in
good standing under the laws of the State of Pennsylvania with full power and
authority to transfer the Assets and conduct its activities as now being
conducted.
2.3 Liabilities of Weston. Weston has filed or will file all required Federal,
state and local tax returns pertaining to the Assets, if any, and has paid or
will pay all taxes shown to be due by such returns, up to and through the date
of this Agreement.
2.4 Title. Except as set forth in subparagraph 2.4.1 hereinafter, Weston has
good and marketable title to the Assets, free and clear of any mortgage, pledge,
lien, encumbrance, charge, title retention, security arrangement or any other
restriction on the use, possession or transfer thereof; provided, however, that
this representation does not apply to the domain names described in paragraph
1.7 above, as to which Weston makes no warranty of any kind.
2.4.1 Certain Liens. The Equipment (as set forth in Exhibit A), GlobeNet
Trademark (as set forth in Exhibit B) and Domain Names (as set forth in Exhibit
I) are subject to a certain security interest granted by Weston to its primary
lender. Weston will proceed diligently to cause such security interest to be
terminated and released as promptly as practicable following the effective date
of this Agreement.
2.5 Legal Proceedings. Weston knows of no claims, suits, proceedings or
investigations pending or threatened against Weston which could result in any
claim against the Assets or which could invalidate this Agreement or any action
contemplated hereunder.
Page 5 of 11
<PAGE> 6
Exhibit 10.18
2.6 Legal Compliance. The execution and performance of this Agreement by Weston
will not result in a breach or constitute a default under:
(a) any charter, by-law, agreement or other document to or by which Weston is a
party or is bound; or
(b) any decree, order or rule of any court or governmental authority, known to
Weston, which is binding on Weston or on any of the Assets.
2.7 Brokers and Finders. No agent or broker or other person acting pursuant to
authority of Weston is entitled to any commission or finder's fees in connection
with the transactions contemplated by this Agreement.
2.8 Weston's Clients, Vendors and Licensors. Weston has no knowledge, nor has it
been notified, by any client, vendor or licensor, of the termination of any
contract, license or right, which termination could affect the Assets in any
material adverse respect.
2.9 Compliance with Law. To the best of Weston's knowledge, Weston has not
violated the laws or regulations of any Federal, state or local governmental
authority, in any manner that could have a material adverse effect on the
Assets.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF ESSENTIAL
Essential represents and warrants to Weston that:
3.1 Authorization. Essential has by proper corporate proceedings duly authorized
the execution, delivery and performance of this Agreement and all instruments
and agreements required to be given pursuant to this Agreement.
3.2 Good Standing. Essential is a corporation organized and legally existing in
good standing under the laws of the State of Maryland with full power and
authority to receive the Assets and conduct its activities as now being
conducted.
3.3 Liabilities of Essential. Essential has filed or will file all required
Federal, state and local tax returns and has paid or will pay all taxes shown to
be due by such returns, up to and through the date of this Agreement.
3.4 Legal Proceedings. Essential knows of no claims, suits, proceedings or
investigations pending or threatened against Essential which could result in any
claim that could invalidate this Agreement or any action contemplated hereunder.
Page 6 of 11
<PAGE> 7
Exhibit 10.18
3.5 Legal Compliance. The execution and performance of this Agreement by
Essential will not result in a breach or constitute a default under:
(a) any charter, by-law, agreement or other document to or by which Essential is
a party or is bound; or
(b) any decree, order or rule of any court or governmental authority, known to
Essential, which is binding on Essential or on any of its assets.
3.6 Brokers and Finders. No agent or broker or other person acting pursuant to
authority of Essential is entitled to any commission or finder's fees in
connection with the transactions contemplated by this Agreement.
3.7 Essential's Clients, Vendors and Licensors. Essential has no knowledge, nor
has it been notified, by any person or entity of the termination of any
contract, license or right, which termination could affect the Assets in any
material adverse respect.
3.8 Compliance with Law. To the best of Essential's knowledge, Essential has not
violated the laws or regulations of any Federal, state or local governmental
authority, in any manner that could have a material adverse effect on its
business or assets.
3.9 Condition of Essential's Business. Since the date of its last balance sheet,
a copy of which is attached as Exhibit J, and with respect to the information
set forth therein, there has not been:
(a) any material adverse change in the financial condition, revenues, business,
organization or personnel of Essential or in the relationship of Essential with
suppliers, clients or others, other than changes occurring in the ordinary
course of business; or
(b) any sale or other disposition of any property, equipment or other assets
previously owned by Essential that would materially restrict it from continuing
to operate its business; or
(c) any material damage, destruction or loss (whether or not insured) affecting
the property or the business of Essential.
ARTICLE IV
ADDITIONAL AGREEMENTS OF WESTON AND ESSENTIAL
4.1 Expenses of Negotiation. Each party to this Agreement shall pay all expenses
incurred on its behalf in connection with the negotiation, execution and
performance of
Page 7 of 11
<PAGE> 8
Exhibit 10.18
this Agreement, including the fees and expenses of its respective counsel.
4.2 Indemnity By Weston. Weston agrees that, except as specifically set forth in
this Agreement, Essential is not assuming any liability or other obligation of
any kind or nature of Weston whatsoever, including, but not limited to,
liabilities for wages, salaries, pension plans, vacation and sick pay, taxes,
and contractual liability. Weston agrees to indemnify, defend and hold harmless
Essential, its successors and assigns, against, and to save each of them
harmless from all claims and liabilities which may be asserted against them by
reason of any such unassumed liabilities or other obligations of Weston or which
may be attributable to any breach of the representations and warranties of
Weston set forth in Article II above.
4.3 Indemnity By Essential. Essential agrees that Weston is not assuming any
liability or other obligation of any kind or nature of Essential whatsoever,
including, but not limited to, liabilities for wages, salaries, pension plans,
vacation and sick pay, taxes, and contractual liability. Essential agrees to
indemnify, defend and hold harmless Weston, its successors and assigns, against,
and to save each of them harmless from all claims and liabilities which may be
asserted against them by reason of any such unassumed liabilities or other
obligations of Essential or which may be attributable to any breach of the
representations and warranties of Essential set forth in Article III above.
ARTICLE V
ADDITIONAL PROVISIONS
5.1 Survival of Representations, Warranties and Indemnities. All of the
representations, warranties of the parties and all obligations to indemnify the
other shall survive the consummation of the transactions contemplated by this
Agreement.
5.2 Notices. Any notice to a party hereto pursuant to this Agreement shall be
given by registered or certified mail addressed, if to Weston to:
Chief Executive Officer
Roy F. Weston, Inc.
1400 Weston Way
West Chester, Pennsylvania 19380
with a copy to:
General Counsel
Roy F. Weston, Inc.
1400 Weston Way
West Chester, Pennsylvania 19380
Page 8 of 11
<PAGE> 9
Exhibit 10.18
If to Essential to:
Chief Executive Officer
Essential Technologies, Inc.
1401 Rockville Pike Suite 500
Rockville, Maryland 20852
5.3 Successors. This Agreement shall inure to the benefit of, and be binding on
and enforceable against, the successors and assigns of Weston and Essential,
respectively. The benefits, but not the burdens, of this Agreement may be freely
assigned by either party.
5.4 Waiver of Performance. Weston or Essential may extend the time for or waive
the performance of any obligations of the other party, or waive compliance by
the other party with any covenants or conditions in this Agreement; provided,
however, that any such extension or waiver shall be effective only if made in a
writing signed by an authorized officer of each party hereto.
5.5 Entire Agreement. This Agreement, together with the Schedules and exhibits
hereto, represents the entire agreement of the parties with respect to the
transactions contemplated herein and all understandings and agreements, oral or
written, heretofore made by the parties are merged in this Agreement, and
neither this Agreement nor any provision hereof may be amended or modified
except by a written agreement signed by an authorized officer of each party
hereto.
5.6 Headings. The section headings and captions in this Agreement are for
convenience of reference only and shall not be deemed to constitute a part of
the provisions hereof, nor affect the meaning or construction of any provision,
condition or covenant hereof.
5.7 Counterparts. For the convenience of the parties hereto, this Agreement may
be executed in any number of counterparts, each such counterpart being deemed to
be an original instrument, and all such counterparts shall together constitute
the same agreement.
5.8 Governing Law. This Agreement shall be deemed to be made in, and in all
respects shall be interpreted, construed and governed by and in accordance with
the laws of the State of Maryland.
Page 9 of 11
<PAGE> 10
Exhibit 10.18
5.9 Severability. In the event any one or more of the provisions contained
herein shall for any reason be held to be invalid, illegal or unenforceable in
any respect, such provision or provisions shall be ineffective only to the
extent of such invalidity or unenforceability, without invalidating the
remainder of such provision or provisions or the remaining provisions of this
Agreement, and this Agreement shall be construed as if such invalid, illegal or
unenforceable provision or provisions had never been contained herein, unless
such a construction would be unreasonable.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
Roy F. Weston, Inc.
("WESTON")
By: s/William L. Robertson Attest:_________________
__________________________
Chief Executive Officer
Essential Technologies, Inc. ("Essential")
By:s/Thomas Lewis
________________________
Attest:______________________
Chief Executive Officer
Page 10 of 11
<PAGE> 11
Exhibit 10.18
Exhibits
<TABLE>
<CAPTION>
<S> <C> <C>
Exhibit A - Equipment List
Exhibit B - GlobeNet Trademark
Exhibit C - Other GlobeNet Assets
Exhibit D - GlobeNet Contracts:
- CEEM, Inc.
- Five Winds International
- McCully Technical Services
Exhibit E - Required Consents
Exhibit F - KS2 Business Plan
Exhibit G - Stock Purchase Warrant
Exhibit H - Essential Promissory Note
Exhibit I - Domain Names
www.benchmarker.net
www.eco-efficiency.com
www.eco-efficiency.net
www.eco-efficiency.org
www.ecoenterprise.com
www.eco-enterprise.com
www.eco-enterprise.net
www.eco-enterprise.org
www.expertnet.net
Exhibit J - Essential Financial Information
Exhibit K - Essential Alliance Partner Application
</TABLE>
Page 11 of 11
<PAGE> 1
Exhibit 10.19
MASTER SERVICES AGREEMENT FOR CONSULTING SERVICES
(HEREINAFTER REFERRED TO AS AGREEMENT)
BETWEEN
ROY F. WESTON, INC.
