SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
for the fiscal year ended
December 31, 1995
Commission file number 1-5642
DRAVO CORPORATION
A PENNSYLVANIA CORPORATION
I.R.S. EMPLOYER IDENTIFICATION NUMBER 25-0447860
3600 ONE OLIVER PLAZA
PITTSBURGH, PENNSYLVANIA 15222-2682
TELEPHONE (412) 566-3000
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Title of Class: Registered:
Common Stock, $1.00 Par Value New York Stock Exchange
Preference Stock Purchase Rights New York Stock Exchange
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,
and (2) has been subject to such filing requirements for the past
90 days. Yes XX . 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. XX
Common shares outstanding as of March 22, 1996: 14,710,546
Aggregate market value of the voting stock held by non-affiliates
of the Registrant as of March 22, 1996: $187,559,462
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Annual Report to Shareholders for the year ended
December 31, 1995 are incorporated by reference to the extent set
forth in Parts I, II and IV of this Report. Portions of the
Proxy Statement for Annual Meeting of Shareholders on April 25,
1996 are incorporated by reference to the extent set forth in
Part III of this Report.
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TABLE OF CONTENTS
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Page
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PART I
Item 1. Business 3 - 5
Item 2. Properties 6
Item 3. Legal Proceedings 7
Item 4. Submission of Matters to a Vote
of Security Holders 7
PART II
Item 5. Market for the Registrant's Common
Stock and Related Stockholder Matte 8 - 14
Item 6. Selected Financial Data 14
Item 7. Management's Discussion and
Analysis of Financial Condition
and Results of Operations 14
Item 8. Financial Statements and Supplementary Data 14
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure 14
PART III
Item 10. Directors and Executive Officers of the
Registrant 15
Item 11. Executive Compensation 16
Item 12. Security Ownership of Certain Beneficial
Owners and Management 16
Item 13. Certain Relationships and Related Transactions 16
PART IV
Item 14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K 17 - 23
Signatures 24
Independent Auditors' Report on Schedules 25
Schedule I. Condensed Financial Information
of Registrant 26 - 33
Table of Contents for documents filed herein as Exhibits
3, 4, 10, 11, 13, 21, 23, 24 and 27 34
</TABLE>
-2-
PART I
Item 1. Business
(a) General Development of the Business
Dravo Corporation (the Registrant) was incorporated in
Pennsylvania in 1936 to consolidate several related corporations
then operating various elements of a business started in 1891 by
F. R. Dravo. Its corporate offices are located at 3600 One
Oliver Plaza, Pittsburgh, Pennsylvania 15222-2682, and its
telephone number is 412-566-3000. As used herein, the term Dravo
includes its consolidated subsidiaries unless otherwise
indicated. In December, 1987, Dravo's Board of Directors
approved a major restructuring program which concentrated Dravo's
future direction exclusively on opportunities involving its
natural resources business. The plan included the sale or other
disposition of the former Engineering and Construction segment,
as well as the sale of the former Materials Handling and Systems
segment approved earlier. All units scheduled for sale were sold
by the end of 1989. The remainder of these businesses have been
presented as discontinued operations in the financial
statements.
Late in 1994, the company sold substantially all the assets and
certain liabilities of Dravo Basic Materials Company, its
construction aggregates subsidiary, to Martin Marietta Materials,
Inc. (Martin Marietta). As a result, Dravo is now primarily a
lime company operating principally in the United States.
Operations are carried on by a wholly-owned subsidiary, Dravo
Lime Company (Dravo Lime). Activities include the production of
lime for utility, metallurgical, pulp and paper, municipal,
construction and miscellaneous chemical and industrial
applications. Three major utility companies with whom the
company has long-term contracts - American Electric Power,
Pennsylvania Power Company and Cincinnati Gas & Electric Company
- - each accounted for more than 10 percent of consolidated revenue
in 1995. All of the properties on which the company's reserves
are located are physically accessible for purposes of mining and
processing limestone into lime.
Dravo Lime, one of the nation's largest lime producers, owns and
operates three integrated lime production facilities, two in
Kentucky and one in Alabama. In 1995 the Black River plant in
Butler, Kentucky completed a two kiln expansion. With the Black
River expansion on-line, Dravo Lime's annual quicklime capacity
totals approximately three million tons. This capacity will
further increase to slightly over 3,300,000 ton-per-year, when a
fourth 1,000 ton-per-day kiln now in the process of being
engineered and constructed at its Maysville, Kentucky facility is
completed in the first quarter of 1997.
The Maysville plant, currently a three kiln, 1,050,000 ton-per-
year facility near Maysville, Kentucky, produces a material
marketed under the trade name Thiosorbicr Lime, that has a
product chemistry ideally suited for removing sulfur dioxide from
power plant stack gases. All of Maysville's output is committed
under long-term contracts with utility companies in the Ohio
Valley region. All contracts contain provisions for price
escalation. Owned reserves at the Maysville site are recovered
from a mine 950 feet underground and are considered adequate to
sustain the future four kiln operation in excess of twenty years.
Dravo Lime also holds options on additional limestone reserves to
sustain production for an additional thirty year period.
-3-
Item 1. Business (continued)
With the completion of the current two kiln expansion, Dravo
Lime's Black River facility is an integrated Thiosorbicr
quicklime, high calcium pebble and
pulverized quicklime, and bulk and bagged hydrated lime facility.
Located along the Ohio River at Butler, Kentucky, Black River has
an annual quicklime capacity of 1,350,000 ton-per-year. Of that
total, in excess of seventy percent is committed to utility
companies and steel and paper customers under contracts with
price escalation provisions. Limestone reserves at Black River
are recovered from a 600-feet-deep underground mine. At Black
River's expanded rate of capacity, reserves are considered
adequate to sustain production levels for more than seventy-five
years.
The company's Longview facility, located near Birmingham,
Alabama, is an integrated facility as well that produces high
calcium quicklime, and bulk and bagged hydrated lime from owned
limestone reserves. At this plant, Dravo Lime also produces
dolomitic quicklime from limestone purchased from a nearby
dolomitic stone quarry. Due to its material handling and storage
capabilities and its ability to produce high calcium and
dolomitic lime, the Longview facility is able to custom blend
quicklime to its customers' chemical specifications. Longview's
annual production capacity is approximately 570,000 ton-per-year.
Limestone at the Longview operation comes from an quarry with
recoverable reserves estimated to last approximately twenty years
at the current production rate. Ultimately, Dravo Lime expects
to convert Longview to an underground mine, providing access to
additional reserves sufficient to support current production
rates for over sixty years.
In conjunction with the sale of Dravo Basic Materials' assets to
Martin Marietta, Dravo Lime entered into agreements appointing
Martin Marietta the exclusive distributor of aggregate by-
products produced when limestone is crushed and screened into
kiln feed. During 1995, an aggregates processing plant was
constructed at the Longview facility that is expected to produce
from 500,000 to 1,000,000 tons of aggregates annually for
purchase by Martin Marietta. A benefit of this installation is
to make a marketable by-product, which reduces the cost Dravo
Lime incurs to recover the high calcium limestone reserves that
are beneath the aggregate quality material.
Dravo Lime products are distributed through quicklime
distribution terminals located in Butler and Belle Vernon,
Pennsylvania; Porterfield, Ohio; Brunswick, Georgia; and Tampa,
Fort Lauderdale and Sanford, Florida. At Baton Rouge, Louisiana,
Dravo Lime owns and operates a lime hydration and bagging
facility from which quicklime, and bulk and bagged hydrated lime
products are distributed.
(b) Competitive Conditions
Dravo encounters competition at all its operations but believes
that its experience, strategically located reserves and technical
expertise in the flue gas desulfurization industry give it
certain competitive advantages.
-4-
Item 1. Business (continued)
Dravo's research and development expenditures were $3.6 million
in 1995 and $4.4 million in 1994. Research and development
spending in 1996 is expected to exceed $3.1 million. The company
expects the research, much of which is being conducted jointly
with utility customers, to lower both the capital and operating
costs associated with flue gas desulfurization (FGD). A major
advancement toward that goal was achieved with the development of
a second generation, proprietary ThioClearR FGD technology. An
agreement in principle has been reached to develop a commercial
scale demonstration using this technology at Applied Energy
Services' Beaver Valley cogeneration facility in Monaca,
Pennsylvania. Other research projects are aimed at developing
proprietary technologies for use in reducing stack gas emissions
of combined SOx/NOx and air toxins while recovering and
processing salable by-products. Dravo believes that in this
field its long-term contracts, accumulated experience and
technical skill represent significant competitive advantages.
Several firms with which Dravo competes have comparable resources
and income. Dravo competes with other firms for qualified
professional personnel, particularly those with technical skills.
(c) Corporate Development
Dravo's corporate development policy encompasses growth through
investment in existing businesses, internal development and
acquisition. Additionally, to the extent that business units no
longer meet management's long-term profitability performance
criteria and business strategies, or do not contribute
significantly to corporate objectives, a policy of divestiture is
followed.
Continuing operations of Dravo Corporation, which are principally
domestic in nature, function in one segment, a natural resource
business, primarily involved in the production, processing and
supply of lime for environmental, metallurgical, pulp and paper,
municipal, construction and miscellaneous chemical and industrial
applications as well as the development and marketing of related
environmental technologies, products and services. Dravo's
position as the world's leading producer of lime for flue gas
desulfurization applications was enhanced by the passage of the
1990 Clean Air Act Amendments.
Further information required by this item is incorporated by
reference to the information set forth under the captions
indicated below in the 1995 Annual Report to Shareholders which
accompanies this report:
<TABLE>
Caption in Annual Report Page No.
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Results of Operations 12 - 14
Note 16: Research and Development 32
Employees at Year-End 34
</TABLE>
-5-
Item 2. Properties
The following is a listing of principal offices, plants and mines
used in operations:
Use Location Owned or Leased
Executive and general Pittsburgh, Pennsylvania Leased
offices
Production facilities Saginaw, Alabama Owned
Butler, Kentucky Owned
Maysville, Kentucky Owned
Distribution sites Ft. Lauderdale, Florida Leased
Tampa, Florida Owned/Leased
Sanford, Florida Leased
Brunswick, Georgia Owned/Leased
Baton Rouge, Louisiana Owned
Porterfield, Ohio Leased
Aliquippa, Pennsylvania Leased
Butler, Pennsylvania Leased
Belle Vernon, Pennsylvania Leased
The following table shows a summary of the company's reserves at
December 31, 1995 and tons mined by Dravo Lime in 1995.
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(Tons in millions)
<CAPTION>
Recoverable 1995
Reserves Production
<S> <C> <C>
Underground Mines:
Owned 466.8 5.7
Quarries:
Owned 55.4 1.4
522.2 7.1
</TABLE>
Additional information required by this item is incorporated by
reference to the information set forth under Item 1(a) "General
Development of the Business" on pages 3 through 5 of this Form 10-
K.
-6-
Item 3. Legal Proceedings
Information required by this item is incorporated by reference to
the information set forth under the caption Note 8: "Contingent
Liabilities" in the Notes to Consolidated Financial Statements on
pages 25 and 26 of the 1995 Annual Report to Shareholders which
accompanies this report.
Item 4. Submission of Matters to a Vote of Security Holders
There were no matters submitted to a vote of security holders for
the three months ended December 31, 1995.
-7-
PART II
Item 5. Market for the Registrant's Common Stock and Related
Stockholder Matters
Information required by this item is incorporated by reference to
the information set forth under the captions indicated below in
the 1995 Annual Report to Shareholders which accompanies this
report:
Caption in Annual Report Page No.
Common Stock Market Price 15
Shareholders at year-end 34
Dividends 15, 34
Description of Dravo Capital Stock
General
Under its Restated Articles of Incorporation ("the Articles"), as
amended, Dravo is authorized to issue 1,878,870 shares of
preference stock, par value $1.00 per share, and 35,000,000
shares of common stock, par value $1.00 per share. At December
31, 1995 issued preference and common shares were 225,386 and
15,055,237, respectively and there were 347,691 shares of common
stock held in the treasury.
Four series of preference stock have been established by
resolutions of the Board of Directors: $2.20 Cumulative
Convertible Series A Preference Stock ("Series A Preference
Stock"), consisting of 26,817 shares, issued on September 1,
1970; $2.475 Cumulative Convertible Series B Preference Stock
("Series B Preference Stock"), consisting of 165,516 shares,
issued on June 12, 1973; Series C Preference Stock consisting of
200,000 shares, which are issuable pursuant to the exercise of
the rights to purchase stock described below; and $12.35 Series D
Cumulative Convertible Exchangeable Preference Stock ("Series D
Preference Stock") consisting of 200,000 shares, issued on
September 21, 1988. All of the shares of Series A Preference
Stock were converted into shares of common stock on April 2,
1978. Presently there are 25,386 shares of Series B Preference
Stock and 200,000 shares of Series D Preference Stock issued and
outstanding. No shares of Series C Preference Stock have been
issued or are outstanding. Other series of preference stock may
be created by resolution of the Board of Directors with such
dividend, liquidation, redemption, sinking fund and conversion
rights as shall be specified therein.
Dividend Rights
The holders of the preference stock are entitled to cumulative
dividends, payable quarterly, which must be paid and the next
quarterly dividend set apart before any dividends (except
dividends in common stock or any other
-8-
Item 5. Market for the Registrant's Common Stock and Related
Stockholder
Matters (continued)
Dividend Rights (continued)
stock ranking after the preference stocks as to dividends and
assets) are declared, or paid, or monies set apart for the
payment of dividends on any class of stock ranking after the
preference stock as to dividends or assets. The rate of
dividends payable upon the Series B Preference Stock is $2.475
per annum. The rate of dividends payable upon the Series C
Preference Stock is an amount per share (rounded to the nearest
cent) equal to the greater of $10.00 or 100 times the aggregate
per share amount of all cash and non-cash dividends or other
distributions, other than a dividend or distribution payable in
shares of common stock, paid on the common stock in the
immediately preceding quarter, subject to adjustment in certain
events. The rate of dividends payable upon the Series D
Preference Stock is 12.35 percent per annum or $12.35 per share,
which rate shall be increased by 2 percent per annum if such
dividends are not paid on any quarterly dividend payment date
until accrued and unpaid dividends on the Series D Preference
Stock are paid.
The holders of the common stock are entitled to such dividends as
may be declared by the Board of Directors out of assets properly
available for that purpose. No common stock dividends have been
declared since April, 1987.
Other information required by this item is incorporated by
reference to the information set forth under the caption "Note 5:
Notes Payable", in the Notes to Consolidated Financial Statements
on pages 24 and 25 of the 1995 Annual Report to Shareholders
which accompanies this report.
Voting Rights
Each share of the common stock and the preference stock is
entitled to one vote, which is cumulative in the election of
directors. The Board of Directors is divided into three classes,
and approximately one third of the directors are elected each
year for three year terms. The effect of such classification of
the Board is to increase the number of shares, voted
cumulatively, necessary to elect directors. If dividends on the
preference stock shall be unpaid or in arrears for six quarterly
dividend periods, the holders of the preference stock voting as a
class shall have the right to elect two additional directors.
Liquidation Rights
In the event of the voluntary or involuntary liquidation or
dissolution of Dravo, or the sale or other disposition of
substantially all of its assets, the holders of the Series B
Preference Stock shall be entitled to receive the sum of $55 per
share plus all accumulated and unpaid dividends thereon; the
holders of Series C Preference Stock shall be entitled to receive
$100 per share plus all accrued and unpaid dividends plus an
amount equal to the holder's pro rata share of the amount that
would be available for distribution
-9-
Item 5. Market for the Registrant's Common Stock and Related
Stockholder Matters (continued)
Liquidation Rights (continued)
after payment of all liabilities, liquidation preferences and a
distribution on the common stock, if any, as determined according
to a formula; and the holders of Series D Preference Stock shall
be entitled to receive $100 per share plus all accumulated and
unpaid dividends thereon. The holders of any other series of
preference stock which may be issued shall be entitled to receive
the amounts provided for in the resolutions creating such series.
The holders of the common stock shall share ratably in the
remaining assets, if any.
No Preemptive Rights and Non-assessability
No preemptive rights attach to the common stock or the preference
stock. Neither the holders of the common stock nor the
preference stock are liable to further calls or assessment by
Dravo.
Redemption and Sinking Fund Provisions
There are no redemption provisions with respect to the common
stock. The Series B Preference Stock may be redeemed, in whole
or in part, at the option of Dravo, on not less than 60 days
notice, on any quarterly dividend payment date by the payment of
$55 per share and all accumulated and unpaid dividends to the
redemption date. The Series C Preference Stock may be redeemed
as a whole, but not in part, at the option of Dravo, at any time,
at a cash price per share based upon the average market value, as
defined and adjusted, of the common stock plus all accrued but
unpaid dividends. The Series D Preference Stock may be redeemed
in whole or in part at the option of Dravo at any time after
January 21, 1996, by the payment of $100 per share and all
accumulated and unpaid dividends to the redemption date, so long
as the current market price (as defined in the Certificate of
Designations, Preferences and Rights for the Series D Preference
Stock) of the common stock on the date the Board decides to
redeem the shares is at least 175 percent of the then effective
conversion price for the Series D Preference Stock. Commencing
on the first quarterly dividend payment date after September 21,
1998 and annually thereafter, Dravo is required to redeem 50,000
shares of Series D Preference Stock in cash at the redemption
price of $100 per share plus all accumulated and unpaid
dividends. Dravo is also required (unless certain conditions are
met) to redeem all of the then outstanding shares of Series D
Preference Stock in cash at $100 per share plus all accumulated
and unpaid dividends (a) if Dravo declares or pays or sets apart
for payment any dividends or makes any other distribution in cash
or other property on or in respect of the common stock or any
other class or series of the capital stock of Dravo ranking
junior to the Series D Preference Stock as to payment of
dividends ("Junior Dividend Stock"), or sets apart money for any
sinking fund or analogous fund for the redemption or purchase of
any Junior Dividend Stock and (b) upon any merger or
consolidation of Dravo if, in connection therewith, the holders
of the common stock receive cash, debt instruments or preference
stock of the surviving entity which ranks on a parity with or
senior to the Series D Preference stock with respect to
liquidation, dissolution or winding up or dividends. There are
no sinking fund provisions with respect to the common stock or
the Series B Preference Stock, Series C Preference Stock or
Series D Preference Stock.
-10-
Item 5. Market for the Registrant's Common Stock and Related
Stockholder Matters (continued)
Conversion
The Series B Preference Stock is presently convertible at any
time prior to redemption at the option of the holder into common
stock on the basis of 3.216 shares of common stock for each share
of Series B Preference Stock, subject to equitable adjustment in
the event of certain changes affecting the common stock. The
Series D Preference Stock is presently convertible at any time
prior to redemption at the option of the holder into common stock
on the basis of 8.0 shares of common stock for each share of
Series D Preference Stock, subject to adjustment in the event of
certain changes affecting the common stock. The Series D
Preference Stock is convertible or exchangeable in whole at any
time by Dravo for an equal face amount of Dravo Senior
Subordinated Convertible Notes due September 21, 2001 containing
the same conversion rights, transfer restrictions and other terms
(other than voting rights) as the Series D Preference Stock.
There are no conversion rights with respect to the Series C
Preference Stock or the common stock.
Rights to Purchase Series C Preference Stock
The Series C Preference Stock is issuable pursuant to the
exercise of rights to purchase Series C Preference Stock. On
April 4, 1986, the Board of Directors declared a distribution of
one right for each outstanding share of common stock to
shareholders of record at the close of business on April 17, 1986
(the "Record Date") and with respect to each share of common
stock that may be issued by Dravo prior to the Distribution Date
described below or the earlier redemption or expiration of the
rights. Each right entitles the registered holder, following the
occurrence of certain events described below, to purchase from
Dravo a unit consisting of one one-hundredth of a share (a
"Unit") of Series C Preference Stock at a purchase price of $60
per Unit, subject to adjustment (the "Purchase Price"). The
descriptions and terms of the rights are set forth in a rights
agreement (the "Rights Agreement") between Dravo and PNC Bank, N.
A. (formerly Pittsburgh National Bank), as the rights agent.
Initially, the rights will be attached to all common stock
certificates representing shares then outstanding, and no
separate rights certificates will be distributed. The rights
will separate from the common stock and a distribution date will
occur upon the earlier of (a) 10 days following a public
announcement that a person or group of affiliated or associated
persons (an "Acquiring Person") has acquired, or obtained the
right to acquire, beneficial ownership of 20 percent or more of
the outstanding shares of common stock of Dravo (the "Stock
Acquisition Date"), or (b) 10 business days following the
commencement of a tender offer or exchange offer that would
result in a person or group beneficially owning 30 percent or
more of such outstanding shares of common stock. Until the
distribution date, (i) the rights will be evidenced by the common
stock certificates and will be transferred with and only with
such common stock certificates, (ii) new common stock
certificates issued after the Record Date will contain a notation
incorporating the Rights Agreement by reference, and (iii) the
surrender for transfer of any certificate for common stock
outstanding will also constitute the transfer of the rights
associated with the common stock represented by such certificate.
-11-
Item 5. Market for the Registrant's Common Stock and Related
Stockholder Matters (continued)
Rights to Purchase Series C Preference Stock (continued)
The rights are not exercisable until the distribution date and
will expire at the close of business on April 17, 1996, unless
earlier redeemed by Dravo as described below.
In the event that, at any time following the distribution date,
(a) Dravo is the surviving corporation in a merger with an
Acquiring Person and its common stock is not changed or
exchanged, (b) an Acquiring Person becomes the beneficial owner
of 30 percent or more of the then outstanding shares of common
stock, (c) an Acquiring Person engages in one or more "self-
dealing" transactions as set forth in the Rights Agreement, or
(d) during such time as there is an Acquiring Person, an event
occurs which results in such Acquiring Person's ownership
interest being increased by more than one percent (e.g., a
reclassification of securities, reverse stock split or
recapitalization of Dravo), each holder of a right will
thereafter have the right to receive, upon exercise, common stock
(or, in certain circumstances, cash, property or other securities
of Dravo) having a value equal to two times the Purchase Price of
the right. Notwithstanding any of the foregoing, (i) rights are
not exercisable following the occurrence of any of the events set
forth in this paragraph until such time as the rights are no
longer redeemable by Dravo as set forth below, and (ii) following
the occurrence of any of the events set forth above, all rights
that are, or (under certain circumstances specified in the Rights
Agreement) were, beneficially owned by any Acquiring Person will
be null and void.
In the event that, at any time following the stock acquisition
date, (i) Dravo is acquired in a merger or other business
combination transaction in which Dravo is not the surviving
corporation (other than a merger described in the preceding
paragraph), or (ii) 50 percent or more of Dravo assets or earning
power is sold or transferred, each holder of a right (except
rights which previously have been voided as set forth above)
shall thereafter have the right to receive, upon exercise, common
stock of the acquiring company having a value equal to two times
the exercise price of the right. The events set forth in this
paragraph and in the preceding paragraph are referred to as the
"Triggering Events."
The Purchase Price payable, and the number of units of Series C
Preference Stock or other securities or property issuable, upon
exercise of the rights are subject to adjustment from time to
time to prevent dilution. No fractional units may be issued and,
in lieu thereof, an adjustment in cash may be made based on the
market price of the Series C Preference Stock on the last trading
date prior to the date of exercise.
At any time until ten days following the stock acquisition date,
Dravo may redeem the rights in whole, but not in part, at a price
of $.01 per right. Under certain circumstances set forth in the
Rights Agreement, the decision to redeem shall require the
concurrence of a majority of the continuing directors, as
defined. After the redemption period has expired and prior to
the occurrence of a Triggering Event, Dravo's right of redemption
may be reinstated if an Acquiring Person reduces his beneficial
ownership to 10
-12-
Item 5. Market for the Registrant's Common Stock and Related
Stockholder
Matters (continued)
Rights to Purchase Series C Preference Stock (continued)
percent or less of the outstanding shares of common stock in a
transaction or series of transactions not involving Dravo.
Immediately upon action of the Board of Directors ordering
redemption of the rights, with, where required, the concurrence
of the continuing directors, the rights will terminate and the
only right of the holders of rights will be to receive the $.01
redemption price.
Until a right is exercised, the holder thereof, as such, will
have no rights as a shareholder of Dravo, including, without
limitation, the right to vote or to receive dividends.
Other than those provisions relating to the principal economic
terms of the rights, any of the provisions of the Rights
Agreement may be amended by the Board of Directors of Dravo prior
to the distribution date. Thereafter, the provisions of the
Rights Agreement may be amended by the Board (in certain
circumstances, with the concurrence of the continuing directors)
in order to cure any ambiguity, to make changes which do not
adversely affect the interests of holders of rights (excluding
the interests of any Acquiring Person), to suspend the
effectiveness of the provision of the Rights Agreement pursuant
to which certain rights become void as described above, or to
shorten or lengthen any time period under the Rights Agreement;
provided, however, that no amendment to adjust the time period
governing redemption shall be made at such time as the rights are
not redeemable.
The rights may have the effect of preventing or discouraging some
attempts to acquire control of Dravo. The rights could cause
substantial dilution to a person or group that attempts to
acquire control of Dravo on terms not approved by its Board of
Directors, unless the offer is conditioned on a substantial
percentage of rights being tendered to and acquired by the
Acquiring Person. The rights should not interfere with any
merger or other business combination approved by the Board of
Directors prior to the expiration of the redemption period since
the rights may be redeemed by Dravo prior to the expiration of
such period and Dravo may suspend the provisions that in certain
circumstances prevent an Acquiring Person from exercising its
rights. The rights could interfere with a negotiated transaction
after an acquisition of 20 percent or more voting power if the
rights were not redeemed. The rights will not prevent a holder
of a controlling interest from exercising control over Dravo.
The Board of Directors has decided not to extend the rights past
the April 17, 1996 expiration date.
A copy of the Rights Agreement has been filed with the Securities
and Exchange Commission as an Exhibit to a Report on Form 8-K. A
copy of the Rights Agreement is available free of charge from
Dravo upon the request of any shareholder. This summary
description of the Rights does not purport to be complete and is
qualified in its entirety by reference to the Rights Agreement.
-13-
Item 5. Market for the Registrant's Common Stock and Related
Stockholder
Matters (continued)
Other Information
Dravo may purchase shares of the Preference Stock whether or not
any dividend arrearage shall exist with respect thereto, and may
hold and dispose of such shares in such manner as it may elect.
The holders of the preference stock who comply with applicable
provisions of law and object to a merger or consolidation
involving Dravo shall have all of the legal rights of objecting
shareholders in a merger or consolidation whether or not they
constitute a class otherwise entitled to such rights.
The transfer agent and registrar for the common stock is
Continental Stock Transfer & Trust Company, New York, NY.
Item 6. Selected Financial Data
Information required by this item, with the exception of common
stock dividends declared, is incorporated by reference to the
information set forth under the caption "Five-Year Summary" on
page 34 of the 1995 Annual Report to Shareholders which
accompanies this report. Dravo has declared no common stock
dividends in the five-year period ending December 31, 1995.
Item 7. Management's Discussion and Analysis of Financial
Condition and
Results of Operations
Information required by this item is incorporated by reference to
the information set forth under the captions "Overview", "Results
of Operations", "Financial Position and Liquidity" and "Outlook"
on pages 12 through 15 of the 1995 Annual Report to Shareholders
which accompanies this report, to the information set forth under
the caption Note 2: "Discontinued Operations" on pages 22 and 23,
Note 3: "Dispositions" on pages 23 and 24, Note 7: "Commitments"
on page 25, Note 8: "Contingent Liabilities" on pages 25 and 26,
Note 13: "Income Taxes" on pages 30 and 31 and Note 14:
"Extraordinary Item" on page 31 in the Notes to Consolidated
Financial Statements of the 1995 Annual Report to Shareholders.
Item 8. Financial Statements and Supplementary Data
Information required by this item is incorporated by reference to
the financial statements and notes thereto set forth on pages 16
through 33, and the Independent Auditors' Report set forth on
page 33 of the 1995 Annual Report to Shareholders which
accompanies this report.
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
Not applicable.
-14-
PART III
Item 10. Directors and Executive Officers of the Registrant
Information required by this Item as to Directors and nominees
for Director is incorporated by reference to the information set
forth under the caption "Information Concerning Directors and
Nominees for Director" in the Registrant's Proxy Statement for
the Annual Meeting of Shareholders on April 25, 1996.
The following information indicates the position and age at March
22, 1996 of the non-director executive officers of Dravo
Corporation and their business experience during the last five
years:
Marshall S. Johnson, Age 54, Vice President, Operations and
Engineering since December, 1994; Vice President, Operations,
Dravo Lime Company from April, 1992 to December 1994; prior
thereto Regional Operations Manager, Dravo Lime Company.
Ernest F. Ladd III, Age 55, Executive Vice President, Chief
Financial Officer since December, 1994; Executive Vice President,
Finance and Administration from December, 1989 to December, 1994.
John R. Major, Age 51, Vice President, Administration since
January, 1989.
James J. Puhala, Age 53, Vice President, General Counsel and
Secretary since September, 1987.
Richard E. Redlinger, Age 44, Vice President, Corporate
Development, and Treasurer since July, 1995; prior thereto Vice
President, Finance and Planning, Dravo Lime Company.
Donald H. Stowe, Jr., Age 44, Vice President Sales and Technology
since December 1994; Executive Vice President, Sales and
Technology, Dravo Lime Company from March, 1992 to December,
1994; prior thereto Sr. Vice President, Sales and Technology,
Dravo Lime Company.
Larry J. Walker, Age 43, Vice President and Controller since
July, 1995; Controller since December, 1989.
-15-
Item 11. Executive Compensation
Information required by this item is incorporated by reference to
the information set forth under the caption "Executive
Compensation" in the Registrant's Proxy Statement for the Annual
Meeting of Shareholders on April 25, 1996.
Item 12. Security Ownership of Certain Beneficial Owners and
Management
Information required by this item is incorporated by reference to
the information set forth under the captions "Security Ownership
of Certain Beneficial Owners" and "Ownership by Management of
Equity Securities" in the Registrant's Proxy Statement for the
Annual Meeting of Shareholders on April 25, 1996.
Item 13. Certain Relationships and Related Transactions
Information required by this item is incorporated by reference to
the information set forth under the caption "Information
Concerning Directors and Nominees for Director" in the
Registrant's Proxy Statement for the Annual Meeting of
Shareholders on April 25, 1996.
-16-
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on
Form 8-K
(a) 1. Financial Statements
The following consolidated financial statements of the
Registrant are filed pursuant to Item 8 of this Form 10-K
and are incorporated herein by reference to the page numbers
indicated below in the 1995 Annual Report to Shareholders
which accompanies this report.
<TABLE>
Description Page No.
<CAPTION>
<S> <C> <C>
Consolidated Balance Sheets at December 31, 1995 and 1994 16, 17
Consolidated Statements of Operations for the years ended
December 31, 1995, 1994 and 1993 18
Consolidated Statements of Retained Earnings for the years
ended December 31, 1995, 1994 and 1993 19
Consolidated Statements of Cash Flows for the years ended
December 31, 1995, 1994 and 1993 20, 21
Notes to Consolidated Financial Statements 22 - 32
Independent Auditors' Report 33
2. Financial Statement Schedules
The following financial statement schedules of the Registrant
are required and are filed pursuant to this item in this
Form 10-K.
Schedule Page No.
Independent Auditors' Report 25
Schedule I. Condensed Financial Information of
Registrant 26 - 33
</TABLE>
Schedules other than those listed above have been omitted because they
are not applicable or because the required information is reported in
the financial statements or notes.
-17-
Item 14. Exhibits, Financial Statement Schedules and Reports on
Form 8-K
(continued)
(a) 3. Exhibits
(3) Articles of Incorporation and By-laws
(i) Articles of Amendment restating Dravo
Corporation's Articles of Incorporation in their
entirety and all subsequent amendments thereto
including but not limited to the Statement with
Respect to Shares of Dravo Corporation as filed
with the Secretary of the Commonwealth of
Pennsylvania on January 27, 1992 are incorporated
by reference to Exhibit 3.1 of the February 12,
1992 Form 8-K of the Registrant.
(ii) By-laws of the Registrant as amended are filed
herein under separate cover.
(4) Instruments Defining the Rights of Security
Holders, including Indentures
(i) Articles of Amendment restating Dravo
Corporation's Articles of Incorporation,
described in Exhibit (3)(i) in this Form 10-K of
the Registrant.
(ii) Shareholders' Rights Agreement dated as of April
4, 1986 between Dravo Corporation and PNC Bank, N.
A. (formerly Pittsburgh National Bank), as rights
agent, incorporated by reference to Exhibit (1) of
the April, 1986 Form 8-K of the Registrant.
(iii) Statement with Respect to Shares -
Domestic Business Corporation amending Section
3(a) of the Certificate of Designations,
Preferences and Rights of Series D Cumulative
Convertible Exchangeable Preference Stock is
incorporated by reference to exhibit (4) (ii) of
the June 30, 1990 Form 10-Q of the Registrant.
(iv) Form of indemnification agreement
between Dravo Corporation and members of its Board
of Directors incorporated by reference to Exhibit
(10)(xvii) of the December 31, 1987 Form 10-K of
the Registrant.
(v) Statement with respect to amended rules
for Form S-8 is incorporated by reference to
Exhibit (4)(x) of the December 31, 1990 Form 10-K
of the Registrant.
-18-
Item 14. Exhibits, Financial Statement Schedules and Reports on
Form 8-K
(continued)
(a) 3. Exhibits (continued)
(4)(vi) Credit and Note and Stock Purchase
Agreement dated as of September 21, 1988 by and
among Dravo Corporation, its wholly-owned
subsidiaries, Dravo Lime Company and Dravo Basic
Materials Company, Inc. and The Prudential
Insurance Company of America and Prudential
Interfunding Corp. is incorporated by reference to
Exhibit (4)(i) of the September 27, 1988 Form 8-K
of the Registrant and amendment dated March 13,
1990 to said agreement is incorporated by
reference to Exhibit (4)(v) of the December 31,
1989 Form 10-K of the Registrant.
(vii) Registration agreement dated as of
September 21, 1988 between Dravo Corporation and
The Prudential Insurance Company of America, is
incorporated by reference to Exhibit (4)(vi) of
the September 27, 1988 Form 8-K of the Registrant.
(viii) (a) Revolving Line of Credit
Agreement with all attendant schedules and
exhibits dated as of September 20, 1990, by
and among Dravo Corporation, Dravo Lime
Company, Dravo Basic Materials Company, Inc.,
First Alabama Bank, and PNC Bank, N. A.