(HEREINAFTER REFERRED TO AS WESTON)
1400 WESTON WAY
WEST CHESTER, PA 19380
AND
INFRASTRUCTURE REVITALIZATION INSTITUTE
(HEREINAFTER REFERRED TO AS CONSULTANT)
1499 CHAIN BRIDGE ROAD, SUITE 201
MCLEAN, VIRGINIA 22101
ARTICLE I - INTRODUCTION
WHEREAS, WESTON, a Pennsylvania Corporation, may from time to time have
work for which it may require the services and expertise of CONSULTANT.
WHEREAS, CONSULTANT has represented to WESTON that it possesses the
appropriate qualifications, expertise and resources to perform such services.
NOW, THEREFORE, the parties agree that the terms and conditions set
forth below shall govern the services to be provided by CONSULTANT to WESTON.
<PAGE> 2
Exhibit 10.19
ARTICLE 2 - SCOPE OF WORK
(a) WESTON hereby engages CONSULTANT to perform the services
(hereinafter referred to as Services) as may be requested in
Purchase Order Releases issued by WESTON hereunder and agreed
to by CONSULTANT. This agreement authorizes, but shall not
obligate WESTON, to issue Purchase Order Releases in
accordance with Article 4 hereunder. The extent of WESTON's
financial obligation under this agreement shall be the
cumulative total value of all Purchase Order Releases issued
hereunder.
(b) WESTON may propose Work to CONSULTANT as WESTON believes to
be within CONSULTANT's professional competence. CONSULTANT,
in his sole discretion, may accept or reject any Work
proposed by WESTON. CONSULTANT agrees to devote his/her best
professional effort to the accomplishment of each Purchase
Order Release accepted by him/her and to perform with
diligence and expedition, consistent with the highest
recognized professional standards and in compliance with all
applicable laws and regulations.
(c) CONSULTANT will provide professional contracting and
consulting expertise for specific tasks, relating to program
facilitation and development, as well as other projects to be
assigned. The specific duties will be planned in accordance
with definite time requirements to accomplish the various
tasks. As such, each assignment will be specifically defined
by task orders, issued against this Master Agreement.
(d) CONSULTANT shall perform work at locations to be identified in
Purchase Order Releases to be issued hereunder.
ARTICLE 3 - ORDER OF PRECEDENCE
In the event of an inconsistency or ambiguity between the documents comprising
this Agreement and the Purchase Order Releases issued hereunder (including Scope
of Work and all changes and modifications thereto), the following order of
precedence shall govern:
A. Purchase Order Releases including all changes or modifications
thereto;
B. Scope of Work; and
C. Agreement.
<PAGE> 3
Exhibit 10.19
ARTICLE 4 - PURCHASE ORDER RELEASES
The CONSULTANT shall perform such work as WESTON may, from time to time,
authorize on Purchase Order Releases issued hereunder. A sample Purchase Order
Release is attached hereto as Exhibit A. Only the WESTON authorized
representative identified in Article 6 or alternate individual as may be
designated in writing may execute a Purchase Order Release. Each Purchase Order
Release issued and accepted by the CONSULTANT shall become a part of this
Agreement. Such Purchase Order Releases will describe the effort to be
accomplished, the completion schedule, the compensation schedule, the applicable
contractual provisions, performance benchmarks and all other relevant
information.
Prior to issuance of any Purchase Order Release, WESTON shall provide a detailed
scope of work to the CONSULTANT and obtain from CONSULTANT, a price estimate and
schedule to accomplish such work. The parties hereto will reach mutual agreement
regarding the compensation and schedule for such work prior to final issuance
and authorization to proceed under any Purchase Order Release.
ARTICLE 5 - CONFIDENTIALITY
(a) CONSULTANT shall receive and retain 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.
(b) WESTON shall receive and retain all Proprietary Information in
confidence and shall not disclose such information to any
person without the express written authorization of
CONSULTANT. WESTON shall use Proprietary Information solely
for the purpose of performing its obligations hereunder and
for no other purpose. Upon termination of this Agreement,
WESTON shall promptly return all Proprietary Information to
CONSULTANT, and will, if requested by CONSULTANT, execute a
certificate warranting that all Proprietary Information has
been returned to CONSULTANT in accordance with this Agreement.
<PAGE> 4
Exhibit 10.19
ARTICLE 6 - AUTHORIZED REPRESENTATIVES
The following individuals are the authorized representatives of the respective
parties to execute this Agreement and any subsequent Notices To Proceed issued
hereunder:
CONSULTANT: Jennifer Hosking, Executive Vice President
WESTON: Ed Pettiss, Vice President
Any subsequent changes to the authorized representatives cited above must be
mutually agreed to via written modification to this Agreement.
ARTICLE 7 - WORK PRODUCT
(a) All information, including, but not limited to, all designs,
drawings, specifications, standards, processes, manuals,
reports, computer software and related information, first
produced by CONSULTANT for WESTON during the performance of
the Services hereunder, shall be considered Proprietary
Information and shall be retained and used solely in
accordance with the provision of Article 5 hereof. To the
extent any such information comprises work susceptible to
protection under the 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" under the copyright laws, 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.
(b) 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 CONSULTANT's Services 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, improvements 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
application and the enforcement of any resulting patents and
(iv) execute any and all documents necessary for the
accomplishment of the foregoing.
<PAGE> 5
Exhibit 10.19
ARTICLE 8 - CONFLICTS OF INTEREST
(a) CONSULTANT warrants that, to the best of his knowledge and
belief, there are no relevant facts or circumstances which
could give rise to a conflict of interest under this
Agreement, or that CONSULTANT has disclosed all such relevant
information.
(b) The CONSULTANT agrees that if an actual or potential conflict
of interest is discovered after award, the CONSULTANT will
make a full disclosure in writing to WESTON. This disclosure
shall include a description of actions which the CONSULTANT
has taken or proposes to take, after consultation with WESTON
to avoid, mitigate or neutralize the actual or potential
conflict.
(c) In performing these Services, CONSULTANT shall not communicate
with any officer, representative, employee, elected official
or agency of the U.S. Government or any state or local
government on behalf of WESTON.
(d) If CONSULTANT is a former United States government employee,
CONSULTANT agrees to furnish WESTON all necessary information
regarding any potential conflict of interest.
ARTICLE 9 - SCHEDULE AND TERM OF AGREEMENT
The effective date of this agreement shall be July 1, 1999 and shall continue in
full force and effect for a period of two years thereafter unless earlier
terminated as provided herein.
ARTICLE 10 - COMPENSATION, INVOICING AND PAYMENT
(a) WESTON will pay CONSULTANT for work performed for WESTON as
specifically assigned and defined by WESTON at the rates
presented in Purchase Order Releases and will reimburse
CONSULTANT at cost its reasonable travel, associated food and
lodging and auto rental expenses approved by WESTON and
incurred in the performance of Services up to the maximum
amount specified in Purchase Order Releases. In consideration
of the remuneration set forth herein and for other good and
valuable consideration acknowledged as having been received
but not specifically set forth in this Agreement, CONSULTANT
hereby agrees to release WESTON from any and prior claims
which CONSULTANT may have against
<PAGE> 6
Exhibit 10.19
WESTON. No entertainment is authorized under this Agreement
and no entertainment expenses will be reimbursed under this
Agreement, except as defined as part of any specific Purchase
Order Release authorized hereunder. Entertainment includes the
purchase of meals or refreshments for any individual other
than CONSULTANT.
(b) For tasks performed on a time and materials basis, CONSULTANT
shall use the labor categories and corresponding fully loaded
rates as provided in Attachment A. Such rates shall be
renegotiated at the end of the first year of this agreement
and annually thereafter. CONSULTANT may amend this labor
category and rate schedule to provide for additional labor
categories as needed.
(c) CONSULTANT shall submit invoices for completed Services (in a
form acceptable to WESTON) within 30 days of the date of
performance of the Work. Invoices shall include, but not be
limited to the following:
1. The Agreement number, Work Order number, Purchase
Order Release number, dates of service, name of
authorized WESTON representative.
2. Names of personnel and title, net unit price or
hourly rate for Services rendered, extended totals,
expenses by category and total amounts due.
3. Invoices shall be submitted as an original and one
copy to:
Roy F. Weston, Inc.
One Weston Way
West Chester, PA 19380-1499
Attn: Accounts Payable
One (1) copy shall also be forwarded to the authorized WESTON
representative under separate cover.
(d) Payments shall be issued to CONSULTANT net 30 days after
receipt and approval of CONSULTANT's invoices by the
authorized WESTON representative. WESTON shall be under no
obligation to reimburse CONSULTANT for any expenses incurred
in violation of any law or to compensate CONSULTANT for any
Services, the performance of which violated any law.
<PAGE> 7
Exhibit 10.19
ARTICLE 11 - TERMINATION
Either party may terminate this Agreement upon thirty (30) days written notice.
Further, WESTON may terminate this Agreement at any time if CONSULTANT breaches
this Agreement or is unable to perform. Termination of this Agreement will not
affect the provisions of Article 5 and 7 which shall remain in effect for a
period of five (5) years from the date of termination.
ARTICLE 12 - SUPPLEMENTAL PROVISIONS
WESTON may, under certain Purchase Order Releases issued under this Agreement
flow down certain clauses from its Client contracts. CONSULTANT agrees to comply
with all supplemental provisions made a part of any specific Purchase Order
Release authorized hereunder.
ARTICLE 13 - RECORDS RETENTION
CONSULTANT shall retain all billing records related to this Agreement in legible
form for a period of five (5) years from date of final payment hereunder, or as
specified in WESTON's Client Contract, whichever period is greater. CONSULTANT
authorizes WESTON to inspect and audit these records during business hours with
prior notice to CONSULTANT.
ARTICLE 14 - TAXES
CONSULTANT shall have sole responsibility for payment of all Federal, State
(unless provided with a Non-taxable Transaction Certificate), Local and other
income taxes and for all employment and other taxes applicable to the
consideration paid to CONSULTANT hereunder. CONSULTANT further agrees to
indemnify and hold WESTON harmless from and against any and all claims related
to such taxes.
ARTICLE 15 - INDEPENDENT CONTRACTOR
In performance of all 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 he is engaged in an
independent business and that similar services are provided for other clients
and WESTON is not the CONSULTANT's sole and only client. CONSULTANT shall in no
way be deemed to be an agent or representative of WESTON. CONSULTANT shall have
no authority to bind or speak for WESTON except as may be specifically given to
CONSULTANT in writing from time to time.
<PAGE> 8
Exhibit 10.19
ARTICLE 16 - 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). Certificates of insurance shall be
provided to WESTON immediately upon request.
ARTICLE 17 - WARRANTY
CONSULTANT warrants: (a) that it possesses the expertise, capability, equipment
and personnel to properly and professionally perform its Services hereunder,
that it is properly and legally licensed (if applicable) to perform such
Services, and that it shall at all times in the performance of such Services
comply with all applicable laws, ordinances and regulations and shall perform
all Services in a good, workmanlike, professional, efficient and non-negligent
manner; and (b) it does not and during the period of performance of this
Agreement will not represent any competitor of WESTON without first providing
WESTON notice describing the scope of work and the competitor.
ARTICLE 18 - INDEMNIFICATION
The 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.
WESTON agrees to indemnify and hold harmless the CONSULTANT, 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 negligent
acts or omissions of WESTON or WESTON's employees or agents.
Neither party shall be liable to the other for incidental, indirect or
consequential damages, except where same arises out of the gross negligence or
willful misconduct of the other party.
ARTICLE 19 - CHANGES
WESTON may, at any time by written notice to CONSULTANT, make changes to any of
the documents constituting this Agreement. Claims for additional compensation or
extension of time (adjustments) under this Article must be made in writing
within ten (10)
<PAGE> 9
Exhibit 10.19
days of issuance of a change notice from WESTON. Failure to provide such written
claim shall constitute a waiver of such claim for adjustment. No claims for
adjustment will be accepted by WESTON after final payment hereunder. Failure to
reach mutual agreement regarding such adjustments hereunder shall constitute a
dispute to be resolved under Article 22 of this Agreement.
ARTICLE 20 - ASSIGNMENT
This Agreement may not be assigned by CONSULTANT, either in whole or in part,
without the prior written consent of WESTON and any attempted assignment shall
be null and void and without force and effect.
ARTICLE 21- YEAR 2000 COMPLIANCE WARRANTY
In addition to all other representations and warranties made hereunder, the
CONSULTANT represents and warrants to WESTON that all Services furnished
hereunder including any and all deliverables developed or required to be
provided hereunder, including without limitation, all designs, drawings,
specifications, standards, processes, manuals, reports, computer software and
related information are fully compliant in all respects with the Year 2000, and
those Services will operate and perform without errors, malfunctions or defects
(including specifically errors, malfunctions or defects relating to date data
representing or referencing different centuries or more than one century) at all
times prior to, during and after the calendar year 2000 A.D. In the event any
such errors, malfunctions or defects are detected in the Services furnished by
the CONSULTANT hereunder, CONSULTANT shall, at its sole cost and expense,
promptly repair or replace the defective Services with Services of like quality,
form, fit and function in all respects as they relate to Year 2000 compliance.
The warranties of CONSULTANT shall survive expiration or earlier termination of
this Agreement, and shall extend to WESTON and all users of the Services.
ARTICLE 22 - DISPUTES
Any dispute arising under this Agreement, including disputes under termination,
not settled by agreement of the parties, 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. The rights of WESTON
and the obligations of CONSULTANT shall survive completion of performance in
accordance with the provisions of this Agreement and the Purchase Order Releases
issued thereunder and final payment hereunder.
<PAGE> 10
Exhibit 10.19
ARTICLE 23 - SEVERABILITY
Any provision or part thereof 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 24 - 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 therein wholly to be performed.
ARTICLE 25 - NON-EXCLUSIVITY
This Agreement is non-exclusive.
<PAGE> 11
Exhibit 10.19
ARTICLE 26 - ENTIRE AGREEMENT
This Agreement, including all Purchase Order Releases issued hereunder,
constitutes the sole and only agreement of the parties hereto and supersedes any
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 duly authorized representative of each party.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by
their duly authorized representatives.
CONSULTANT:
BY:
NAME: Jennifer T. Hosking
(Print/Type)
TITLE: Executive Vice President
DATE: 11/11/99
ROY F. WESTON, INC. (WESTON):
BY:
NAME: Edmund B. Pettiss,Jr.
(Print/Type)
TITLE: VP, Marketing
DATE: 11/11/99
Page 11 of 11
<PAGE> 12
Exhibit 10.19
Attachment A
IRI Rate Schedule
(Effective 11/11/99)
<TABLE>
<S> <C>
Senior Consultant $85.00
Consultant/Project Manager $65.00
Web Developer $60.00
Writer/Communications Expert $55.00
Jr. Writer/Researcher $35.00
Administrative Support $25.00
</TABLE>
Page 1 of 1
<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
1999 1998 1997
---- ---- ----
Thousands of Dollars,
Except Share and Per Share Amounts
<S> <C> <C> <C>
Basic
Net income (loss) $ 988 $ 858 $ (11,425)
Weighted average shares 9,951,404 9,914,379 9,712,752
Basic earnings (loss) per share $ .10 $ .09 $ (1.18)
Diluted
Net income (loss) $ 988 $ 858 $ (11,425)
Weighted average shares with dilutive options 9,971,943 9,936,379 9,712,752
Diluted earnings (loss) per share $ .10 $ .09 $ (1.18)
</TABLE>
<PAGE> 1
Exhibit 13
ROY F WESTON, INC.
1999 ANNUAL REPORT
1
<PAGE> 2
MANAGEMENT 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
----------------------------------------
1999 1998 1997
----------------------------------------
<S> <C> <C> <C>
Net revenues 100.0 % 100.0 % 100.0 %
----------------------------------------
Expenses
Direct salaries and other operating costs 88.0 % 86.5 % 94.5 %
General and administrative expenses 11.6 % 12.7 % 17.8 %
Pension curtailment gain -- -- (2.7)%
Restructuring charges (credits) -- -- (1.2)%
Impairment of long-lived assets -- -- 0.9 %
----------------------------------------
Income (loss) from operations 0.4 % 0.8 % (9.3)%
Other income 0.6 % 0.2 % 0.3 %
----------------------------------------
Income (loss) before income taxes 1.0 % 1.0 % (9.0)%
Income taxes (benefit) 0.3 % 0.4 % (1.0)%
----------------------------------------
Net income (loss) 0.7 % 0.6 % (8.0)%
=========================================
</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 44%, 42%,
and 40% of gross revenues in 1999, 1998, and 1997, respectively. The increases
are due, in part, to greater subcontracting of laboratory analysis beginning in
May 1997 as a result of divestiture of the Company's analytical laboratories and
to a higher concentration of construction and remediation projects.
RESULTS OF OPERATIONS
1999 COMPARED TO 1998
Net revenues increased 5% to $147,766,000 from $140,386,000 in 1998. An
increase of $11,940,000, or 11%, in net revenues from the Company's
Infrastructure Redevelopment segment was partially offset by a decrease of
$4,317,000, or 17%, in net revenues from the Company's Federal Programs segment.
The increase in Infrastructure Redevelopment net revenues is primarily due to
increased volume of work as a result of higher contract bookings in 1998 and
1999. The decrease in Federal Programs' net revenues was primarily due to the
loss of one large contract in the middle of 1999.
The Company had income from operations of $582,000 in 1999, a 49% decrease from
$1,145,000 in 1998. Income from operations in 1999 and 1998 includes $500,000
and $1,000,000, respectively, from reductions in
10 ROY F. WESTON, INC. AND SUBSIDIARIES
<PAGE> 3
the Company's estimated insurance claim liabilities. In addition, the 1998
results include $800,000 of net revenues from work performed on a contract in
prior years, resulting from a settlement of that contract. A modest increase in
margins in 1999 was partially offset by lower operations personnel utilization.
Direct salaries and other operating costs increased $8,580,000, or 7%, in 1999
as the Company incurred increased business development salaries and expenses
related to impaired property redevelopment and ports and waterways. Operating
costs in 1999 included approximately $400,000 of salaries and expenses
attributable to integrating the activities and employees of a former Naval
detachment that became the Company's Vallejo, CA, office. General and
administrative expenses declined $637,000, or 4%, in 1999 due primarily to tight
cost control and increased computer system operating efficiencies.
The Company had other income of $830,000 in 1999 compared to $285,000
in 1998. Interest and dividend income decreased $468,000 in 1999 due to lower
average amounts invested. The decrease was offset by a $480,000 gain from the
demutualization of a life insurance company in which the Company is a
policyholder. Interest expense increased $254,000, or 19%, in 1999, due
primarily to increased short-term borrowings under the Company's line of credit.
Other income in 1999 includes a $770,000 gain from a life insurance claim. This
nontaxable gain reduced the Company's effective income tax rate to 30% in 1999
from 40% in 1998.
1998 COMPARED TO 1997
Net revenues decreased 1% to $140,386,000 from $142,359,000 in 1997. The
Company had no net revenues from its analytical laboratory operations in 1998 as
it completed the sale of these operations in May 1997. Analytical laboratory
operations provided $5,624,000 of net revenues in 1997. Dedicated site federal
program net revenues decreased $2,215,000 due to lower margins on one project
and a 3% decrease in total direct labor. Net revenues for the Company's other
operations increased $6,137,000 due to both higher utilization of direct labor
and increased multipliers. The increased direct labor was primarily due to
additional projects obtained through enhanced selling efforts.
The Company had income from operations of $1,145,000 in 1998 compared to a
loss from operations of $13,216,000 in 1997. The 1998 results included a
$1,000,000 reduction in the Company's estimated insurance claim liability and
$800,000 of net revenues for work performed on a contract in prior years. 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.
Margins were significantly improved in 1998 as the Company realized the
benefit of staff and cost reductions initiated in the second half of 1997.
Operations personnel utilization was up nearly two full percentage points in
1998.