(formerly Pittsburgh National Bank) is
incorporated by reference to Exhibit (4)(i) of
the September 30, 1990 Form 10-Q of the
Registrant.
(b) Amendment dated September
20, 1990 to Credit and Note and Stock Purchase
Agreement dated as of September 21, 1988 is
incorporated by reference to Exhibit (4) (ii)
of the September 30, 1990 Form 10-Q of the
Registrant.
(c) First amendment to the
Companies' Pledge Agreement dated September
20, 1990 of the Credit and Note and Stock
Purchase Agreement dated September 21, 1988 is
incorporated by reference to Exhibit (4)(iii)
of the September 30, 1990 Form 10-Q of the
Registrant.
(d) First amendment to the
Second Intercreditor Agreement dated September
20, 1990 of the Credit and Note and Stock
Purchase Agreement dated September 21, 1988 is
incorporated by reference to Exhibit (4)(iv)
of the September 30, 1990 Form 10-Q of the
Registrant.
(e) Intercreditor Agreement
dated September 20, 1990 by and among The
Prudential Insurance Company of America, First
Alabama Bank, PNC Bank, N. A. (formerly
Pittsburgh National Bank), Mellon Bank, N. A.,
and the Royal Bank of Canada is incorporated
by reference to Exhibit (4) (v) of the
September 30, 1990 Form 10-Q of the
Registrant.
-19-
Item 14. Exhibits, Financial Statement Schedules and Reports on
Form 8-K
(continued)
(a) 3. Exhibits (continued)
(4)(ix) (a) Loan Agreement dated as of
December 1, 1978 between Dravo Equipment
Company and County of Harrison, Ohio.
The Registrant hereby
agrees to furnish to the Commission upon
request a copy of the instrument listed under
exhibit (4)(ix). The instrument does not
authorize the issuance of securities in excess
of 10 percent of total assets of the
Registrant and its subsidiaries on a
consolidated basis.
(x) Override Agreement, dated January 21,
1992, between Dravo Corporation, The Prudential
Insurance Company of America, First Alabama Bank,
PNC Bank, N. A. (formerly Pittsburgh National
Bank) and Continental Bank, N. A. is incorporated
by reference to Exhibit 10.1 of the February 12,
1992 Form 8-K of the Registrant.
(xi) First Amendment, dated March 10, 1993,
to the Override Agreement dated January 21, 1992
is incorporated by reference to Exhibit 4 (xi) of
the December 31, 1992 Form 10-K of the Registrant.
(xii) Second Amendment, dated March 7, 1994,
to the Override Agreement dated January 21, 1992
is incorporated by reference to Exhibit 4 (xii)
of the December 31, 1993 Form 10-K of the
Registrant.
(xiii) First Amendment, dated March 7, 1994, to
the Amended and Restated Revolving Credit
Agreement dated January 21, 1992 is incorporated
by reference to Exhibit 4 (xiii) of the December
31, 1993 Form 10-K of the Registrant.
(xiv) Four copies of the First Amendment, (one
each for The Prudential Insurance Company of
America, First Alabama Bank, PNC Bank, N.A. and
Continental Bank N.A.), dated March 7, 1994, to
the Amended and Restated Revolving Credit
Agreement dated January 21, 1992 are incorporated
by reference to Exhibit 4 (xiv) of the December
31, 1993 Form 10-K of the Registrant.
(xv) Amendment Agreement dated August 1, 1994
encompassing the Third Amendment to the Override
Agreement dated January 21, 1992 and the Second
Amendment to the Amended and Restated Revolving
Credit Agreement dated January 21, 1992 is
incorporated by reference to the August 18, 1994
Form 8-K of the Registrant.
-20-
Item 14. Exhibits, Financial Statement Schedules and Reports on
Form 8-K
(continued)
(a) 3. Exhibits (continued)
(4)(xvi) Amendment Agreement dated January 3,
1995 encompassing the Fourth Amendment to the
Override Agreement dated January 21, 1992 and the
Third Amendment to the Amended and Restated
Revolving Credit Agreement dated January 21, 1992
is incorporated by reference to Exhibit 4 (xvii)
of the December 31, 1994 Form 10-K of the
Registrant.
(xvii) Amendment Agreement dated December 31,
1995 encompassing the Fifth Amendment to the
Override Agreement dated January 21, 1992 and the
Fourth Amendment to the Amended and Restated
Revolving Credit Agreement dated January 21, 1992
is filed herein under separate cover.
(xviii) Amendment and Restatement of
Articles IV, V, VI and Appendix A dated February
15, 1996 of the Override Agreement dated January
21, 1992 is filed herein under separate cover.
(10) Material Contracts
(All of the following, except item 10 (xiv),
are Management Contracts or Compensatory Plans or
Arrangements required to be filed as an Exhibit to this
Form 10-K.)
(i) Dravo Corporation Executive Death and
Disability Income Executive Benefits Plan (now
Executive Benefit Plan), approved by the Board of
Directors on October 23, 1980, incorporated by
reference to Exhibit 10 (i) of the December 31,
1980 Form 10-K of the Registrant, and amendment
thereto dated July 1, 1984, incorporated by
reference to Exhibit 10 (i) of the December 31,
1984 Form 10-K of the Registrant.
(ii) Dravo Corporation Stock Option Plan of
1978, as amended, incorporated by reference to
Exhibit 10 (vi) of the December 31, 1982 Form 10-K
of the Registrant.
(iii) Dravo Corporation Long-Term Incentive
Award Plan of 1983, as amended, incorporated by
reference to Exhibit 10 (iv) of the December 31,
1987 Form 10-K of the Registrant.
(iv) Dravo Corporation Employee Stock Option
Plan of 1988, incorporated by reference to the
Proxy Statement for the Annual Meeting of
Shareholders on April 28, 1988.
(v) Dravo Corporation Incentive Compensation
Plan is filed herein under separate cover.
(vi) Dravo Corporation Stock Option Plan of
1994, as amended December, 1995, is filed herein
under separate cover.
-21-
Item 14. Exhibits, Financial Statement Schedules and Reports on
Form 8-K
(continued)
(a) 3. Exhibits (continued)
(10)(vii) Dravo Corporation Non-Employee
Directors' Retainer Fee Plan, incorporated by
reference to the Registrant's Registration
Statement No. 333-01689 on Form S-8 dated March
13, 1996.
(viii) Dravo Corporation Stock Incentive
Compensation Plan, incorporated by reference to
the Registrant's Registration Statement No. 333-
01691 on Form S-8 dated March 13, 1996.
(ix) Agreement dated June 1, 1993 between
Dravo Corporation and Ernest F. Ladd III is
incorporated by reference to Exhibit 10 (viii) of
the December 31, 1993 Form 10-K of the Registrant.
(x) Agreement dated June 1, 1993 between
Dravo Corporation and Carl A. Gilbert is
incorporated by reference to Exhibit 10 (ix) of
the December 31, 1993 Form 10-K of the Registrant.
(xi) Agreement dated June 1, 1993 between
Dravo Corporation and John R. Major is
incorporated by reference to Exhibit 10 (xi) of
the December 31, 1993 Form 10-K of the Registrant.
(xii) Agreement dated June 1, 1993 between
Dravo Corporation and James J. Puhala is filed
herein under separate cover.
(xiii) Agreement dated January 1, 1995 between
Dravo Corporation and Donald H. Stowe, Jr., is
filed herein under separate cover.
(xiv) Noncompetition and Nondisclosure
Agreement dated January 3, 1995 by and among Dravo
Corporation, Dravo Basic Materials Company, Inc.,
Dravo Lime Company and Martin Marietta Materials,
Inc. is incorporated by reference to Exhibit 10.1
of the January 17, 1995 Form 8-K of the
Registrant.
(11) Statement Re Computation of Per Share Earnings
filed under separate cover.
(13) 1995 Annual Report to Shareholders attached to
this report under separate cover. Except for the pages
and information thereof expressly incorporated by
reference in this Form 10-K, the Annual Report to
Shareholders is provided solely for the information of
the Securities and Exchange Commission and is not to be
deemed "filed" as part of the Form 10-K.
(21) Subsidiaries of the Registrant filed under separate
cover.
(23) Consent of Independent Auditors filed under separate
cover.
-22-
Item 14. Exhibits, Financial Statement Schedules and Reports on
Form 8-K
(continued)
(a) 3. Exhibits (continued)
(24) Powers of Attorney are filed herein under separate
cover.
(b) Reports on Form 8-K
There were no reports on Form 8-K for the three months ended
December 31, 1995.
-23-
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
DRAVO CORPORATION
March 27, 1996 By:/s/ CARL A. GILBERT
Carl A. Gilbert, President and Chief Executive Officer
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 and on the date
indicated.
Signature Title Date
/s/ CARL A. GILBERT President, Chief Executive
Carl A. Gilbert Officer and Director March 27, 1996
/s/ ERNEST F. LADD III Executive Vice President,
Ernest F. Ladd III Chief Financial Officer March 27, 1996
/s/ LARRY J. WALKER Vice President and
Larry J. Walker Controller March 27, 1996
*ARTHUR E. BYRNES Director March 27, 1996
Arthur E. Byrnes
*JAMES C. HUNTINGTON, JR. Director March 27, 1996
James C. Huntington, Jr.
*WILLIAM E. KASSLING Director March 27, 1996
William E. Kassling
*WILLIAM G. ROTH Director March 27, 1996
William G. Roth
*KONRAD M. WEIS Director March 27, 1996
Konrad M. Weis
/s/ ERNEST F. LADD III
*By Ernest F. Ladd III, Attorney-in-fact
-24-
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
Dravo Corporation:
Under date of January 24, 1996, we reported on the consolidated
balance sheets of Dravo Corporation and subsidiaries as of
December 31, 1995, and 1994, and the related consolidated
statements of operations, retained earnings, and cash flows for
each of the years in the three-year period ended December 31,
1995, as contained in the 1995 annual report to shareholders. As
discussed in Notes 10 and 13 to the consolidated financial
statements, the company adopted the method of accounting for
postemployment benefits prescribed by Statement of Financial
Accounting Standards No. 112 in 1994 and the methods of
accounting for postretirement benefits other than pensions and
income taxes prescribed by Statements of Financial Accounting
Standard Nos. 106 and 109, respectively, in 1993. These
consolidated financial statements and our report thereon are
incorporated by reference in the annual report on Form 10-K for
the year 1995. In connection with our audits of the
aforementioned consolidated financial statements, we also audited
the related financial statement schedule as listed in answer to
Item 14(a)(2). The financial statement schedule is the
responsibility of the company's management. Our responsibility
is to express an opinion on the financial statement schedule
based on our audits.
In our opinion, such financial statement schedule, when
considered in relation to the basic consolidated financial
statements taken as a whole, presents fairly, in all material
respects, the information set forth therein.
KPMG PEAT MARWICK LLP
Pittsburgh, Pennsylvania
January 24, 1996
-25-
<TABLE>
DRAVO CORPORATION (PARENT COMPANY)
Schedule I - Condensed Financial Information of Registrant
Balance Sheets
<CAPTION>
(In thousands) December 31,
1995 1994
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 279 $ 254
Accounts receivable 879 1,605
Notes receivable - 1,200
Current income tax benefit
from affiliates 5,694 1,941
Net assets of discontinued operations 923 -
Other current assets 434 1,585
Total current assets 8,209 6,585
Investments in affiliates 140,866 195,497
Notes receivable - 1,300
Deferred income tax benefit
from affiliates 24,853 24,853
Other assets 19,532 19,241
Property, plant and equipment 6,832 6,832
Less accumulated depreciation and
amortization 6,824 6,818
Net property, plant and equipment 8 14
Total assets $193,468 $247,490
</TABLE>
See accompanying notes to financial statements.
-26-
<TABLE>
DRAVO CORPORATION (PARENT COMPANY)
Schedule I - Condensed Financial Information of Registrant
Balance Sheets
<CAPTION>
(In thousands) December 31,
1995 1994
LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C> <C>
Current liabilities:
Accounts payable-trade $ 1,566 $ 2,404
Accrued insurance - 567
Accrued retirement contribution 2,423 2,388
Net liabilities of discontinued operations - 13,547
Other current liabilities 641 675
Total current liabilities 4,630 19,581
Advances from affiliates 73,176 116,818
Net liabilities of discontinued operations 9,517 8,445
Other liabilities 6,290 5,900
Redeemable preference stock:
Par value $1, issued 200,000 shares: Series D,
cumulative, convertible, exchangeable
(entitled in liquidation to $20.0
million) 20,000 20,000
Shareholders' equity:
Preference stock, par value $1, authorized
1,878,870 shares: Series B, $2.475 cumulative,
convertible, issued 25,386 and 28,386 shares
(entitled in liquidation to $1.4 million
and $1.6 million); 25 28
Series D, reported above
Common stock, par value $1, authorized
35,000,000 shares; issued 15,055,237
and 14,985,839 15,055 14,986
Other shareholders' equity 64,775 61,732
Total shareholders' equity 79,855 76,746
Total liabilities and
shareholders' equity $193,468 $247,490
</TABLE>
See accompanying notes to financial statements.
-27-
<TABLE>
DRAVO CORPORATION (PARENT COMPANY)
Schedule I - Condensed Financial Information of Registrant
Statements of Operations
<CAPTION>
Years ended December 31,
(In thousands) 1995 1994 1993
<S> <C> <C> <C>
General and administrative
expenses $ (961) $ (1,433) $ (1,046)
Interest expense (9) (16) --
Interest income -- 9 49
Loss from continuing operations
before taxes, affiliate earnings
and extraordinary item (970) (1,440) (997)
Income tax benefit (provision) 3,008 (4,107) 27,834
Earnings (loss) from continuing
operations before affiliate
earnings 2,038 (5,547) 26,837
Equity in affiliate earnings 8,943 1,544 8,565
Earnings (loss) from continuing
operations 10,981 (4,003) 35,402
Loss from discontinued operations -- (6,554) (35,303)
Net earnings (loss) before cumulative
effect of change in accounting
principle 10,981 (10,557) 99
Cumulative effect of change in
accounting for income taxes -- -- (276)
Net earnings (loss) $10,981 $(10,557) $ (177)
</TABLE>
See accompanying notes to financial statements.
-28-
<TABLE>
DRAVO CORPORATION (PARENT COMPANY)
Schedule I - Condensed Financial Information of Registrant
Statements of Cash Flows
<CAPTION>
(In thousands) Years ended December 31,
1995 1994 1993
<S> <C> <C> <C>
Cash flows from operating activities:
Earnings (loss) from continuing
operations $ 10,981 $ (4,003) $ 35,402
Adjustments to reconcile earnings (loss) from
continuing operations to net cash provided
(used) by continuing operations activities:
Depreciation and amortization 6 9 13
Equity in earnings of affiliates (8,943) (1,544) (8,565)
Cumulative effect of change in accounting
principle for income taxes -- -- (276)
Changes in assets and liabilities:
Decrease (increase) in accounts
receivable 726 (1,036) 691
Decrease (increase) in deferred income
tax benefits (3,753) 2,542 (6,828)
Decrease (increase) in other current
assets 1,151 (1,269) 334
Increase in other assets (3,517) (7,791) (1,159)
Increase (decrease) in accounts payable
and accrued expenses (1,404) 961 (2,012)
Increase (decrease) in other
liabilities 390 3,352 (224)
Net cash provided (used) by continuing
operations activities (4,363) (8,779) 17,376
Loss from discontinued operations -- (6,554) (35,303)
Increase (decrease) in net liabilities of
discontinued operations (13,099) (4,592) 21,647
Proceeds from repayment of notes receivable
from sale of discontinued operations 2,200 1,600 1,992
Net cash used by discontinued operations
activities (10,899) (9,546) (11,664)
Net cash provided (used) by operating
activities $(15,262) $(18,325) $ 5,712
</TABLE>
See accompanying notes to financial statements.
-29-
<TABLE>
DRAVO CORPORATION (PARENT COMPANY)
Schedule I - Condensed Financial Information of Registrant
Statements of Cash Flows
<CAPTION>
(In thousands) Years ended December 31,
1995 1994 1993
<S> <C> <C> <C>
Cash flows from investing activities:
Increase (decrease) in advances from
subsidiaries $(68,068) $20,778 $(2,893)
Dividends received from affiliates 88,000 -- --
Other, net -- 266 (581)
Net cash provided (used) by investing
activities 19,932 21,044 (3,474)
Cash flows from financing activities:
Proceeds from issuance of common stock 557 42 101
Purchase of treasury stock (2,667) -- --
Dividends paid (2,535) (2,544) (2,554)
Net cash used by financing activities (4,645) (2,502) (2,453)
Net increase (decrease) in cash and cash
equivalents 25 217 (215)
Cash and cash equivalents at beginning
of year 254 37 252
Cash and cash equivalents at end of year $ 279 $ 254 $ 37
</TABLE>
See accompanying notes to financial statements.
-30-
DRAVO CORPORATION (PARENT COMPANY)
Schedule I - Condensed Financial Information of Registrant
Notes to Financial Statements
Notes 1 through 3, 5 through 15, and 17 to Dravo Corporation's
Consolidated Financial Statements have relevance to the parent
company financial statements and should be read in conjunction
therewith.
Note 1: Commitments
There was no continuing operations rental expense for 1995, 1994
or 1993. The minimum future rentals under noncancelable
operating leases and minimum future rental receipts from
subleases to third parties as of December 31, 1995 are indicated
in the table below. Of the $7.5 million net minimum payments,
$5.6 million has been expensed in connection with discontinued
operations.
(In thousands)
1996 $10,608
1997 10,750
1998 3,629
1999 --
2000 --
After 2000 --
Total minimum payments required24,987
Less: Minimum sublease rental
receipts (17,514)
Net minimum payments $ 7,473
Note 2: Income Taxes
The company adopted Statement of Financial Accounting Standards
No. 109 "Accounting for Income Taxes" (SFAS 109) effective
January 1, 1993. The cumulative effect of this change in
accounting for income taxes of $276,000 is determined as of
January 1, 1993 and is reported separately in the Statements of
Operations for the year ended December 31, 1993. Prior years
financial statements were not restated to apply the provisions of
SFAS 109.
Dravo Corporation files a consolidated federal income tax return
which includes the parent and consolidated subsidiaries. Dravo
Corporation parent company financial statements recognize current
income tax benefits to the extent the benefits are offset by
current income tax liabilities of the consolidated subsidiaries.
Long-term deferred income tax benefits are recognized to the
extent that it is more likely than not that the company will
generate sufficient consolidated taxable income to utilize net
operating loss carryforwards prior to their expiration.
-31-
Note 2: Income Taxes (continued)
The income tax benefit (provision) for the years ended December
31 are comprised of the following:
<TABLE>
(In thousands) 1995 1994 1993
<CAPTION>
<S> <C> <C> <C>
Provision to offset tax benefits
of subsidiaries $ -- $(4,107) $ --
Benefit to offset tax liabilities
of subsidiaries 3,008 -- 2,981
Change in net deferred tax asset -- -- 24,853
$3,008 $(4,107) $27,834
</TABLE>
The tax effects of temporary differences that give rise to
significant portions of the deferred tax assets and deferred tax
liabilities at December 31 are as follows:
<TABLE>
(In thousands)
<CAPTION>
1995 1994
<C> <C> <C>
Deferred tax assets:
Provision for discontinued operations $ 3,008 $ 7,477
Net operating loss carryforwards 67,229 61,713
Investment tax credit carryforwards 1,411 1,506
Other -- 721
Total gross deferred tax assets 71,648 71,417
Less valuation allowance 38,251 41,882
Net deferred tax assets after
valuation allowance 33,397 29,535
Deferred tax liabilities:
Pension accrual 6,151 4,682
Other 2,393 --
Total gross deferred tax liabilities 8,544 4,682
Net deferred tax asset $24,853 $24,853
</TABLE>
Management believes it is more likely than not that the net
deferred tax asset of $24.9 million will be realized through the
reversal of temporary differences and through its subsidiaries
future income. In order to fully realize the net deferred tax
asset, the parent company and its subsidiaries will need to
generate future taxable income of approximately $73.2 million
prior to the expiration of its net operating loss carryforwards.
There can be no assurance, however, that the parent, or its
subsidiaries, will generate any earnings or any specific level of
continued earnings.
-32-
Note 3: Dividends
Cash dividends paid to the Registrant for the respective years
ended December 31:
<TABLE>
(In thousands)
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Consolidated affiliates $88,000 $-0- $-0-
50 percent or less owned companies
accounted for by the equity method 916 792 586
</TABLE>
-33-
EXHIBITS
Table of Contents
<TABLE>
Exhibit (Exhibit No.) Page No.
<CAPTION>
<S> <C>
3. Articles of Incorporation and By-laws
(ii) By-laws of the Registrant as amended (3) 1-11
4. Instruments Defining the Rights of Security Holders,
Including Indentures
(xvii) Amendment Agreement dated December 31, 1995
encompassing the Fifth Amendment to the
Override Agreement and the Fourth Amendment
to the Amended and Restated Revolving Credit
Agreement. (4xvii) 1-45
(xviii) Amendment and Restatement of Articles IV, V,
VI and Appendix A dated February 15, 1996
of the Override Agreement. (4xviii) 1-31
10. Material Contracts
(v) Dravo Corporation Incentive Compensation Plan (10v) 1-5
(vi) Dravo Corporation Stock Option Plan of
1994, as amended December, 1995. (10vi) 1-11
(xii) Agreement between Dravo Corporation and James J.
Puhala. (10xii) 1-16
(xiii) Agreement between Dravo Corporation and Donald H.
Stowe, Jr. (10xiii) 1-16
11. Statement RE Computation of Per Share Earnings (11) 1, 2
13. 1995 Annual Report (13) 12-35
21. Subsidiaries of the Registrant (21) 1
23. Consent of Experts and Counsel (23) 1
24. Powers of Attorney (24) 1-5
27. Financial Data Schedule (EDGAR filing only) (27) 1
</TABLE>
-34-
BY-LAWS
As Amended April 27, 1995
ARTICLE I
Board of Directors
SECTION 1. The Board of Directors shall consist of not less
than two and not more than twelve persons to be elected by the
shareholders as herein provided, the exact number to be determined from
time to time by proper resolution of the Board of Directors. The
Directors shall be classified with respect to the time during which
they shall severally hold office, by dividing them into three classes,
each consisting as nearly as possible of the same number of Directors.
At each annual meeting of the shareholders, Directors in the number for
those whose terms then expire shall be elected to serve for terms of
three years, except that the number of Directors to be elected to such
terms shall be adjusted if the number of Directors shall have been
decreased as provided herein so as to eliminate the place of a Director
whose term then expires.
Nominations for election to the Board of Directors may be made by
the Board of Directors or by any shareholder of the Corporation
entitled to notice of, and to vote at, any meeting called for the
election of Directors. Nominations, other than those made by or on
behalf of the Board of Directors of the Corporation, shall be noticed
in writing and shall be received by the Secretary of the Corporation
not later than (i) with respect to an election of directors to be held
at an annual meeting of shareholders, ninety (90) days prior to the
anniversary date of the immediately preceding annual meeting, and (ii)
with respect to an election of directors to be held at a special
meeting of shareholders, the close of business on the fifteenth (15th)
day following the date on which notice of such meeting is first given
to shareholders or public disclosure of the meeting is made. Such
notification shall contain the following information to the extent
known to the notifying shareholder: (a) the name and residence address
of each proposed nominee and of the notifying shareholder; (b) the
principal occupation of each proposed nominee; (c) a representation
that the notifying shareholder intends to appear in person or by proxy
at the meeting to nominate the person or persons specified in the
notice; (d) the total number of shares of the Corporation that will be
voted for each proposed nominee; (e) the total number of shares of the
Corporation owned by the notifying shareholder; (f) a description of
all arrangements or understandings between the notifying shareholder
and each nominee and any other person or persons (naming such person or
persons) relating to such nomination or nominations by the notifying
shareholder; (g) such other information regarding each nominee proposed
by such shareholder as would be required to be included in a proxy
statement filed with the Securities and Exchange Commission; and (h)
the consent of each nominee to serve as a director of the Corporation
if so elected. If the information submitted to the Corporation within
the time prescribed above is determined by the Chairman of the Board of
the Corporation to be deficient in any manner, the Chairman shall
advise the notifying shareholder in writing of such deficiencies not
Page 2
By-Laws
later than the close of business on the fifth (5th) day following the
date that the Corporation first received written notice of the
nomination made by the notifying shareholder. The notifying shareholder
must thereafter cure such deficiencies by sending a revised
notification to the Secretary of the Corporation setting forth the
required information which must be received by the Secretary in writing
not later than the fifth (5th) day following the date that the
notifying shareholder received notice from the Corporation of the
deficiencies in the notifying shareholder's written nomination.
Notwithstanding the above, these nominating procedures shall not apply
to any special meeting of the shareholders of the Corporation called
for the election of directors for which notice of the meeting was not
given to shareholders at least twenty (20) days prior to the meeting.
The chairman may disregard and refuse to recognize any nomination
determined by him not to have been made in accordance with the
foregoing procedures.
If a vacancy occurs in the Board of Directors from any cause,
including any increase in the number of Directors in the manner
prescribed in this Section, a majority of the remaining members of the
Board of Directors, though less than a quorum, shall have the power to
elect a Director to fill such vacancy to serve for the balance of the
unexpired term of the vacating director and until his or her successor
has been elected and qualified.
In the case of an increase in the number of Directors in the
manner specified in this Section, the additional offices so created
shall be assigned by the Board of Directors to the appropriate class so
that the three classes shall continue to consist, as nearly as
possible, of the same number of Directors.
At any shareholders' meeting at which Directors are to be elected,
separate elections shall be held for the Directors of each class then
to be elected.
The Directors shall hold office during the terms for which they
have been elected and until their successors are elected and qualified.
SECTION 2. The Board of Directors may, by resolution adopted
by a majority of the whole Board, designate one or more committees,
each committee to consist of two or more of the Directors of the
Corporation. Standing committees shall include the Audit and Finance
Committee and the Compensation and Nominating Committee, each of which
shall be comprised exclusively of Directors who are not current
employees of the Corporation.
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SECTION 3. The Board of Directors, as soon as reasonably
possible after each annual meeting of shareholders, shall hold a
meeting to organize, elect officers of the Corporation and transact
other business.
Regular meetings of the Board of Directors may be held without
notice at such time and place as shall from time to time be determined
by the Board of Directors and may be adjourned by the members present
to any other time and place.
Special meetings may be called at any time by the chief executive
officer or any two members of the Board of Directors upon at least 24
hours' notice, which need not be in writing.
A majority of the Directors in office shall constitute a quorum
for the transaction of business.
If all the Directors shall severally or collectively consent in
writing to any action to be taken by the Corporation, such action shall
be as valid corporate action as though it had been authorized at a
meeting of the Board of Directors.
One or more Directors may participate in a meeting of the Board of
Directors, or of a committee thereof, by means of conference telephone
or similar communications equipment by means of which all persons
participating in the meeting can hear each other.
SECTION 4. The Board of Directors shall have the right to
adopt such rules and regulations for the conduct of business, and from
time to time alter and amend the same, as to them may seem proper.
SECTION 5. The Board of Directors (or the Compensation
Committee by delegation from the Board), shall fix the compensation of
the officers of the Corporation and such other employees who are
designated by the Board of Directors as holding major positions of
authority in the Corporation.
ARTICLE II
Officers
SECTION 1. The officers of the Corporation to be elected by
the Board of Directors shall consist of a Chairman, one or more Vice
Chairman (any one or more of whom may have added to his title another
word or words specially designating the further powers and duties
assigned to that officer), a President, one or more Vice Presidents
(any one or more of whom may be designated an Executive Vice President,
Senior Vice President, Group Vice President or have added to his title
another word or words specifically designating the further powers and
Page 4
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duties assigned to that officer), a Treasurer, a Controller and a
Secretary, who shall hold office until their respective successors are
duly elected and qualified or until the earlier death, resignation or
removal from office of any of them.
SECTION 2. Subordinate officers to be appointed by the Board
of Directors shall include one or more assistant secretaries and one or
more assistant treasurers.
ARTICLE III
Duties of the Chairman
SECTION 1. The Chairman, who shall be elected from among the
Directors, shall preside at all meetings of the shareholders and of the
Board of Directors at which he shall be present.
ARTICLE IV
Duties of the Vice Chairmen
SECTION 1. The Vice Chairmen, who shall be elected from among
the Directors, shall perform such duties as shall be prescribed time to
time by the Board of Directors or the chief executive officer.
ARTICLE V
Duties of the President
SECTION 1. The President, who shall be elected from among the
Directors, shall be the chief executive officer of the Corporation, and
be subject to the control of the Board of Directors, shall be in
general and active charge of the business affairs of the Corporation,
shall establish the various Divisions and units of the Corporation, and
shall appoint and designate the duties of the Managers of Divisions of
the Corporation. In the absence or inability to act of the President,
the officer or officers designated from time to time by the Board of
Directors shall perform the duties pertaining to the office of
President.
ARTICLE VI
Duties of the Vice Presidents
SECTION 1. The Vice Presidents shall perform such duties as
shall be prescribed from time to time by the Board of Directors or the
chief executive officer.
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ARTICLE VII
Duties of the Secretary
SECTION 1. The Secretary shall, under the direction of the
chief executive officer, record the proceeding of all meetings of the
Board of Directors and of the shareholders for presentation in a
suitable book. The Secretary shall notify the shareholders of all
annual and special meetings and the members of the Board of Directors
of all special meetings, have charge of the corporate seal and perform
all the duties which are customary and incident to the office of
Secretary of like companies.
ARTICLE VIII
Duties of the Treasurer
SECTION 1. The Treasurer shall, under the direction of the
Vice President in charge of financial affairs, have general charge of
the funds of the Corporation and shall make such reports of the
receipts and disbursements in such form and manner as the Board of
Directors may direct. He shall if so directed by the chief executive
officer, attend any or all meetings of the Board of Directors and
report on his activities as the chief executive officer may prescribe.
ARTICLE IX
Duties of the Controller
SECTION 1. The Controller shall, under the direction of the
Vice President in charge of financial affairs, maintain adequate
records of all assets, liabilities and transactions of the Corporation;
cause adequate audits to be currently and regularly made; prepare
financial, cost and tax reports and other reports of a financial and
accounting nature required by governmental agencies; and in conjunction
with other officers and heads of departments initiate and enforce
controls and procedures whereby the business of the Corporation shall
be conducted with the maximum of efficiency and economy. He shall, if
so directed by the chief executive officer, attend any or all meetings
of the Board of Directors and report on his activities as the chief
executive officer may prescribe.
ARTICLE X
Checks, Notes and Contracts
SECTION 1. All checks drawn upon the funds of the Corporation
and all promissory notes, drafts, bills of exchange or other negotiable
instruments shall be signed in the name of the Corporation by such
person or persons as the Board of Directors may from time to time
designate.
Page 6
By-Laws
SECTION 2. All written contracts other than those mentioned
in Section 1 of this Article shall be signed in the name of the
Corporation by the Chairman or a Vice Chairman or the President or a
Vice President, unless otherwise directed by the Board of Directors.
ARTICLE XI
Elections
SECTION 1. In elections of directors by shareholders, voting
need not be by ballot unless required by vote of the shareholders
before the voting for election of directors begins.
Election of officers shall be in such manner as a majority of the
Directors present and voting at a duly organized meeting may determine.
ARTICLE XII
Offices
SECTION 1. The registered office of the Corporation shall be
in the City of Pittsburgh, County of Allegheny, State of Pennsylvania,
but the Board of Directors may establish another office or other
offices at any place or places in the state of Pennsylvania or
elsewhere.
ARTICLE XIII
Seal
SECTION 1. The seal of the Corporation shall have inscribed
thereon the name of the Corporation, the year of its creation, the name
of the State under whose laws it was created and the words "Corporate
Seal".
ARTICLE XIV
Meetings of the Shareholders
SECTION 1. Meetings of the shareholders may be held at such
places within or without the State of Pennsylvania as may be fixed by
the Board of Directors.
The annual meeting of the shareholders of the Corporation for the
election of Directors shall be held on such date and at such time and
place as may be fixed from time to time by the Board of Directors,
provided, however, that in fixing the date, time and place of said
meeting the Board of Directors shall comply with all applicable
statutes and regulations as well as the rules of the New York Stock
Exchange.
Page 7
By-Laws
SECTION 2. Special meetings of the shareholders may be called
at any time by the Board of Directors, the Chairman of the Board or the
President of the Corporation. Notice shall be given by the Secretary of
the time and place of holding the annual and any special meeting of the
shareholders by mailing such notice to the addresses of said
shareholders, as shown by the share register or the records of the
Corporation, at least five days prior to the date of the meeting,
except when a longer period of notice is required by law.
SECTION 3. Unless otherwise provided in a resolution of the
Board of Directors with respect to any meeting of shareholders and
stated in the notice of the meeting, the presence of shareholders
entitled to cast at least a majority of the votes that all shareholders
are entitled to cast on a particular matter to be acted upon at the
meeting shall constitute a quorum for purposes of consideration and
action on the matter. If no quorum be present at any meeting so called,
the holders of less than a majority of said shares may meet and adjourn
the meeting from time to time until a quorum be present or until action
may be taken in the absence of a quorum in the manner prescribed by
law.
ARTICLE XV
Share Certificates
SECTION 1. Share certificates shall be issued to the
shareholders and transfers thereof shall be made by a transfer agent,
if one or more transfer agents are appointed by the Board of Directors,
otherwise by the Secretary or Assistant Secretary. Transfers shall be
made in person or by power of attorney on the books of the Corporation
on the surrender of the certificates. The share certificates shall be
signed by the Chairman, the President or a Vice President or other
officer designated by the Board of Directors, countersigned by the
Treasurer or Assistant Treasurer or other officers designated by the
Board of Directors and sealed with the seal of the Corporation.
One or more transfer agents and registrars of the shares of stock
of the Corporation may be appointed by the Board of Directors. The
signatures, countersignatures, and seal, or any of them on the share
certificates may be executed in facsimile, engraved or printed,
provided that the share certificates are signed or countersigned by a
corporate transfer agent or by a corporate registrar other than the
Corporation itself, appointed by the Board of Directors.
ARTICLE XVI
Resignations
SECTION 1. Any Director or officer may resign his office at
any time, such resignation to be in writing and to take effect from the
time of its receipt by the corporation, unless some time be fixed in
the said resignation, and then from that time. The acceptance of a
resignation shall not be required to make it effective.