ROY F. WESTON, INC. AND SUBSIDIARIES 11
<PAGE> 4
MANAGEMENT DISCUSSION AND ANALYSIS
General and administrative expenses declined $7,545,000, or 30%, in 1998,
decreasing to 12.7% of net revenues from 17.8% in 1997. Expenditures in 1997
included approximately $2,500,000 for reductions in the Company's administrative
workforce and changes to its Board of Directors and senior management. The
workforce reductions resulted in substantially lower administrative salaries and
expenses in 1998. In addition, expenses for the Company's computer systems were
much lower in 1998 due to the 1997 writedown of financial and project software
costs.
The Company had other income of $285,000 in 1998 compared to $341,000 in
1997. Interest and dividend income decreased $624,000 in 1998 primarily due to
significantly lower average amounts invested. This decrease was largely offset
by a 1998 increase of $442,000 in gains on sales of investments. In addition,
the Company realized gains of $157,000 and $21,000 on redemptions of $3,971,000
and $186,000 of its 7% Convertible Subordinated Debentures in 1998 and 1997,
respectively. Interest expense decreased $252,000 from 1997 due primarily to the
repurchase of 7% Convertible Subordinated Debentures and the repayment of a
five-year term loan.
The Company had an effective income tax rate of 40% in 1998 compared to an
effective income tax benefit rate of 11% in 1997. The 1997 rate included an
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
1997 basic net loss per share by $.31, or 26% of its 1997 basic net loss per
share.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents and marketable securities decreased $1,185,000
in 1999 to $4,355,000 from $5,540,000 at December 31, 1998.
Operating activities provided cash of $993,000 in 1999 and used cash of
$4,167,000 in 1998. The total of accounts receivable and work in process, net of
advance billings, increased $2,673,000 in 1999. The Company has encountered
significant billing and collection delays due to a dispute over contract
modification issues on one large federal construction project. The Company
intends to commence litigation to resolve the dispute. Although the outcome of
any litigation is uncertain, the Company believes that its position is sound and
that it will achieve a favorable resolution of the dispute, in which event the
Company could recognize a significant gain. In the event of an unfavorable
resolution, the Company could sustain a significant loss, which could be
material.
Cash provided from operating activities in 1999 includes proceeds
aggregating approximately $1,400,000 from the demutualization of an insurance
company in which the Company was a policyholder and from a life insurance claim.
During 1999, the Company contributed $620,000 for 40% ownership of WESKEM,
LLC, a newly formed limited liability company. The Company may be required to
contribute additional cash to the limited liability company over the next three
years. Capital expenditures for property and equipment and other assets were
$4,571,000 in 1999 and $3,180,000 in 1998. Investments in 1999 and 1998
consisted primarily of system development expenses, computers, and other
equipment. The Company plans to invest $3,000,000 to $4,000,000 of capital in
2000. The Company's capital expenditures are generally financed through
operating cash flow, but some additional borrowing may be required.
12 ROY F. WESTON, INC. AND SUBSIDIARIES
<PAGE> 5
The Company is required to make annual redemptions of its 7% Convertible
Subordinated Debentures in the principal amount of $3,140,000 by April 15 of
each year. During 1999, the Company redeemed $1,635,000 of these debentures,
satisfying the balance of the Company's 1999 requirement, and a portion of the
2000 requirement. Repurchases of $2,903,000 are required to be made to satisfy
the April 15, 2000 requirement.
The Company currently has an $18,000,000 revolving credit facility with a
bank to provide cash borrowings and letters of credit. The facility is
collateralized by liens on substantially all of the Company's tangible and
intangible assets, excluding real estate. The facility expires on June 5, 2000
with a one-year renewal option and is available for working capital and general
corporate purposes, including permitted acquisitions. Cash borrowings bear
interest at 1% over the prime interest rate or, at the Company's option, other
variable rates. Cash borrowings for purposes other than acquisitions are limited
to $10,000,000 and amounts exceeding $8,000,000, if any, bear interest at 2%
over the prime interest rate. The agreement requires the Company to maintain
certain deposits, tangible net worth, and certain financial ratios and restricts
dividend payments, certain expenditures, and debt outside the agreement. At
December 31, 1999, the Company had $3,400,000 of outstanding cash borrowings
under the facility and had outstanding letters of credit aggregating $2,141,000.
At December 31, 1999, the Company was not in compliance with one of the
financial ratio covenants required under the credit facility. A waiver of
noncompliance has been obtained from the lender. The Company's working capital
borrowing needs have increased due to the Company's revenue growth and to the
adverse effect on the Company's cash flow created by the federal construction
project contract dispute referred to above. To meet these increased borrowing
needs, the Company intends to enter into a replacement credit facility with its
existing lender. The Company has received a written commitment from that lender
for a replacement credit facility that will reduce the total amount of the
facility, but increase the amount available for working capital borrowings. The
Company expects the new facility to be effective by May 2000. If the Company
were unable to obtain the new facility or a comparable credit facility, the
Company could experience significant cash constraints.
During 1999, the Company borrowed the cash value of a life insurance
policy aggregating $2,305,000.
OTHER
The Company had net contract backlog of $67,500,000 and $61,000,000 at
December 31, 1999 and 1998, respectively. 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 1999, new contract bookings were $163,800,000, a 13% increase from
1998.
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.
ROY F. WESTON, INC. AND SUBSIDIARIES 13
<PAGE> 6
MANAGEMENT DISCUSSION AND ANALYSIS
The Company expended considerable effort in readying its operations for
potential Year 2000 issues, including replacing all of its business systems at a
total cost of approximately $4,100,000 during 1999 and 1998. The cost of
addressing other Year 2000 issues aggregated approximately $450,000. The Company
did not experience any significant disruptions in its operations as a result of
the change to Year 2000.
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
strategies and plans, technological developments, and other matters. The Private
Securities Litigation Reform Act of 1995 provides a safe harbor for these
forward looking statements, including statements contained in this report. In
order to comply with the terms of the safe harbor, the Company notes that a
number of factors 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 in which the Company operates.
- - 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, including successful resolution of any contract
disputes.
- - 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, including adequate financing to fund
working capital needs and the Company's acquisition strategy.
- - 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, including professional liability and pollution
claims.
- - The Company's ability to conclude and implement acquisitions of other
businesses consistent with the Company's acquisition strategy.
- - The Company's ability to retain key personnel.
The Company disclaims any intent or obligation to update forward looking
statements.
14 ROY F. WESTON, INC. AND SUBSIDIARIES
<PAGE> 7
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31
----------------------------------------------------------------------------
(Thousands of dollars, 1999 1998 1997 1996 1995
except per share amounts)
<S> <C> <C> <C> <C> <C>
Gross revenues $ 263,744 $ 241,192 $ 238,103 $ 263,388 $ 309,858
Net revenues $ 147,766 $ 140,386 $ 142,359 $ 176,530 $ 206,273
Income (loss) from operations $ 582 $ 1,145 $ (13,216) $ (23,181)* $ 2,623
Net income (loss) $ 988 $ 858 $ (11,425) $ (16,655) $ 1,514
Basic earnings (loss) per share $ .10 $ .09 $ (1.18) $ (1.74) $ .16
</TABLE>
* Includes restructuring and impairment charges aggregating $17,567.
<TABLE>
<CAPTION>
AT DECEMBER 31
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Working capital $ 44,741 $ 44,854 $ 46,239 $ 58,956 $ 67,875
Total assets $ 121,427 $ 121,356 $ 125,248 $ 141,472 $ 163,406
Short-term debt $ 6,684 $ 3,600 $ 2,914 $ 2,159 $ 2,261
Long-term debt (less
current portion) $ 9,648 $ 12,997 $ 15,884 $ 18,922 $ 24,673
Stockholders' equity $ 57,163 $ 56,324 $ 55,367 $ 66,090 $ 82,901
=========================================================================
</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, 1999 and 1998, and the related
consolidated statements of operations, cash flows, and stockholders' equity for
each of the three years in the period ended December 31, 1999. 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 auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Roy F. Weston,
Inc. and Subsidiaries as of December 31, 1999 and 1998, and the consolidated
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1999 in conformity with accounting principles
generally accepted in the United States.
/s/ PricewaterhouseCoopers LLP
February 3, 2000
ROY F. WESTON, INC. AND SUBSIDIARIES 15
<PAGE> 8
FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31
------------------------
(Thousands of dollars) 1999 1998
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 4,355 $ 3,993
Marketable securities -- 1,547
Accounts receivable, trade, net of allowance for doubtful accounts 56,919 60,476
Unbilled costs and estimated earnings on contracts in process 27,291 20,540
Deferred income taxes 2,202 2,470
Other 4,760 4,376
------------------------
Total current assets 95,527 93,402
------------------------
PROPERTY AND EQUIPMENT
Land 215 215
Buildings and improvements 11,196 11,500
Furniture and equipment 32,643 30,544
Leasehold improvements 1,846 1,787
Construction in progress 132 --
------------------------
Total property and equipment 46,032 44,046
Less accumulated depreciation and amortization 36,184 34,852
------------------------
Property and equipment, net 9,848 9,194
------------------------
OTHER ASSETS
Goodwill, net of accumulated amortization of $4,200 in 1999
and $4,138 in 1998 1,754 1,816
Deferred income taxes 5,634 5,528
Other 8,664 11,416
------------------------
Total other assets 16,052 18,760
------------------------
TOTAL ASSETS $121,427 $121,356
========================
</TABLE>
See notes to consolidated financial statements.
16 ROY F. WESTON, INC. AND SUBSIDIARIES
<PAGE> 9
<TABLE>
<CAPTION>
December 31
----------------------------
(Thousands of dollars) 1999 1998
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Borrowings under line of credit $ 3,400 $ 1,900
Current maturities of long-term debt 3,284 1,700
Accounts payable and accrued expenses 17,299 17,579
Billings on contracts in process in excess of costs and
estimated earnings 11,867 10,939
Employee compensation, benefits, and payroll taxes 8,732 8,445
Income taxes payable 288 202
Other 5,916 7,783
----------------------------
Total current liabilities 50,786 48,548
----------------------------
LONG-TERM DEBT 9,648 12,997
----------------------------
OTHER LIABILITIES 3,830 3,487
----------------------------
CONTINGENCIES
STOCKHOLDERS' EQUITY
Common stock, $.10 par value, 10,500,000 shares authorized;
3,170,294 shares issued in 1999 and 1998 317 317
Series A common stock, $.10 par value, 20,500,000 shares authorized;
8,650,778 shares issued in 1999 and 1998 865 865
Unrealized gain on investments 419 597
Additional paid-in capital 55,928 55,928
Retained earnings 4,695 3,707
----------------------------
62,224 61,414
Less treasury stock at cost, 1,081,275 Common shares in 1999
and 1998; 783,043 Series A common shares in 1999 and
792,805 Series A common shares in 1998 5,061 5,090
----------------------------
Total stockholders' equity 57,163 56,324
----------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $121,427 $121,356
============================
</TABLE>
ROY F. WESTON, INC. AND SUBSIDIARIES 17
<PAGE> 10
FINANCIAL STATEMENTS
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31
-----------------------------------------------------
(Thousands of dollars, except per share amounts) 1999 1998 1997
<S> <C> <C> <C>
Gross revenues $ 263,744 $ 241,192 $ 238,103
Direct project costs 115,978 100,806 95,744
-----------------------------------------------------
Net revenues 147,766 140,386 142,359
-----------------------------------------------------
Expenses
Direct salaries and other operating costs 130,021 121,441 134,552
General and administrative expenses 17,163 17,800 25,345
Pension curtailment gain -- -- (3,899)
Restructuring credits -- -- (1,668)
Impairment of long-lived assets -- -- 1,245
-----------------------------------------------------
147,184 139,241 155,575
-----------------------------------------------------
Income (loss) from operations 582 1,145 (13,216)
-----------------------------------------------------
Other income (expense)
Investment income 1,639 1,662 1,844
Interest expense (1,625) (1,371) (1,623)
Other 816 (6) 120
-----------------------------------------------------
830 285 341
-----------------------------------------------------
Income (loss) before income taxes 1,412 1,430 (12,875)
Provision (benefit) for income taxes 424 572 (1,450)
-----------------------------------------------------
Net income (loss) $ 988 $ 858 $ (11,425)
=====================================================
Basic earnings (loss) per share $ .10 $ .09 $ (1.18)
=====================================================
Weighted average shares outstanding - basic 9,951,404 9,914,379 9,712,752
=====================================================
Diluted earnings (loss) per share $ .10 $ .09 $ (1.18)
=====================================================
Weighted average shares outstanding - diluted 9,971,943 9,936,379 9,712,752
=====================================================
</TABLE>
See notes to consolidated financial statements.
18 ROY F. WESTON, INC. AND SUBSIDIARIES
<PAGE> 11
FINANCIAL STATEMENTS
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31
-------------------------------------------
(Thousands of dollars) 1999 1998 1997
-------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 988 $ 858 $(11,425)
Adjustments to reconcile net income (loss)
to net cash provided by operating
activities:
Depreciation and amortization 3,889 3,770 5,396
Provision for losses on accounts receivable 407 704 511
Pension curtailment gain -- -- (3,899)
Impairment of long-lived assets -- -- 1,245
Other (697) (438) (174)
Change in assets and liabilities:
Accounts receivable, trade 3,150 (6,683) 10,472
Unbilled costs and estimated earnings on contracts
in process (6,751) 380 (2,769)
Other current assets (378) (1,733) (60)
Accounts payable and accrued expenses (280) 3,700 2,010
Billings on contracts in process in excess of costs
and estimated earnings 928 (3,336) 2,042
Employee compensation, benefits, and payroll taxes 287 (276) (4,605)
Income taxes 80 1,143 1,558
Deferred income taxes 254 301 424
Other current liabilities (1,163) (2,793) (1,927)
Other assets and liabilities 279 236 3,476
-------------------------------------------
Net cash provided by (used for) operating activities 993 (4,167) 2,275
-------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of investments 3,282 9,912 15,381
Payments for purchase of investments (501) (6,676) (12,075)
Investment in WESKEM, LLC (620) -- --
Capital expenditures (4,571) (3,180) (2,780)
-------------------------------------------
Net cash provided by (used for) investing activities (2,410) 56 526
-------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Borrowings under line of credit 1,500 1,900 --
Principal payments under long-term debt (2,055) (4,798) (2,411)
Insurance policy loan 2,305 -- --
Other 29 235 499
-------------------------------------------
Net cash provided by (used for) financing activities 1,779 (2,663) (1,912)
-------------------------------------------
Net increase (decrease) in cash and cash equivalents 362 (6,774) 889
-------------------------------------------
CASH AND CASH EQUIVALENTS
Beginning of year 3,993 10,767 9,878
-------------------------------------------
End of year $ 4,355 $ 3,993 $ 10,767
===========================================
</TABLE>
See notes to consolidated financial statements.
ROY F. WESTON, INC. AND SUBSIDIARIES 19
<PAGE> 12
FINANCIAL STATEMENTS
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Series A
Common Stock Common Stock
(Thousands of dollars and shares) ---------------------- -------------------- Unrealized Gain (Loss)
Shares Amount Shares Amount on Investments
-------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
At January 1, 1997 3,193 $ 319 8,319 $832 $ 541
Shares issued under employee
stock purchase plan -- -- 240 24 --
Treasury stock transactions -- -- -- -- --
Other (23) (2) 23 2 192
Net loss -- -- -- -- --
-------------------------------------------------------------------------
At December 31, 1997 3,170 317 8,582 858 733
Shares issued under employee
stock purchase plan -- -- 69 7 --
Other -- -- -- -- (136)
Net income -- -- -- -- --
-------------------------------------------------------------------------
At December 31, 1998 3,170 317 8,651 865 597
Treasury stock transactions -- -- -- -- --
Other -- -- -- -- (178)
Net income -- -- -- -- --
-------------------------------------------------------------------------
At December 31, 1999 3,170 $ 317 8,651 $865 $ 419
=========================================================================
</TABLE>
See notes to consolidated financial statements.
20 ROY F. WESTON, INC. AND SUBSIDIARIES
<PAGE> 13
<TABLE>
<CAPTION>
Treasury Stock
----------------------------------------
Additional Retained Common Series A Stockholders' Comprehensive
Paid-in Capital Earnings Shares Common Shares Amount Equity Total Income
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 55,130 $ 14,274 (1,081) (770) $ (5,006) $ 66,090 $ --
559 -- -- -- -- 583 --
-- -- -- (23) (84) (84) --
11 -- -- -- -- 203 192
-- (11,425) -- -- -- (11,425) (11,425)
- ---------------------------------------------------------------------------------------------------------------------------------
55,700 2,849 (1,081) (793) (5,090) 55,367 $ (11,233)
===============
228 -- -- -- -- 235 $ --
-- -- -- -- -- (136) (136)
-- 858 -- -- -- 858 858
- ---------------------------------------------------------------------------------------------------------------------------------
55,928 3,707 (1,081) (793) (5,090) 56,324 $ 722
===============
-- -- -- 10 29 29 $ --
-- -- -- -- -- (178) (178)
-- 988 -- -- -- 988 988
- ---------------------------------------------------------------------------------------------------------------------------------
$ 55,928 $ 4,695 (1,081) (783) $ (5,061) $ 57,163 $ 810
=================================================================================================================================
</TABLE>
ROY F. WESTON, INC. AND SUBSIDIARIES 21
<PAGE> 14
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - NATURE OF OPERATIONS
The Company provides services to industry, the federal government, and
state and local government markets. Services provided include infrastructure
redevelopment, federal program management, and knowledge systems and solutions.
The Company's services are provided primarily in the United States, although
services in other countries 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.
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.
LONG-LIVED ASSET IMPAIRMENT
The Company reviews 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.
22 ROY F. WESTON, INC. AND SUBSIDIARIES
<PAGE> 15
CONTRACT REVENUE RECOGNITION
The Company provides professional engineering, consulting, and other
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 follows 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 of Financial
Accounting Standards No. 123 are included in Note 9 to the consolidated
financial statements.
NOTE 3 - RESTRUCTURING AND IMPAIRMENT CHARGES
During 1996, the Company adopted plans to withdraw from the analytical
laboratory business, close or reduce the size of certain offices, 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, 1999 and 1998,
respectively, the Company had accruals aggregating $67,000 and $593,000,
respectively, included as other current liabilities in the accompanying
consolidated balance sheets, for costs, principally lease payments to be
incurred in future periods as a result of the restructuring.
During 1997, the Company completed the sale of the 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 an impairment charge of $1,245,000 in
1997, in accordance with Statement of Financial Accounting Standards No. 121.
The impairment charge reduced the carrying value of the Company's financial and
project software to its estimated fair value.
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) 1999 1998
--------------------------------------------
<S> <C> <C>
Fair Value:
Current $ -- $ 1,547
Noncurrent 2,342 3,853
--------------------------------------------
2,342 5,400
Gross unrealized holding gains (635) (950)
Gross unrealized holding losses -- 45
--------------------------------------------
Cost basis of investments $ 1,707 $ 4,495
============================================
</TABLE>
ROY F. WESTON, INC. AND SUBSIDIARIES 23
<PAGE> 16
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Investment activity for the years ended December 31 was as follows:
<TABLE>
<CAPTION>
(Thousands of dollars) 1999 1998 1997
--------------------------------------------------------------
<S> <C> <C> <C>
Proceeds from sale of investments $ 3,282 $ 9,912 $ 15,381
--------------------------------------------------------------
Gross realized gains $ 400 $ 461 $ 270
--------------------------------------------------------------
Gross realized losses $ -- $ -- $ --
--------------------------------------------------------------
Change in unrealized holding gain $ (270) $ (206) $ 291
Deferred income taxes 92 70 (99)
--------------------------------------------------------------
Net change in unrealized holding gain $ (178) $ (136) $ 192
==============================================================
</TABLE>
Realized gains and losses are determined on a specific identification
basis and included in investment income in the accompanying consolidated
statements of operations.