Page 8
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ARTICLE XVII
Indemnification
SECTION 1. The Corporation shall indemnify every person who is
or was a party or is threatened to be made a party to or is involved
(as a witness or otherwise) in any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative and whether or not by or in the right of the Corporation
or otherwise (hereafter a "proceeding"), by reason of the fact that he
or she is or was a Director or officer or employee of the Corporation,
or is or was serving at the request of the Corporation as a Director,
officer or trustee or employee of another corporation, partnership,
joint venture, trust or other enterprise, including service with
respect to an employee benefit plan, or by reason of any action alleged
to have been taken or not taken by him or her while acting in any such
capacity, against expenses (including attorneys' fees) and all
liability and loss, including judgments, fines, ERISA excise taxes
and penalties and amounts paid or to be paid in settlement (whether
with or without court approval), actually and reasonable incurred by
him or her in connection with such threatened, pending or completed
action, suit or proceeding, except to the extent prohibited by law as
the same exists or may hereafter be amended (except in the case of any
such amendment which has the effect of narrowing indemnification rights
that the Corporation was permitted to provide prior to such amendment);
provided, however, that except with respect to claims described in
Section 2 hereof, the Corporation shall indemnify any such person
seeking indemnification in connection with a proceeding (or part
thereof), initiated by such person only if such proceeding (or part
thereof) was authorized by the Board of Directors of the Corporation.
Subject to the foregoing indemnification, the right to indemnification
conferred in this Section shall include the right to be paid by the
Corporation expenses incurred; provided, however, that to the extent
required by law, the payment of such expenses in advance of the final
disposition of a proceeding shall be made only upon receipt of an
undertaking by or on behalf of such person to repay such amounts if it
shall ultimately be determined that he or she is not entitled to be
indemnified under this Article or otherwise.
SECTION 2. If a claim under Section 1 is not paid in full by
the Corporation within forty-five (45) days after a written claim has
been received by the Corporation, the claimant may, at any time
thereafter, bring suit against the Corporation to recover the unpaid
amount of the claim. The claimant shall also be entitled to be paid the
expenses of prosecuting such claim to the extent he or she is
successful in whole or in part on the merits or otherwise in
establishing his or her right to indemnification or to the advancement
of expenses.
Page 9
By-Laws
SECTION 3. The right to indemnification, including the right
to the advancement of expenses, conferred in this Article shall not be
exclusive of any other rights to which a person seeking indemnification
or advancement of expenses hereunder may be entitled under any by-law,
agreement, vote of shareholders, or directors or otherwise, both as to
action in his or her official capacity and as to action in any other
capacity while holding that office.
SECTION 4. The Corporation may create a fund of any nature,
which may, but need not be, under the control of a trustee, or
otherwise secure or insure in any manner its indemnification
obligations, including its obligation to advance expenses, whether
arising under or pursuant to this Article or otherwise.
SECTION 5. The Corporation shall have the express authority to
enter into such agreements as the Board of Directors deem appropriate
for the indemnification of, including the advancement of expenses to,
present or future Directors, officers and employees of the Corporation
in connection with their service to, or status with, the Corporation or
any other corporation, partnership, joint venture, trust or other
enterprise, including any employee benefit plan, for whom such person
is serving at the request of the Corporation.
SECTION 6. The right to indemnification, including the right
to the advancement of expenses provided herein, shall be a contract
right, shall continue as to a person who has ceased to be a director,
officer, employee, or to serve in any other of the capacities described
herein, and shall inure to the benefit of the heirs, executors and
administrators of such person. Notwithstanding any amendment,
alteration or repeal of this Article or any of its provisions or the
adoption of any provision inconsistent with this Article or any of its
provisions, any person who is or was a director, officer or employee or
is or was serving at the request of the Corporation as a director,
officer, employee, or trustee of another corporation or of a
partnership, joint venture, trust or other enterprise, including
service with respect to employee benefit plans, shall be entitled to
indemnification, including the right to the advancement of expenses, in
accordance with the provisions hereof and thereof with respect to any
action taken or omitted prior to such amendment, alteration or repeal
or the adoption of such inconsistent provision except to the extent
such amendment, alteration, repeal or inconsistent provisions provides
broader rights with respect to indemnification, including the
advancement of expenses, than the Corporation was permitted to provide
prior to the amendment, alteration, repeal, or the adoption of such
inconsistent provision or to the extent otherwise prescribed by law.
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By-Laws
ARTICLE XVIII
By-Laws--Adoption, Alteration, Amendment and Repeal
SECTION 1. The By-Laws of the Corporation may be adopted,
altered, amended or repealed by a majority vote of the shareholders
present and voting at any regular or special meeting duly convened
after notice to the shareholders of that purpose or by a majority vote
of the members of the Board of Directors present and voting at any
regular or special meeting, subject always to the power of the
shareholders to change any such action taken by the Board of Directors.
ARTICLE XIX
Limitation on Director Liability
SECTION 1. A director of the Corporation shall not be
personally liable for monetary damages for any action taken or failure
to take any action unless the director has breached or failed to
perform the duties of his office under Section 8363 of the Directors'
Liability Act and such breach or failure to perform constitutes
self-dealing, willful misconduct or recklessness; provided, however,
that the foregoing provision shall not eliminate or limit the liability
of a director (i) for any responsibility or liability of such director
pursuant to any criminal statute, or (ii) for any liability of a
director for the payment of taxes pursuant to local, State or
Federal law. This Article XIX shall not apply to any actions filed
prior to January 27, 1987 or to any breach of performance of duty or
any failure of performance of duty by any director occurring prior to
January 27, 1987.
SECTION 2. Notwithstanding any other provision of law, the
Articles of Incorporation or the By-Laws of the Corporation, the
affirmative vote of shareholders entitled to cast at least a majority
of the votes which all shareholders would be entitled to cast in an
annual election of directors (or such greater percentage of votes as
shall be required by law) shall be required to adopt any amendment,
alteration or repeal of, or to adopt any provision inconsistent with,
this Article XIX or any of its provision, including this Section 2.
Neither the repeal or modification of this Article XIX or any of its
provisions nor the adoption of any provision inconsistent with this
Article XIX or any of its provisions shall adversely affect any
limitation on the personal liability of a director of the Corporation
existing at the time of such repeal or modification or the adoption of
such inconsistent provision.
Page 11
By-Laws
ARTICLE XX
Applicability of Certain provisions of the Pennsylvania Business
Corporation Law
SECTION 1. Subchapters G (relating to Control Share
Acquisitions), H (relating to Disgorgement by Certain Controlling
Shareholders Following Attempts to Acquire Control), I (relating to
Severance Compensation for Employees Terminated Following Certain
Control-Share Acquisitions), and J (relating to the Status of Labor
Contracts Following Certain Business Combination Transactions) of
Chapter 25 of the Pennsylvania Business Corporation Law shall not be
applicable to the Corporation.
EXECUTION COUNTERPART
AMENDMENT AGREEMENT
This AMENDMENT AGREEMENT (this "Agreement" or this
"Amendment"), dated as of December 31, 1995, is entered into by and
among DRAVO CORPORATION, a Pennsylvania corporation ("Dravo"), DRAVO
LIME COMPANY, a Delaware corporation ("Lime"), DRAVO BASIC MATERIALS
COMPANY, INC., an Alabama corporation ("Basic", together with Lime
referred to herein as the "Companies"), FIRST ALABAMA BANK, a
subsidiary of Regions Financial Corporation ("FAB"), PNC BANK,
NATIONAL ASSOCIATION (formerly known as Pittsburgh National Bank)
("PNC"), BANK OF AMERICA ILLINOIS (formerly known as Continental
Bank and Continental Bank N.A.) ("BAI"; FAB, PNC and BAI
collectively referred to herein as "Banks"), THE PRUDENTIAL
INSURANCE COMPANY OF AMERICA ("Prudential" and the Banks
collectively referred to as "Lenders" and each a "Lender"), and FAB,
as agent for the Banks (in such capacity, together with its
successors and assigns, the "Agent") and BAI, as documentation agent
for the Banks (in such capacity, together with its successors and
assigns, the "Documentation Agent").
PRELIMINARY STATEMENTS
(1) The Companies, Dravo and the Lenders have entered into
an Override Agreement, dated as of January 21, 1992, as amended by
the First Amendment to Override Agreement, dated March 10, 1993, the
Second Amendment to Override Agreement, dated as of March 7, 1994,
the Amendment Agreement, dated as of August 1, 1994 and the
Amendment Agreement, dated as of January 3, 1995 (as so amended, the
"Override Agreement"). In addition, the Companies, the Agent and
the Lenders have entered into an Amended and Restated Revolving
Credit Agreement, dated as of January 21, 1992, as amended by the
First Amendment to Amended and Restated Revolving Credit Agreement,
dated as of March 7, 1994, by the Amendment Agreement dated as of
August 1, 1994 and the Amendment Agreement dated as of January 3,
1995 (as so amended, the "Revolving Credit Agreement"). Capitalized
terms used but not defined herein shall have the meanings assigned
to such terms in the Override Agreement, as amended hereby.
(2) The parties hereto desire to amend the Revolving Credit
Agreement, the Override Agreement and certain other Operative
Documents to reflect certain covenant changes, among other things.
NOW, THEREFORE, in consideration of the premises, the parties
hereto agree as follows:
ARTICLE I
FIFTH AMENDMENT TO OVERRIDE AGREEMENT
SECTION 1.01. Amendments to Override Agreement. The
Override Agreement shall be, effective as of the date hereof and
subject to the satisfaction of the conditions precedent set forth in
Section 4.01 hereof, amended as follows:
(a) Amendments to Article IV. Article IV shall be amended
as follows:
(i) Section 4.01(a) is amended by deleting the word
"and" and the semicolon following clause (viii), adding a
period at the end of clause (viii), and deleting in its
entirety the following clause (ix):
"(ix) promptly upon receipt or transmission
thereof, a copy of each report (financial or
otherwise), notice (including, without limitation, any
notice disclosing any default), certificate or
statement received or provided by it or any of its
Subsidiaries pursuant to any Transaction Document, to
the extent not provided to the Lenders by any Dravo
Party pursuant to clauses (i) through (viii) above."
(ii) Section 4.01(b) is amended by deleting in its
entirety the phrase "(other than Lime SPV)" in each place in
which it appears therein;
(iii) Section 4.01(b) is further amended by deleting
in its entirety the following sentences at the end thereof:
"The inspection rights of the Lenders with respect to
Lime SPV shall be governed by the Master Common
Facilities Agreement as in effect on the Initial
Funding Date. Each of the Dravo Parties further
covenants that, so long as a Lender shall hold any
Note or Notes or any Secured Obligation shall remain
outstanding, it will permit one of the Lenders and its
representatives to perform an annual collateral audit
with respect to the Collateral, at the expense of the
Dravo Parties, which collateral audit shall be
conducted in accordance with such Lender's then
existing practices and procedures relating to
collateral audits."
(iv) Section 4.01(d) is amended by deleting in its
entirety the parenthetical phrase "(other than Lime SPV, the
SPV General Partner and the SPV Limited Partner)".
(v) Section 4.01(e) is amended by deleting in its
entirety the parenthetical phrase "(other than Lime SPV, the
SPV General Partner and the SPV Limited Partner)".
(vi) Section 4.01(f) is amended by deleting in its
entirety the parenthetical phrase "(other than Lime SPV, the
SPV General Partner and the SPV Limited Partner)".
(vii) Section 4.01(g) is amended by deleting in its
entirety the parenthetical phrase "(other than Discontinued
Subsidiaries, Lime SPV, the SPV General Partner and the SPV
Limited Partner)" in each place in which it appears therein
and substituting therefor in each case the new parenthetical
phrase "(other than Discontinued Subsidiaries)".
(viii) Section 4.01(h) is amended by deleting in
its entirety the parenthetical phrase "(other than Lime SPV,
the SPV General Partner and the SPV Limited Partner)".
(ix) Section 4.01(l) is amended by deleting in its
entirety the parenthetical phrase "(other than any
properties acquired by Lime SPV for use in the Project)".
(x) Section 4.01 is amended by deleting in its
entirety each of the following subsections (m), (n), (o),
(p), (q), (r) and (s) and relettering subsections (t), (u),
(v), (w) as (m), (n), (o) and (p), respectively.
"(m) Direct Ownership of Lime SPV, the SPV
General Partner and the SPV Limited Partner. Lime
shall maintain direct 100% ownership of all capital
stock (other than the Class B Common Stock of the SPV
General Partner) of the SPV General Partner and the
SPV Limited Partner, and shall cause the SPV General
Partner and the SPV Limited Partner to maintain direct
100% ownership of all of the partnership interests of
Lime SPV.
(n) Lime SPV, SPV General Partner and SPV
Limited Partner Organizational Documents. Lime shall
not, without the prior written consent of the Lenders,
permit Lime SPV, the SPV General Partner and the SPV
Limited Partner to amend, supplement, replace, restate
or otherwise modify any of the organizational
documents of such Person, including, without
limitation, (i) the limited partnership agreement and
certificate of limited partnership of Lime SPV and
(ii) the articles of incorporation of the SPV General
Partner and the SPV Limited Partner.
(o) Issuance of Additional Capital Stock by
the SPV General Partner and the SPV Limited Partner.
Except for (i) one share of Class B Common Stock
issued by the SPV General Partner to PruPower and (ii)
any shares of capital stock issued by the SPV General
Partner and the SPV Limited Partner to Lime on or
before the Initial Funding Date, Lime shall not permit
the SPV General Partner or the SPV Limited Partner to
issue, sell or otherwise dispose of (either directly,
or indirectly by the issuance of rights or options
for, or securities convertible into, such shares) any
shares of any class of its capital stock.
(p) Distributions Under Deposit and
Disbursement Agreement. Lime shall cause Lime SPV,
the SPV General Partner and the SPV Limited Partner to
distribute immediately to Lime all funds received by
Lime SPV pursuant to the Deposit and Disbursement
Agreement.
(q) Amendments to Master Common Facilities
Agreement and Deposit and Disbursement Agreement.
Lime shall not, without the prior written consent of
the Lenders, enter into any amendment of (i) the
provisions of the Master Common Facility Agreement set
forth in Section 9.1 of the Project Intercreditor
Agreement or (ii) the requirement set forth in Section
2.2(b)(ii) of the Deposit and Disbursement Agreement
that Lime shall receive all remaining amounts after
all other required payments (including, without
limitation, required payments resulting from any
amendment to said Section 2.2(b)(ii)) have been made
pursuant thereto.
(r) Replacement of Lime as Operator of the
Black River Facility. Lime agrees and acknowledges
that the Lenders shall have the right to replace Lime
as the operator of the Black River Facility in
accordance with the terms of the Master Common
Facilities Agreement.
(s) Indemnity of Lime SPV Against Lime.
Notwithstanding anything to the contrary contained in
the Master Common Facilities Agreement, Lime (in its
capacity as "Operator" thereunder) shall have no
obligation to indemnify Lime SPV with respect to any
amounts due and payable on the Notes (as defined in
the Note Purchase Agreement) (including, without
limitation, any principal, interest, fees or Make-
Whole Amount (as defined in the Note Purchase
Agreement)), except to the extent of any amounts
realized upon the sale, foreclosure or other
disposition of the Shared Collateral (as defined in
Annex A to the Project Intercreditor Agreement)."
(xi) Section 4.02(b) is amended in its entirety to
read as follows:
"Fixed Charge Test. Dravo shall cause the Fixed
Charge Coverage Ratio of Dravo and its Subsidiaries as
at the end of each of Dravo's fiscal quarters to equal
or exceed 1.25 from the Effective Date to and
including December 31, 1996 and 1.5 thereafter.
(b) Amendments to Article V. Article V shall be amended
as follows:
(i) Section 5.01(a), Working Capital and Current
Ratio Requirements, is amended by deleting such Section in
its entirety and substituting therefor the following new
Section 5.01(a):
"(a) Net Worth Requirement. Dravo will not
permit its Consolidated Net Worth at any time to be
less than $90,784,000 (the "Base Amount") as of the
Effective Date hereof and as of each quarter ending
thereafter to be less than a sum equal to the Base
Amount plus 50% of Consolidated Net Earnings available
to common shareholders (to the extent this is a
positive number) for each quarter ending after the
Effective Date."
(ii) Section 5.01(b) is amended in its entirety to
read as follows:
"(b) Dividend Restrictions. Dravo shall not:
(x) pay or declare any dividend on any class of its
stock or make any other distribution on account of any
class of its stock (referred to herein collectively as
"Dividends") or (y) make, directly or indirectly
(including by Subsidiary of Dravo), any Excess
Redemption (all Dividends and Excess Redemptions
collectively referred to herein as "Dravo Restricted
Payments") if such Dravo Restricted Payments, taken
together with all other Dravo Restricted Payments made
on or after September 30, 1995, would exceed 25% of
Consolidated Net Earnings from Continuing Operations
after September 30, 1995. There shall not be included
in Dravo Restricted Payments (x) Dividends paid, or
distributions made, in stock of Dravo; or
(y) exchanges of stock of one or more classes of Dravo
for common stock of Dravo or for stock of Dravo of the
same class, except to the extent that cash or other
value is involved in such exchange; or (z) the payment
of regularly scheduled dividends on the Shares or the
Preference Stock Series B originally issued to the
Mechling estate (the "Mechling Shares"). The term
"stock" as used in this Section 5.01(b) shall include
warrants or options to purchase stock.
Notwithstanding the foregoing, Dravo shall not make a
Dravo Restricted Payment if a Default or Event of
Default has occurred or would occur as a result of
such Dravo Restricted Payment. As used herein, the
term "Excess Redemption" means any redemption,
purchase or other acquisition of any shares of the
capital stock (including without limitation any
preferred stock) of Dravo in an amount exceeding the
cash proceeds received by Dravo in connection with any
issuance or sale of any capital stock of Dravo (net
of all reasonable costs and expenses incurred by Dravo
in connection with such issuance of capital stock)
occurring after September 30, 1995.
(iii) Section 5.01(c) is amended in its entirety to
read as follows:
"(c) Debt. Dravo shall not, and shall not
permit any of its Subsidiaries to, at any time create,
incur, assume or suffer to exist:
(i) any Debt in excess of 50% of Dravo
Consolidated Net Tangible Assets from the
Effective Date hereof to and including
December 31, 1996 and 45% of Dravo Consolidated
Net Tangible Assets thereafter; or
(ii) any Debt so that the ratio of Debt
to EBDIAT would exceed 3.25 to 1.0 from the
Effective Date hereof to and including
December 31, 1996 and 3.0 to 1.0 thereafter.
(iv) Section 5.01(d) is amended by deleting the
phrase "(other than (A) the Secured Obligations, (B) any
Debt incurred in connection with the Project pursuant to the
Note Purchase Agreement and the other Financing Documents
and (C) any Debt permitted by Section 5.01(e) hereof)" in
its entirety and substituting therefor the new phrase
"(other than the Secured Obligations)".
(v) Section 5.01 is amended by deleting in its
entirety the following subsection (e):
"(e) Maximum Project Debt. Dravo shall not
permit Lime SPV, the SPV General Partner and the SPV
Limited Partner to create, incur, assume or suffer to
exist at any time subsequent to the Initial Funding
Date, any Debt for borrowed money or any guaranties of
Debt for borrowed money (other than the outstanding
principal amount of the Notes (as defined in the Note
Purchase Agreement), which in no event shall exceed
$50,000,000) in an aggregate amount in excess of the
sum of (i) $10,000,000, (ii) the amount of any Debt
incurred to finance capital expenditures required to
enable such Persons to comply with Applicable Law
(including, without limitation, Environmental Laws (as
defined in the Note Purchase Agreement)) and (iii) the
amount of any Debt incurred by such Persons upon the
occurrence and during the continuance of an Event of
Default (as defined in Annex A to the Project
Intercreditor Agreement)."
(vi) Section 5.02(a) is amended by deleting such
Section in its entirety.
(vii) Section 5.02(b) is amended by deleting such
Section in its entirety.
(viii) Section 5.02 is amended by deleting in its
entirety the following subsection (d) at the end thereof:
"(d) Lime shall not permit Lime SPV to enter
into any lime supply agreements other than (i)
Economically Similar Contracts (as defined in Annex A
to the Project Intercreditor Agreement) and (ii) other
lime supply agreements that are approved in writing by
the Lenders."
(ix) The introductory paragraph of Section 5.03 is
amended in its entirety to read as follows:
"Section 5.03. Dravo Parties Negative
Covenants. So long as a Lender shall hold any Note or
Notes or any Secured Obligation remains outstanding,
each of the Dravo Parties shall comply with each of
the following:"
(x) Section 5.03(a)(i)(H) is amended in its entirety
to read as follows:
"(H) Liens created or permitted by any
Operative Document entered into in connection with
this Agreement (including, without limitation,
Permitted Liens (as defined in the Note Purchase
Agreement)), and"
(xi) Section 5.03(a)(ii) is amended by deleting in
its entirety the following proviso at the end thereof:
"provided, however, that (a) notwithstanding the
foregoing, Lime may (i) make advances to Lime SPV
pursuant to Section 1.4(d) of the Master Common
Facilities Agreement and (ii) make capital
contributions (including, without limitation, the
Investment (as defined in the Note Purchase
Agreement)) to, and pay any other amount (including,
without limitation, any amount required to be paid by
Lime pursuant to Section 3.15 of the Lime Security
Agreement (as defined in the Note Purchase Agreement)
as in effect on the Initial Funding Date) on behalf
of, Lime SPV, the SPV General Partner and the SPV
Limited Partner (x) on or before the Conversion Date
(as defined in Annex A to the Project Intercreditor
Agreement) pursuant to the Financing Documents, in an
aggregate amount not to exceed the sum of (A)
$12,400,000 in the aggregate on the Initial Funding
Date and (B) $5,300,000 in the aggregate for amounts
required to be contributed by Lime to Lime SPV
pursuant to Section 3.15(b) of the Lime Security
Agreement (as defined in the Note Purchase Agreement)
as in effect on the Initial Funding Date, and (y) from
time to time after said Conversion Date, in an
aggregate amount not to exceed the lesser of (1)
$4,000,000 and (2) the amount disbursed to Lime SPV
from the Construction Account (as defined in Annex A
to the Project Intercreditor Agreement) on the
Conversion Date pursuant to Section 2.1(b) of the
Deposit and Disbursement Agreement as in effect on the
Initial Funding Date, and (b) the foregoing provisions
of this Section 5.03(a)(ii) shall not apply to Lime
SPV, the SPV General Partner and the SPV Limited
Partner."
(xii) Section 5.03(a)(iii) is amended by deleting in
its entirety the phrase "shall not apply to any Discontinued
Subsidiary, Lime SPV, the SPV General Partner or the SPV
Limited Partner" and substituting therefor the new phrase
"shall not apply to any Discontinued Subsidiary".
(xiii) Section 5.03(a)(iv) is amended by deleting
in its entirety the phrase "except that (1) Lime SPV, the
SPV General Partner and the SPV Limited Partner may sell or
otherwise dispose of assets in the ordinary course of
business (including, without limitation, the sale or other
disposition of worn-out or obsolete equipment), (2) Lime
SPV, the SPV General Partner and the SPV Limited Partner may
sell or otherwise dispose of any assets to the Lenders (on
behalf of the Companies) or, in the event that the Lenders
have been given a right of first refusal to purchase such
assets and have declined to exercise such right, to any
other Person, (3) Lime SPV, the SPV General Partner and the
SPV Limited Partner may merge or consolidate with or into
any Person if the continuing or surviving entity is Lime
SPV, the SPV General Partner or the SPV Limited Partner, and
(4) so long as no Default" and substituting therefor the
phrase "except that so long as no Default".
(xiv) Section 5.03(a)(iv) is further amended by
deleting in its entirety the following proviso at the end
thereof:
provided, however, that any decision by the Lenders to
purchase assets from Lime SPV, the SPV General Partner
or the SPV Limited Partner pursuant to clause (2)
above shall be made by the Majority Lenders (provided,
that any Lender that does not concur in the decision
of the Majority Lenders shall not be obligated to
provide any funds for the purchase price of such
assets, unless such funds are otherwise available to
be borrowed by the Companies from such Lender pursuant
to the Revolving Credit Agreement and the Companies so
request such borrowing pursuant to the terms thereof);
(xv) Section 5.03(a)(v) is deleted in its entirety.
(c) Amendments to Article VI. Article VI shall be amended
as follows:
(i) Section 6.01(c) is amended by deleting in its
entirety from the first and second line thereof the
parenthetical phrase "(other than Lime SPV, SPV General
Partner and SPV Limited Partner)" and from the seventeenth
and eighteenth lines thereof the phrase "other than Lime
SPV, SPV General Partner and SPV Limited Partner".
(ii) Section 6.01(e) is amended by deleting the
references to "4.01(m)" and "4.01(o)".
(iii) Section 6.01(g) is amended by deleting in its
entirety the parenthetical phrase "(other than Lime SPV, SPV
General Partner and SPV Limited Partner)".
(iv) Section 6.01(h) is amended by deleting in its
entirety the parenthetical phrase "(other than Lime SPV, SPV
General Partner and SPV Limited Partner)".
(v) Section 6.01(i) is amended by deleting in its
entirety the parenthetical phrase "(other than Lime SPV, SPV
General Partner and SPV Limited Partner)" in each place in
which it appears therein.
(vi) Section 6.01(j) is amended by deleting in its
entirety the parenthetical phrase "(other than Lime SPV, SPV
General Partner and SPV Limited Partner)" in each place in
which it appears therein.
(vii) Section 6.01(l) is amended by deleting in its
entirety the parenthetical phrase "(other than Lime SPV, SPV
General Partner and SPV Limited Partner)".
(viii) Section 6.01(m) is amended by deleting in
its entirety the parenthetical phrase "(other than Lime SPV,
SPV General Partner and SPV Limited Partner)".
(ix) Section 6.01(o) is amended in its entirety to
read as follows:
"(o) at any time, the aggregate commitment for
advances (excluding any sublimit or commitment for the
issuance of letters of credit) under all revolving
credit facilities of the Companies having a revolving
term with an expiration date later than six calendar
months after such time shall be less than
$40,000,000,"
(x) Section 6.01 is amended by deleting in its
entirety each of the following subsections (q), (r) and (s):
"(q) an "Event of Default" shall have occurred
under the Note Purchase Agreement and the Notes (as
defined in the Note Purchase Agreement) shall have
been declared due and payable pursuant to the terms
thereof; or
(r) any event or condition (unless due to
Uncontrollable Forces (as defined in Article 4 of the
Master Common Facilities Agreement as in effect on the
Initial Funding Date)) affecting the Project (other
than the Project Kilns (as defined in Annex A to the
Project Intercreditor Agreement)) shall have occurred
that has had, or could reasonably be expected to have,
a material adverse effect on the operation of the
Black River Facility, and either (i) Lime SPV shall
not have commenced remedial action, within 60 days
after the occurrence of such event or condition, to
cure such event or condition in such manner as shall
be necessary to cause such adverse effect to cease to
be material (or to cause such expectation to cease to
be reasonable) or (ii) such remedial action shall not
have been completed within 90 days after the
occurrence of such event or condition, if reasonably
susceptible to cure within such period, or, if not
reasonably susceptible to cure within such period,
Lime SPV shall not be diligently pursuing the steps
necessary to effect such cure; or
(s) Lime shall have failed to make a Capacity
Payment (as defined in the Note Purchase Agreement)
and the Collateral Agent shall have received a written
notice from the Required Holders (as defined in the
Note Purchase Agreement) directing it to take action
to realize upon the Assigned Lime Contract Collateral
(as defined in Annex A to the Project Intercreditor
Agreement) as a result of such failure;"
(xi) Section 6.01 is amended by deleting the phrase
"clauses (a) through (f), inclusive, or (k) through (s)" in
its entirety and substituting therefor the new phrase
"clauses (a) through (f), inclusive, or (k) through (p)".
(d) Amendment to Article VII. Article VII shall be amended
as follows:
(i) Section 7.01 is amended by deleting in its
entirety each of the following subsections (q) and (r):
"(q) Ownership of Lime SPV, the SPV General
Partner and the SPV Limited Partner. Lime owns
directly 100% of all capital stock (other than one
share of Class B Common Stock of the SPV General
Partner that is owned by PruPower) of the SPV General
Partner and the SPV Limited Partner, and the SPV
General Partner and the SPV Limited Partner own
directly 100% of the partnership interests of Lime
SPV.
(r) Project Improvements. The real estate
improvements described in Exhibit A to the
Improvements Deed, dated as of August 1, 1994, between
Lime and Lime SPV, have been constructed for use by
the Project and were purchased with proceeds from the
issuance of the Construction Notes and with additional
funds made available to Lime SPV as equity
contributions."
(ii) Section 7.01 is further amended by adding as a
new subsection (q) the following:
"(q) The Dravo Parties shall fail on or prior
to February 15, 1996 to grant to the Collateral Agent
on behalf of the Lenders a first-priority lien and/or
security interest in the property described in
Schedule 7.01(q) under security agreements, mortgages
and other instruments satisfactory to Lenders,
together with such opinions and other requirements
deemed necessary by the Lenders.
SECTION 1.02. Amendments to Appendix A. Appendix A shall
be amended as follows:
(a) The definition "Consolidated Net Earnings" is amended
in its entirety to read as follows:
"Consolidated Net Earnings" shall mean the
consolidated net income (as determined in accordance with
GAAP), without giving effect to any gains (net of expenses
and taxes applicable thereto) in excess of losses resulting
from the sale, conversion or other disposition of capital
assets (i.e., assets other than current assets), any gains
resulting from the write-up of assets, any extraordinary
gains (except for gains resulting from the use of net
operating loss carryforwards), any items of gain (or plus
any items of loss) that were included in determining such
consolidated net income and were not realized in the
ordinary course of business (whether or not classified as
"ordinary" by GAAP), any equity of such Person or any of its
Subsidiaries in the unremitted earnings of any corporation
which is not a Subsidiary, any earnings of any Person
acquired by such Person or any of its Subsidiaries through
purchase, merger or consolidation or otherwise for any year
prior to the year of acquisition, or any deferred credit
representing the excess of equity in any of its Subsidiaries
at the date of acquisition over the cost of the investment
in such, all determined in accordance with GAAP; provided,
however, that any increase in earnings arising out of the
recognition after December 31, 1994 of a deferred tax asset
in an amount not to exceed $27,000,000 in the aggregate and
any deduction from earnings or equity from the write off of
any prepaid pension assets in an amount not to exceed
$27,000,000 in the aggregate shall not be taken into account
in determining Consolidated Net Earnings.
(b) The definition "Discontinued Operations Fixed Charge
Coverage Ratio" is amended by deleting such definition in its
entirety.
(c) The definition "Fixed Charge Coverage Ratio" is amended
in its entirety to read as follows:
"Fixed Charge Coverage Ratio" shall mean, for any
fiscal quarter of Dravo, the ratio obtained by dividing
(a) EBITDAR of Dravo and its Subsidiaries for the three
immediately preceding fiscal quarters of Dravo and the
quarter of determination (the "Relevant Preceding Period")
by (b) the sum of: (i) the amount of interest paid or
accrued (including all imputed or capitalized interest) on
all Debt of Dravo and its Subsidiaries during the Relevant
Preceding Period (including all imputed interest on
Capitalized Lease Obligations), plus (ii) all installments
of Funded Debt (excluding the indebtedness incurred by the
Companies under the Revolving Credit Agreement) scheduled to
become due in the immediately succeeding four fiscal
quarters of Dravo (the "Relevant Succeeding Period"), plus
(iii) the regularly scheduled dividends to be paid to the
holders of the Shares or any other preferred stock of Dravo
or any of its Subsidiaries during the Relevant Succeeding
Period, plus (iv) the regularly scheduled redemptions of the
Shares or any other preferred stock, if any, of Dravo or any
of its Subsidiaries to be made by Dravo during the Relevant
Succeeding Period, plus (v) net rentals as reflected on the
most recently delivered financial statements.
(d) The definition "Funded Debt" is amended in its entirety
to read as follows:
"Funded Debt shall mean, without duplication, any:
(i) obligation payable more than one year from
the date of the creation thereof, which under GAAP is
shown on the balance sheet as a liability (including
without limitation Capitalized Lease Obligations and
excluding reserves for deferred income taxes and other
reserves to the extent that such reserves do not
constitute an obligation), plus
(ii) the aggregate amount of indebtedness of
public authorities incurred in connection with
industrial revenue bond and pollution control revenue
bond financings of plant facilities or equipment to be
leased to or operated by such Person, plus
(iii) all off-balance sheet indebtedness
(including without limitation guaranty obligations and
indebtedness incurred in connection with
sale/leaseback transactions), other than obligations
under operating leases, plus
(iv) all Guarantees, endorsements (other than
endorsements of negotiable instruments for collection
in the ordinary course of business) and other
contingent liabilities (whether direct or indirect) in
connection with the obligations, stock or dividends of
any Person, plus
(v) obligations under any other contract in
connection with any borrowed money which in effect is
substantially equivalent to a Guaranty."
(e) The definition "Notes" is amended by deleting in its
entirety the phrase "the Additional Notes".
(f) The definition "Operative Documents" is amended by
deleting in its entirety the phrase "the SPV Stock Pledge Agreement,
the SPV Partner Pledge Agreement, the Project Intercreditor
Agreement, the Assignment and Security Agreement," immediately
following the phrase "the Basic Mortgage," and inserting the
punctuation and phrase ", the Dravo Guaranty" immediately following
the phrase "the Environmental Indemnity Agreement".
(g) The definition "Security Documents" is amended by
deleting in its entirety the phrase "the SPV Stock Pledge Agreement,
the SPV Partner Pledge Agreement, the Assignment and Security
Agreement," immediately following the phrase "the Basic Mortgage,".
(h) The following new definitions shall be inserted in
alphabetical order in Appendix A:
"Consolidated Net Worth" shall mean, for any Person,
the Consolidated stockholders' equity, as defined in
accordance with GAAP, plus the book value of the Shares,
plus charges for additional minimum liabilities related to
qualified pension plans, provided however, that any increase
in Consolidated Net Worth arising out of the recognition
after December 31, 1994 of a deferred tax asset in an amount
not to exceed $27,000,000 in the aggregate and any deduction
in Consolidated Net Worth from the write off of any prepaid
pension assets in an amount not to exceed $27,000,000 in the
aggregate shall not be taken into account in determining
Consolidated Net Worth.
"Dravo Guaranty" shall mean that certain Guaranty
Agreement dated as of December 31, 1995, executed in favor
of the Collateral Agent on behalf of the Lenders, as it may
be amended, modified or supplemented from time to time in
accordance with its terms.
"EBITDAR" shall mean, for any period, Consolidated Net
Earnings from Continuing Operations adjusted by adding
thereto the amount of all amortization of intangibles,
interests, taxes (after taking into account the use of net
operating loss carryforwards), depreciation and rents that
were deducted in arriving at Consolidated Net Earnings for
such period.
"Effective Date" shall mean October 1, 1995.
(i) Each of the following definitions shall be deleted in
its entirety:
"Additional Notes" shall mean those certain Revolving
Notes attached as Exhibits A-5, A-6, A-7 and A-8 to the
Revolving Credit Agreement, executed by each of Basic and
Lime in favor of each of the Lenders, respectively, and each
Note delivered in substitution or exchange for any such
Note.
"Assignment and Security Agreement" means the
Assignment and Security Agreement, dated as of August 1,
1994, by Lime in favor of the Collateral Agent, as the same
may be amended, modified or supplemented from time to time
in accordance with its terms.
"Black River Facility" shall have the meaning set
forth in Annex A to the Project Intercreditor Agreement.
"Construction Notes" shall have the meaning set forth
in the Note Purchase Agreement.
"Deposit and Disbursement Agreement" shall mean the
Deposit and Disbursement Agreement, dated as of August 1,
1994, among Wilmington Trust Company, as Collateral Agent,
Wilmington Trust Company, as Disbursement Agent, and Lime
SPV, as said Agreement may be amended, modified or
supplemented from time to time in accordance with the terms
thereof and the terms of the other Transaction Documents.
"Financing Documents" shall have the meaning set forth
in Annex A to the Project Intercreditor Agreement.
"Initial Funding Date" shall have the meaning set
forth in the Note Purchase Agreement.
"Lime SPV" shall mean Dravo Black River Limited
Partnership, a Delaware limited partnership.
"Master Common Facilities Agreement" shall mean that
certain Master Common Facilities Agreement, dated as of
August 1, 1994, between Lime and Lime SPV, as said Agreement
may be amended, modified or supplemented from time to time
in accordance with the terms thereof and the terms of the
other Transaction Documents.
"Note Purchase Agreement" shall mean that certain Note
Purchase Agreement, dated as of August 1, 1994, by and
between Lime SPV and PruPower, as said Agreement may be
amended, modified or supplemented from time to time in
accordance with the terms thereof and the terms of the other
Transaction Documents.
"Project" shall have the meaning set forth in Annex A
to the Project Intercreditor Agreement.
"Project Intercreditor Agreement" shall mean the
Intercreditor Agreement, dated as of August 1, 1994, by and
among Wilmington Trust Company, PruPower, the Collateral
Agent, FAB, PNC, BAI and Prudential, as consented to and
acknowledged by Lime and Lime SPV, as such Agreement may be
amended, modified or supplemented from time to time in
accordance with its terms.
"Prudential" shall mean The Prudential Insurance
Company of America, acting through Prudential Capital Group,
and its successors and assigns.
"PruPower" shall mean The Prudential Insurance Company
of America, as purchaser of the Construction Notes of Lime
SPV pursuant to the Note Purchase Agreement, and its
successors and assigns.
"SPV General Partner" shall mean DBR General Inc., a
Delaware corporation.
"SPV Limited Partner" shall mean Dravo Black River
Limited Inc., a Delaware corporation.
"SPV Partner Pledge Agreement" shall mean the Partner
Security Agreement, dated as of August 1, 1994, by the SPV
General Partner and the SPV Limited Partner in favor of the
Collateral Agent, as it may be amended, modified or
supplemented from time to time in accordance with its terms.
"SPV Stock Pledge Agreement" shall mean the Stock
Pledge Agreement, dated as of August 1, 1994, by Lime in
favor of the Collateral Agent, as it may be amended,
modified or supplemented from time to time in accordance
with its terms.
"Transaction Documents" shall have the meaning set
forth in Annex A to the Project Intercreditor Agreement.
"Unavailable Cash" shall mean any and all Project
Revenues (as defined in Annex A of the Project Intercreditor
Agreement) that, pursuant to the terms of the Deposit and
Disbursement Agreement or any other Transaction Document,
are not available for distribution to Lime (other than any
amounts paid for Debt Service (as defined in Annex A to the
Project Intercreditor Agreement) and Operation and
Maintenance Costs (as defined in Article 4 of the Master
Common Facilities Agreement as in effect on the Initial
Funding Date)); provided, however, that Unavailable Cash
shall include any expenditures made by Lime SPV for Capital
Additions or Modifications (as defined in Article 4 of the
Master Common Facilities Agreement as in effect on the
Initial Funding Date), or for any adjustments, alterations
or other physical changes to the Project of any kind
whatsoever, in excess of $1,500,000 in any calendar year to
the extent that such excess was not funded with (i)
additional Debt of Lime SPV or (ii) any equity contribution
by Lime to Lime SPV made in accordance with Section
5.03(a)(ii) of the Override Agreement.
ARTICLE II
FIFTH AMENDMENT TO
REVOLVING CREDIT AGREEMENT
SECTION 2.01. Amendments to Revolving Credit Agreement. The
Revolving Credit Agreement shall be, effective as of the date hereof
and subject to the satisfaction of the conditions precedent set
forth in Section 4.01 hereof, amended as follows:
(a) Amendments to Article I. Article I shall be amended
as follows:
(i) Section 1.1 is amended in its entirety to read
as follows:
"SECTION 1.1. Revolving Line of Credit Facility.
(a) Commitment. Subject to all the terms and conditions
hereof, including without limitation Section 1.3, and so
long as there shall exist no Event of Default or Default,
Lenders, subject to the terms and conditions hereof, agree
to lend to Borrowers such sums as Borrowers may request,
from time to time, and at any time, on a revolving basis
until July 31, 1997 (as such date may be extended pursuant
to Section 1.9, the "Maturity Date"), provided that, after
giving effect to the making of any such loans and the
issuance of any Letter of Credit, the aggregate principal
amount of outstanding revolving line of credit loans
(including any loans deemed to be made pursuant to
Section 11.2 as a result of a drawing on any Letter of
Credit) plus the Stated Amount of all outstanding Letters of
Credit (calculated after giving effect to any such drawing)
made pursuant to this Agreement shall not at any time exceed
the sum of SIXTY-FIVE MILLION AND NO/100THS DOLLARS
($65,000,000.00), and provided further that the aggregate
principal amount of outstanding revolving line of credit
loans (including any loans deemed to be made pursuant to
Section 11.2 as a result of a drawing on any Letter of
Credit) plus the Stated Amount of all outstanding Letters of
Credit (calculated after giving effect to any such drawing)
made by a Lender pursuant to this Agreement shall not exceed
the maximum limitation for each Lender shown opposite the
name of each Lender and designated the "Revolving Line of
Credit and Letters of Credit Facilities Combined" on
Schedule I attached hereto and made a part hereof
(calculated after giving effect to any termination of a
Lender's Commitment (as defined in Section 1.9) pursuant to
Section 1.9). All such revolving loans shall be referred to
herein as the "Revolving Line of Credit". Subject to the
terms and conditions hereof, advances under the Revolving
Line of Credit, with respect to a Base Rate Loan, shall be
equal to at least ONE HUNDRED THOUSAND AND NO/100THS DOLLARS
($100,000.00) or an integral multiple thereof and with
respect to a Eurodollar Rate Loan, shall be equal to at
least FIVE MILLION AND NO/100THS DOLLARS ($5,000,000.00) or
an integral multiple of $1,000,000. Subject to all the
terms and conditions hereof, Borrowers may borrow, repay and
reborrow at any time or from time to time from the date
hereof to but excluding July 31, 1997 (unless extended in
writing pursuant to Section 1.9) or the termination of the
revolving aspects of this Agreement with respect to advances
pursuant to Section 8.1, whichever is earlier.
(b) Conversion to Term Loan.
(i) The Borrowers may, on the Maturity Date and so
long as no Event of Default has occurred and is continuing,
elect to convert (the "Term Loan Option") all or a portion
of the Revolving Line of Credit outstanding on the Maturity
Date in an amount not to exceed SEVENTEEN MILLION AND
NO/100THS DOLLARS ($17,000,000.00) and in no event less than
$10,000,000 (the "Converted Amount") into a Term Loan (the
"Term Loan").
(ii) If the Borrowers exercise the Term Loan Option,
interest on the Term Loan shall accrue at a rate per annum
as specified in Section 9.3. The Term Loan shall be repaid
in 20 substantially equal quarterly installments, due and
payable on the last day of January, April, July and October
of each year and shall be due and payable in full on
July 31, 2002.
(iii) The notice, if any, of the exercise of the Term
Loan Option shall be submitted by the Borrowers in writing
to the Agent at least 60 Business Days prior to the Maturity
Date, and shall specify the portion of the Revolving Line of
Credit for which the Term Loan Option is being exercised and
the initial Interest Period, if any. Any notice shall be
irrevocable once given.
(iv) On the date of conversion to a Term Loan, the
Borrowers shall pay to Lenders in immediately available
funds a fee equal to .25 of 1% of the Converted Amount.
Such fee shall be shared pro rata by Lenders.
(c) Notes.
(i) Revolving Notes. All sums advanced pursuant to
the Revolving Line of Credit shall be payable, as to both
principal and interest, and shall bear interest, at the rate
and in the manner provided herein and in the Revolving Notes
of Borrowers, copies of which are attached hereto, marked
Exhibits A-1, A-2 and A-3, and expressly made a part hereof
as though fully set forth herein (the "Revolving Notes").
Borrower shall execute and deliver to Lenders the Revolving
Notes in an aggregate sum of SIXTY-FIVE MILLION AND
NO/100THS ($65,000,000.00) DOLLARS; provided, however, the
liability of Borrowers to Lenders for the principal
indebtedness of the Revolving Line of Credit shall be
limited to the net principal amount actually advanced by
Lenders to Borrowers under the Revolving Notes. All
advances under the Revolving Note shall be evidenced by
Lenders' records with respect to such advances, which
records shall be prime facie evidence as to the amount at
any time due such Lender hereunder. All advances under the
Revolving Line of Credit shall be made pursuant to the
procedures set forth hereinbelow in Article IX. Borrowers
irrevocably authorize Lenders to disburse any Revolving Line
of Credit loans made hereunder for the account of the
Borrowers either to Lime or to Dravo Natural Resources
Company ("DNRC") pursuant to the DNRC Agency Agreement.
(ii) Term Notes. All sums advanced pursuant to the
Term Loan Option shall be payable, as to both principal and
interest, and shall bear interest, at a rate and in the
manner provided herein and the Term Notes, executed and
delivered by each of the Borrowers and in form and substance
satisfactory to each of the Lenders (the "Term Notes").
(ii) The fourth sentence of Section 1.3 is amended by
deleting the date "April 30, 1996" and substituting therefor the
date "July 31, 1997".
(iii) The last sentence of Section 1.5 is amended by deleting
the date "June 30" and substituting therefor the date "July 31".
(iv) The first sentence of Section 1.6 is amended by
deleting the figure "$75,000,000" and substituting therefore the
figure "$65,000,000".
(v) Section 1.9(a) is amended in its entirety to read as
follows:
"(a) At least 10 but not more than 60 days
before each May 31, commencing May 31, 1996, the
Borrowers may, by delivering a written request to the
Agent (each such request being irrevocable), request
that each Lender extend for one year the Maturity Date
with respect to such Lender's Revolving Line of Credit
commitment and commitment to issue (or cause to be
issued) Letters of Credit (such commitments referred
to herein collectively, with respect to each Lender,
as such Lender's "Commitment"). The Agent shall, upon
its receipt of such a request, promptly notify each
Lender thereof, and request that each Lender promptly
advise the Agent of its approval or rejection of such
request."
(b) Amendment to Article V. Section 5.1(b)(1) is amended
by deleting the phrase "and in the Note Purchase Agreement"
immediately following the phrase "the representations and warranties
of the Dravo Parties set forth herein".
(c) Amendments to Article IX. Article IX shall be amended
as follows:
(i) Section 9.1 is amended by deleting in its
entirety each of the following subsections (c), (d)
and (e):
(c) Notwithstanding subsections (a) and (b)
above, in the event that any Lender does not agree to
provide any funds (to the extent that such funds are
not otherwise available to be borrowed by the
Borrowers from such Lender pursuant to this Agreement)
for (i) the cure of any defaults pursuant to Article
6 of the Project Intercreditor Agreement or (ii) the
purchase price of any assets sold by Lime SPV in
connection with the exercise by the Lenders of any
right of first refusal pursuant to Section
5.03(a)(iv)(2) of the Override Agreement, the Lenders
that agree to provide such funds (the "Funding
Lenders") shall advance such funds on a pro rata
basis, based on the proportion of each Funding
Lender's Commitment to the aggregate amount of the
Commitments of the Funding Lenders. So long as no
Event of Default shall have occurred and be
continuing, notwithstanding Section 11.7, any amounts
of principal prepaid or repaid by the Borrowers
pursuant to this Agreement shall be applied, first, to
the repayment of all advances made by the Funding
Lenders pursuant to clauses (i) and (ii) above (on a
pro rata basis based on the amount of advances made by
each of the Funding Lenders) and second, to the
repayment of all other amounts owing to the Lenders
hereunder (on a pro rata basis in accordance with
their respective percentages set forth in subsection
(a) above), in each case otherwise in accordance with
this Agreement. Upon the occurrence and during the
continuance of an Event of Default, any amounts of
principal prepaid or repaid by the Borrowers or
otherwise realized pursuant to any Security Document
shall be applied on a pro rata basis in accordance
with the percentages of the Lenders set forth in
subsection (a) above. Any funds provided by a Funding
Lender pursuant to clauses (i) and (ii) above shall be
deemed to be a Revolving Line of Credit advance made
by such Lender to the Borrowers, and the Borrowers
shall be obligated to repay such advances pursuant to
the terms hereof. In furtherance of the foregoing,
any purchase of assets pursuant to clause (ii) above
shall be made on behalf of Lime, and Lime shall be the
legal and beneficial owner of such assets.
(d) In connection with any advances made by
the Funding Lenders pursuant to subsection (c) above,
the Companies shall execute such agreements, documents
and instruments (including, without limitation,
additional promissory notes), and take such further
actions, as any Funding Lender may reasonably request.
(e) Notwithstanding anything to the contrary
contained herein, in order to effect the cure of any
default pursuant to Article 6 of the Project
Intercreditor Agreement, the Lenders shall have the
right (but not the obligation) to advance funds on
behalf of the Borrowers and to make any payments
directly to any Persons (other than the Borrowers) to
the extent necessary to cure such default.
(ii) Section 9.2 is amended in its entirety to read
as follows:
"SECTION 9.2. Manner of Revolving Line of
Credit Participation. Unless otherwise specifically
provided in this Agreement, Agent shall receive from
Borrowers at least three business days', with respect
to Eurodollar Rate Loans, and one business day, with
respect to Base Rate Loans, prior written, telex,
telecopier or telegraphic notice of Borrowers'
intention to borrow hereunder, specifying the date,
the total amount of the loan that Borrowers request
under this Agreement, the type of loan and if a
Eurodollar Rate Loan, the Interest Period therefor.
Upon receipt of such request from Borrowers, Agent
shall forthwith give Lenders (excluding itself if
Agent is also a Lender) telex, telecopier or
telegraphic notice of Borrower's request and shall
specify the amount of each such Lender's proposed
participation in the loan based on the information
each Lender has furnished Agent with respect to the
outstanding Revolving Line of Credit loans made by
each Lender and the outstanding Letters of Credit
applicable to each Lender. Unless Lenders correct
said information prior to funding, which correction
shall be confirmed in writing by such Lender to Agent,
the Lenders shall deposit such amount, or cause such
amount to be deposited, with Agent in lawful money of
the United States of America in immediately available
funds by 11:00 A.M. (Central time) on the date of the
proposed loan by wire transfer to Agent in the case of
each Lender that is not Agent, and by deposit with
Agent in immediately available funds in the case of a
Lender that is also the Agent, and Agent shall
thereafter deposit in Borrowers' or DNRC's account or
accounts at Agent the requested funds by 11:30 A.M.
(Central time) on the date of the proposed loan."
(iii) Article IX is further amended by adding
the following new Sections 9.3 and 9.4 at the end thereof.
SECTION 9.3. Interest. (a) Each Borrower
shall, and hereby jointly and severally agrees to, pay
interest on the unpaid principal amount of each loan
from the date of such loan until such principal is
paid in full at the applicable rate set forth below.
(b) Rate of Interest. All loans shall bear
interest on the unpaid principal amount thereof from
the date such loans are made until paid in full,
except as otherwise provided in Section 9.3(e), as
follows:
(i) If a Eurodollar Rate Loan, at a rate
per annum equal to the sum of (a) the Eurodollar
Rate determined for the applicable Interest
Period plus (b) the Interest Rate Margin; and
(ii) If a Base Rate Loan, at a rate per
annum equal to the sum of (A) the Base Rate plus
(B) the Interest Rate Margin.
The applicable basis for determining the rate of
interest on the loans shall be selected at the time a
borrowing notice or a conversion/continuation notice,
as contemplated by subsection (d) below, is delivered
by the Borrowers to the Agent. If on any day any loan
is outstanding with respect to which notice has not
been timely delivered to the Agent in accordance with
the terms of this Agreement specifying the basis for
determining the rate of interest on that day, then for
that day that loan shall be deemed to be a Base Rate
Loan.
(c) Interest Payments.
(i) Interest accrued on each Base Rate
Loan shall be payable in arrears (A) on each
Interest Payment Date applicable to such Loan,
(B) upon the prepayment thereof in full or in
part, (C) upon conversion thereof to a
Eurodollar Rate Loan, and (D) if not theretofore
paid in full, at maturity (whether by
acceleration or otherwise) of such Base Rate
Loan.
(ii) Interest accrued on each Eurodollar
Rate Loan shall be payable in arrears (A) on
each Interest Payment Date applicable to such
Loan, (B) upon the payment or prepayment thereof
in full or in part, and (C) if not theretofore
paid in full, at maturity (whether by
acceleration or otherwise) of such Eurodollar
Rate Loan.
(d) Conversion or Continuation.
(i) The Borrowers shall have the option
(A) to convert at any time (1) all or any part
of outstanding Base Rate Loans to Eurodollar
Rate Loans or (2) all or any part of Eurodollar
Rate Loans to Base Rate Loans; or (B) to
continue all or any part of outstanding
Eurodollar Rate Loans, having Interest Periods
which expire on the same date as Eurodollar Rate
Loans, and the succeeding Interest Period of
such continued Loans shall commence on such
expiration date; provided, however, (I) no
portion of any such outstanding Loan may be
continued as (and shall be immediately converted
into a Base Rate Loan), or be converted into, a
Eurodollar Rate Loan (x) if the continuation of,
or the conversion into, would violate any of the
provisions of Section 9.4 or (y) if an Event of
Default has occurred and is continuing, and
(II) if the option set forth in clause (B) of
this Section is not exercised, in accordance
with the terms of this Section 9.3, in respect
of a Eurodollar Rate Loan, such Eurodollar Rate
Loan shall convert automatically into a Base
Rate Loan on the final date of the applicable
Interest Period.
(ii) To convert or continue a loan, the
Borrowers shall deliver a written notice to the
Agent at least three business days in advance of
the proposed conversion/continuation date. Upon
receipt of such request from Borrowers, the
Agent shall forthwith give such notice to each
Lender. Such notice shall specify the proposed
conversion/continuation date (which shall be a
business day), the principal amount to be
converted/continued, whether such borrowing
shall be converted and/or continued, if
applicable, and the requested Interest Period.
Any notice for conversion to, or continuation
of, a loan shall be irrevocable, and the
Borrowers shall be bound to convert or continue
in accordance therewith.
(e) Certain Defined Terms. The following
capitalized terms used in this Agreement shall have
the following meanings:
"Base Eurodollar Rate" means, with respect to
any Interest Period, the interest rate per annum
(rounded upwards, if necessary, to the next 1/16 of
1%) determined by the Reference Bank to be the rate
per annum at which deposits in immediately available
United States dollars are offered to the Reference
Bank in the London interbank market at approximately
11:00 a.m. (London time) on the date two (2) Business
Days prior to the first day of the applicable Interest
Period for a period equal to such Interest Period and
in an amount substantially equal to the amount of the
Eurodollar Rate Loan requested by the Borrowers for
such Interest Period.
"Base Rate" means, for any period, a fluctuating
interest rate per annum equal to the higher of (i) the
rate per annum as shall be established by the Agent
from time to time, as the Agent's base rate and
(ii) the sum of (A) one-half of one percent (0.5%) and
(B) the Federal Funds Rate.
"Base Rate Loans" means all loans which bear
interest at a rate determined by reference to the Base
Rate.
"Eurodollar Rate" means, with respect to any
Interest Period applicable to a Eurodollar Rate Loan,
an interest rate per annum obtained by dividing (i)
the Base Eurodollar Rate applicable to that Interest
Period by (ii) a percentage equal to one hundred
percent (100%) minus the Eurodollar Reserve
Percentage.
"Eurodollar Rate Loans" means those loans which
bear interest at a rate determined by reference to the
Eurodollar Rate.
"Eurodollar Reserve Percentage" means, for any
day, that percentage which is in effect on such day,
as prescribed by the Federal Reserve Board for
determining the maximum reserve requirement
(including, without limitation, any emergency,
supplemental or other marginal reserve requirement)
for a member bank of the Federal Reserve System in New
York, New York in respect of "Eurocurrency
Liabilities" as set forth in Regulation D of the
Federal Reserve Board (or in respect of any other
category of liabilities which includes deposits by
reference to which the interest rate on Eurodollar
Rate Loans is determined).
"Federal Funds Rate" means an interest rate per
annum equal to the rate per annum at which the
Reference Bank, in its sole discretion, may acquire
federal funds in the interbank term federal funds
market in New York City through brokers of recognized
standing.
"Interest Payment Date" means (i) with respect
to any Base Rate Loan, the last day of each calendar
month commencing on the first such day following the
making of such Base Rate Loan, and (ii) with respect
to any Eurodollar Rate Loan, the last day of each
Interest Period applicable to such Loan.
"Interest Rate Margin" means, as of any date, a
rate equal to, with respect to any Eurodollar Rate
Loan, 2.00% per annum and with respect to any Base
Rate Loan, 0% per annum.
"Reference Bank" means the Agent.
SECTION 9.4. Special Provisions Governing
Eurodollar Rate Loans. With respect to Eurodollar
Rate Loans:
(a) Determination of Interest Period. The
period between the date on which each Eurodollar Rate
Loan is made and the date of payment in full of such
Loan shall be divided into successive periods, each
such period being an "Interest Period" for such Loan.
The initial Interest Period for each Loan shall begin
on the date of such Loan and end on the last day of
such period as selected by the Borrowers, and
thereafter, each subsequent Interest Period for such
Loan shall begin on the last day of the immediately
preceding Interest Period for such Loan and end on the
last day of such period as selected by the Borrowers.
The duration of each such Interest Period for each
Eurodollar Rate Loan shall be one, two or three
months, provided, however, that:
(i) the duration of any Interest Period
for any Loan that commences before the repayment
date for such Loan and otherwise ends after such
repayment date shall end on such repayment date;
(ii) In the case of immediately
successive Interest Periods applicable to a
borrowing of Eurodollar Rate Loans, each
successive Interest Period shall commence on the
day on which the next preceding Interest Period
expires;
(iii) If any Interest Period would
otherwise expire on a day which is not a
business day, such Interest Period shall be
extended to expire on the next succeeding
business day unless such next succeeding
business day would fall in the next calendar
month, in which case such Interest Period shall
end on the next preceding Business Day;
(iv) Borrowers may not select an Interest
Period as to any Eurodollar Rate Loan if such
Interest Period terminates later than the
Maturity Date; and
(v) There shall be no more than ten
Interest Periods in effect at any one time.
(b) Interest Rate Unascertainable, Inadequate
or Unfair. In the event that at least one business
day before the commencement of an Interest Period, a
Lender determines that adequate and fair means do not
exist for ascertaining the applicable interest rates
by reference to which the Eurodollar Rate, then being
determined is to be fixed, then such Lender shall
forthwith give notice thereof to the Borrowers and the
Agent, whereupon (until such Lender notifies the
Borrowers and the Agent that the circumstances giving
rise to such suspension no longer exist, which such
Lender shall do promptly after it determines that such
circumstances no longer exist) the right of all
Borrowers to elect to have loans from such Lender bear
interest based upon the Eurodollar Rate shall be
suspended and all outstanding Eurodollar Rate Loans
from such Lender shall be converted into Base Rate
Loans on the last day of the then current Interest
Period therefor, notwithstanding any prior election by
the Borrowers to the contrary.
(c) Illegality.
(i) If at any time a Lender determines
(which determination shall, absent manifest
error, be final and conclusive and binding upon
all parties) that the making or continuation of
any Eurodollar Rate Loan has become, as a result
of any event occurring after the date hereof (A)
unlawful or (B) impermissible by compliance by
such Lender with any law, governmental rule,
regulation or order of any governmental
authority (whether or not having the force of
law and whether or not failure to comply
therewith would be unlawful or would result in
costs or penalties), then such Lender may give
notice of that determination to the Agent and
the Borrowers.
(iii) When notice is given by a Lender
under this Section, (A) the Borrowers' right to
request from such Lender and such Lender's
obligation, if any, to make Eurodollar Rate
Loans shall be immediately suspended, and such
Lender shall make a Base Rate Loan in lieu of
any requested Eurodollar Rate Loans (on which
such Base Rate Loan the interest and principal
shall be payable contemporaneously with the
related Eurodollar Rate Loans of the other
Lenders) and (B) if Eurodollar Rate Loans are
then outstanding, the Borrowers shall
immediately, or if permitted by applicable law,
no later than the last date permitted thereby,
upon at least one business day's prior notice to
such Lender, convert each such Loan into a Base
Rate Loan (on which such Base Rate Loan the
interest and principal shall be payable
contemporaneously with the related Eurodollar
Rate Loans of the other Lenders).
(iii) If at any time after a Lender gives
notice under this Section, such Lender
determines that it may lawfully make Eurodollar
Rate Loans, such Lender shall promptly give
notice of that determination to the Borrowers
and the Agent. The Borrowers' right to request,
and such Lender's obligation, if any, to make
Eurodollar Rate Loans shall thereupon be
restored.
(d) Compensation. In addition to all amounts
required to be paid by the Borrowers pursuant to
Section 9.3, the Borrowers shall jointly and severally
compensate each Lender, within thirty days of written
notice, for all losses, expenses and liabilities
(including, without limitation, any loss or expense
incurred by reason of the liquidation or reemployment
of deposits or other funds acquired by each such
Lender to fund or maintain such Lender's Eurodollar
Rate Loans to the Borrowers) which such Lender may
sustain (i) if for any reason not the fault of such
Lender, a loan, conversion into or continuation of
Eurodollar Rate Loans does not occur on a date
specified therefor in any notice given by the
Borrowers or a successive Interest Period does not
commence after notice therefor is given, or (ii) if
for any reason any Eurodollar Rate Loan is prepaid on
a date which is not the last day of the applicable
Interest Period, or (iii) as a consequence of a
required conversion of a Eurodollar Rate Loan to a
Base Rate Loan as a result of any of the events
indicated in Section 9.4, or (iv) as a consequence of
any failure by the Borrowers to repay Eurodollar Rate
Loans when required by the terms of this Agreement.
Such Lender's written notice shall set forth in
reasonable detail the basis for such compensation and
shall be conclusive as to the amount of compensation
due to such Lender, absent manifest error.
(e) Exhibits. Exhibits A-1, A-2 and A-3 to
the Revolving Credit Agreement are deleted in their
entirety and Exhibits A-1, A-2 and A-3 attached hereto
are substituted therefor, respectively.
(f) Amendments to Article XII. Article XII
shall be amended by adding the following Section 12.3:
"Section 12.3 Documentation Agent. (a) BAI
shall act as Documentation Agent and in such
capacity will advise and consult with the Agent,
from time to time on an as needed basis and as
may be mutually satisfactory to the Agent and
BAI, including with respect to the amendment of
the Operative Documents.
(b) The Documentation Agent shall have
no duties or responsibilities other than those
expressly set forth in clause (a) above.
Neither the Documentation Agent nor any of its
officers, directors, employees or agents shall
be liable for any action taken or omitted by it
or them as such hereunder or under any other
Operative Document or in connection herewith or
therewith, unless caused by its or their gross
negligence or willful misconduct. The duties of
the Documentation Agent shall be mechanical and
administrative in nature. The Documentation
Agent shall not have by reason of this Agreement
or any other Operative Document a fiduciary
relationship in respect of any Lender or the
holder of any Note; and nothing in this
Agreement or any other Operative Document,
express or implied, is intended to or shall be
so construed as to impose upon the Documentation
Agent any obligations or liabilities in respect
of this Agreement or any other Operative
Document except as expressly set forth above.
ARTICLE III
AMENDMENTS TO INTERCREDITOR AGREEMENT
SECTION 3.01. Amendments to Intercreditor Agreement. The
Intercreditor Agreement shall be, effective as of the date hereof
and subject to the satisfaction of the conditions precedent set
forth in Section 4.01 hereof, amended as follows:
(a) Amendments to Section 1. Section 1 shall be amended
by deleting in its entirety each of the following subsections (j),
(k), (l), (m), (n) and (o):
"(j) Notwithstanding the terms of the Override
Agreement or any Transaction Document, in the event that the
Collateral Agent receives notice pursuant to the first
sentence of Article 5 of the Project Intercreditor
Agreement, the Collateral Agent shall take actions pursuant
to said Article 5 only at the direction of the Majority
Lenders; provided, however, that any Secured Party that does
not concur in the directions of the Majority Lenders shall
not be obligated to provide any funds for the purchase price
of the "Existing Creditors Call Option" (as defined in said
Article 5), unless such funds are otherwise available to be
borrowed by the Companies from such Secured Party pursuant
to the Revolving Credit Agreement and the Companies so
request such borrowing pursuant to the terms thereof.
(k) Notwithstanding the terms of the Override
Agreement or any Transaction Document, the Collateral Agent
shall take actions pursuant to Article 6 of the Project
Intercreditor Agreement only at the direction of the
Majority Lenders; provided, however, that any Secured Party
that does not concur in the directions of the Majority
Lenders shall not be obligated to provide any funds for the
cure of any defaults pursuant to said Article 6, unless such
funds are otherwise available to be borrowed by the
Companies from such Secured Party pursuant to the Revolving
Credit Agreement and the Companies so request such borrowing
pursuant to the terms thereof.
(l) Notwithstanding the terms of the Override
Agreement or any Transaction Document, the Collateral Agent
shall take actions pursuant to Section 3.3(vi) of the
Project Intercreditor Agreement only at the direction of the
Majority Lenders.
(m) Notwithstanding the terms of the Override
Agreement or any Transaction Document, the Collateral Agent
shall agree to amendments of (i) Article III of the Master
Common Facilities Agreement only with the consent or at the
direction of all of the Secured Parties, (ii) any provisions
in the Master Common Facilities Agreement regarding the use
or disposition of any Collateral only with the consent or at
the direction of all of the Secured Parties, and (iii) any
other provisions in the Master Common Facility Agreement
only with the consent or at the direction of the Majority
Lenders.
(n) The Secured Parties hereby consent to the
execution and delivery by the Collateral Agent of the
following documents on or before the Initial Funding Date:
(i) amendments to the Basic Mortgage and the Lime Mortgages,
in substantially the form of Exhibits B-1, B-2, B-3 and B-4
attached to the Amendment Agreement, dated as of August 1,
1994, among the Dravo Parties, the Lenders and FAB, as agent
for the Lenders; (ii) the Mortgage Subordination Agreement,
dated as of August 1, 1994, by and between the Collateral
Agent and Lime SPV; (iii) the Assignment and Security
Agreement; (iv) the SPV Stock Pledge Agreement; (v) the SPV
Partner Pledge Agreement; (vi) UCC-1 financing statements
with respect to the collateral described in the Assignment
and Security Agreement, the SPV Partner Pledge Agreement and
the amendments described in clause (i) above; (vii) a Deed
of Partial Release (the "Release") with respect to certain
improvements located on the Site (as defined in the Note
Purchase Agreement) that will be owned by Lime SPV; and
(viii) UCC-3 financing statement amendments with respect to
the property described in the Release and in the Warranty
Bill of Sale and Assignment, dated as of August 1, 1994, by
Lime to Lime SPV.
(o) Each Secured Party shall have the right, but not
the obligation, to provide funds for the purchase price of
the "Existing Creditors Call Option" (as defined in Article
5 of the Project Intercreditor Agreement) in an amount equal
to such Secured Party's Percentage (as defined in Section
9.1(a) of the Revolving Credit Agreement) of such purchase
price (or such lesser or greater amount as such Secured
Party may agree to provide)."
(b) Amendments to Section 6. Section 6 shall be amended
as follows:
(i) The definition of "Collateral", "Security
Documents" and "Sharing Payments" shall be amended to read
as follows:
"Collateral" shall mean all real and personal
property in or upon which a Dravo Party or other third
Person has granted to the Collateral Agent on behalf of the
Secured Parties or to any Secured Party, pursuant to the
Security Documents, a lien, security interest or other
encumbrance to secured the Secured Obligations and the Dravo
Guaranty.
"Security Documents" means the Security Agreement, the
Dravo Pledge Agreement, the Companies Pledge Agreement, the
Dravo Security Agreement, the Lime Patent Security
Agreement, the Lime Mortgages, the Dravo Guaranty and all
documents and instruments executed and delivered in
connection therewith and any other document or instrument
pursuant to which a Dravo Party or any other Person grants
to the Collateral Agent or a Secured Party a security
interest in, or lien or encumbrance upon, any real or
personal property to secure the payment or performance of
the Secured Obligations.
"Sharing Payment" means a payment with respect to a
Secured Obligation, whether by way of a direct payment to a
Secured Party from a Dravo Party, including without
limitation any payment under the Dravo Guaranty, or other
Person or through the exercise by a Secured Party of any
right of setoff, bankers' lien or similar right; provided,
however, that a distribution to the Secured Parties of
Proceeds as contemplated in Section 2 hereof shall not
constitute a "Sharing Payment" hereunder.
(ii) The following new definition shall be inserted
in alphabetical order:
"Dravo Guaranty" means that certain Guaranty Agreement
dated as of December 31, 1995, executed in favor of the
Collateral Agent on behalf of the Lenders, as it may be
amended, modified or supplemented from time to time in
accordance with its terms.