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) 1999 1998
-------------------------------------
<S> <C> <C>
Industrial clients $ 18,512 $ 16,003
State and municipal governments 13,242 13,913
U.S. Government agencies 25,670 31,674
Retentions 1,535 768
-------------------------------------
58,959 62,358
Less allowance for doubtful accounts 2,040 1,882
-------------------------------------
$ 56,919 $ 60,476
=====================================
</TABLE>
Unbilled costs and estimated earnings consisted of the following:
<TABLE>
<CAPTION>
(Thousands of dollars) 1999 1998
------------------------------------------
<S> <C> <C>
Industrial clients $ 5,139 $ 2,564
State and municipal governments 5,014 6,751
U.S. Government agencies 16,433 10,952
Retentions 705 273
------------------------------------------
$ 27,291 $ 20,540
==========================================
</TABLE>
The Company does not believe there is any undue credit risk in connection
with realization of its account receivable.
Unbilled costs and estimated earnings can be invoiced upon attaining
certain milestones under fixed-price contracts, completion of federal government
indirect rate audits, final approval of design plans for engineering services,
and completion of construction on certain projects. Billed and unbilled
retentions of $2,240,000 at December 31, 1999 include $565,000, which is
expected to be collected during 2001 and thereafter.
24 ROY F. WESTON, INC. AND SUBSIDIARIES
<PAGE> 17
NOTE 6 - LINE OF CREDIT AGREEMENT
The Company has an $18,000,000 revolving credit facility with a bank to
provide cash borrowings and letters of credit that expires on June 5, 2000. The
facility is collateralized by liens on substantially all of the Company's
tangible and intangible assets, excluding real estate. The facility is for a
two-year period with a one-year renewal option and is available for working
capital and other general corporate purposes, including permitted acquisitions.
Under the terms of the agreement, cash borrowings bear interest at 1% over
the prime interest rate or, at the Company's option, other variable rates. Cash
borrowings for working capital are limited to $10,000,000 and any such
borrowings over $8,000,000 bear interest at 2% over the prime interest rate. The
Company is subject to a 3/8% annual charge on the unused portion of the
facility. The agreement requires the Company to maintain minimum levels of
tangible net worth and certain financial ratios and restricts certain
expenditures and debt outside the agreement. At December 31, 1999, the Company
was not in compliance with one of the financial ratio covenants required under
the credit facility.
The Company had $3,400,000 of outstanding cash borrowings under the
facility at December 31, 1999 and had outstanding letters of credit aggregating
$2,141,000.
NOTE 7 - LONG-TERM DEBT
Long-term debt at December 31 consisted of the following:
<TABLE>
<CAPTION>
(Thousands of dollars) 1999 1998
------------------------------------
<S> <C> <C>
7% Convertible Subordinated Debentures due April 15, 2002 $ 12,323 $ 13,958
Capitalized lease obligations 609 739
------------------------------------
Total debt 12,932 14,697
Less current maturities 3,284 1,700
------------------------------------
$ 9,648 $ 12,997
====================================
</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%.
The Company is required to redeem annually $3,140,000 of the principal
amount of the Debentures, so as to retire 80% of the Debentures prior to
maturity. During 1999, 1998, and 1997, the Company repurchased $1,635,000,
$3,971,000, and $186,000 principal amount of Debentures, respectively, thus
satisfying the redemption requirements through 1999 and a portion of the 2000
redemption requirement. Debentures aggregating $2,903,000 are required to be
repurchased by April 15, 2000. The gains on redemption of $53,000, $157,000, and
$21,000 in 1999, 1998, and 1997, 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,
1999 and 1998 was $10,724,000 and $12,946,000, respectively.
ROY F. WESTON, INC. AND SUBSIDIARIES 25
<PAGE> 18
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Maturities of long-term debt are as follows:
<TABLE>
<CAPTION>
Years Ending December 31 (Thousands of dollars)
<S> <C>
2000 $ 3,284
2001 3,244
2002 6,360
2003 40
2004 4
-------------
$ 12,932
=============
</TABLE>
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>
2000 $ 3,999
2001 3,227
2002 2,147
2003 2,165
2004 1,747
Thereafter 13,655
-------------
$ 26,940
=============
</TABLE>
The following is a summary of rental expense for the years ended December
31:
<TABLE>
<CAPTION>
(Thousands of dollars) 1999 1998 1997
----------------------------------------------------------------
<S> <C> <C> <C>
Gross rental expense $ 15,466 $ 12,210 $ 15,068
Reimbursed as direct project expenses (10,210) (7,497) (6,897)
----------------------------------------------------------------
Net rental expense $ 5,256 $ 4,713 $ 8,171
================================================================
</TABLE>
26 ROY F. WESTON, INC. AND SUBSIDIARIES
<PAGE> 19
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 and each share of Series A common
stock has one-tenth of one vote.
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 1,675,000
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>
Option Price Weighted Average
Number of Shares per Share Price per Share
-----------------------------------------------------------
<S> <C> <C> <C>
Outstanding at January 1, 1997 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
Granted -- -- $ --
Exercised -- -- --
Canceled (83,467) $ 3.75 - $14.50 $ 6.12
-----------------------------------------------------------
Outstanding at December 31, 1998 769,149 $ 2.75 - $14.50 $ 4.29
Granted 410,000 $ 2.31 - $ 2.81 $ 2.44
Exercised -- -- --
Canceled (79,600) $ 2.44 - $14.50 $ 4.37
-----------------------------------------------------------
Outstanding at December 31, 1999 1,099,549 $ 2.31 - $ 7.75 $ 3.60
===========================================================
Exercisable at December 31, 1997 120,600 $ 4.00 - $14.50 $ 7.13
Exercisable at December 31, 1998 149,710 $ 3.75 - $14.50 $ 5.70
Exercisable at December 31, 1999 196,540 $ 2.75 - $ 7.75 $ 5.28
</TABLE>
At December 31, 1999 there were 461,151 shares available for further
grants under the Option Plan. The weighted average remaining contractual life of
options outstanding at December 31, 1999 was 7.8 years.
Options granted during 1997 include options for 435,000 shares which were
to vest if the closing market price of the Company's Series A common stock
attained certain thresholds, and remained at or above those thresholds for at
least 90 days. Vesting for these options was changed in 1999 so that they vest
at the rate of 20% per year beginning April 1, 2000. 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.
In 1999 the Company granted Stock Appreciation Rights (SARs) to certain
executives. Under the terms of the SARs the executives will receive a cash award
if the market price of the Series A shares exceeds $2.50 per share during the
measurement period, as defined. The potential cash award under these SARs is
capped, based on the exercise price
ROY F. WESTON, INC. AND SUBSIDIARIES 27
<PAGE> 20
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
of certain options held by the executives. As of December 31, 1999 no amounts
were recognized in the accompanying consolidated statement of operations as the
market threshold had not been met.
The Company also had an Employee Stock Purchase Plan (Purchase Plan),
which provided for the purchase of Series A common stock by eligible employees.
The Purchase Plan was 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 were reserved for issuance under the
Purchase Plan. The price per share of Series A common stock was equal to 85% of
the lower of the closing market price of Series A common stock on the first
trading day of each semiannual purchase period, or the last trading day of such
purchase period. During the years ended December 31, 1998 and 1997,
respectively, 68,737 and 240,054 shares were issued under the Purchase Plan at
prices ranging from $2.34 per share to $3.45 per share. Substantially all of the
shares reserved for issuance under the Purchase Plan had been distributed as of
July 1, 1998, and the Purchase Plan has terminated in accordance with its terms.
In 1999, the Company adopted a Director Stock Compensation Plan. Under the
terms of this plan, certain directors receive shares of Series A common stock,
rather than cash for their quarterly director fees. A total of 200,000 shares of
Series A common stock have been reserved for issuance under this plan.
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 applicable 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:
<TABLE>
(Thousands of dollars, except per share amount) 1999 1998 1997
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net income (loss) $ 687 $ 557 $(11,823)
Basic earnings (loss) per share $ .07 $ .06 $ (1.22)
</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 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. There were
no option grants in 1998. Significant assumptions used and results follow:
<TABLE>
<CAPTION>
1999 1997
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Risk-free interest rates 5.3% - 6.1% 6.3% - 6.8%
Volatility 47% 59% - 96%
Dividends None None
Fair value $1.38 - $1.71 $2.19 - $3.85
</TABLE>
NOTE 10 - EMPLOYEE BENEFIT PLANS
The Company has a defined benefit pension plan (Retirement Income Plan)
that covered substantially all of its employees until July 1, 1997. Effective
that date, benefits under the Retirement Income Plan were frozen, resulting in
the recognition of a curtailment gain of $3,899,000 in 1997. In addition, the
Company has nonqualified supplementary retirement plans (Supplemental Plans)
that provide additional benefits to certain executives. The Company also
provides certain postretirement medical benefits.