ARTICLE IV
CONDITIONS PRECEDENT
SECTION 4.01. Conditions of Effectiveness. This Amendment
shall become effective when, and only when, (a) the Agent shall have
received counterparts of this Amendment executed by each of the
Dravo Parties and the Lenders, (b) all accrued but unpaid interest,
fees and expenses under the terms of the Revolving Credit Agreement,
as amended hereby, and all outstanding fees and expenses of counsel
to the Agent and the Lenders, shall have been paid in full to the
extent due and payable after giving effect to this Amendment, (c)
the Agent additionally shall have received all of the following
documents, each (unless otherwise indicated) being dated the date of
receipt thereof by the Agent (which date shall be the same for all
such documents), in form and substance satisfactory to the Agent and
the Lenders:
(i) Copies of (A) all documents evidencing all
requisite corporate action of each Dravo Party (including
any and all resolutions of the Board of Directors of each
Dravo Party) authorizing the execution, delivery and
performance of this Amendment and the matters contemplated
hereby and thereby, (B) all documents evidencing all
Governmental Approvals, if any, with respect to this
Amendment and the matters contemplated hereby and thereby,
and (C) the certificate or articles of incorporation
(certified as of a recent date by the Secretary of the State
of its jurisdiction of incorporation) and by-laws of each
Dravo Party.
(ii) A good standing certificate issued by the
Secretary of State of its incorporation and certificates of
qualification to do business as a foreign corporation for
each Dravo Party issued by the Secretary of State of each
State in which such Dravo Party is required by law to be
qualified to do business, each dated as of a date not more
than five days prior to the date hereof.
(iii) A certificate of the Secretary or an Assistant
Secretary of each Dravo Party certifying the names and true
signatures of the officers authorized to sign this Amendment
on behalf of such Dravo Party and any other documents to be
delivered by such Dravo Party hereunder.
(iv) Duly executed copies of the Notes, in
substantially the forms of Exhibits A-1, A-2 and A-3
attached hereto.
(v) Duly executed unconditional and irrevocable
guaranty of Dravo, in form and substance satisfactory to the
Lenders.
(vi) A favorable opinion of Buchanan Ingersoll,
Professional Corporation, special counsel for the Dravo
Parties, in form and substance satisfactory to the Lenders.
(vii) Such other documents, instruments, approvals
(and, if required by the Agent, certified duplicates of
executed copies thereof) or opinions as the Agent or any
Lender may reasonably request.
(d) The representations and warranties contained herein
shall be true on and as of the Effective Date; there shall exist on
the Effective Date, no Event of Default or Default; there shall
exist no material adverse change in the financial condition,
business operation or prospects of any Dravo Party or its
Subsidiaries since December 31, 1994; and each Dravo Party shall
have delivered to the Lenders an Officer's Certificate, dated the
Effective Date, to such effect.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
SECTION 5.01. Representations and Warranties of the Dravo
Parties. (a) Each of the Dravo Parties hereby repeats and confirms
each of the representations and warranties made by it in Article VII
of the Override Agreement, as amended hereby, as though made on and
as of the date hereof, with each reference therein to "this
Agreement", the "Operative Documents", "hereof", "hereunder",
"thereof", "thereunder" and words of like import being deemed to be
a reference to the Override Agreement and the Operative Documents,
in each case as amended hereby.
(b) Each of the Dravo Parties represents and warrants as
follows:
(i) Such Dravo Party and each of its Subsidiaries is
a corporation duly organized, validly existing and in good
standing under the laws of the state of its incorporation
and is duly qualified to do business in, and is in good
standing in, all other jurisdictions where the nature of its
business or the nature of property owned or used by it makes
such qualification necessary.
(ii) The execution, delivery and performance by
such Dravo Party of this Amendment are within its corporate
powers, have been duly authorized by all necessary corporate
action and do not contravene (A) such Dravo Party's charter
or by-laws, (B) law or (C) any legal or contractual
restriction binding on or affecting such Dravo Party; and
such execution, delivery and performance do not or will not
result in or require the creation of any Lien upon or with
respect to any of its properties.
(iii) No Governmental Approval is required for the due
execution, delivery and performance by such Dravo Party of
this Amendment, except for such Governmental Approvals as
have been duly obtained or made and which are in full force
and effect on the date hereof and not subject to appeal.
(iv) This Amendment constitutes the legal,
valid and binding obligations of such Dravo Party
enforceable against such Dravo Party in accordance with its
terms; subject to the qualifications, however, that the
enforcement of the rights and remedies herein is subject to
bankruptcy and other similar laws of general application
affecting rights and remedies of creditors and that the
remedy of specific performance or of injunctive relief is
subject to the discretion of the court before which any
proceedings therefor may be brought.
(v) Except as set forth in the Form 10-Q dated
September 30, 1995, there are no pending or threatened
actions, suits or proceedings affecting such Dravo Party or
any of its Subsidiaries or the properties of such Dravo
Party or any of its Subsidiaries before any court,
governmental agency or arbitrator, that may, if adversely
determined, materially adversely affect the financial
condition, properties, business, operations or prospects of
such Dravo Party and it Subsidiaries, considered as a whole,
or affect the legality, validity or enforceability of the
Override Agreement or any other Operative Document, in each
case as amended by this Amendment.
ARTICLE VI
WAIVER OF COVENANTS
SECTION 6.01. Waiver. Subject to the effectiveness of this
Amendment Agreement, the Lenders, pursuant to the request of the
Dravo Parties, hereby waive solely with respect to the quarter
ending December 31, 1994 and the period commencing January 1, 1995
and ending on the Effective Date hereof, the negative covenants
contained in Sections 4.02(b)(ii), 5.01(a), 5.02(a) and 5.02(b) of
the Override Agreement.
ARTICLE VII
MISCELLANEOUS
SECTION 7.01. Reference to and Effect on the Operative
Documents. (a) Upon the effectiveness of this Amendment, on and
after the date hereof each reference in the Revolving Credit
Agreement and the Override Agreement to "this Agreement",
"hereunder", "hereof" or words of like import referring to the
Revolving Credit Agreement and the Override Agreement, respectively,
and each reference in the other Operative Documents to "the
Revolving Credit Agreement", "the Override Agreement", "thereunder",
"thereof" or words of like import referring to the Revolving Credit
Agreement and the Override Agreement, shall mean and be a reference
to the Revolving Credit Agreement and the Override Agreement,
respectively, as amended hereby.
(b) Except as specifically amended above, the Revolving
Credit Agreement, the Override Agreement and the Notes, and all
other Operative Documents, are and shall continue to be in full
force and effect and are hereby in all respects ratified and
confirmed. Without limiting the generality of the foregoing, the
Security Documents and all of the Collateral described therein do
and shall continue to secure the payment of all obligations of the
Dravo Parties under the Revolving Credit Agreement, the Notes and
the other Operative Documents, in each case as amended hereby.
(c) The execution, delivery and effectiveness of this
Amendment shall not, except as expressly provided herein, operate as
a waiver of any right, power or remedy of any Lender or the Agent
under any of the Operative Documents, nor constitute a waiver of any
provision of any of the Operative Documents.
SECTION 7.02. Costs and Expenses. The Dravo Parties jointly
and severally agree to pay on demand all costs and expenses incurred
by the Agent and the Lenders in connection with the preparation,
execution and delivery of this Amendment and the other documents to
be delivered hereunder and thereunder, including, without
limitation, the reasonable fees and out-of-pocket expenses of
counsel for the Agent and the Lenders with respect thereto and with
respect to advising the Agent and the Lenders as to their rights and
responsibilities under this Amendment. The Dravo Parties jointly
and severally further agree to pay on demand all costs and expenses,
if any (including, without limitation, reasonable counsel fees and
expenses of counsel), incurred by the Agent and the Lenders in
connection with the enforcement (whether through negotiations, legal
proceedings or otherwise) of this Amendment, the Transaction
Documents and the other documents to be delivered hereunder and
thereunder, including, without limitation, counsel fees and expenses
in connection with the enforcement of rights under this Section
7.02.
SECTION 7.03. Execution in Counterparts. This Amendment may
be executed in any number of counterparts and by different parties
hereto in separate counterparts, each of which when so executed and
delivered shall be deemed to be an original and all of which taken
together shall constitute but one and the same instrument.
SECTION 7.04. Governing Law. This Amendment shall be
governed by, and construed in accordance with, the laws of the State
of New York.
[Signatures Commence on Next Page.]<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be executed by their respective officers thereunto duly
authorized, as of the date first above written.
FIRST ALABAMA BANK, individually
and as Agent
By /s/ PETER P. GAILLARD
Name: Peter P.Gaillard
Title: Senior Vice President
<PAGE>
PNC BANK, NATIONAL ASSOCIATION
By /s/ MICHAEL J. BEYER
Name: Michael J.Beyer
Title: Vice President
<PAGE>
BANK OF AMERICA ILLINOIS,
individually and as Documentation Agent
By /s/ MICHAEL J. MCKENNEY
Name: Michael J. McKenney
Title: Vice President
<PAGE>
THE PRUDENTIAL INSURANCE
COMPANY OF AMERICA
By s/s KEVIN J. KRASKA
Name: Kevin J. Kraska
Title: Vice President
<PAGE>
DRAVO CORPORATION
By /s/ ERNEST F. LADD III
Name: Ernest F. Ladd III
Title: Executive Vice President
DRAVO LIME COMPANY
By /s/ ERNEST F. LADD III
Name: Ernest F. Ladd III
Title: Executive Vice President
DRAVO BASIC MATERIALS
COMPANY, INC.
By /s/ ERNEST F. LADD III
Name: Ernest F. Ladd III
Title: Executive Vice President
[EXECUTION COPY]
AMENDMENT AND RESTATEMENT OF
ARTICLES IV, V AND VI
OF THE OVERRIDE AGREEMENT
and
AMENDMENT AND RESTATEMENT OF
APPENDIX A, DEFINITIONS
dated as of February 15, 1996
by and among
DRAVO CORPORATION
DRAVO LIME COMPANY
DRAVO BASIC MATERIALS COMPANY, INC.
FIRST ALABAMA BANK
PNC BANK, NATIONAL ASSOCIATION
BANK OF AMERICA ILLINOIS
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
<PAGE>
AMENDMENT AND RESTATEMENT
THIS AMENDMENT AND RESTATEMENT, dated as of February 15, 1996
is entered into by and among FIRST ALABAMA BANK ("FAB"), PNC BANK,
NATIONAL ASSOCIATION (f/k/a Pittsburgh National Bank) ("PNC"), BANK
OF AMERICA ILLINOIS ("BAI"), THE PRUDENTIAL INSURANCE COMPANY OF
AMERICA ("Prudential"); FAB, PNC, BAI and Prudential herein
collectively referred to as "Lenders" and each a "Lender") and DRAVO
CORPORATION, a Pennsylvania corporation ("Dravo"), DRAVO LIME
COMPANY, a Delaware corporation ("Lime") and DRAVO BASIC MATERIALS
COMPANY, INC., an Alabama corporation ("Basic"; Lime and Basic are
sometimes hereinafter collectively referred to as the "Companies").
PRELIMINARY STATEMENTS
(1) The Companies, Dravo and the Lenders have entered into
an Override Agreement, dated as of January 21, 1992, as amended by
the First Amendment to Override Agreement, dated March 10, 1993, the
Second Amendment to Override Agreement, dated as of March 7, 1994,
the Amendment Agreement, dated as of August 1, 1994, the Amendment
Agreement, dated as of January 3, 1995 and the Amendment Agreement
dated as of December 31, 1995 (as so amended and amended, modified
or supplemented from time to time, the "Override Agreement"). In
addition, the Companies, the Agent and the Lenders have entered into
an Amended and Restated Revolving Credit Agreement, dated as of
January 21, 1992, as amended by the First Amendment to Amended and
Restated Revolving Credit Agreement, dated as of March 7, 1994, by
the Amendment Agreement dated as of August 1, 1994, the Amendment
Agreement dated as of January 3, 1995 and the Amendment Agreement
dated as of December 31, 1995 (as so amended and amended, modified
or supplemented from time to time, the "Revolving Credit
Agreement"). Capitalized terms used but not defined herein shall
have the meanings assigned to such terms in the Override Agreement,
as amended hereby.
(2) The parties hereto desire to amend and restate Articles
IV, V and VI of the Override Agreement and Appendix A.
In consideration of the mutual agreements herein contained and
other good and valuable consideration, the receipt and adequacy of
which are hereby acknowledged, the parties hereto hereby agree to
amend and restate Articles IV, V and VI of the Override Agreement as
follows and Appendix A as attached hereto.
ARTICLE I
AMENDMENT AND RESTATEMENT
SECTION 1.01. Amendment and Restatement of Articles IV, V and
VI. Each of the following Articles IV, V and VI of the Override
Agreement shall be amended and restated in full as follows:
ARTICLE IV
UNIFORM AFFIRMATIVE COVENANTS
SECTION 4.01. Dravo Parties Affirmative Covenants. So long
as a Lender shall hold any Note or Notes or any Secured Obligation
remains outstanding, the Dravo Parties shall comply with the
following:
(a) Financial Statements. Each of the Dravo Parties
will deliver in triplicate to each Lender (or any other holder
of any Note or Notes) so long as such Lender (or holder) shall
hold any Note or Notes:
(i) as soon as practicable and in any event
within 45 days after the end of each quarterly period in
each fiscal year, consolidating and consolidated
statements of income and cash flows, of such corporation
and its Subsidiaries for the period from the beginning
of the current fiscal year to the end of such quarterly
period, and a consolidating and consolidated balance
sheet of such corporation and its Subsidiaries as at the
end of such quarterly period, setting forth in each case
in comparative form figures for the corresponding period
in the preceding fiscal year, all in reasonable detail
and certified by an authorized financial officer of such
corporation, subject to changes resulting from normal
year-end adjustments;
(ii) as soon as practicable and in any event
within 90 days after the end of each fiscal year,
consolidating and consolidated statements of income and
cash flows and a consolidated statement of stockholders'
equity of such corporation and its Subsidiaries for such
year, and a consolidating and consolidated balance sheet
of such corporation and its Subsidiaries as at the end
of such year, setting forth in each case in comparative
form corresponding consolidated figures from the
preceding annual audit, all in reasonable detail and
satisfactory in form to each of the Lenders and, as to
the consolidated statements, reported on by independent
public accountants of recognized national standing
selected by such Dravo Party whose report shall be
without limitation as to the scope of the audit and
satisfactory in substance to the Majority Lenders and,
as to the consolidating statements, certified by an
authorized financial officer of such Dravo Party;
(iii) promptly upon transmission thereof,
copies of all such financial statements, proxy
statements, notices and reports as it shall send to its
stockholders and copies of all registration statements
(without exhibits) and all reports which it files with
the Securities and Exchange Commission (or any
governmental body or agency succeeding to the functions
of the Securities and Exchange Commission);
(iv) as soon as is practicable and in any event
prior to the end of each fiscal year, a projected income
statement, balance sheet and cash flow statement for
each of the Dravo Parties for the ensuing fiscal year,
setting forth in each case figures on an annual basis in
reasonable detail and certified by an authorized
financial officer of each such corporation;
(v) promptly upon receipt thereof, a copy of
each other report submitted to such corporation or any
Subsidiary by independent accountants in connection with
any annual, interim or special audit made by them of the
books of such corporation or any Subsidiary;
(vi) upon the request of a holder of any Note,
provide such holder, and any qualified institutional
buyer designated by such holder, such financial and
other information as such holder may reasonably
determine to be necessary in order to permit compliance
with the information requirements of Rule 144A under the
Securities Act in connection with the resale of Notes,
except at such times as Dravo is subject to the
reporting requirements of section 13 or 15(d) of the
Exchange Act. For the purpose of this clause (vi), the
term "qualified institutional buyer" shall have the
meaning specified in Rule 144A under the Securities Act;
(vii) with reasonable promptness, such other
financial data as any Lender may reasonably request; and
(viii) a report, delivered not less
frequently than once during each period of four
consecutive months, of the General Counsel of Dravo that
describes and evaluates all pending litigation against
any Dravo Party where the amount of potential loss could
exceed $5,000,000. Each such report should include a
brief description of the events that have occurred in
such litigation since the date of the last report,
including, without limitation, the occurrence and/or
outcome of any motions for summary judgment, discovery
motions, substantive discovery responses, or motions for
final adjudication. In addition, at the request of any
Lender, each Dravo Party shall, at its expense, provide
each Lender, and its outside counsel, an opportunity to
receive copies of all documentation received or prepared
in connection with any such litigation, and to discuss
the status thereof with the General Counsel of Dravo and
the outside counsel of any such Dravo Party handling
such matter. Notwithstanding the foregoing, at no time
shall any Dravo Party or its counsel be required to make
any disclosure or provide any access to information
pursuant to this paragraph which would result in the
loss to such Dravo Party of any privilege against
disclosure generally recognized under law.
Together with each delivery of financial statements required
by clauses (i) and (ii) above, each of the Dravo Parties will
deliver to each Lender (addressed to it) a Compliance Certificate,
in the form of Exhibit O hereto, demonstrating (with computations in
reasonable detail except to the extent specifically set forth in
such financial statements) compliance by the Dravo Parties with
Section 4.02(b), 5.01(a), (b), (c)(i), (c)(ii) and (d), and stating
that there exists no Default or Event of Default, or, if any such
Default or Event of Default exists, specifying the nature thereof,
the period of existence thereof and what action such corporation
proposes to take with respect thereto.
Together with each delivery of financial statements required
by clause (ii) above, each of the Dravo Parties will deliver to each
Lender a certificate of said accountants stating that, in making the
audit necessary to the certification of such financial statements
they have obtained no knowledge of any Default or Event of Default,
or, if any such Default or Event of Default exists, specifying the
nature and period of existence thereof. Such accountants, however,
shall not be liable to anyone by reason of their failure to obtain
knowledge of any Default or Event of Default which would not be
disclosed in the course of an audit conducted in accordance with
generally accepted auditing standards. Each Lender is hereby
authorized to deliver a copy of any financial statement delivered to
such Lender pursuant to this Section 4.01(a) to any regulatory body
having jurisdiction over such Lender.
Each of the Dravo Parties also covenants that forthwith upon
the chief executive officer, principal financial officer or
principal accounting officer of such Dravo Party obtaining knowledge
of:
(i) a Default or an Event of Default;
(ii) a material adverse change in the financial
condition, business or operations of such Dravo Party and its
Subsidiaries, taken as a whole;
(iii) the institution of legal proceedings against such
Dravo Party and/or any Subsidiary, which has a reasonable
possibility of materially adversely affecting the financial
condition, business or operations of such Dravo Party and its
Subsidiaries, taken as a whole or which in any manner draws
into question the validity of or has a reasonable possibility
of impairing the ability of such Dravo Party to perform its
obligations under this Agreement or any of the other Operative
Documents to which it is a party;
(iv) the occurrence of any default under any agreement
or note evidencing borrowed money;
(v) the occurrence of any other event that reasonably
could impair the ability of such Dravo Party to meet its
obligations hereunder or under any other Operative Document;
or
(vi) any (A) Environmental Liabilities, (B) pending,
threatened or anticipated Environmental Proceedings, (C)
Environmental Notices, (D) Environmental Judgments and Orders,
or (E) Environmental Releases at, on, in, under or in any way
materially affecting the Properties;
such Dravo Party will deliver to the Lenders an Officer's
Certificate specifying the nature and period of existence thereof
and what action such Dravo Party has taken, is taking or proposes to
take with respect thereto.
(b) Inspection of Property. Each of the Dravo Parties
covenants that, so long as a Lender shall hold any Note or Notes,
any of them will permit any person designated by such Lender in
writing, at the expense of such Dravo Party, to visit and inspect
any of the properties of any such Dravo Party and its Subsidiaries,
to examine the corporate books and financial records of any such
Dravo Party and its Subsidiaries and make copies thereof or extracts
therefrom and to discuss the affairs, finances and accounts of any
such corporation with the principal officers and independent public
accountants of such corporation, all at such reasonable times and
upon such reasonable notice and as often as such Lender may
reasonably request.
(c) Secure Notes Equally. Each of the Dravo Parties
covenants that, if any of the Dravo Parties creates or assumes any
Lien upon any of its property or assets, whether now owned or
hereafter acquired, other than Liens excepted by the provisions of
Section 5.03(a)(i) (unless prior written consent to the creation or
assumption thereof shall have been obtained pursuant to Section
8.02), it will make or cause to be made effective provisions whereby
the Notes then outstanding will be further secured by such Lien
equally and ratably with any and all other debt thereby secured as
long as such other debt shall be so secured.
(d) Guaranteed Obligations. Each of the Dravo Parties
covenants that if, at any time after the date hereof, it or any of
its Subsidiaries incurs or permits to exist any Debt or other
obligation guaranteed or collateralized in any other manner by any
Person, it will simultaneously cause such Person to execute and
deliver to each holder of any Note a guaranty agreement in form and
substance satisfactory to such holder guaranteeing payment of the
principal amount of the Notes and any premium and interest thereon,
which bears the same ratio to the total unpaid principal amount of
the Notes as the amount of such other obligation which is guaranteed
bears to the total unpaid principal amount of such other obligation,
or if such other obligation is collateralized, to collateralize the
Notes equally and ratably with such other obligation.
(e) Maintenance of Insurance. Each of the Dravo Parties
will maintain, and will cause each of its Subsidiaries to maintain,
with responsible insurers, insurance with respect to its properties
and business against such casualties and contingencies (including
public liability, larceny, embezzlement or other criminal
misappropriation) and in such amounts as is customary in the case of
similarly situated corporations engaged in the same or similar
businesses, and, if requested in writing by a Lender, together with
each delivery of financial statements under clause (ii) of Section
4.01(a) each of the Dravo Parties will deliver an Officer's
Certificate specifying the details of such insurance in effect.
(f) Taxes. Neither Dravo nor either of the Companies nor
any Subsidiary thereof will file, or cause to be filed, any federal
income tax return inconsistent with the representation contained in
Section 7.01(e).
(g) Maintenance of Corporate Existence/Compliance with
Law/Preservation of Property. Except as allowed under Section
5.03(a)(iii) or 5.03(a)(iv), each of the Dravo Parties covenants
that it and each Subsidiary (other than Discontinued Subsidiaries)
will do or cause to be done all things necessary to preserve, renew
and keep in full force and effect the corporate existence of such
Dravo Party and its Subsidiaries (other than Discontinued
Subsidiaries) and comply in all material respects with all laws and
regulations (including, without limitation, laws and regulations
relating to equal employment opportunity and employee safety)
applicable to it and its Subsidiaries (other than Discontinued
Subsidiaries), the failure with which to comply would have a
reasonable possibility of materially adversely affecting the
business, operations or financial condition of such Dravo Party and
its Subsidiaries (other than Discontinued Subsidiaries), taken as a
whole; at all times maintain, preserve and protect all material
intellectual property of such Dravo Party and its Subsidiaries
(other than Discontinued Subsidiaries), and preserve all the
remainder of its material property used or useful in the conduct of
its business and keep the same in good repair, working order and
condition.
(h) Compliance with Environmental Laws. Each of the Dravo
Parties will, and will cause each of its Subsidiaries to, comply in
a timely fashion with, or operate pursuant to valid waivers of the
provisions of, all Environmental Requirements including, without
limitation, the emission of wastewater effluent, solid and hazardous
waste and air pollution, and establishing general environmental
conditions, together with any other applicable requirements for
conducting, on a timely basis, periodic tests and monitoring for
contamination of ground water, surface water, air and land and for
biological toxicity of the aforesaid, and diligently comply with the
regulations (except to the extent such regulations are waived by
appropriate governmental authorities) of the Environmental
Protection Agency or other relevant federal, state or local
governmental authority, except where the failure to do so would not
have a reasonable possibility of materially adversely affecting the
business, operations or financial condition of such Dravo Party and
its Subsidiaries, taken as a whole.
(i) Appraisals. From time to time, a Lender or Lenders may
commission or obtain an appraisal of the property covered by the
Lime Mortgages by an appraiser satisfactory to such Lender or
Lenders and in compliance with the standards of the Member Appraisal
Institute and may commission or obtain such other valuations as a
Lender or Lenders may reasonably require from time to time.
(j) Additional Mortgage Conveyances. Upon the acquisition
by any Dravo Party of any additional properties located adjacent to,
or used or usable in connection with the operations of the Dravo
Parties on, the property covered by the Lime Mortgages or the
commencement of any such operations thereon by the Dravo Parties,
then, upon the request of a Lender or Lenders, the Dravo Parties
shall convey or cause to be conveyed duly authorized, executed and
delivered mortgages on such properties (or, at the option of
Lenders, modifications to the existing mortgages) in order to cause
such additional properties to be subjected to the lien and
encumbrance of the applicable Lime Mortgages. In connection with
any such conveyance, the Dravo Parties shall also deliver the items
described in Section 3.01(e), "Real Estate Documents", hereof with
respect to such additional property and the mortgage conveyance of
such additional property.
(k) Consents. The Dravo Parties will obtain on or prior to
March 31, 1996 the consent of (1) Ohio Power Company to the
assignment by Dravo Black River Limited Partnership to Lime of the
Lime Supply Agreement dated June 21, 1993 between Lime and Ohio
Power Company and (2) Svedala Industries, Inc. to the assignment by
Dravo Black River Limited Partnership to Lime of the Agreement,
dated as of August 27, 1993, as amended, by and between Svedala
Industries, Inc., through its Kennedy Van Saun division, and Lime.
SECTION 4.02 Dravo Additional Covenants. So long as a Lender
shall hold any Note or Notes or any Secured Obligation remains
outstanding, Dravo shall comply with the following.
(a) Ancillary Reports. Dravo shall deliver to each Lender
the following reports in triplicate:
(i) a monthly balance sheet, income statement and cash
flow statement for Dravo and its Subsidiaries prepared by
Dravo, within thirty days after the close of each calendar
month; provided, however, that delivery of the Directors
Report shall be deemed to satisfy the requirements of this
clause; and
(ii) for each of Dravo's fiscal quarters commencing
with the fiscal quarter ending March 31, 1996, a report
listing all letters of credit then issued and outstanding on
behalf of Dravo and its Subsidiaries, as well as the amount of
and issuing institution for each such letter of credit, within
thirty days after the close of each such quarter.
(b) Fixed Charge Test. Dravo shall cause the Fixed Charge
Coverage Ratio of Dravo and its Subsidiaries as at the end of each
of Dravo's fiscal quarters to equal or exceed 1.25 from the
Effective Date to and including December 31, 1996 and 1.5
thereafter.
(c) Mandatory Payments of Note Receivable. Dravo shall make
the repayments required under the Note Receivable.
ARTICLE V
UNIFORM NEGATIVE COVENANTS
SECTION 5.01. Dravo Negative Covenants. So long as a Lender
shall hold any Note or Notes or any Secured Obligation remains
outstanding, Dravo shall comply with each of the following.
(a) Net Worth Requirements. Dravo will not permit its
Consolidated Net Worth at any time to be less than $90,784,000 (the
"Base Amount") as of the Effective Date hereof and as of each
quarter ending thereafter to be less than a sum equal to the Base
Amount plus 50% of Consolidated Net Earnings available to common
shareholders (to the extent this is a positive number) for each
quarter ending after the Effective Date.
(b) Dividend Restrictions. Dravo shall not: (x) pay or
declare any dividend on any class of its stock or make any other
distribution on account of any class of its stock (referred to
herein collectively as "Dividends") or (y) make, directly or
indirectly (including by a Subsidiary of Dravo), any Excess
Redemption (all Dividends and Excess Redemptions collectively
referred to herein as "Dravo Restricted Payments") if such Dravo
Restricted Payments, taken together with all other Dravo Restricted
Payments made on or after September 30, 1995, would exceed 25% of
Consolidated Net Earnings from Continuing Operations after
September 30, 1995. There shall not be included in Dravo Restricted
Payments (x) Dividends paid, or distributions made, in stock of
Dravo; or (y) exchanges of stock of one or more classes of Dravo for
common stock of Dravo or for stock of Dravo of the same class,
except to the extent that cash or other value is involved in such
exchange; or (z) the payment of regularly scheduled dividends on the
Shares or the Preferred Stock Series B originally issued to the
Mechling estate ("Mechling Shares"). The term "stock" as used in
this Section 5.01(b) shall include warrants or options to purchase
stock. Notwithstanding the foregoing, Dravo shall not make a Dravo
Restricted Payment if a Default or Event of Default has occurred or
would occur as a result of such Dravo Restricted Payment. As used
herein, the term "Excess Redemption" means any redemption, purchase
or other acquisition of any shares of the capital stock of Dravo in
an amount exceeding the cash proceeds received by Dravo in
connection with any issuance or sale of any capital stock (including
without limitation any preferred stock) of Dravo in an amount
exceeding cash proceeds received by Dravo (net of all reasonable
costs and expenses incurred by Dravo in connection with such
issuance of capital stock) occurring after September 30, 1995.
(c) Debt. Dravo shall not, and shall not permit any of its
Subsidiaries to, create, incur, assume or suffer to exist;
(i) any Debt in excess of 50% of Dravo Consolidated
Net Tangible Assets from the Effective Date hereof to and
including December 31, 1996 and 45% of Dravo Consolidated Net
Tangible Assets thereafter; or
(ii) any Debt so that the ratio of Debt to EBDIAT would
exceed 3.25 to 1.0 from the Effective Date hereof to and
including December 31, 1996 and 3.0 to 1.0 thereafter.
(d) Secured Debt. Dravo shall not, and shall not permit any
of its Subsidiaries to, create, incur, assume or suffer to exist at
any time the aggregate of (i) any secured Debt (other than the
Secured Obligations) plus (ii) an amount equal to the greater of the
fair market value or acquisition cost of any additional real estate
(plus improvements) acquired by a Person (other than a Dravo Party)
for the benefit of any Dravo Party or any affiliate thereof located
adjacent to, or used or usable in connection with the operations of
the Dravo Parties on, the property covered by the Lime Mortgages, in
excess of 7% of Dravo Consolidated Net Tangible Assets.
SECTION 5.02. Companies Negative Covenants. So long as a
Lender shall hold any Note or Notes or any Secured Obligation
remains outstanding, neither of the Companies shall make any payment
to Dravo with respect to or on account of the Dravo affiliated
group's consolidated federal income tax liability ("Dravo
Consolidated Tax Liability") in excess of the amount of such tax
liability that would have been apportioned to such Company had
Section 1552(a)(1) of the Code and Treasury Regulation
31.155201(a)(1) been used to determine each such Company's tax
liability. In addition, no payment shall be made by any Other
Subsidiary or any Subsidiary of the Companies to Dravo with respect
to or on account of the Dravo Consolidated Tax Liability. No
intercompany account or indebtedness owing from the Companies or
their Subsidiaries shall be created in connection with any tax
sharing agreement or arrangement with respect to or on account of
the Dravo Consolidated Tax Liability and any such intercompany
account or indebtedness that may have been created prior to the date
hereof shall be, and hereby is, contributed to the capital of the
Companies and each such Company is thereby released from any further
liability arising in connection with such intercompany account or
indebtedness.
SECTION 5.03. Dravo Parties Negative Covenants. So long as
a Lender shall hold any Note or Notes or any Secured Obligation
remains outstanding, each of the Dravo Parties shall comply with
each of the following:
(a) Liens and Other Restrictions. None of the Dravo
Parties will, nor will any of them permit any Subsidiary to:
(i) Liens. Create, assume or suffer to exist
any Lien upon any of its property or assets, whether now
owned or hereafter acquired (whether or not provision is
made for the equal and ratable securing of the Notes in
accordance with the provisions of Section 4.01(c)),
except
(A) Liens for taxes not yet due or that
(a) are being actively contested in good faith by
appropriate proceedings diligently contesting
such obligations, and (b) would not have a
material and adverse effect on the business,
conditions, operations or prospects of such
corporation in the event that the underlying
obligations for such Liens were not paid,
(B) other Liens incidental to the conduct
of its business or the ownership of its property
and assets which were not incurred in connection
with the borrowing of money or the obtaining of
advances or credit, and which do not in the
aggregate materially detract from the value of
its property or assets or materially impair the
use thereof in the operation of its business,
(C) Liens on property or assets of a
Subsidiary to secure its obligations to the Dravo
Party (other than Dravo) of which it is a
Subsidiary or another Subsidiary of such Dravo
Party (other than Dravo),
(D) any Lien existing on any property of
any corporation at the time it becomes a
Subsidiary of such Dravo Party, or existing prior
to the time of acquisition upon any property
acquired by such Dravo Party or any Subsidiary of
such Dravo Party through purchase, merger or
consolidation or otherwise, whether or not
assumed by such Dravo Party or such Subsidiary,
or placed upon property at the time of
acquisition by such Dravo Party or any Subsidiary
of such property to secure all or a portion of
(or to secure Debt incurred to pay all or a
portion of) the purchase price thereof, provided
that (a) any such Lien shall not encumber any
other property of such Dravo Party or such
Subsidiary, and (b) the amount secured by each
such Lien shall not exceed, at the time such
corporation becomes a Subsidiary of such Dravo
Party or at the time of acquisition of such
property by such Dravo Party or a Subsidiary of
such Dravo Party or at the time of any renewal,
extension or refunding of such Lien, 75% of the
lower of either the cost or market value of the
property being acquired,
(E) any liens securing Debt of such Dravo
Party or a Subsidiary of such Dravo Party
incurred in connection with an industrial revenue
bond or pollution control revenue bond financing
of the facilities or equipment to be occupied or
operated by such Dravo Party or such Subsidiary,
(F) any Lien renewing, extending or
refunding any Lien permitted by clauses (D) and
(E) of this Section 5.03(a)(i), provided that the
amount secured shall not be increased, and the
Lien shall not be extended to other property,
(G) Liens created or permitted by any
Operative Document entered into in connection
with this Agreement , and
(H) Liens set forth in Schedule
5.03(a)(i) hereto;
(ii) Loans, Advances, Investments and Contingent
Liabilities. Make or permit to remain outstanding any
loan or advance to, or Guarantee, endorse or otherwise
be or become contingently liable, directly or
indirectly, in connection with the obligations, stock or
dividends of, or own, purchase or acquire any stock,
obligations or securities of, or any other interest in,
or make any capital contribution to, any Person, except
that such Dravo Party or any Subsidiary of such Dravo
Party may
(A) own, purchase or acquire stock,
obligations or securities of a Subsidiary of such
Dravo Party or of a corporation which immediately
after such purchase or acquisition will be a
Subsidiary of such Dravo Party,
(B) acquire and own stock, obligations or
securities received in settlement of debts
(created in the ordinary course of business)
owing to such Dravo Party or any Subsidiary of
such Dravo Party,
(C) own, purchase or acquire prime
commercial paper and certificates of deposit in
United States commercial banks (having capital
surplus in excess of $100,000,000), in each case
due within one year from the date of purchase and
payable in the United States in Dollars,
obligations of the United States Government or
any agency thereof, and obligations guaranteed by
the United States Government, and repurchase
agreements of such banks for terms of less than
one year in respect to the foregoing certificates
and obligations,
(D) endorse negotiable instruments for
collection in the ordinary course of business,
(E) guarantee Debt of a Subsidiary of
such Dravo Party which is permitted by Section
5.01(d),
(F) make or permit to remain outstanding
travel and other like advances to officers and
employees in the ordinary course of business,
(G) make or permit to remain outstanding
loans or advances to, or Guarantee, endorse or
otherwise be or become contingently liable in
connection with the obligations, stock or
dividends of, or own, purchase or acquire stock,
obligations or securities of, any other Person,
provided that the aggregate principal amount of
such loans and advances, excluding the aggregate
amount of all loans made pursuant to clause (H)
of this Section 5.03(a)(ii), plus the aggregate
amount of such contingent liabilities, plus
(without duplication) the aggregate amount of
liabilities permitted by clauses (A) and (E) of
Section 5.03(a)(viii), plus the aggregate amount
of the investment (at original cost) in such
stock, obligations and securities shall not
exceed $5,000,000 for the Dravo Parties and their
Subsidiaries on a combined basis (excluding from
such amount those letters of credit for which the
Dravo Parties are liable on the Closing Date as
set forth in Schedule 5.03(a)(ii)(G) hereto as
well as any term obligation or obligations into
which such letters of credit may be converted) at
any time outstanding, and further provided that
no Subsidiary of such Dravo Party shall make any
loan or advance to, or acquire any stock,
obligations or securities of, such Dravo Party,
(H) with respect to the Companies, make
loans to Dravo from time to time to the extent
permitted under Section 5.02(a)(iv) hereof;
provided, however, that notwithstanding anything
to the contrary provided in this Section, all
such loans made by the Companies, and Dravo's
obligations to the Companies resulting from such
loans, shall be evidenced at all times by a note
or notes which (i) shall be in form and substance
satisfactory to the Majority Lenders, and
(ii) shall be pledged to the Collateral Agent on
behalf of the Lenders pursuant to the Companies
Pledge Agreement,
(I) allow to exist loans, guarantees,
investments or contingent liabilities outstanding
on the Closing Date and set forth on Schedule
5.03(a)(ii)(I);
(iii) Sale of Stock and Debt of Subsidiaries.
Sell or otherwise dispose of, or part with control of,
any shares of stock or Debt of any Subsidiary of such
Dravo Party, except to such Dravo Party or another
Subsidiary of such Dravo Party, and except that all
shares of stock and Debt of any Subsidiary of such Dravo
Party at the time owned by or owed to such Dravo Party
and its Subsidiaries may be sold as an entirety for a
cash consideration which represents the fair value (as
determined in good faith by the Board of Directors of
such Dravo Party) at the time of sale of the shares of
stock and Debt so sold, provided that the assets of such
Subsidiary do not constitute more than 10% of the
consolidated assets of Dravo and all of its Subsidiaries
and that the earnings of such Subsidiary shall not have
contributed more than 10% of the Consolidated Net
Earnings of Dravo and its Subsidiaries for any of the
three fiscal years then most recently ended, and further
provided that, at the time of such sale, such Subsidiary
shall not own, directly or indirectly, any shares of
stock or Debt of any other Subsidiary of such Dravo
Party (unless all of the shares of stock and Debt of
such other Subsidiary owned, directly or indirectly, by
such Dravo Party and all of its Subsidiaries are
simultaneously being sold in a transaction permitted by
this Section 5.03(a)(iii)); provided, however, that the
foregoing provisions of this Section 5.03(a)(iii) shall
not apply to any Discontinued Subsidiary.
(iv) Merger and Sale of Assets. Merge or
consolidate with any other corporation or sell, lease or
transfer or otherwise dispose of assets constituting
more than 10% of the consolidated assets of the Dravo
Parties and their Subsidiaries on a combined basis, or
assets which shall have contributed more than 10% of the
Dravo Consolidated Net Earnings for any of the three
fiscal years then most recently ended, to any Person,
except that so long as no Default or Event of Default
shall have occurred and be continuing;
(A) any Subsidiary of Basic or Lime may
merge with that Company of which it is a
Subsidiary (provided that such Company shall be
the continuing or surviving corporation) or with
any one or more other Subsidiaries of such
Company,
(B) any Subsidiary of Basic or Lime may
sell, lease, transfer or otherwise dispose of any
of its assets to that Company of which it is a
Subsidiary or another Subsidiary of such Company,
(C) any Subsidiary may sell or otherwise
dispose of all or substantially all of its assets
to any Person other than Dravo subject to the
conditions specified in Section 5.03(a)(iii) with
respect to a sale of the stock of such
Subsidiary, and
(D) a Dravo Party may merge or
consolidate with any other corporation, provided
that (i) such Dravo Party shall be the continuing
or surviving corporation or the continuing or
surviving corporation shall assume all
obligations of such Dravo Party under the
Operative Documents (pursuant to documents
acceptable to the Lenders) and, in any case, the
merged or consolidated corporation is at the time
of such merger or consolidation in a line of
business related to that of such Dravo Party or
any Subsidiary thereof, and (ii) such corporation
as the continuing or surviving corporation shall
not, immediately after such merger or
consolidation, be in default under this Agreement
or the other Operative Documents, including all
covenants herein and therein contained;
(v) Sale and Lease-Back. Enter into or
permit to remain in effect any arrangement with any
lender or investor or to which such lender or investor
is a party providing for the leasing by a Dravo Party or
any Subsidiary thereof of real or personal property
which has been or is to be sold or transferred by such
Dravo Party or any Subsidiary thereof to such lender or
investor or to any Person to whom funds have been or are
to be advanced by such lender or investor on the
security of such property or rental obligations of such
Company or any Subsidiary thereof;
(vi) Sale or Discount of Receivables. Sell
with recourse, or discount or otherwise sell for less
than the face value thereof, any of its notes or
accounts receivable except for those notes or accounts
receivable which have been past due for 90 days or more
and transferred in the ordinary course for collection
purposes;
(vii) Certain Contracts. Enter into or be a party
to
(A) any contract providing for the making
of loans, advances or capital contributions to
any Person other than a Subsidiary of such Dravo
Party (except where the obligation is limited to
a fixed maximum amount which is within the
limitations of clause (H) of Section 5.03(a)(ii),
or the obligation is one incurred in connection
with the making of any loan or loans pursuant to
clause (I) of Section 5.03(a)(ii)), or for the
purchase of any property from any Person, in each
case in order to enable such Person to maintain
working capital, net worth or any other balance
sheet condition or to pay debts, dividends or
expenses, or
(B) any contract for the purchase of
materials, supplies or other property or services
if such contract (or any related document)
requires that payment for such materials,
supplies or other property or services shall be
made regardless of whether or not delivery of
such materials, supplies or other property or
services is ever made or tendered, or
(C) any contract to rent or lease (as
lessee) any real or personal property if such
contract (or any related document) provides that
the obligation to make payments thereunder is
absolute and unconditional under conditions not
customarily found in commercial leases then in
general use or requires that the lessee purchase
or otherwise acquire securities or obligations of
the lessor, or
(D) any contract for the sale or use of
materials, supplies or other property, or the
rendering of services, if such contract (or any
related document) requires that payment for such
materials, supplies or other property, or the use
thereof, or payment for such services, shall be
subordinated to any indebtedness (of the
purchaser or user of such materials, supplies or
other property or the Person entitled to the
benefit of such services) owed or to be owed to
any Person, or
(E) any other contract which, in economic
effect, is substantially equivalent to a
Guarantee, except as permitted by clause (D) of
Section 5.03(a)(ii) or where the obligation is
limited to a fixed maximum amount which is within
the limitations of clause (H) of Section
5.03(a)(ii);
(viii) Transactions With Stockholders.
Directly or indirectly purchase, acquire or lease any
property from, or sell, transfer or lease any property
to, or otherwise deal with, in the ordinary course of
business or otherwise (i) any Affiliate, or (ii) any
Substantial Stockholder, provided that (a) such acts and
transactions prohibited by this Section 5.03(a)(viii))
may be performed or engaged in if made upon terms not
less favorable to a Company than if no such relationship
described in clauses (i) and (ii) above existed, (b) a
Company may sell to, or purchase (within the limitations
of Section 5.03(b)) from any such Person shares of such
Company stock, and (c) such Company may pay management
fees (within the limitations of Section 5.03(b)) to any
such Person;
(b) Issuance of Stock. Neither of the Companies
(either directly, or indirectly by the issuance of rights or
options for, or securities convertible into, such shares) will
issue, sell or otherwise dispose of any shares of any class of
its stock, except to Dravo or the other Company, and Dravo and
the Companies will at all such times own l00% of the issued
and outstanding stock of all classes of each of the Companies,
and neither of the Companies will permit any of its
Subsidiaries (either directly, or indirectly by the issuance
of rights or options for, or securities convertible into, such
shares) to issue, sell or otherwise dispose of any shares of
any class of its stock except to such Company or another
Subsidiary of such Company.
(c) Environmental Matters. Each of the Dravo Parties
covenants that it will not, and will not permit any Third
Party to, use, produce, manufacture, process, generate, store,
dispose of, manage at, or ship or transport to or from the
Properties any Hazardous Materials except for Hazardous
Materials used, produced, manufactured, processed, generated,
stored, disposed of, released or managed in the ordinary
course of business in compliance in all material respects with
all applicable Environmental Requirements and except for
Hazardous Materials released in amounts which do not require
investigation or remediation pursuant to applicable
Environmental Requirements.
(d) Liabilities of DNRC. Each of the Dravo Parties
covenants that it will not allow DNRC to incur liabilities for
any purpose other than as set forth in Section 1 of the DNRC
Agency Agreement or allow any Person other than DNRC to
perform the duties set forth in Section 1 of the DNRC Agency
Agreement or amend the DNRC Agency Agreement without the prior
written consent of the Lenders.
ARTICLE VI
UNIFORM EVENTS OF DEFAULT
SECTION 6.01. Uniform Events of Default. If any of the
following events shall occur and be continuing for any reason
whatsoever (and whether such occurrence shall be voluntary or
involuntary or come about or be effected by operation of law or
otherwise):
(a) either of the Companies defaults in the payment of
any principal of any Note when the same shall become due,
either by the terms thereof or otherwise as herein provided;
or
(b) either of the Companies defaults in the payment of
any interest or premium, if any, on any Note or any other
amount due under any Operative Document for more than 10 days
after the date due; or
(c) any of the Dravo Parties or any Subsidiary of any
of the Dravo Parties defaults in payment of principal of or
interest on any other obligation for money borrowed of
$100,000 or more, including, without limitation, on any
obligation arising under the Convertible Notes (or any
Capitalized Lease Obligation, any obligation under a
conditional sale or other title retention agreement, any
obligation issued or assumed as full or partial payment for
property whether or not secured by a purchase money mortgage
or any obligation under notes payable or drafts accepted
representing extensions of credit) beyond any period of grace
provided with respect thereto, or defaults in the performance
or observance of any other agreement, term or condition
contained in any agreement under which any such obligation is
created (or if any other default under any such agreement
shall occur and be continuing) and the effect of such default
is to cause, or to permit the holder or holders of such
obligation (or a trustee on behalf of such holder or holders)
to cause, such obligation to become due (or to be defeased or
repurchased by a Dravo Party or any Subsidiary) prior to its
stated maturity; or
(d) any representation or warranty made by any of the
Dravo Parties herein or in any other Operative Document or in
connection with this Agreement or any other Operative Document
shall be false in any material respect on the date as of which
made; or
(e) any Dravo Party defaults in the performance or
observance of any of the covenants contained in Section
4.01(c), 4.01(d), 4.02(b) or Article V; or
(f) any Dravo Party defaults in the performance or
observance of any other agreement, term or condition contained
herein, and such default shall not have been remedied within
30 days after any officer of such Dravo Party obtains actual
knowledge thereof; or
(g) any of the Dravo Parties or any Subsidiary thereof
makes an assignment for the benefit of creditors or is
generally not paying its debts as such debts become due; or
(h) any order, judgment or decree is entered under any
bankruptcy, reorganization, compromise, arrangement,
insolvency, readjustment of debt, dissolution or liquidation
or similar law whether now or hereafter in effect (herein
called the "Bankruptcy Law") of any jurisdiction adjudicating
any of the Dravo Parties or any Subsidiary thereof bankrupt or
insolvent or that is an order for relief; or
(i) any of the Dravo Parties or any Subsidiary thereof
petitions or applies to any tribunal for, or consents to, the
appointment of, or taking possession by, a trustee, receiver,
custodian, liquidator or similar official, of such Dravo Party
or any Subsidiary thereof, or of any substantial part of the
assets of such Dravo Party or any Subsidiary thereof, or
commences a voluntary case under the Bankruptcy Law of the
United States or any proceedings (other than proceedings for
the voluntary liquidation or dissolution of a Subsidiary of
such Dravo Party) relating to such Dravo Party or any
Subsidiary thereof under the Bankruptcy Law of any other
jurisdiction, whether now or hereafter in effect, or shall
take any corporate action in furtherance of any of the
foregoing; or
(j) any such petition or application is filed, or any
such proceedings are commenced, against any of the Dravo
Parties or any Subsidiary thereof or any of the Dravo Parties
or any Subsidiary thereof by any act indicates its approval
thereof, consent thereto or acquiescence therein, or an order
for relief is entered in an involuntary case under the
Bankruptcy Law of the United States, as now or hereafter
constituted, or an order, judgment or decree is entered
appointing any such trustee, receiver, custodian, liquidator
or similar official, or approving the petition in any such
proceedings, and such order, judgment or decree remains
unstayed and in effect for more than 30 days; or
(k) any order, judgment or decree is entered in any
proceedings against any of the Dravo Parties decreeing the
dissolution of any of the Dravo Parties and such order,
judgment or decree remains unstayed and in effect for more
than 60 days; or
(l) any order, judgment or decree is entered in any
proceedings against any of the Dravo Parties or any Subsidiary
thereof decreeing a split-up of such Dravo Party or such
Subsidiary which requires the divestiture of 10%, or the
divestiture of the stock of a Subsidiary whose assets
constitute 10% of the consolidated assets of Dravo and its
Subsidiaries determined in accordance with GAAP or which
requires the divestiture of assets, or stock of a Subsidiary
of such Dravo Party, which shall have contributed l0% of the
Consolidated Net Earnings of Dravo and its Subsidiaries
determined in accordance with GAAP for any of the three fiscal
years then most recently ended, and such order, judgment or
decree remains unstayed and in effect for more than 60 days;
or
(m) a judgment in an amount in excess of $5,000,000 is
rendered against any of the Dravo Parties or any Subsidiary
thereof and within 60 days after entry thereof, such judgment
is not discharged or execution thereof stayed pending appeal,
or within 60 days after the expiration of any such stay, such
judgment is not discharged; or
(n) any of the Dravo Parties shall fail to comply with
the terms of any of the Operative Documents or any Hedging
Arrangement to which it is a party beyond applicable grace
periods, if any, specified in such Operative Documents or any
such Hedging Arrangement; or
(o) at any time, the aggregate commitment for
advances (excluding any sublimit or commitment for the
issuance of letters of credit) under all revolving credit
facilities of the Companies having a revolving term with an
expiration date later than six calendar months after such time
shall be less than $40,000,000; or
(p) the DNRC Agency Agreement shall cease to be in
full force and effect or DNRC shall fail to comply with the
DNRC Agency Agreement;
then (i) if such event is an Event of Default specified in clause
(g), (h), (i), or (j) of this Section 6.01, all of the Notes at the
time outstanding shall automatically become immediately due and
payable at par together with interest accrued thereon, without
presentment, demand, protest or notice of any kind, all of which are
hereby waived by the Companies, and (ii) if such event is an Event
of Default specified in clause (a) or (b) of this Section 6.01, any
holder of any Note may at its option during the continuance of such
Event of Default, by notice in writing to the Companies, declare all
of the Notes held by such holder to be, and all of the Notes held by
such holder shall thereupon be and become, immediately due and
payable together with interest accrued thereon and together with the
Yield-Maintenance Premium, if any, with respect to each such Term
Note, without presentment, demand, protest or notice of any kind,
all of which are hereby waived by each of the Companies and (iii) if
such event is any other Event of Default, the Requisite Lenders may,
at their option, by notice in writing to the Companies, declare the
Notes or any of them, as the case may be, to be, and the Notes or
any of them, as the case may be, shall thereupon be and become,
immediately due and payable together with the Yield-Maintenance
Premium, if any, with respect to each Term Note, without
presentment, demand, protest or other notice of any kind, all of
which are hereby waived by the Companies, provided that the
Yield-Maintenance Premium, if any, with respect to each Term Note
shall be due and payable upon such declaration only if (x) such
event is an Event of Default specified in any of clauses (a) through
(f), inclusive, or (k) through (p), inclusive, of this Section 6.01,
(y) Prudential shall have given to the Companies at least ten
Business Days' written notice before such declaration stating its
intention so to declare the Term Notes to be immediately due and
payable and identifying one or more such Events of Default whose
occurrence on or before the date of such notice permits such
declaration and (z) one or more of the Events of Default so
identified shall be continuing at the time of such declaration. If
any Note shall have been declared to be due and payable pursuant to
clause (ii) or (iii) above, any holder of any other Note may at
anytime thereafter, regardless of whether any Event of Default shall
at such time be continuing, by notice in writing to the Companies,
declare all of the Notes held by such holder to be, and all of the
Notes held by such holder shall thereupon be and become, immediately
due and payable together with interest accrued thereon and together
with the Yield-Maintenance Premium, if any, with respect to each
such Term Note, without presentment, demand, protest or notice of
any kind, all of which are hereby waived by the Companies, provided
that the Yield-Maintenance Premium, if any, with respect to each
Term Note shall be due and payable upon any declaration pursuant to
this Section 6.01 as provided in the foregoing.
SECTION 6.02. Rescission of Defaults. If, at any time after
the outstanding principal amount of the Notes shall have become due
and payable pursuant to Section 6.01, and no judgment or decree for
any amounts so becoming due and payable shall have been entered, (a)
all amounts of principal and interest which shall have become due
and payable in respect of all of the Notes otherwise than pursuant
to Section 6.01 shall have been paid in full, together with interest
on all such overdue principal and (to the extent permitted by
applicable law) interest at the rate specified in such Note or
Notes, and an amount sufficient to cover all costs and expenses of
collection incurred by or on behalf of the Lenders (including
counsel fees and expenses) and (b) every other Default (whether or
not constituting an Event of Default) shall have been remedied or
waived, then the Majority Lenders may, by written notice to the
Companies, rescind and annul such acceleration and its consequences,
but no such rescission and annulment shall extend to or affect any
subsequent Default or Event of Default or impair any right
consequent thereon, and no such rescission and annulment shall
require Lenders to repay any interest, principal or premium actually
received as a result of such acceleration.
SECTION 6.03. Other Remedies. If any Event of Default or
Default shall occur and be continuing, each Lender may proceed to
protect and enforce its rights under this Agreement and the
Operative Documents, as the case may be, by exercising such remedies
as are available to them in respect thereof under applicable law,
either by suit in equity or by action at law, or both, whether for
specific performance of any covenant or other agreement contained in
this Agreement or in aid of the exercise of any power granted in
this Agreement or the Operative Documents. No remedy conferred in
this Agreement upon a Lender is intended to be exclusive of any
other remedy, and each and every such remedy shall be cumulative and
shall be in addition to every other remedy conferred herein or now
hereafter existing at law or in equity or by statute or otherwise.
SECTION 1.02. Amendment and Restatement of Appendix A.
Appendix A shall be amended and restated in full to read as the
Appendix A attached hereto.
ARTICLE II
CONDITIONS PRECEDENT
SECTION 2.01. Conditions of Effectiveness. This Amendment
and Restatement shall become effective when, and only when, (a) King
& Spalding shall have received counterparts of this Amendment and
Restatement executed by each of the Dravo Parties and the Lenders
and all of the following documents, each (unless otherwise
indicated) being dated the date of receipt thereof by King &
Spalding (which date shall be the same for all such documents), in
form and substance satisfactory to the Lenders:
(i) Copies of (A) all documents evidencing all
requisite corporate action of each Dravo Party (including any
and all resolutions of the Board of Directors of each Dravo
Party) authorizing the execution, delivery and performance of
this Amendment and Restatement and the matters contemplated
hereby and thereby, (B) all documents evidencing all
Governmental Approvals, if any, with respect to this Amendment
and Restatement and the matters contemplated hereby and
thereby, and (C) the certificate or articles of incorporation
and by-laws of each Dravo Party.
(ii) A good standing certificate issued by the
Secretary of State of its incorporation for each Dravo Party,
each dated as of a date not more than five days prior to the
date hereof.
(iii) A certificate of the Secretary or an Assistant
Secretary of each Dravo Party certifying the names and true
signatures of the officers authorized to sign this Amendment
and Restatement on behalf of such Dravo Party and any other
documents to be delivered by such Dravo Party hereunder.
(iv) Amendment to the First Mortgage and Security
Agreement, dated as of January 21, 1992, by Lime in favor of
the Collateral Agent, recorded in Pendleton County, Kentucky,
duly executed by Lime and the Collateral Agent.
(v) A signed copy of a commitment for title insurance
providing for a date-down endorsement to the title insurance
policy issued by Commonwealth Land Title Insurance Company,
Loan Policy Number E0835807, covering the land utilized by the
Project in Pendleton County, Kentucky, containing such
exceptions as the Lenders may determine to be acceptable.
(vi) A Warranty Bill of Sale and Assignment, pursuant
to which all of the personal property conveyed by Lime to
Dravo Black River Limited Partnership (the "SPV") under the
Warranty Bill of Sale and Assignment, dated as of August 1,
1994, by Lime to the SPV, is conveyed back to Lime, duly
executed by Lime and the SPV.
(vii) An Improvements Deed, pursuant to which all of the
Improvements conveyed by Lime to the SPV under the
Improvements Deed, dated as of August 1, 1994, by Lime to the
SPV, are conveyed back to Lime, duly executed by Lime and the
SPV.
(viii) Financing Statements on Form UCC-1 covering
the personal property conveyed under the Warranty Bill of Sale
and Assignment delivered pursuant to clause (vi) above, to be
filed in all jurisdictions as may be necessary or, in the
opinion of the Collateral Agent, desirable to perfect the
security interests of the Collateral Agent therein.
(ix) A Termination of Ground Lease, pursuant to which
the Ground Lease, dated as of August 1, 1994, between Lime and
the SPV will be terminated of record, duly executed by Lime
and the SPV.
(x) A Termination of Easement Agreement, pursuant to
which the Easement Agreement, dated as of August 1, 1994,
between Lime and the SPV will be terminated of record, duly
executed by Lime and the SPV.
(xi) A Termination of Mortgage Subordination Agreement,
pursuant to which the Mortgage Subordination Agreement, dated
as of August 1, 1994, by the Collateral Agent in favor of the
SPV will be terminated of record, duly executed by the
Collateral Agent and the SPV.
(xii) A favorable opinion of Buchanan Ingersoll,
Professional Corporation, special counsel for the Dravo
Parties, in form and substance satisfactory to the Lenders.
(xiii) Such other documents, instruments, approvals
(and, if required by the Agent, certified duplicates of
executed copies thereof) or opinions as the Agent or any
Lender may reasonably request.
(b) The representations and warranties contained herein
shall be true on and as of the date hereof; there shall exist on the
date hereof, no Event of Default or Default; there shall exist no
material adverse change in the financial condition, business
operation or prospects of any Dravo Party or its Subsidiaries since
December 31, 1994; and each Dravo Party shall have delivered to the
Lenders an Officer's Certificate, dated the date hereof, to such
effect.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.01. Representations and Warranties of the Dravo
Parties. (a) Each of the Dravo Parties hereby repeats and confirms
each of the representations and warranties made by it in Article VII
of the Override Agreement as though made on and as of the date
hereof, with each reference therein to "this Agreement", the
"Operative Documents", "hereof", "hereunder", "thereof",
"thereunder" and words of like import being deemed to be a reference
to the Override Agreement, as amended hereby.
(b) Each of the Dravo Parties further represents and
warrants as follows:
(i) Such Dravo Party and each of its Subsidiaries is
a corporation duly organized, validly existing and in good
standing under the laws of the state of its incorporation and
is duly qualified to do business in, and is in good standing
in, all other jurisdictions where the nature of its business
or the nature of property owned or used by it makes such
qualification necessary.
(ii) The execution, delivery and performance by
such Dravo Party of this Amendment and Restatement are within
its corporate powers, have been duly authorized by all
necessary corporate action and do not contravene (A) such
Dravo Party's charter or by-laws, (B) law or (C) any legal or
contractual restriction binding on or affecting such Dravo
Party; and such execution, delivery and performance do not or
will not result in or require the creation of any Lien upon or
with respect to any of its properties.
(iii) No Governmental Approval is required for the due
execution, delivery and performance by such Dravo Party of
this Amendment, except for such Governmental Approvals as have
been duly obtained or made and which are in full force and
effect on the date hereof and not subject to appeal.
(iv) This Amendment and Restatement constitutes
the legal, valid and binding obligations of such Dravo Party
enforceable against such Dravo Party in accordance with its
terms; subject to the qualifications, however, that the
enforcement of the rights and remedies herein is subject to
bankruptcy and other similar laws of general application
affecting rights and remedies of creditors and that the remedy
of specific performance or of injunctive relief is subject to
the discretion of the court before which any proceedings
therefor may be brought.
(v) Except as set forth in the Form 10-Q dated
September 30, 1995, there are no pending or threatened
actions, suits or proceedings affecting such Dravo Party or
any of its Subsidiaries or the properties of such Dravo Party
or any of its Subsidiaries before any court, governmental
agency or arbitrator, that may, if adversely determined,
materially adversely affect the financial condition,
properties, business, operations or prospects of such Dravo
Party and it Subsidiaries, considered as a whole, or affect
the legality, validity or enforceability of the Override
Agreement or any other Operative Document, as amended hereby.
[Signatures Begin on Next Page.]
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto have caused
this Amendment and Restatement to be duly executed and delivered by
their respective officers thereunto duly authorized as of the date
first above written.
FIRST ALABAMA BANK
By: /s/ PETER P. GAILLARD
Name: Peter P. Gaillard
Title: Senior Vice President
PNC BANK, NATIONAL
ASSOCIATION (f/k/a Pittsburgh
National Bank)
By:/s/ DALE A. STEIN
Name: Dale A. Stein
Title: Vice President
BANK OF AMERICA ILLINOIS
By:/s/ MICHAEL J. MCKENNEY
Name: Michale J. McKenney
Title: Vice President
<PAGE>
THE PRUDENTIAL INSURANCE
COMPANY OF AMERICA
By:/s/ KEVIN J. KRASKA
Name: Kevin J. Kraska
Title: Vice President
DRAVO CORPORATION
By:/s/ ERNEST F. LADD III
Name: Ernest F. Ladd III
Title: Executive Vice President
DRAVO LIME COMPANY
By:/s/ ERNEST F. LADD III
Name: Ernest F. Ladd III
Title: Executive Vice President
DRAVO BASIC MATERIALS
COMPANY, INC.
By:/s/ ERNEST F. LADD III
Name: Ernest F. Ladd III
Title: Executive Vice President
<PAGE>
(5)
Dravo Corporation
Incentive Compensation Plan
(Revised December 1995)
The Dravo Corporation Incentive Compensation Plan provides
senior managers and other key employees the opportunity to
earn incentive income each year by achieving or surpassing
predetermined, preapproved objectives.
Objectives
The objectives of the Incentive Compensation Plan are to:
1. Promote individual ownership and accountability in the
ongoing success of the corporation, while focusing team efforts
on overall corporate earnings objectives.
2. Encourage and reward management achievements that contribute
to the value of the corporation.
3. Communicate key corporate and divisional priorities through
the plan.
4. Provide senior managers and other key employees with a
competitive compensation opportunity.
Plan Summary
The Dravo Corporation Incentive Compensation Plan (ICP) is
a target incentive plan that provides for the
establishment of target, threshold and optimum incentive
awards based upon performance against specific
predetermined performance objectives. Prior to the
beginning of each plan year, target, threshold and optimum
performance levels will be established and approved for
Corporate and Dravo Lime divisional performance. Those
employees who function across divisional locations will
have a single Corporate component (100%). Those who are
assigned to an individual operating unit will have both a
Corporate component (70%) and a Divisional component
(30%).
At the beginning of each year each participant will be
provided with a Participant's Guide, which will give them
an overview of the plan and specify their target award and
award components.
Shareholder Protection Provisions
To assure that ICP awards are related to acceptable
corporate earnings, the following shareholder protection
provisions will apply:
In developing each year's Plan, the sum of all projected
ICP awards will not be allowed to exceed 8% of projected
after tax earnings from continuing operations. If the
total of all projected ICP awards exceeds 8% of the
projected after tax earnings from continuing operations,
then either the number of participants and/or the
individual target percentages are to be reduced until the
total is 8% or less.
If the Corporation fails to achieve threshold EPS
performance, no incentive awards will be made under the
plan at any level for any component for any participant.
Eligibility
Participation in the plan may be extended to Corporate and
Dravo Lime senior managers and other key employees. Prior
to the beginning of each plan year, eligible participants
are recommended by the President and Chief Executive
Officer (CEO) and approved by the Compensation Committee
of the Board of Directors (Committee).
Individual Target Awards
Target awards are established so as to pay competitive
levels of incentive compensation for achievement of the
targeted performance levels. Target awards will equal a
specified percentage of the Midpoint salary of the job
grade for each participant in the plan. Percentages may
vary within the job grade based on accountability of the
job as recommended by the CEO and approved by the
Committee each year.
Range of Awards
The target award will be paid at the targeted level of
performance on any component of the plan.
The threshold award, equal to 50 percent of the target
award, will be paid at the threshold level of performance
on any component of the plan. If performance fails to
meet the threshold, no award will be made for that
component.
The optimum award, equal to 150 percent of the target
award, will be paid for performance equal to or above the
optimum level of performance on any component of the Plan.
Allocation of Awards Among Components
Awards will be allocated to reflect the organizational
level where the participant has the greatest level of
influence on business results.
For all participants awards the greatest weight will be
given to corporate performance. For participants assigned
to a specific operating division, a portion of their award
will be allocated to reflect the performance of their
respective division.
Corporate Component
All participants at the Corporate level, and those
participants who are not assigned to a specific operating
division will receive 100% of their award through the
Corporate component. Employees who are assigned to a
specific operating division location will receive 70% of
their award through the Corporate component.
The performance measure for the Corporate component is
Earnings Per Share (EPS) from continuing operations. The
CEO will recommend to the Committee for approval
threshold, target and optimum levels of EPS performance
for the Plan Year for use in determining awards.
Performance at the threshold level will result in an award
of 50% of the target for this component. At the target
level of performance, the target award will be made and at
the optimum level, the optimum award of 150% of target
will be made. For intermediate results, awards will be
interpolated.
The Corporate component may be adjusted, with the approval
of the Committee, to reflect the impact of extraordinary
events on Corporate EPS.
Divisional Component
Participants employed in the various operating divisions -
- Black River, Maysville and Longview -- will receive 30%
of their awards through a Divisional component that is
based upon the results attained by their respective
operating division.
The performance measure for the Divisional component is
earnings before interest and taxes (EBIT). The CEO will
recommend to the Committee for approval threshold, target
and optimum levels of EBIT performance for each operating
division for the plan year for use in determining awards.
The relationship of actual results to awards is determined
in the same way as described above for the Corporate
component.
The Divisional component may be adjusted, with the
approval of the Committee, to reflect the impact of
extraordinary events on an operating division's EBIT.
Payment of Incentive in Dravo Corporate Stock
For participants in job grade level 24 and above having a
target percentage of 15% or more, the ICP award may be
paid in a combination of cash and stock. The maximum
percentage of stock will be specified for each applicable
job grade. The actual amount of the award paid in stock
will be recommended by the CEO and approved by the
Committee. Such stock award will be a grant to the
employee, and it is expected that the employee will retain
ownership of the stock while in a management position with
the Corporation. The amount of incentive award to be used
for stock will be determined by first tax adjusting the
employee's total incentive award and then applying the
percentage to that tax adjusted amount. The number of
shares of stock awarded will be calculated using the
average between the high and low price of the stock on the
date the award is made, and using the full market value of
the stock.
Partial Year Payments
A new employee, hired into an approved ICP position, will
have his target percentage and component allocation
established in accordance with the Plan. The employee's
award will be calculated at the end of the year along with
other participants, but the award will be prorated based
on the number of months of employment.
Terminations
Employees who terminate from the company prior to December
31 of the plan year for any reason, with the exception of
lay off, change of control termination, retirement,
disability, or death, will forfeit their incentive
compensation for that year. Employees who leave the
company prior to December 31 due to lay off, change of
control termination, retirement, disability, or in the
event of death, will receive a prorated incentive for
those months actually worked. Employees who leave the
company after December 31 will be paid their award, if
any, when other ICP payments are distributed.
Promotions
Employees promoted into an ICP position from a non-ICP
position, or employees who are promoted into a position
having a higher salary grade, target percentage and/or
different component allocation, will receive an award
prorated for the number of months spent in the new
position. If an ICP award has been earned in their
previous position, that award will be prorated by the
number of months spent in the previous position.
Plan Administration
The plan is administered by the Compensation Committee of
the Board of Directors. The Committee is authorized to
interpret the plan, to establish and amend rules for its
administration and to make discretionary adjustments in
awards due to extraordinary events.
Recommendations as to the operation of the plan, eligible
participants, target percentages, component allocations,
type (cash and/or restricted stock) and amount of awards,
performance criteria, and extraordinary adjustments may be
made to the Committee by the CEO.
11
DRAVO CORPORATION
STOCK OPTION PLAN OF 1994
Section 1. Establishment of the Plan. There is hereby
established the Dravo Corporation Stock Option Plan of 1994
(hereinafter called the "Plan"), pursuant to which officers, other
key employees and non-employee directors of Dravo Corporation and
its subsidiaries may be granted options to purchase shares of
common stock of the Corporation or rights to share in the
improvement in the Corporation's stock price performance, in order
to provide a long-range incentive and a shareholder's perspective
to those persons principally responsible for the continued growth
and financial success of the Corporation.
Section 2. Definitions. For purposes of the Plan, the
following definitions shall control:
(a) Corporation - Dravo Corporation and its Subsidiaries.
(b) Board - the Board of Directors of Dravo Corporation.