28 ROY F. WESTON, INC. AND SUBSIDIARIES
<PAGE> 21
The following provides a reconciliation of benefit obligations, plan
assets, and funded status of the plans:
<TABLE>
<CAPTION>
Retirement Supplemental Postretirement
Income Plan Plans Medical
------------------------------------------------------------
(Thousands of dollars)
<S> <C> <C> <C>
CHANGE IN BENEFIT OBLIGATION
Benefit obligation at January 1, 1998 $ 32,946 $ 3,068 $ 1,000
Service cost -- 40 68
Interest cost 2,360 212 77
Plan amendments -- -- --
Special termination benefits -- 58 --
Benefits paid (1,133) (204) (161)
Actuarial (gain) or loss 2,734 (29) 213
Participant contributions -- -- 8
------------------------------------------------------------
Benefit obligation at December 31, 1998 36,907 3,145 1,205
Service cost -- 47 62
Interest cost 2,558 218 71
Benefits paid (748) (200) (141)
Actuarial (gain) or loss 4,321 (74) (129)
Participant contributions -- -- 10
------------------------------------------------------------
Benefit obligation at December 31, 1999 $ 43,038 $ 3,136 $ 1,078
============================================================
CHANGE IN PLAN ASSETS
Fair value of plan assets at January 1, 1998 $ 34,263 $ -- $ --
Actual return on plan assets 6,774 -- --
Employer contributions 796 204 153
Participant contributions -- -- 8
Benefits paid (1,133) (204) (161)
Expenses (147) -- --
------------------------------------------------------------
Fair value of plan assets at December 31, 1998 40,553 -- --
Actual return on plan assets 5,606 -- --
Employer contributions -- 200 131
Participant contributions -- -- 10
Benefits paid (748) (200) (141)
Expenses (75) -- --
------------------------------------------------------------
Fair value of plan assets at December 31, 1999 $ 45,336 $ -- $ --
============================================================
RECONCILIATION OF FUNDED STATUS:
At December 31, 1998
Funded status $ 3,646 $ (3,145) $ (1,205)
Unrecognized actuarial (gain) loss (1,558) 869 (528)
Unrecognized transition obligation -- 55 1,036
Unrecognized prior service cost -- 19 --
------------------------------------------------------------
Net amount recognized $ 2,088 $ (2,202) $ (697)
============================================================
At December 31, 1999
Funded status $ 2,298 $ (3,136) $ (1,078)
Unrecognized actuarial (gain) loss 275 748 (600)
Unrecognized transition obligation -- 37 962
Unrecognized prior service cost -- 14 --
------------------------------------------------------------
Net amount recognized $ 2,573 $ (2,337) $ (716)
============================================================
</TABLE>
ROY F. WESTON, INC. AND SUBSIDIARIES 29
<PAGE> 22
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The components of net periodic benefit cost for the years ended December
31 are as follows:
<TABLE>
<CAPTION>
(Thousands of dollars) 1999 1998 1997
-------------------------------------------------
<S> <C> <C> <C>
RETIREMENT INCOME PLAN:
Service cost $ -- $ -- $ 979
Interest cost 2,558 2,360 2,435
Expected return on plan assets (3,167) (2,809) (2,500)
Amortization of prior service cost -- -- (7)
Amortization of transitional obligation -- -- 16
Recognized actuarial loss 124 -- --
-------------------------------------------------
Net periodic benefit cost (credit) $ (485) $ (449) $ 923
==================================================
SUPPLEMENTAL PLANS
Service cost $ 47 $ 40 $ 76
Interest cost 218 211 220
Amortization of prior service cost 5 5 13
Amortization of transitional obligation 18 18 18
Recognized actuarial loss 47 41 54
-------------------------------------------------
Net periodic benefit cost $ 335 $ 315 $ 381
==================================================
POSTRETIREMENT MEDICAL:
Service cost $ 62 $ 68 $ 51
Interest cost 71 77 68
Amortization of transition obligation 74 74 74
Recognized actuarial gain (56) (59) (79)
-------------------------------------------------
Net periodic benefit cost $ 151 $ 160 $ 114
==================================================
</TABLE>
Significant assumptions used in the benefit plans at December 31 were:
<TABLE>
<CAPTION>
1999 1998
-----------------------------------------
<S> <C> <C>
RETIREMENT INCOME PLAN:
Weighted average discount rate 6.40% 6.90%
Expected long-term rate of return on plan assets 9.25% 9.25%
Rate of compensation increase 5.00% 5.00%
SUPPLEMENTAL PLANS:
Weighted average discount rate 7.50% 6.90%
POSTRETIREMENT MEDICAL:
Weighted average discount rate 7.50% 6.90%
Initial health care cost trend rate 8.00% 9.00%
Ultimate health care cost trend rate 5.50% 5.50%
Grading period 4 Years 5 years
</TABLE>
30 ROY F. WESTON, INC. AND SUBSIDIARIES
<PAGE> 23
Assumed health care cost trend rates can have a significant effect on
amounts reported for the postretirement medical plan. A 1% change in the assumed
health care cost trend rates would increase the aggregate of service cost and
interest cost for 1999 by $3,000 and the accumulated postretirement medical
benefit obligation at December 31, 1999 by $44,000.
The Company also has a Retirement 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 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 $1,712,000, $1,653,000, and $1,951,000 for the years
ended December 31, 1999, 1998, and 1997, respectively. In addition, effective
July 1, 1997, the Company began making an additional contribution to the Plan.
The additional contribution, which aggregated $1,596,000, $1,508,000, and
$879,000 for the years ended December 31, 1999, 1998, and 1997, respectively, is
made for the benefit of all eligible employees and is not dependent on an
employee contribution.
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, 1999, 1998, and 1997 for these plans
were $2,703,000, $2,771,000, and $3,181,000, respectively.
NOTE 11 - CONTINGENCIES
As collateral for performance on contracts, the Company is contingently
liable at December 31, 1999 in the amount of $2,141,000, under standby letters
of credit.
The Company has encountered significant billing and collection delays due
to a dispute over contract modification issues on one large federal construction
project. The Company intends to commence litigation to resolve the dispute.
Although the outcome of any litigation is uncertain, the Company believes that
its position is sound and that it will achieve a favorable resolution of the
dispute, in which event the Company could recognize a significant gain. In the
event of an unfavorable resolution, the Company could sustain a significant
loss, which could be material.
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 is 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.
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.
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.
ROY F. WESTON, INC. AND SUBSIDIARIES 31
<PAGE> 24
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 12 - INCOME TAXES
The components of the provision (benefit) for income taxes are as follows:
<TABLE>
<CAPTION>
(Thousands of dollars) 1999 1998 1997
--------------------------------------------------
<S> <C> <C> <C>
Current
Federal $ -- $ 149 $ (1,905)
State 171 122 30
--------------------------------------------------
171 271 (1,875)
--------------------------------------------------
Deferred
Federal 253 301 425
State -- -- --
-------------------------------------------------
253 301 425
--------------------------------------------------
$ 424 $ 572 $ (1,450)
==================================================
</TABLE>
Temporary differences that give rise to deferred tax assets and
liabilities at December 31 are as follows:
<TABLE>
<CAPTION>
(Thousands of dollars) 1999 1998
--------------------------------------
<S> <C> <C>
Deferred tax assets:
Uncollectible accounts $ 815 $ 110
Net operating loss carryforwards 6,952 6,626
Supplemental retirement plans 1,473 1,419
Self insurance 1,506 1,647
Other accruals 1,279 1,299
Depreciation 68 --
Facility closure 864 1,450
State tax loss carryforwards 3,324 2,942
Other 2,176 1,925
--------------------------------------
$ 18,457 $ 17,418
--------------------------------------
Deferred tax liabilities:
Retainage $ (157) $ (174)
Award fees -- (312)
Pensions (984) (791)
Other (1,322) (401)
--------------------------------------
(2,463) (1,678)
--------------------------------------
Valuation allowance (8,157) (7,742)
--------------------------------------
Net deferred income taxes $ 7,837 $ 7,998
======================================
</TABLE>
32 ROY F. WESTON, INC. AND SUBSIDIARIES
<PAGE> 25
At December 31, 1999, the Company has federal net operating loss
carryforwards of approximately $20,447,000, 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>
1999 1998 1997
--------------------------------------------
<S> <C> <C> <C>
Statutory rate 34.0% 34.0% 34.0%
Valuation allowance -- 2.5 (23.3)
State income taxes, net of federal taxes 7.9 5.7 (0.2)
Amortization of goodwill 1.5 1.5 (0.2)
Travel-related meals 6.6 5.7 (0.8)
Officers life insurance (19.8) (5.8) (0.1)
Other, net (0.2) (3.6) 1.9
--------------------------------------------
Effective tax rate 30.0% 40.0% 11.3%
=============================================
</TABLE>
NOTE 13 - MAJOR CUSTOMER INFORMATION
The Company's largest customer is the U.S. Government and its agencies,
which provided the following gross revenues for the years ended December 31:
<TABLE>
<CAPTION>
(Thousands of dollars) 1999 1998 1997
---------------------------------------------------
<S> <C> <C> <C>
Department of Defense $ 70,396 $ 60,892 $ 50,146
Environmental Protection Agency 45,826 50,842 47,285
Department of Energy 27,065 20,229 25,379
Other 4,705 4,600 6,528
---------------------------------------------------
Total U.S. Government $ 147,992 $ 136,563 $ 129,338
==================================================
</TABLE>
NOTE 14 - SUPPLEMENTAL CASH FLOW INFORMATION
Cash payments for income taxes were $115,000, $51,000, and $192,000 in the
years ended December 31, 1999, 1998, and 1997, respectively. The Company
received refunds of previously paid income taxes aggregating $25,000,
$1,136,000, and $3,672,000 in the years ended December 31, 1999, 1998, and 1997,
respectively.
Cash payments for interest were $1,328,000, $1,218,000, and $1,464,000 in
the years ended December 31, 1999, 1998, and 1997, respectively.
Capital lease obligations of $290,000, $697,000, and $128,000 were
incurred during the years ended December 31, 1999, 1998, and 1997, respectively,
when the Company entered into leases for office equipment.
ROY F. WESTON, INC. AND SUBSIDIARIES 33
<PAGE> 26
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 15 - RELATED PARTY TRANSACTIONS
The Company used the services of a travel agency that was owned by one of
its directors. Under an agreement entered into in 1996, the Company paid the
travel agency a monthly fee and received rebates from the travel agency of the
commissions earned from providers of transportation and other travel-related
services. Net payments to the travel agency included in general and
administrative expenses in the accompanying consolidated statements of
operations in 1998 and 1997 were $285,000 and $280,000, respectively.
In June 1998 the above arrangement was terminated, and the Company's
travel requirements are handled internally using contracted labor. The director
has been retained as a consultant to the travel department and in 1999 and 1998
was paid $150,000 and $75,000, respectively, in this capacity.
A relative of a director of the Company is an officer of a not for profit
organization to which the Company has contributed a total of $50,000.
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.
NOTE 16 - SEGMENTS
The Financial Accounting Standards Board has adopted Statement of
Financial Accounting Standards No. 131, "Disclosures about Segments of an
Enterprise and Related Information," effective for fiscal years ending after
December 15, 1998. Under Statement No. 131, the Company has defined its
reportable segments as Infrastructure Redevelopment, Federal Programs, and
Knowledge Systems and Solutions. Federal Programs is segregated primarily
because its services are delivered to clients at dedicated site Federal
government locations, while Knowledge Systems and Solutions is segregated due to
differences in its products and services from the Company's other businesses.
The following information for the years ended December 31, 1999 and 1998
is required by Statement No. 131. Information for the year ended December 31,
1997 is not presented as it is impractical to develop such information as the
Company undertook a significant reorganization in 1997.