(c) Change in Control - a change in control of the Corporation of
such a nature that it would be required to be reported by the
Corporation in response to Item 6(e) of Schedule 14A of Regulation
14A promulgated under the Securities Exchange Act of 1934, as in
effect on the date hereof ("Exchange Act"); provided, however, that
without respect to the foregoing, such a change in control shall be
deemed to have occurred if
i) any "person" (as such term is used in Sections 13(d) and
14(d)(2) of the Exchange Act) is or becomes the beneficial owner,
directly or indirectly, of securities of the Corporation
representing 20% or more of the combined voting power of the
Corporation's then outstanding securities; or
ii) during any period of three consecutive years, individuals who
at the beginning of such period constitute the Board, cease for
any reason to constitute at least a majority thereof unless the
election, or the nomination for election by the Corporation's
shareholders, of each new director was approved by a vote of at
least two-thirds of the directors then still in office who were
directors at the beginning of the period.
(d) Committee - the Compensation Committee appointed by the Board
consisting of directors who are not present or former employees of
the Corporation. The Committee shall be constituted so that at all
relevant times it meets the then applicable requirements of Rule
16b-3 (or its successor) promulgated under the Securities Exchange
Act of 1934, as amended.
(e) Common Stock - the $1.00 par value shares of common stock of
the Corporation.
(f) Employee Participant - any employee who has met the
eligibility requirements set forth in Section 7(a) hereof and to
whom a grant has been made and is outstanding under the Plan.
(g) Fair Market Value - the mean between the highest and lowest
quoted selling prices of the Common Stock on the New York Stock
Exchange on the relevant date for valuation, or, if no sale of
Common Stock shall have been made on that day, the next preceding
day on which there was such a sale. If the Common Stock is not
listed on the New York Stock Exchange, the Fair Market Value of the
Common Stock shall be as determined by the Committee in its
discretion.
(h) IRC - Internal Revenue Code of 1986, as amended.
(i) Incentive Stock Option - an option which meets the
qualifications of Section 422 of the IRC.
(j) Non-Statutory Stock Option - an option which is not an
Incentive Stock Option.
(k) Retirement - retirement at or after age 55 under a retirement
plan of the Corporation.
(l) SAR or Stock Appreciation Right - an award under which the
grantee may earn additional compensation based upon the market
performance of the Common Stock.
(m) Subsidiary - a corporation the majority of the outstanding
voting stock of which is directly or indirectly owned by the
Corporation.
Section 3. Types of Options. Options granted pursuant to the
Plan may be either Incentive Stock Options or Non-Statutory Stock
Options. Incentive Stock Options and Non-Statutory Stock Options
shall be granted separately hereunder. Subject to the provisions
of the Plan, the Committee, in its sole discretion, shall determine
whether and to what extent options granted under the Plan shall be
designated as Incentive Stock Options or Non-Statutory Stock
Options.
Section 4. Duration. All awards granted under this Plan must
be granted within ten years from the effective date set forth in
Section 25 hereof. Any awards outstanding after the expiration of
such ten-year period may be exercised within the option periods
prescribed for such options.
Section 5. Administration. The Plan shall be administered by
the Committee. A majority of the Committee shall constitute a
quorum, and the acts of a majority of the members present at any
meeting at which a quorum is present, or the acts approved in
writing by a majority of the Committee, shall be deemed the acts of
the Committee. Subject to the provisions of the Plan and to
policies determined by the Board of Directors, the Committee is
authorized to interpret the Plan, adopt such rules and regulations
and take such action in the administration of the Plan as it shall
deem proper. Decisions of the Committee shall be binding on all
persons claiming rights under the Plan. Subject to the provisions
of the Plan, recommendations as to the operation and administration
of the Plan, eligible employees, type and amount of incentive
awards and performance criteria may be made by a Management
Compensation Committee which shall consist of senior executives of
the Corporation selected by the Committee.
Section 6. Authority of the Committee. Subject to the
provisions of the Plan, the Committee shall have full and final
authority to determine the persons to whom options and SARs shall
be awarded and the number of shares to be covered by each option or
SAR. The Committee may determine that options or SARs shall be
exercisable in one or more installments during the term of the
option or SAR and the right to exercise may be cumulative as
determined by the Committee.
Section 7. Eligibility.
(a) Officers and other key employees of the Corporation (including
officers and other employees who are directors of the Corporation)
who, in the opinion of the Committee, are mainly responsible for
the continued growth and development and future financial success
of the business shall be eligible to participate in the Plan. The
Committee shall, in its sole discretion, from time to time select
from such eligible persons those to whom options or SARs shall be
granted and determine the type of option and the number of shares
to be included in such option or SAR. No officer or other employee
shall have any right to receive an option or SAR except as the
Committee in its discretion shall determine.
(b) Non-employee directors shall be eligible to receive awards
only pursuant to and in accordance with Section 12 of the Plan.
Section 8. Shares Subject to the Plan. The total number of
shares of Common Stock which may be issued or on which SARs may be
calculated pursuant to the Plan shall be One Million (1,000,000)
shares of Common Stock (subject to adjustment as provided in
Section 13), which may be either authorized and unissued shares or
shares held in the treasury of the Corporation, and which shares
are hereby reserved for the purposes of the Plan. To the extent
that options or SARs granted under the Plan shall expire or
terminate without being exercised, shares covered thereby shall
remain available for purposes of the Plan. To the extent that
options are terminated by reason of the exercise of a related SAR,
the shares covered by such option shall not be available for grant
of further options or SARs under the Plan.
Section 9. Terms of Options and SARs Awarded to Employee
Participants. Each option and SAR granted to an Employee
Participant under the Plan shall be evidenced by a stock option or
Stock Appreciation Rights agreement between the Corporation and the
grantee and shall be subject to the following terms and conditions:
(a) Subject to adjustment as provided in Section 13 of the Plan,
the price at which each share covered by an option or SAR may be
purchased shall be determined in each case by the Committee but
shall not be less than the Fair Market Value thereof at the time
the option is granted. If a grantee owns (or is deemed to own
under applicable provisions of the IRC and rules and regulations
promulgated thereunder) more than 10% of the combined voting power
of all classes of the stock of the Corporation (or any parent or
Subsidiary corporation of the Corporation) and an option granted to
such grantee is intended to qualify as an Incentive Stock Option,
the option price shall be not less than 110% of the Fair Market
Value of the shares covered by the option on the date the option is
granted.
(b) During the lifetime of the grantee, the option or SAR may be
exercised only by the grantee or by his or her guardian or legal
representative. The option or SAR shall not be transferable by the
grantee otherwise than by will or by the laws of descent and
distribution.
(c) Except as otherwise provided herein, an option or SAR may be
exercised in whole at any time, or in part from time to time,
within such period or periods from the granting of the option or
SAR as may be determined by the Committee and set forth in the
stock option or Stock Appreciation Rights agreement (such period or
periods being hereinafter referred to as the exercise period),
provided that except as otherwise provided in Section 11 hereof,
options and SARS may not be exercisable prior to one (1) year from
the date of grant and the exercise period shall not exceed ten
years. Notwithstanding the foregoing:
i) An option or SAR may be exercised during the lifetime of the
grantee only while he or she is in the employ of the Corporation
or within three (3) months following termination of employment
and only to the extent that the option or SAR would be exercis-
able by the grantee at the time of termination. Notwithstanding
the foregoing, in the event that termination is by reason of
Retirement, permanent disability or death, the option or SAR may
be exercised in whole or in part until the earlier of (1) the
expiration of the term of the option or SAR, or (2) five years
after said termination. In the event the grantee dies within five
years following Retirement or termination by reason of permanent
disability,his or her estate may exercise the option or SAR until
the earlier of(1)the expiration of the term of the option or SAR,
or(2)five years after said employee's retirement or termination.
For this purpose, the grantee may designate to the Committee the
person or persons to whom his or her rights under the option or
SAR shall pass in the event of his or her death;
ii) The option or SAR may not be exercised for more shares
(subject to adjustment as provided in Section 13) after the
termination of the grantee's employment or his or her death than
the grantee was entitled to acquire thereunder at the time of the
termination of the grantee's employment or his or her death;
iii) If a grantee owns (or is deemed to own under applicable
provisions of the IRC and rules and regulations promulgated
thereunder) more than 10% of the combined voting power of all
classes of the stock of the Corporation (or any parent or
Subsidiary corporation of the Corporation) and an option granted
to such grantee is intended to qualify as an Incentive Stock
Option, the option by its terms may not be exercisable after the
expiration of five years from the date such option is granted.
(d) Subject to the limitations herein set forth, the option or SAR
may be exercised in whole or in part from time to time by written
request made to the Corporation in the manner determined from time
to time by the Committee. Payment in full for the number of shares
purchased upon exercise of an option shall be made to the
Corporation at the time of each exercise. Payment may be made in
cash or by delivering to the Corporation shares of Common Stock of
the Corporation or any combination of such shares and cash, having
in any case an aggregate Fair Market Value equal to the option
price of the shares being purchased pursuant to the exercise of the
option, or by delivering to the Corporation a notice of exercise
with an irrevocable direction to a registered broker-dealer under
the Securities Exchange Act of 1934, as amended, to sell a
sufficient portion of the shares and deliver the sale proceeds
directly to the Corporation to pay the exercise price.
(e) No grantee may be granted Incentive Stock Options to purchase
Common Stock of the Corporation in any year to the extent that the
aggregate Fair Market Value of the Common Stock, determined at the
time of grant, with respect to which Incentive Stock Options are
exercisable for the first time by the grantee (under all plans of
the Corporation) exceeds $100,000 during such calendar year. If
any option designated as an Incentive Stock Option either alone or
in conjunction with any other option or options exceeds the
foregoing limitation, options in excess of such limitation shall
automatically be reclassified as Non-Statutory Stock Options by
whole number of shares, with later granted options being so
reclassified first.
(f) The Committee, in its discretion, may provide that any option
intended to be an Incentive Stock Option shall also be subject to
such additional or more restrictive terms and conditions as may,
from time to time, be required to constitute such option an
Incentive Stock Option under the provisions of Section 422 of the
IRC. This Plan shall be construed in a manner consistent with
Section 422 of the IRC and Treasury Regulations promulgated or
proposed thereunder.
(g) The Committee may include such other terms and conditions not
inconsistent with the foregoing as the Committee shall approve.
Without limiting the generality of the preceding sentence, the
Committee shall be authorized to impose conditions to the exercise
of options relating to the performance of the Corporation or any
Subsidiary or of grantee(s) or any combination of the foregoing.
The Committee shall, in its sole judgment, determine whether such
conditions have been fulfilled and may require that the Committee
receive from the Corporation a written certificate as to the
fulfillment of such conditions before shares are issued and sold
pursuant to options or SARs which have been exercised.
Section 10. Stock Appreciation Rights.
(a) The Committee, in its discretion, may provide that any option
granted to an Employee Participant includes a tandem Stock
Appreciation Right; provided, however, that a grantee may elect to
exercise the tandem Stock Appreciation Right with respect to an
Incentive Stock Option only when the Fair Market Value of the
shares subject to such option exceeds the option price. The right
to elect such Stock Appreciation Right granted in tandem with an
option shall entitle the grantee to receive an amount equal to the
excess of the Fair Market Value of one share of Common Stock over
the option price per share, multiplied times the number of shares
as to which the option, or portion thereof, is surrendered. This
amount shall be paid in cash or in Common Stock, or in such
combination of Common Stock and cash as the Committee shall from
time to time determine, having in any case an aggregate Fair Market
Value equal to the amount required to be paid. All SARs granted in
tandem with options shall be subject to the same terms and
conditions as the related option.
(b) The Committee, in its discretion, may grant Stock Appreciation
Rights which do not relate to an option. Such "stand-alone" SARs
shall be governed by the provisions of the Plan relating to Non-
Statutory Stock Options and by the terms of a Stock Appreciation
Rights Agreement between the Corporation and the grantee setting
forth the number of shares as to which such stand-alone SARs are
granted and such other terms and conditions as the Committee may
determine. Upon exercise of a stand-alone SAR, the grantee shall
be entitled to receive an amount equal to the excess of the Fair
Market Value of one share of Common Stock determined at the date of
exercise over the Fair Market Value of one share of Common Stock
determined at the date of grant, multiplied times the number of
shares as to which the SAR was granted. This amount shall be paid
in cash or in Common Stock, or in such combination of Common Stock
and cash as the Committee shall from time to time determine, having
in any case an aggregate Fair Market Value equal to the amount
required to be paid.
Section 11. Acceleration of Right of Exercise. Except with
respect to options granted to non-employee directors, any option or
SAR granted hereunder shall become immediately exercisable in the
event of a Change in Control unless otherwise provided by the
Committee at the time of grant.
Section 12. Provisions Applicable to Non-employee Directors
Options.
(a) Each non-employee director shall automatically receive a Non-
Statutory Stock Option to purchase 1,500 shares of Common Stock on
the first Friday following the Corporation's Annual Meeting of
Shareholders at which such director is elected to serve and on the
first Friday following each Annual Meeting of Shareholders
thereafter so long as such director continues as a member of the
Board. Any non-employee director whose initial term commenced
prior to the effective date of this Plan who is serving as a
director on such effective date shall automatically receive a Non-
Statutory Stock Option to purchase 1500 shares of common stock on
the first Friday following each Annual Meeting of Shareholders so
long as such director continues as a member of the Board.
(b) Each option granted to a non-employee director shall be
evidenced by written documentation containing its terms and
conditions.
(c) The exercise price for options granted to non-employee
directors shall not be less than 100% of the Fair Market Value of
the underlying shares of Common Stock on the date the stock option
is granted.
(d) Stock options granted to non-employee directors under this
Plan shall become exercisable one year after the date of grant,
shall expire ten years after the date of grant and shall not be
transferable otherwise than by will or by the laws of descent and
distribution.
(e) Payment may be made in cash or by delivering to the
Corporation shares of Common Stock of the Corporation or any
combination of such shares and cash, having in any case an
aggregate Fair Market Value equal to the option price of the shares
being purchased pursuant to the exercise of the option or by
delivering to the Corporation a notice of exercise with an
irrevocable direction to a registered broker-dealer under the
Securities Exchange Act of 1934, as amended, to sell a sufficient
portion of the shares and deliver the sale proceeds directly to the
Corporation to pay the exercise price.
(f) Upon cessation of service of a non-employee director (other
than for death), only those options exercisable at the date of
cessation of service shall continue to be exercisable by the
grantee. Such options must be exercised within 90 days of
cessation of service, but in no event after the expiration of the
option period.
(g) Upon the death of a non-employee director, those options which
were exercisable on the date of death may be exercised within 36
months from the date of death, but in no event after the expiration
of the option period, by the grantee's estate. For this purpose,
the grantee may designate to the Committee the person or persons to
whom his or her rights under the option shall pass in the event of
his death.
Section 13. Adjustment of Number and Price of Shares.
(a) In the event that a dividend shall be declared upon the Common
Stock of the Corporation payable in shares of said stock, the
number of shares of Common Stock covered by each outstanding option
and SAR and the number of shares available for issuance pursuant to
the Plan but not covered by options or SARs shall be adjusted by
adding thereto the number of shares which would have been
distributable thereon if such shares had been outstanding on the
date fixed for determining the shareholders entitled to receive
such stock dividend.
(b) In the event that the outstanding shares of Common Stock of
the Corporation shall be changed into or exchanged for a different
number or kind of shares of stock or other securities of the
Corporation or of another corporation, whether through
reorganization, recapitalization, stock split-up, combination of
shares, merger or consolidation, then there shall be substituted
for the shares of Common Stock covered by each outstanding option
and SAR and for the shares available for issuance pursuant to the
Plan but not covered by an option or SAR, the number and kind of
shares of stock or other securities which would have been
substituted therefor if such shares had been outstanding on the
date fixed for determining the shareholders entitled to receive
such changed or substituted stock, SAR or other securities.
(c) In the event there shall be any change, other than specified
above in this Section 13, in the number or kind of outstanding
shares of Common Stock of the Corporation or of any stock or other
securities into which such Common Stock shall be changed or for
which it shall have been exchanged, then if the Committee shall
determine, in its discretion, that such change equitably requires
an adjustment in the number or kind of shares covered by
outstanding options or SARs or which are available for issuance
pursuant to the Plan but not covered by options or SARs, such
adjustment shall be made by the Committee and shall be effective
and binding for all purposes of the Plan and on each outstanding
stock option and SAR agreement.
(d) In the event that, by reason of a corporate merger,
consolidation, acquisition of property or stock, separation,
reorganization or liquidation, the Board of Directors shall
authorize the issuance or assumption of a stock option or stock
options in a transaction to which Section 424(a) of the IRC
applies, then, notwithstanding any other provision of the Plan, the
Committee may grant an option or options upon such terms and
conditions as it may deem appropriate for the purpose of assumption
of the old option, in conformity with the provisions of such
Section 424(a) and the regulations thereunder, as they may be
amended from time to time; provided, however, that no such grant
may be made to a non-employee director.
(e) No adjustment or substitution provided for in this Section 13
shall require the Corporation to issue or to sell a fractional
share under any stock option or Stock Appreciation Rights agreement
and the total adjustment or substitution with respect to each stock
option or Stock Appreciation Rights agreement shall be limited
accordingly.
(f) In the case of any adjustment or substitution provided for in
this Section 13, the price per share in each stock option and SAR
agreement shall be equitably adjusted by the Committee to reflect
the greater or lesser number of shares of stock or other securities
into which the stock covered by the option or SAR may have been
changed or which may have been substituted therefor.
Section 14. Amendment and Termination. The Board of
Directors may modify, amend, or terminate the Plan at any time
except that, to the extent then required by applicable law, rule,
or regulation, approval of the holders of a majority of shares of
Common Stock represented in person or by proxy at a meeting of the
stockholders will be required to increase the maximum number of
shares of Common Stock available for distribution under the Plan
(other than increases due to adjustments in accordance with the
Plan and a one time increase that would not increase the amount of
Common Stock issuable under the Plan by more than 10%).
Notwithstanding the foregoing, an amendment revising the price,
date of exercisability, option period of or amount of shares under
a Stock Option granted to a non-employee director shall not be made
more frequently than once every six months unless necessary to
comply with the IRC or with the Employee Retirement Income Security
Act of 1974, as amended, or the Rules promulgated thereunder,
respectively. No modification, amendment, or termination of the
Plan shall adversely affect the rights of a participant under a
grant previously made to him without the consent of such
participant.
Section 15. Compliance with Governmental Regulations.
Notwithstanding any provision of the Plan or the terms of any stock
option or SAR agreement issued under the Plan, the Corporation
shall not be required to issue any shares hereunder prior to the
registration of the shares subject to the Plan under the Securities
Act of 1933 or the Securities Exchange Act of 1934, if such
registration shall be necessary, or before compliance by the
Corporation or any participant with any other provisions of either
of those acts or of regulations or rulings of the Securities and
Exchange Commission thereunder, or before compliance with all other
applicable Federal and state laws and regulations and rulings
thereunder. The Corporation shall use its best efforts to effect
such registrations and to comply with such laws, regulations and
rulings forthwith upon advice by its counsel that any such
registration or compliance is necessary.
Section 16. Compliance with Rule 16b-3. It is the
Corporation's intent that the Plan comply in all respects with Rule
16b-3 of the Exchange Act and any regulations promulgated
thereunder. If any provision of this Plan is later found not to be
in compliance with the Rule, the provisions shall be deemed null
and void. All grants and exercises of options under this Plan by
individuals subject to Section 16 of the Exchange Act shall be
executed in accordance with the requirements of Section 16, as
amended, and any regulations promulgated thereunder.
Section 17. Tax Withholding.
(a) Whenever shares are to be issued under the Plan, the
Corporation shall have the right to require the grantee to remit to
the Corporation an amount sufficient to satisfy Federal, state and
local tax withholding requirements prior to the delivery of any
certificate for such shares. If a grantee makes a disposition of
shares acquired upon the exercise of an Incentive Stock Option
within either two years after grant or one year after the receipt
of Common Stock by the grantee, the grantee shall promptly notify
the Corporation and the Corporation shall have the right to require
the grantee to pay to the Corporation an amount sufficient to
satisfy Federal, state and local tax withholding requirements.
Whenever payments are to be made in cash, such payments shall be
net of an amount sufficient to satisfy Federal, state and local tax
withholding requirements and authorized deductions.
(b) A grantee who is obligated to pay to the Corporation an amount
required to be withheld under applicable income tax laws in
connection with the exercise of Non-Statutory Stock Options under
the Plan may elect to satisfy this withholding obligation, in whole
or in part, by requesting that the Corporation withhold shares of
Common Stock otherwise issuable to the grantee upon exercise of the
option or by delivering to the Corporation already owned shares of
Common Stock of the Corporation having a Fair Market Value on the
date on which the amount of tax to be withheld is determined (the
"Tax Date") equal to the amount of the tax required to be withheld.
Any fractional amount shall be paid to the Corporation by the
grantee in cash or shall be withheld from the grantee's next
regular paycheck.
(c) An election by a grantee to have shares of Common Stock
withheld or to deliver to the Corporation already owned shares of
Common Stock of the Corporation to satisfy Federal, state and local
tax withholding requirements pursuant to subparagraph (b) above
(the "Election"), shall be subject to the following restrictions:
i) The Election must be in writing and delivered to the
Corporation prior to the Tax Date;
ii) The Election shall be irrevocable by the grantee; and
iii) The Election shall be subject to approval by the Committee,
which approval may be granted or withdrawn at any time prior to
the Tax Date.
(d) Notwithstanding the provisions of subparagraphs (a)-(c) above,
if a grantee is an officer or director of the Corporation, as
defined for purposes of Rule 16b-3 under the Exchange Act, as
amended, and withholding of any Federal, state or local taxes is
required, the Corporation shall hold back from the shares of Common
Stock to be delivered that number of shares having a Fair Market
Value equal to the amount of tax to be withheld to satisfy the tax
withholding obligation.
Section 18. Governing Law. The Plan shall be construed and
its provisions enforced and administered in accordance with the
laws of the Commonwealth of Pennsylvania applicable to contracts
entered into and performed entirely in such state.
Section 19. Designation of Beneficiary. An Employee
Participant may designate, in a writing delivered to the
Corporation before his or her death, a person or persons to
receive, in the event of the Employee Participant's death, any
rights to which he or she would be entitled under the Plan. An
Employee Participant may also designate an alternate beneficiary to
receive payments if the primary beneficiary does not survive the
Employee Participant. An Employee Participant may designate more
than one person as his or her beneficiary or alternate beneficiary,
in which case such persons would receive payments as joint tenants
with a right of survivorship. A beneficiary designation may be
changed or revoked by an Employee Participant at any time by filing
a written statement of such change or revocation with the
Corporation. If an Employee Participant fails to designate a
beneficiary, then his estate shall be deemed to be his beneficiary.
Section 20. Employment Rights. Neither the Plan nor any
action taken hereunder shall be construed as giving any employee of
the Corporation the right to become a Employee Participant, and a
grant under the Plan shall not be construed as giving any Employee
Participant any right to be retained in the employ of the
Corporation.
Section 21. Expenses. The expenses of administering the Plan
shall be borne by the Corporation.
Section 22. Indemnification. Service on the Committee shall
constitute service as a member of the Board so that members of the
Committee shall be entitled to indemnification and reimbursement as
directors of the Corporation pursuant to its Articles of
Incorporation, By-Laws, or resolutions of the Board or
shareholders.
Section 23. Relationship to Other Benefits. No payment under
the Plan shall be taken into account in determining any benefits
under any retirement, group insurance, or other employee benefit
plan of the Corporation. The Plan shall not preclude the
shareholders of the Corporation, the Board or any committee
thereof, or the Corporation from authorizing or approving other
employee benefit plans or forms of incentive compensation, nor
shall it limit or prevent the continued operation of other
incentive compensation plans or other employee benefit plans of the
Corporation or the participation in any such plans by Employee
Participants in the Plan.
Section 24. No Trust or Fund Created. Neither the Plan nor
any grant made hereunder shall create or be construed to create a
trust or separate fund of any kind or a fiduciary relationship
between the Corporation and an Employee Participant or any other
person. To the extent that any person acquires a right to receive
payments from the Corporation pursuant to a grant under the Plan,
such right shall be no greater than the right of any unsecured
general creditor of the Corporation.
Section 25. Effective Date of the Plan. The Plan shall
become effective immediately upon approval of the Plan by the Board
provided that the Plan shall thereafter be approved by a majority
of the outstanding shares of the Corporation at the Annual Meeting
of the Shareholders of the Corporation on April 28, 1994. No
options shall be granted hereunder until the Committee shall have
been advised by the Corporation's counsel that all applicable legal
requirements have been satisfied and that appropriate rulings, if
any, which are required from governmental agencies, have been
obtained.
As amended effective December 12, 1995.
(Page )
AGREEMENT
This Agreement made as of this 1st day of June , 1993 by
and between Dravo Corporation, a Pennsylvania corporation
(the "Corporation") and James J. Puhala an individual
residing in the State of Alabama and an employee of the
Corporation (the "Executive").
WITNESSETH:
WHEREAS, the Board of Directors of the Corporation has
determined that it is in the best interests of the
Corporation to enter into this Agreement with the Executive;
and
WHEREAS, the Executive desires to obtain certain
benefits in the event his employment is terminated due to a
Change-in-Control of the Corporation;
NOW, THEREFORE, the parties hereto, each intending to be
legally bound hereby, agree as follows:
1. Definition of Terms. The following terms when used
in this Agreement shall have the meaning hereafter set
forth:
(a) "Annual Salary Adjustment Percentage" shall mean
the mean average percentage increase in base salary
for all elected officers of the Corporation during
the two full calendar years immediately preceding the
time to which such percentage is being applied;
provided, however, that if after a Change-in-Control,
as hereinafter defined, there should be a significant
change in the number of elected officers of the
Corporation or in the manner in which they are
compensated, then the foregoing definition shall be
changed by substituting for the phrase "elected
officers of the Corporation" the phrase "persons then
performing the functions formerly performed by the
elected officers of the Corporation."
(b) "Cause for Termination" shall mean
(i) the deliberate and intentional failure by
the Executive to devote substantially his entire
business time and best efforts to the performance
of his duties (other than any such failure
resulting from the Executive's incapacity due to
physical or mental illness or disability) after a
demand for substantial performance is delivered
to the Executive by the Board of Directors of the
Corporation which specifically identifies the
manner in which the Board believes that the
Executive has not substantially performed his
duties,
or
(ii) the deliberate and intentional engaging by
the Executive in gross misconduct materially and
demonstrably injurious to the Corporation.
For purposes of this definition, no act, or failure
to act, on the Executive's part shall be considered
"deliberate and intentional" unless done, or omitted
to be done, by the Executive not in good faith and
without reasonable belief that his action or omission
was in the best interests of the Corporation.
(c) "Change-in-Control" shall mean a change in control of
the Corporation of such a nature that it would be
required to be reported by the Corporation in
response to item 6(e) of Schedule 14A of Regulation
14A promulgated under the Securities Exchange Act of
1934, as in effect on the date hereof ("Exchange
Act"); provided, however, that without respect to the
foregoing, such a change in control shall be deemed
to have occurred if
(i) any "person" (as such term is used in
Sections 13(d) and 14(d)(2) of the Exchange Act)
is or becomes the beneficial owner, directly or
indirectly, of securities of the Corporation
representing 20% or more of the combined voting
power of the Corporation's then outstanding
securities;
or
(ii) during any period of three consecutive
years, individuals who at the beginning of such
period constitute the Board of Directors of the
Corporation (the "Board") cease for any reason to
constitute at least a Majority thereof unless the
election, or the nomination for election by the
Corporation's shareholders, of each new director
was approved by a vote of at least two-thirds of
the directors then still in office who were
directors at the beginning of the period.
(d) "Date of Termination" shall mean
(i) if the Executive's employment is
terminated for Disability, thirty (30) days
after a Notice of Termination is given to the
Executive (provided that the Executive shall
not have returned to the performance of the
Executive's duties on a full time basis during
such thirty (30) day period);
(ii) if the Executive's employment
terminates due to his death or Retirement, the
date of death or Retirement, respectively;
(iii) if the Executive terminates
employment upon Good Reason for Termination,
the date specified for termination in any
notice delivered to the Corporation by the
Executive; or
(iv) if the Executive's employment is
terminated for any other reason, the date on
which a termination becomes effective pursuant
to a Notice of Termination; provided, however,
that if within thirty (30) days after any
Notice of Termination is given the party
receiving such Notice of Termination notifies
the other party that a dispute exists
concerning the termination, the Date of
Termination shall be the date on which the
dispute is finally determined, either by
mutual written agreement of the parties, by a
binding and final arbitration award or by a
final judgment, order or decree of a court of
competent jurisdiction (the time for appeal
therefrom having expired and no appeal having
been perfected).
(e) "Disability" shall mean such incapacity due to
physical or mental illness or injury as causes the
Executive to be absent from his principal office for
the entire portion of 90 consecutive business days.
(f) "Good Reason for Termination" shall mean:
(i) without the Executive's express written
consent, the assignment to the Executive of
any duties inconsistent with his positions,
duties, responsibilities and status with the
Corporation immediately prior to a Change-in-
Control, or a change in his reporting
responsibilities, titles or offices as in
effect immediately prior to a Change-in-
Control, or any removal of the executive from
or any failure to re-elect the Executive to
any of such positions, except in connection
with the termination of the Executive's
employment due to a Cause for Termination,
Disability or Retirement (as hereinafter
defined) or as a result of the Executive's
death;
(ii) a reduction by the Corporation in
the Executive's base salary as in effect
immediately prior to the Change-in-Control or
as the same may be increased from time to time
or the failure by the Corporation to increase
such base salary each year after the year in
which the Change-in-Control occurs by an
amount which at least equals, on a percentage
basis, the Annual Salary Adjustment
Percentage;
(iii) a failure by the Corporation to
continue to provide incentive compensation
comparable to that provided by the
Corporation's Incentive Compensation Plan as
the same may from time to time prior to a
Change-in-Control be modified or superseded by
another plan (the "Incentive Compensation
Plan"), or a failure by the Corporation to
continue the Executive as a participant in the
Incentive Compensation Plan on at least the
basis and according to the standards in effect
immediately prior to the Change-in-Control or
to pay the Executive when due any deferred
portion of a previous award under the
Incentive Compensation Plan;
(iv) the Corporation's requiring the
Executive to be based anywhere other than the
Corporation's executive offices at which the
Executive has his principal office immediately
prior to the Change-in-Control, except for
required travel on the Corporation's business
to an extent substantially consistent with the
Executive's present business travel
obligations immediately prior to the Change-in-
Control, or, in the event the Executive
consents to any such relocation of the
Corporation's principal executive offices, the
failure by the Corporation to pay (or
reimburse the Executive for) all reasonable
moving expenses incurred by the Executive
relating to a change of the Executive's
principal residence in connection with such
relocation and to indemnify the Executive
against any loss (defined as the difference
between the actual sale price of such
residence and the higher of (a) the
Executive's aggregate investment in such
residence or (b) the fair market value of such
residence as determined by a real estate
appraiser designated by the Executive and
reasonably satisfactory to the Corporation)
realized in the sale of the Executive's
principal residence in connection with any
such change of residence;
(v) the failure by the Corporation to
continue in effect any benefit or compensation
plan (including but not limited to the
Corporation's Long-Term Incentive Award Plan
of 1983, Stock Option Plan of 1978, Employee
Stock Option Plan of 1988, Stock Option Plan
of 1994, and the Executive Benefit Plan),
pension plan, life insurance plan, health and
accident plan or disability plan in which the
Executive is participating immediately prior
to the Change-in-Control (provided, however,
that there shall not be deemed to be any such
failure if the Corporation substitutes for the
discontinued plan, a plan providing the
Executive with substantially similar
benefits), the taking of any action by the
Corporation which would adversely affect the
Executive's participation in or materially
reduce the Executive's benefits under any of
such plans or deprive the Executive of any
material fringe benefit enjoyed by the
Executive immediately prior to the Change-in-
Control, or the failure by the Corporation to
provide the Executive with the number of paid
vacation days to which the Executive is then
entitled on the basis of years of service with
the Corporation in accordance with the
Corporation's normal vacation policy all as
and to the extent they are in effect
immediately prior to the Change-in-Control;
(vi) the failure of the Corporation to
obtain the assumption of this Agreement by any
successor as contemplated in Section 9(c)
hereof; or
(vii) any purported termination of the
employment of the Executive by the Corporation
which is not (A) due to the Executive's
Disability, death, Retirement (as hereinafter
defined) or in accordance with section 2
hereof, or (B) effected pursuant to a Notice
of Termination satisfying the requirements of
subsection (g) below;
(viii) notwithstanding the foregoing, it
shall not be deemed Good Reason for
Termination if the Corporation, acting in good
faith, makes changes to any compensation or
benefits plan or program that is made
available on a nondiscriminatory basis to the
salaried employees of the Corporation, which
changes do not apply disproportionately to the
elected officers of the Corporation or those
persons then performing the functions formerly
performed by the elected officers of the
Corporation.
(g) "Notice of Termination" shall mean a written
statement which sets forth the specific reason for
termination and, if such is claimed to be Cause for
Termination, in reasonable detail the facts and
circumstances which indicate that such is Cause for
Termination together with notice of the time and
place of the meeting of the Board of Directors of the
Corporation called to consider such matter in
accordance with section 2 hereof.
(h) "Options" shall mean any stock options issued
pursuant to the Corporation's Employee Stock Option
Plan of 1988, Long-Term Incentive Award Plan of 1983,
Stock Option Plan of 1978 or any future stock option
plan.
(i) "Retirement" shall mean a termination of the
Executive's employment after age 65 or in accordance
with any mandatory retirement arrangement with
respect to an earlier age agreed to by the Executive.
(j) "Stock Appreciation Rights" shall mean any stock
appreciation rights issued pursuant to the
Corporation's Employee Stock Option Plan of 1988,
Long-Term Incentive Award Plan of 1983, Stock Option
Plan of 1978 or any future stock appreciation rights
plan.
2. "Termination by the Corporation Due to Cause for
Termination."
If the Corporation desires to terminate the Executive's
employment due to Cause for Termination, the Corporation
shall first deliver a Notice of Termination to the
Executive. Thereafter, the Board of Directors at a
meeting held not less than two weeks nor more than four
weeks after the delivery of the Notice Of Termination
shall consider whether cause for Termination exists.