<TABLE>
<CAPTION>
Year Ending December 31, 1999 Infrastructure Federal Knowledge Corporate Consolidated
(Thousands of dollars) Redevelopment Programs Systems and
Solutions
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net revenues $ 122,877 $ 20,489 $ 2,984 $ 1,416 $ 147,766
Segment profit (loss) $ 12,278 $ 3,033 $ (842) $ (13,057) $ 1,412
Total assets $ 84,316 $ 7,011 $ 1,296 $ 28,804 $ 121,427
Depreciation and amortization $ 1,841 $ 91 $ 160 $ 1,797 $ 3,889
Interest expense $ 1,492 $ 216 $ 15 $ (98) $ 1,625
Capital expenditures $ 980 $ 156 $ 201 $ 3,234 $ 4,571
</TABLE>
<TABLE>
<CAPTION>
Year Ending December 31, 1998 Infrastructure Federal Knowledge Corporate Consolidated
(Thousands of dollars) Redevelopment Programs Systems and
Solutions
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net revenues $ 110,937 $ 24,806 $ 3,690 $ 953 $ 140,386
Segment profit (loss) $ 11,426 $ 3,524 $ (792) $ (12,728) $ 1,430
Total assets $ 74,810 $ 11,283 $ 1,021 $ 34,242 $ 121,356
Depreciation and amortization $ 1,880 $ 107 $ 134 $ 1,649 $ 3,770
Interest expense $ 1,195 $ 200 $ 13 $ (37) $ 1,371
Capital expenditures $ 421 $ 36 $ 139 $ 2,584 $ 3,180
</TABLE>
34 ROY F. WESTON, INC. AND SUBSIDIARIES
<PAGE> 27
NOTE 17 - SUBSEQUENT EVENT (UNAUDITED)
On March 13, 2000, the Company received a waiver of its noncompliance with
one of the financial ratio covenants required under its credit facility. The
Company has received a written commitment for a replacement credit facility with
the same lender that will reduce the total amount of the facility, but increase
the amount available for working capital borrowings. The Company expects the new
facility to be effective by May 2000.
NOTE 18 - QUARTERLY FINANCIAL DATA (UNAUDITED)
Quarterly financial information for 1999 and 1998 is presented in the
following tables:
<TABLE>
<CAPTION>
First Second Third Fourth
(Thousands of dollars, except per share data) Quarter Quarter Quarter Quarter
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1999
Gross revenues $ 72,804 $ 60,065 $ 62,869 $ 68,006
Net revenues $ 37,815 $ 36,053 $ 35,938 $ 37,960
Income (loss) from operations $ 717 $ 390* $ (80) $ (445)
Net income $ 371 $ 91 $ 94** $ 432***
Basic earnings per share $ .04 $ .01 $ .01 $ .04
1998
Gross revenues $ 54,677 $ 58,780 $ 62,416 $ 65,319
Net revenues $ 32,751 $ 34,936+ $ 36,552 $ 36,147
Income from operations $ 348 $ 168 $ 155 $ 474++
Net income $ 207 $ 152 $ 104 $ 395
Basic earnings per share $ .02 $ .02 $ .01 $ .04
</TABLE>
* Includes a reduction in estimated insurance claim liabilities of $500.
** Includes a pretax gain of $480 resulting from the demutualization of a
life insurance company in which the Company is a policyholder.
*** Includes a gain from a life insurance claim of $770.
+ Includes $800 for work performed in an earlier period resulting from a
contract settlement.
++ Includes a reduction in estimated insurance claim liabilities of $1,000.
ROY F. WESTON, INC. AND SUBSIDIARIES 35
<PAGE> 28
SENIOR MANAGEMENT
WILLIAM L. ROBERTSON
Chief Executive
PATRICK G. MCCANN
President and Chief Operating Officer
WILLIAM G. MECAUGHEY, CPA
Vice President, Chief Financial Officer, and Treasurer
ARNOLD P. BORISH, ESQ.
Vice President, General Counsel, Corporate Secretary,
and Manager, Mergers and Acquisitions
JOHN R. BROOKS
Vice President and Manager,
Construction Remediation and Redevelopment Group, and
President, Weston International
JOHN D. DIFILIPPO, P.E.
Vice President and Manager, Southern Division
RAYMOND J. GRIFFIN
Vice President and Manager, Human Resources
JOHN HAMMOND
Vice President and Manager, Eastern Division
VINCENT A. LAINO, JR.
Vice President, Chief Information Officer, and
Manager, KS2 Information Services
L. STEVEN WAGNER
Vice President and Manager, Western Division
EDMUND B. PETTISS, JR.
Vice President and Manager, Marketing
ALAN SOLOW, CHP
Vice President and Manager, Federal Group
KURT STIMPSON
Vice President and Manager, Midwest Division
JOHN W. THORSEN, P.E.
Vice President and Manager, Quality Assurance
BOARD OF DIRECTORS
KATHERINE W. SWOYER(1)
Chairman of the Board, Roy F. Weston, Inc.
AMBASSADOR RICHARD L. ARMITAGE(1)
President, Armitage Associates, L.C.
JESSE BROWN(2)
President and Chief Executive Officer,
Brown and Associates
THOMAS E. CARROLL(1)
President and Chief Executive Officer,
MEDIQ Incorporated
THOMAS HARVEY(1)
Chief Executive Officer, A-55, Inc.
Chairman, Global Environment and Technology Foundation,
Global Initiatives, Inc., and GlobeQuest International,
Inc.
WAYNE F. HOSKING, JR., ESQ.(2)
Government Relations Director,
Roy F. Weston, Inc.
WILLIAM L. ROBERTSON(1)
Chief Executive,
Roy F. Weston, Inc.
THOMAS M. SWOYER, JR.(2)
Operations Manager, San Antonio Office, Roy F. Weston, Inc.
A. FREDERICK THOMPSON, PH.D., P.E.(2)
Program Director, Environmental Technologies,
National Science Foundation
ROY F. WESTON, P.E., DEE (1),(2)
Retired, (Chairman Emeritus), Roy F. Weston, Inc.
JAMES H. WOLFE, CPA(2)
Retired, PricewaterhouseCoopers, LLP
- --------------------------------
Committees:
(1) Member, Executive Committee
(2) Member, Audit Committee
36 ROY F. WESTON, INC. AND SUBSIDIARIES
<PAGE> 29
COMPANY
STOCK
LISTING
WESTON'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 table
displayed sets forth the
range of high and low
per share sales prices
for the Series A common stock
as reported by the
Nasdaq.
As of December 31,
1999, there were
2,299 holders of record
of Series A common
stock and 26 holders of Common stock.
WESTON has not paid
any cash dividends
since 1978. The Board
of Directors intends to
retain earnings for the
foreseeable future for
the expansion of
WESTON's business.
GENERAL INFORMATION
FINANCIAL INFORMATION
Analysts, investors, and others seeking information about WESTON's financial
performance or financial reports, including SEC Forms 10-K and 10-Q, may contact
the company. Requests should be directed to:
William G. Mecaughey, CPA
Chief Financial Officer & Treasurer
Roy F. Weston, Inc.
1400 Weston Way, P.O. Box 2653
West Chester, Pennsylvania 19380
Telephone: (610) 701-4556
COMPANY INFORMATION
News media and others seeking general information about WESTON may contact:
Corporate Marketing
Roy F. Weston, Inc.
1400 Weston Way, P.O. Box 2653
West Chester, Pennsylvania 19380
Telephone: (610) 701-3182
ANNUAL MEETING
The annual meeting of stockholders will be held on May 15, 2000, 11:00 a.m. at
WESTON headquarters:
Roy F. Weston, Inc.
1400 Weston Way, P.O. Box 2653
West Chester, Pennsylvania 19380
CERTIFIED PUBLIC ACCOUNTANTS
PricewaterhouseCoopers, LLP
2400 Eleven Penn Center
Philadelphia, Pennsylvania 19103-2962
TRANSFER AGENT AND REGISTRAR
American Stock Transfer and Trust Company
40 Wall Street
New York, New York 10005-2392
INTERNET ADDRESS
For up-to-date information on WESTON's service capabilities, environmental
issues and information, corporate developments, and investor relations, click to
http://www.rfweston.com.
STOCK
HISTORY
SERIES "A" NASDAQ PRICE
<TABLE>
<CAPTION>
High Low
<S> <C> <C>
1999
First Quarter $ 3.00 $ 2.00
Second Quarter $ 3.50 $ 2.13
Third Quarter $ 3.06 $ 2.50
Fourth Quarter $ 3.00 $ 1.88
1998
First Quarter $ 4.25 $ 2.75
Second Quarter $ 4.38 $ 3.38
Third Quarter $ 4.31 $ 2.25
Fourth Quarter $ 3.06 $ 2.25
</TABLE>
<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
Roy F. Weston, Inc. of Michigan Michigan
</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. 333-80855,
333-80859 and 33-13915) of our reports dated February 3, 2000 on our audits of
the consolidated financial statements and financial statement schedule of Roy F.
Weston, Inc. and Subsidiaries as of December 31, 1999 and 1998 and for the years
ended December 31, 1999, 1998, and 1997 which reports are either included in or
incorporated by reference into this Annual Report on Form 10-K.
PRICEWATERHOUSECOOPERS, LLP
2400 Eleven Penn Center
Philadelphia, Pennsylvania
March 27, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET OF DECEMBER 31, 1999 AND THE CONSOLIDATED STATEMENT
OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1999 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 4,355
<SECURITIES> 0
<RECEIVABLES> 84,210<F1>
<ALLOWANCES> 2,040
<INVENTORY> 0
<CURRENT-ASSETS> 95,527
<PP&E> 46,032
<DEPRECIATION> 36,184
<TOTAL-ASSETS> 121,427
<CURRENT-LIABILITIES> 50,786
<BONDS> 9,648
0
0
<COMMON> 1,182
<OTHER-SE> 55,981
<TOTAL-LIABILITY-AND-EQUITY> 121,427
<SALES> 0
<TOTAL-REVENUES> 263,744
<CGS> 0
<TOTAL-COSTS> 263,162
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 407
<INTEREST-EXPENSE> 1,625
<INCOME-PRETAX> 1,412
<INCOME-TAX> 424
<INCOME-CONTINUING> 988
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 988
<EPS-BASIC> .10
<EPS-DILUTED> .10
<FN>
<F1>Includes 27,291 of unbilled costs and estimated earnings thereon
</FN>
</TABLE>