Cause for Termination shall not be deemed to exist under
this Agreement unless and until the Board determines in
good faith by the affirmative vote of not less than three-
quarters of the entire membership of the Board that the
Executive has engaged in conduct which is Cause for
Termination. Should the Board determine that Cause for
Termination exists, the Board may at that time or during a
period of two weeks thereafter terminate the Executive's
employment due to Cause for Termination by adopting at
such time or during such period by a similar three-
quarters vote a resolution terminating the Executive's
employment. If the Board fails to adopt within such two-
week period a resolution terminating the Executive's
employment, then the Corporation shall be deemed to have
waived its right to terminate the Executive due to those
circumstances which constituted the Cause for Termination
previously found to exist by the Board.
3. Termination Payments Following Change-in-Control.
(a) If, during the term of this Agreement, a Change-
in-Control shall have occurred and the Executive's
employment with the Corporation shall be terminated
(i) due to the Executive's death,
(ii) by the Executive unless terminated
for Good Reason for Termination, or
(iii) by the Corporation in accordance
with section 2 hereof or for Disability or
Retirement, then the Corporation shall have no
obligations hereunder to the Executive and the
only obligations of the Corporation to the
Executive shall be in accordance with any
other employment agreement applicable to the
Executive and the then various policies,
practices and benefit plans of the
Corporation.
(b) If during the term of this Agreement both a Change-in-
Control shall have occurred and the Executive's
employment with the Corporation shall have terminated
other than under the circumstances above described in
Subsection 3(a), then the Corporation shall pay or
cause to be paid on or before the fifth day following
the Date of Termination in cash to the Executive the
following sums:
(i) any unpaid portion of the Executive's
full base salary for the period from the last
period for which the Executive was paid to the
Date of Termination;
(ii) any then deferred portions of cash
awards (including deferred awards which but
for this provision would not be payable until
subsequent to the Date of Termination) made to
the Executive under the Executive incentive
Compensation Plan; and
(iii) an amount as liquidated damages for
lost future remuneration equal to the product
obtained by multiplying
(A) the lesser of
(1) three or
(2) a number equal to the number of
calendar months remaining from the
Date of Termination to the date on
which the Executive is 65 years of age
(or, if earlier, the age agreed to by
the Executive pursuant to any prior
arrangement) divided by twelve
times
(B) the sum of
(1) the greater of
(i) the Executive's base salary
for the year in effect on the Date
of Termination (provided that in
the case of Termination for Good
Reason by the Executive the date
immediately preceding the date of
the earliest event which gave rise
to the Termination for Good Reason
by the Executive shall be used
instead of the Date of
Termination)
or
(ii) the Executive's base salary
for the year in effect on the date
of the Change-in-Control;
provided that "base salary for the
year" shall be the amount of base
salary for the year established by the
Board of Directors at the beginning of
the fiscal year in question in
accordance with the compensation
policies and practices of the
Corporation, without regard to any
reduction in the amount actually paid
to the Executive during such year as a
result of any plan of the Corporation
to reduce compensation due to economic
considerations, and without regard to
any deferral of compensation payable
to the Executive for services rendered
during such year to a subsequent year.
plus
(2) the greater of
(i) the average annual cash award
received by the Executive under
the Executive Incentive
Compensation Plan for the two
calendar years immediately
preceding the Date of Termination
(provided that in the case of
Termination for Good Reason by the
Executive the date immediately
preceding the date of the event
which gave rise to the Termination
for Good Reason by the Executive
shall be used instead of the Date
of Termination;
or
(ii) the average annual cash award
received by the Executive under
the Incentive Compensation Plan
for the two calendar years
immediately preceding the date of
the Change-in-Control.
(c) Notwithstanding any other provisions of this
Agreement, in the event that any payment or benefit
received or to be received by the Executive pursuant
to the terms of this Agreement or otherwise
(collectively the "Total Payments") would not be
deductible, in whole or part, as a result of section
280G of the Internal Revenue Code of 1986, as amended
(the "Code") by the Corporation, an affiliate or
other person making such payment or providing such
benefit, the payments due under this Agreement (the
"Contract Payments") shall be reduced until no
portion of the Total Payments is not deductible, or
the Contract Payments are reduced to zero. For
purposes of this limitation (i) no portion of the
Total Payments the receipt or enjoyment of which you
shall have effectively waived in writing prior to the
date of payment of the Contract Payments shall be
taken into account, (ii) no portion of the Total
Payments shall be taken into account which in the
opinion of tax counsel selected by the Corporation's
independent auditors and acceptable to you does not
constitute a "parachute payment" within the meaning
of section 280G(b)(2) of the Code, (iii) the Contract
Payments shall be reduced only to the extent
necessary so that the Total Payments (other than
those referred to in clauses (i) or (ii) in their
entirety constitute reasonable compensation for
services actually rendered within the meaning of
section 280G(b)(4) of the Code or are otherwise not
subject to disallowance as deductions, in the opinion
of the tax counsel referred to in clause (ii); and
(iv) the value of any non-cash benefit or any
deferred payment or benefit included in the Total
Payments shall be determined by the Corporation's
independent auditors in accordance with the
principles of sections 280G(d)(3) and (4) of the
Code.
4. Stock Appreciation Rights and Stock Options.
(a) If the Executive's employment should terminate
under such circumstances as entitle the Executive to
receive payments pursuant to section 3(b) hereof,
then, in lieu of Stock Appreciation Rights granted to
the Executive (and whether or not they are in tandem
with any Options, but provided that this subsection
shall not apply to any Stock Appreciation Rights in
tandem with incentive stock options) that were
outstanding for at least six months prior to the Date
of Termination and that were neither subsequently
exercised nor expired by their terms prior to the Date
of Termination (which rights and any related in tandem
options shall be cancelled upon the making of the
payment hereafter described), the Executive shall
receive an amount in cash on or before the fifth day
following the Date of Termination equal to the
difference, if positive, obtained by
(i) taking the product obtained by
multiplying
(A) the number of such stock appreciation
rights
times
(B) the greater of
(1) the mean between the highest and
lowest quoted selling prices for the
Corporation's common stock on the
composite tape for the New York Stock
Exchange on the trading day
immediately preceding the Date of
Termination;
or
(2) the highest price paid per share
for the Corporation's common stock in
the transaction resulting in the
actual Change-in-Control.
and
(ii) subtracting therefrom the aggregate
of the products obtained by multiplying the
mean between the highest and lowest quoted
selling prices for the Corporation's Common
Stock on the composite tape for the New York
Stock Exchange on each date of grant of such
Stock Appreciation Rights times the number of
such Stock Appreciation Rights granted on such
date.
(b) If the Executive's employment should terminate
under such circumstances as entitle the Executive to
payments pursuant to Section 3(b) hereof then the
Executive may elect, during the 60-day period from and
after a Change of Control (other than a Change of
Control initiated by the Executive), to surrender his
rights in any of the options granted to the Executive
provided that this subsection shall not apply to any
Options accompanied by a Stock Appreciation Right that
were outstanding for at least six months prior to the
Date of Termination and that were neither subsequently
exercised nor expired by their terms prior to the Date
of Termination and, upon such surrender, the
Corporation shall pay to the Executive an amount of
cash with respect to each such option equal to the
difference, if positive, obtained by
(i) taking the product obtained by
multiplying
(A) the number of shares of common stock as
to which the option is exercisable
times
(B) the greater of
(1) the mean between the highest and
lowest quoted selling prices for the
Corporation's Common Stock on the
composite tape for the New York Stock
Exchange on the trading day
immediately preceding the Date of
Termination
or
(2) the highest price paid per share
for Corporation's Common Stock in the
transaction resulting in the actual
Change-in-Control
and
(ii) subtracting therefrom the option
price for such Shares of Common Stock.
(c) In the event the Executive's employment should
terminate under such circumstances as entitle the
Executive to payments pursuant to Section 3(b) hereof,
the Corporation agrees to accelerate and make
immediately exercisable in full all unmatured options
held by the Executive at the Date of Termination,
whether or not otherwise exercisable, effective as of
the Date of Termination. In the event that the
Executive has been granted Incentive Stock Options
pursuant to Section 422A(b)(7) of the Internal Revenue
Code of 1986 (the "Code") which would otherwise become
immediately exercisable hereunder but for the
limitation imposed by Code Section 422A(b)(7), such
options shall only become exercisable as to the
maximum number of shares permitted by Code Section
422A(b)(7) and the balance of such options shall
become exercisable at the earliest date or dates
thereafter permitted by Code Section 422A(b)(7), with
those options with the lowest exercise prices becoming
exercisable at the earliest date or dates.
5. Retirement Benefits.
(a) If the Executive's employment should terminate
under such circumstances as entitle the Executive to
receive payments pursuant to section 3(b) hereof,
then, notwithstanding such termination, the Executive
shall be deemed to continue as an active employee
participant in the Corporation's pension plan for
salaried employees, and the benefits payable to him,
his surviving spouse or contingent annuitant shall be
calculated as if he had been continuously employed by
the Corporation for those years (including parts
thereof) subsequent to the Date of Termination and
prior to the earlier of (i) three years subsequent to
the Date of Termination, and (ii) the Executive's
death or attainment of age 65 (or, if earlier, the
age agreed to by the Executive pursuant to any prior
arrangement), at the covered remuneration set forth
in the following sentences of this subsection. The
covered remuneration for any part of a year remaining
after the Date of Termination shall equal the number
of months remaining in such year times the sum
determined pursuant to section 3(b)(iv)(B) hereof and
divided by twelve. The covered remuneration for the
first full credited year following the Date of
Termination shall equal the sum determined pursuant
to section 3(b)(iv)(B) hereof. The covered
remuneration for the first full credited year after
the first full credited year shall equal the sum of
(i) the covered remuneration for the immediately
preceding year plus (ii) the product of the Annual
Salary Adjustment percentage for such credited years
times the covered remuneration for the immediately
preceding year.
(b) If for any reason whether by law or the terms of the
Corporation's pension plan, such pension plan cannot
either use the above credited years of service and
remuneration above described in subsection 5(a) for
purposes of the Executive's pension benefits
(including surviving spouse and contingent annuitant
benefits) or cannot pay the full amount of benefits
which would result from the foregoing subsections,
then the Corporation hereby contractually agrees to
pay the difference between
(i) the benefits which would be payable if
the pension plan had been able to pay such
benefits based upon the credited years of
service and covered remuneration above
described in subsection 5(a),
and
(ii) the benefits, if any, actually paid
to the Executive, his surviving spouse or
contingent annuitant by the pension plan.
The Corporation shall not be required to fund its
obligation to pay the foregoing difference.
6. Other Benefit Plans.
(a) If the Executive's employment should terminate
under such circumstances as entitle the Executive to
receive payments pursuant to section 3(b) hereof and
if the Executive is a participant in the
Corporation's Executive Benefit Plan (or a plan
providing comparable benefits) shall be in effect
prior to the Change-in-Control, then the Executive
will be deemed for purposes of such Plan (or, if
applicable, the plan providing comparable benefits)
to have continuously remained in the employ of the
Corporation until the earlier of (i) three years
subsequent to the Date of Termination, and (ii) his
death or attainment of age 65 (or the age agreed to
by the Executive pursuant to any prior arrangement),
at a total compensation equal to his total
compensation in effect on the Date of Termination
(provided that in the case of Termination for Good
Reason by the Executive the date immediately
preceding the date of the earliest event which gave
rise to the Termination for Good Reason by the
Executive shall be used instead of the Date of
Termination) and to have made any required
contributions due thereunder. The Executive will be
eligible to receive all benefits under such Plan (or,
if applicable, the plan providing comparable
benefits) payable as though he had so remained in the
Corporation's employ and had made any required
contributions notwithstanding that he neither was so
employed nor made any such contributions.
(b) Except with respect to (i) any Stock Appreciation
Rights and Stock Options, as to which payment is
provided in Section 4(a) hereof, (ii) the
Corporation's pension plan, which is governed by
paragraph 5 hereof, (iii) the Executive Benefit Plan,
and (iv) the Incentive Compensation Plan, the
Executive shall be deemed for purposes of all
employee benefits to have remained in the continuous
employment of the Corporation for a period of three
years following the Date of Termination and shall be
entitled to all of the benefits provided by such
plans as though he had so remained in the employment
of the Corporation.
(c) If for any reason, whether by law or provisions of
the Corporation's employee benefit plans, any
benefits which the Executive would be entitled to
under the foregoing subsections of this section 6
cannot be paid pursuant to such employee benefit
plans, then the Corporation hereby contractually
agrees to pay to the Executive the difference between
the benefits which the Executive would have received
in accordance with the foregoing subsections of this
section if the relevant employee benefit plan could
have paid such benefit and the amount of benefits, if
any, actually paid by such employee benefit plan.
The Corporation shall not be required to fund its
obligation to pay the foregoing difference.
7.Other Employment.
(a) The Executive shall have no duty to seek any other
employment after termination of his employment with
the Corporation and the Corporation hereby waives and
agrees not to raise or use any defense based on the
position that the Executive had a duty to mitigate or
reduce the amounts due him hereunder by seeking other
employment whether suitable or unsuitable.
(b) Should the Executive obtain other employment, then
the only effect of such on the obligations of the
Corporation hereunder shall be that the Corporation
shall be entitled to credit against any payments
which would otherwise be made pursuant to sections 5,
6(a) or 6(b) hereof, any comparable payments to which
the Executive is entitled under the pension or other
employee benefit plans maintained by the Executive's
other employers after termination of his employment
with the Corporation. In no event shall any sums
received by the Executive from any other employment
be credited against or otherwise reduce the amounts
payable by the Corporation pursuant to Sections 3 or
4 hereof.
8.Term.
(a) This Agreement shall be for a term expiring
August 31, 1998 and shall automatically be extended
for successive five year terms at the end of each
preceding term unless termination occurs pursuant to
subsection (b) or (c) below, whichever is applicable.
(b) If a Change-in-Control has occurred, this
Agreement shall remain in effect until terminated on
the date which is three years from the Change-in-
Control.
(c) If a Change-in-Control has not occurred, this
Agreement shall terminate if the Executive's
employment with the Corporation terminates for any
reason whether such termination of employment is by
the Corporation or by the Executive. Otherwise,
prior to a Change-in-Control, this Agreement may only
be terminated by the Corporation upon the giving by
the Corporation of notice of termination at least
thirty days prior to the end of the then term, in
which event this Agreement shall terminate at the end
of such term.
9. Miscellaneous.
(a) This Agreement shall be construed under the laws
of the Commonwealth of Pennsylvania.
(b) This Agreement constitutes the entire
understanding of the parties hereto with respect to
the subject matter hereof and may only be amended or
modified by written agreement signed by the parties
hereto.
(c) The Corporation will require any successor
(whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially
all of the business and/or assets of the Corporation,
by agreement in form and substance satisfactory to
the executive, to expressly assume and agree to
perform this Agreement in the same manner required of
the Corporation and to perform it as if no such
succession had taken place. Failure of the
Corporation to obtain such agreement prior to the
effectiveness of any such succession shall be a
breach of this Agreement and shall entitle the
Executive to terminate employment due to Good Reason
for Termination. As used in this Agreement,
"Corporation" shall mean the Corporation as
hereinbefore defined and any successor to its
business and/or assets as aforesaid which executes
and delivers the agreement provided for in this
subsection (c) or which otherwise becomes bound by
all the terms and provisions of this Agreement by
operation of law.
(d) This Agreement shall inure to the benefit of and be
enforceable by the Executive or his legal
representatives, executors, administrators,
successors, heirs, distributees, devisees and
legatees. If the Executive should die while any
amounts would still be payable to him hereunder if he
had continued to live, all such amounts, unless
otherwise provided herein, shall be paid in
accordance with the terms of this Agreement to his
devisee, legatee or other designee or if there be no
such designee, to his estate.
(e) Any notice or other communication provided for in
this Agreement shall be in writing and, unless
otherwise expressly stated herein, shall be deemed to
have been duly given if mailed by United States
registered mail, return receipt requested, postage
prepaid addressed
in the case of the Executive to his office at the
Corporation with a copy to his residence and in the
case of the Corporation to its principal executive
offices, attention of the Chief Executive Officer.
(f) No provisions of this Agreement may be modified,
waived or discharged unless such waiver, modification
or discharge is agreed to in writing signed by the
Executive and approved by resolution of the Board of
Directors of the Corporation. No waiver by either
party hereto at any time of any breach by the other
party hereto of, or compliance with, any condition or
provision of this Agreement to be performed by such
other party shall be deemed a waiver of similar or
dissimilar provisions or conditions at the same or at
any prior or subsequent time. Except for any
employment agreement with the Executive, no
agreements or representations, oral or otherwise,
express or implied, with respect to the subject
matter hereof have been made by either party which
are not set forth expressly in this Agreement. To
the extent that the provisions of this Agreement are
in conflict with any such employment agreement,
following a Change-in-Control the employment
agreement shall automatically be amended in
accordance with this Agreement and the provisions of
this Agreement shall govern.
(g) The invalidity or unenforceability of any provisions
of this Agreement shall not affect the validity or
enforceability of any other provision of this
Agreement, which shall remain in full force and
effect.
(h) This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an
original but all of which together will constitute
one and the same instrument.
IN WITNESS WHEREOF, this Agreement has been executed on
the date first above written.
ATTEST: DRAVO CORPORATION
/s/ A. H. TENHUNDFELD, JR. By /s/ JOHN R. MAJOR
/s/ JAMES J. PUHALA
(Page )
AGREEMENT
This Agreement made as of this 1st day of January , 1995
by and between Dravo Corporation, a Pennsylvania corporation
(the "Corporation") and Donald H. Stowe, Jr., an individual
residing in the State of Pennsylvania and an employee of the
Corporation (the "Executive").
WITNESSETH:
WHEREAS, the Board of Directors of the Corporation has
determined that it is in the best interests of the
Corporation to enter into this Agreement with the Executive;
and
WHEREAS, the Executive desires to obtain certain
benefits in the event his employment is terminated due to a
Change-in-Control of the Corporation;
NOW, THEREFORE, the parties hereto, each intending to be
legally bound hereby, agree as follows:
1. Definition of Terms. The following terms when used
in this Agreement shall have the meaning hereafter set
forth:
(a) "Annual Salary Adjustment Percentage" shall mean
the mean average percentage increase in base salary
for all elected officers of the Corporation during
the two full calendar years immediately preceding the
time to which such percentage is being applied;
provided, however, that if after a Change-in-Control,
as hereinafter defined, there should be a significant
change in the number of elected officers of the
Corporation or in the manner in which they are
compensated, then the foregoing definition shall be
changed by substituting for the phrase "elected
officers of the Corporation" the phrase "persons then
performing the functions formerly performed by the
elected officers of the Corporation."
(b) "Cause for Termination" shall mean
(i) the deliberate and intentional failure by
the Executive to devote substantially his entire
business time and best efforts to the performance
of his duties (other than any such failure
resulting from the Executive's incapacity due to
physical or mental illness or disability) after a
demand for substantial performance is delivered
to the Executive by the Board of Directors of the
Corporation which specifically identifies the
manner in which the Board believes that the
Executive has not substantially performed his
duties,
or
(ii) the deliberate and intentional engaging by
the Executive in gross misconduct materially and
demonstrably injurious to the Corporation.
For purposes of this definition, no act, or failure
to act, on the Executive's part shall be considered
"deliberate and intentional" unless done, or omitted
to be done, by the Executive not in good faith and
without reasonable belief that his action or omission
was in the best interests of the Corporation.
(c) "Change-in-Control" shall mean a change in control of
the Corporation of such a nature that it would be
required to be reported by the Corporation in
response to item 6(e) of Schedule 14A of Regulation
14A promulgated under the Securities Exchange Act of
1934, as in effect on the date hereof ("Exchange
Act"); provided, however, that without respect to the
foregoing, such a change in control shall be deemed
to have occurred if
(i) any "person" (as such term is used in
Sections 13(d) and 14(d)(2) of the Exchange Act)
is or becomes the beneficial owner, directly or
indirectly, of securities of the Corporation
representing 20% or more of the combined voting
power of the Corporation's then outstanding
securities;
or
(ii) during any period of three consecutive
years, individuals who at the beginning of such
period constitute the Board of Directors of the
Corporation (the "Board") cease for any reason to
constitute at least a Majority thereof unless the
election, or the nomination for election by the
Corporation's shareholders, of each new director
was approved by a vote of at least two-thirds of
the directors then still in office who were
directors at the beginning of the period.
(d) "Date of Termination" shall mean
(i) if the Executive's employment is
terminated for Disability, thirty (30) days
after a Notice of Termination is given to the
Executive (provided that the Executive shall
not have returned to the performance of the
Executive's duties on a full time basis during
such thirty (30) day period);
(ii) if the Executive's employment
terminates due to his death or Retirement, the
date of death or Retirement, respectively;
(iii) if the Executive terminates
employment upon Good Reason for Termination,
the date specified for termination in any
notice delivered to the Corporation by the
Executive; or
(iv) if the Executive's employment is
terminated for any other reason, the date on
which a termination becomes effective pursuant
to a Notice of Termination; provided, however,
that if within thirty (30) days after any
Notice of Termination is given the party
receiving such Notice of Termination notifies
the other party that a dispute exists
concerning the termination, the Date of
Termination shall be the date on which the
dispute is finally determined, either by
mutual written agreement of the parties, by a
binding and final arbitration award or by a
final judgment, order or decree of a court of
competent jurisdiction (the time for appeal
therefrom having expired and no appeal having
been perfected).
(e) "Disability" shall mean such incapacity due to
physical or mental illness or injury as causes the
Executive to be absent from his principal office for
the entire portion of 90 consecutive business days.
(f) "Good Reason for Termination" shall mean:
(i) without the Executive's express written
consent, the assignment to the Executive of
any duties inconsistent with his positions,
duties, responsibilities and status with the
Corporation immediately prior to a Change-in-
Control, or a change in his reporting
responsibilities, titles or offices as in
effect immediately prior to a Change-in-
Control, or any removal of the executive from
or any failure to re-elect the Executive to
any of such positions, except in connection
with the termination of the Executive's
employment due to a Cause for Termination,
Disability or Retirement (as hereinafter
defined) or as a result of the Executive's
death;
(ii) a reduction by the Corporation in
the Executive's base salary as in effect
immediately prior to the Change-in-Control or
as the same may be increased from time to time
or the failure by the Corporation to increase
such base salary each year after the year in
which the Change-in-Control occurs by an
amount which at least equals, on a percentage
basis, the Annual Salary Adjustment
Percentage;
(iii) a failure by the Corporation to
continue to provide incentive compensation
comparable to that provided by the
Corporation's Incentive Compensation Plan as
the same may from time to time prior to a
Change-in-Control be modified or superseded by
another plan (the "Incentive Compensation
Plan"), or a failure by the Corporation to
continue the Executive as a participant in the
Incentive Compensation Plan on at least the
basis and according to the standards in effect
immediately prior to the Change-in-Control or
to pay the Executive when due any deferred
portion of a previous award under the
Incentive Compensation Plan;
(iv) the Corporation's requiring the
Executive to be based anywhere other than the
Corporation's executive offices at which the
Executive has his principal office immediately
prior to the Change-in-Control, except for
required travel on the Corporation's business
to an extent substantially consistent with the
Executive's present business travel
obligations immediately prior to the Change-in-
Control, or, in the event the Executive
consents to any such relocation of the
Corporation's principal executive offices, the
failure by the Corporation to pay (or
reimburse the Executive for) all reasonable
moving expenses incurred by the Executive
relating to a change of the Executive's
principal residence in connection with such
relocation and to indemnify the Executive
against any loss (defined as the difference
between the actual sale price of such
residence and the higher of (a) the
Executive's aggregate investment in such
residence or (b) the fair market value of such
residence as determined by a real estate
appraiser designated by the Executive and
reasonably satisfactory to the Corporation)
realized in the sale of the Executive's
principal residence in connection with any
such change of residence;
(v) the failure by the Corporation to
continue in effect any benefit or compensation
plan (including but not limited to the
Corporation's Long-Term Incentive Award Plan
of 1983, Stock Option Plan of 1978, Employee
Stock Option Plan of 1988, Stock Option Plan
of 1994, and the Executive Benefit Plan),
pension plan, life insurance plan, health and
accident plan or disability plan in which the
Executive is participating immediately prior
to the Change-in-Control (provided, however,
that there shall not be deemed to be any such
failure if the Corporation substitutes for the
discontinued plan, a plan providing the
Executive with substantially similar
benefits), the taking of any action by the
Corporation which would adversely affect the
Executive's participation in or materially
reduce the Executive's benefits under any of
such plans or deprive the Executive of any
material fringe benefit enjoyed by the
Executive immediately prior to the Change-in-
Control, or the failure by the Corporation to
provide the Executive with the number of paid
vacation days to which the Executive is then
entitled on the basis of years of service with
the Corporation in accordance with the
Corporation's normal vacation policy all as
and to the extent they are in effect
immediately prior to the Change-in-Control;
(vi) the failure of the Corporation to
obtain the assumption of this Agreement by any
successor as contemplated in Section 9(c)
hereof; or
(vii) any purported termination of the
employment of the Executive by the Corporation
which is not (A) due to the Executive's
Disability, death, Retirement (as hereinafter
defined) or in accordance with section 2
hereof, or (B) effected pursuant to a Notice
of Termination satisfying the requirements of
subsection (g) below;
(viii) notwithstanding the foregoing, it
shall not be deemed Good Reason for
Termination if the Corporation, acting in good
faith, makes changes to any compensation or
benefits plan or program that is made
available on a nondiscriminatory basis to the
salaried employees of the Corporation, which
changes do not apply disproportionately to the
elected officers of the Corporation or those
persons then performing the functions formerly
performed by the elected officers of the
Corporation.
(g) "Notice of Termination" shall mean a written
statement which sets forth the specific reason for
termination and, if such is claimed to be Cause for
Termination, in reasonable detail the facts and
circumstances which indicate that such is Cause for
Termination together with notice of the time and
place of the meeting of the Board of Directors of the
Corporation called to consider such matter in
accordance with section 2 hereof.
(h) "Options" shall mean any stock options issued
pursuant to the Corporation's Employee Stock Option
Plan of 1988, Long-Term Incentive Award Plan of 1983,
Stock Option Plan of 1978 or any future stock option
plan.
(i) "Retirement" shall mean a termination of the
Executive's employment after age 65 or in accordance
with any mandatory retirement arrangement with
respect to an earlier age agreed to by the Executive.
(j) "Stock Appreciation Rights" shall mean any stock
appreciation rights issued pursuant to the
Corporation's Employee Stock Option Plan of 1988,
Long-Term Incentive Award Plan of 1983, Stock Option
Plan of 1978 or any future stock appreciation rights
plan.
2. "Termination by the Corporation Due to Cause for
Termination."
If the Corporation desires to terminate the Executive's
employment due to Cause for Termination, the Corporation
shall first deliver a Notice of Termination to the
Executive. Thereafter, the Board of Directors at a
meeting held not less than two weeks nor more than four
weeks after the delivery of the Notice Of Termination
shall consider whether cause for Termination exists.
Cause for Termination shall not be deemed to exist under
this Agreement unless and until the Board determines in
good faith by the affirmative vote of not less than three-
quarters of the entire membership of the Board that the
Executive has engaged in conduct which is Cause for
Termination. Should the Board determine that Cause for
Termination exists, the Board may at that time or during a
period of two weeks thereafter terminate the Executive's
employment due to Cause for Termination by adopting at
such time or during such period by a similar three-
quarters vote a resolution terminating the Executive's
employment. If the Board fails to adopt within such two-
week period a resolution terminating the Executive's
employment, then the Corporation shall be deemed to have
waived its right to terminate the Executive due to those
circumstances which constituted the Cause for Termination
previously found to exist by the Board.
3. Termination Payments Following Change-in-Control.
(a) If, during the term of this Agreement, a Change-
in-Control shall have occurred and the Executive's
employment with the Corporation shall be terminated
(i) due to the Executive's death,
(ii) by the Executive unless terminated
for Good Reason for Termination, or
(iii) by the Corporation in accordance
with section 2 hereof or for Disability or
Retirement, then the Corporation shall have no
obligations hereunder to the Executive and the
only obligations of the Corporation to the
Executive shall be in accordance with any
other employment agreement applicable to the
Executive and the then various policies,
practices and benefit plans of the
Corporation.
(b) If during the term of this Agreement both a Change-in-
Control shall have occurred and the Executive's
employment with the Corporation shall have terminated
other than under the circumstances above described in
Subsection 3(a), then the Corporation shall pay or
cause to be paid on or before the fifth day following
the Date of Termination in cash to the Executive the
following sums:
(i) any unpaid portion of the Executive's
full base salary for the period from the last
period for which the Executive was paid to the
Date of Termination;
(ii) any then deferred portions of cash
awards (including deferred awards which but
for this provision would not be payable until
subsequent to the Date of Termination) made to
the Executive under the Executive incentive
Compensation Plan; and
(iii) an amount as liquidated damages for
lost future remuneration equal to the product
obtained by multiplying
(A) the lesser of
(1) three or
(2) a number equal to the number of
calendar months remaining from the
Date of Termination to the date on
which the Executive is 65 years of age
(or, if earlier, the age agreed to by
the Executive pursuant to any prior
arrangement) divided by twelve
times
(B) the sum of
(1) the greater of
(i) the Executive's base salary
for the year in effect on the Date
of Termination (provided that in
the case of Termination for Good
Reason by the Executive the date
immediately preceding the date of
the earliest event which gave rise
to the Termination for Good Reason
by the Executive shall be used
instead of the Date of
Termination)
or
(ii) the Executive's base salary
for the year in effect on the date
of the Change-in-Control;
provided that "base salary for the
year" shall be the amount of base
salary for the year established by the
Board of Directors at the beginning of
the fiscal year in question in
accordance with the compensation
policies and practices of the
Corporation, without regard to any
reduction in the amount actually paid
to the Executive during such year as a
result of any plan of the Corporation
to reduce compensation due to economic
considerations, and without regard to
any deferral of compensation payable
to the Executive for services rendered
during such year to a subsequent year.
plus
(2) the greater of
(i) the average annual cash award
received by the Executive under
the Executive Incentive
Compensation Plan for the two
calendar years immediately
preceding the Date of Termination
(provided that in the case of
Termination for Good Reason by the
Executive the date immediately
preceding the date of the event
which gave rise to the Termination
for Good Reason by the Executive
shall be used instead of the Date
of Termination;
or
(ii) the average annual cash award
received by the Executive under
the Incentive Compensation Plan
for the two calendar years
immediately preceding the date of
the Change-in-Control.
(c) Notwithstanding any other provisions of this
Agreement, in the event that any payment or benefit
received or to be received by the Executive pursuant
to the terms of this Agreement or otherwise
(collectively the "Total Payments") would not be
deductible, in whole or part, as a result of section
280G of the Internal Revenue Code of 1986, as amended
(the "Code") by the Corporation, an affiliate or
other person making such payment or providing such
benefit, the payments due under this Agreement (the
"Contract Payments") shall be reduced until no
portion of the Total Payments is not deductible, or
the Contract Payments are reduced to zero. For
purposes of this limitation (i) no portion of the
Total Payments the receipt or enjoyment of which you
shall have effectively waived in writing prior to the
date of payment of the Contract Payments shall be
taken into account, (ii) no portion of the Total
Payments shall be taken into account which in the
opinion of tax counsel selected by the Corporation's
independent auditors and acceptable to you does not
constitute a "parachute payment" within the meaning
of section 280G(b)(2) of the Code, (iii) the Contract
Payments shall be reduced only to the extent
necessary so that the Total Payments (other than
those referred to in clauses (i) or (ii) in their
entirety constitute reasonable compensation for
services actually rendered within the meaning of
section 280G(b)(4) of the Code or are otherwise not
subject to disallowance as deductions, in the opinion
of the tax counsel referred to in clause (ii); and
(iv) the value of any non-cash benefit or any
deferred payment or benefit included in the Total
Payments shall be determined by the Corporation's
independent auditors in accordance with the
principles of sections 280G(d)(3) and (4) of the
Code.
4. Stock Appreciation Rights and Stock Options.
(a) If the Executive's employment should terminate
under such circumstances as entitle the Executive to
receive payments pursuant to section 3(b) hereof,
then, in lieu of Stock Appreciation Rights granted to
the Executive (and whether or not they are in tandem
with any Options, but provided that this subsection
shall not apply to any Stock Appreciation Rights in
tandem with incentive stock options) that were
outstanding for at least six months prior to the Date
of Termination and that were neither subsequently
exercised nor expired by their terms prior to the Date
of Termination (which rights and any related in tandem
options shall be cancelled upon the making of the
payment hereafter described), the Executive shall
receive an amount in cash on or before the fifth day
following the Date of Termination equal to the
difference, if positive, obtained by
(i) taking the product obtained by
multiplying
(A) the number of such stock appreciation
rights
times
(B) the greater of
(1) the mean between the highest and
lowest quoted selling prices for the
Corporation's common stock on the
composite tape for the New York Stock
Exchange on the trading day
immediately preceding the Date of
Termination;
or
(2) the highest price paid per share
for the Corporation's common stock in
the transaction resulting in the
actual Change-in-Control.
and
(ii) subtracting therefrom the aggregate
of the products obtained by multiplying the
mean between the highest and lowest quoted
selling prices for the Corporation's Common
Stock on the composite tape for the New York
Stock Exchange on each date of grant of such
Stock Appreciation Rights times the number of
such Stock Appreciation Rights granted on such
date.
(b) If the Executive's employment should terminate
under such circumstances as entitle the Executive to
payments pursuant to Section 3(b) hereof then the
Executive may elect, during the 60-day period from and
after a Change of Control (other than a Change of
Control initiated by the Executive), to surrender his
rights in any of the options granted to the Executive
provided that this subsection shall not apply to any
Options accompanied by a Stock Appreciation Right that
were outstanding for at least six months prior to the
Date of Termination and that were neither subsequently
exercised nor expired by their terms prior to the Date
of Termination and, upon such surrender, the
Corporation shall pay to the Executive an amount of
cash with respect to each such option equal to the
difference, if positive, obtained by
(i) taking the product obtained by
multiplying
(A) the number of shares of common stock as
to which the option is exercisable
times
(B) the greater of
(1) the mean between the highest and
lowest quoted selling prices for the
Corporation's Common Stock on the
composite tape for the New York Stock
Exchange on the trading day
immediately preceding the Date of
Termination
or
(2) the highest price paid per share
for Corporation's Common Stock in the
transaction resulting in the actual
Change-in-Control
and
(ii) subtracting therefrom the option
price for such Shares of Common Stock.
(c) In the event the Executive's employment should
terminate under such circumstances as entitle the
Executive to payments pursuant to Section 3(b) hereof,
the Corporation agrees to accelerate and make
immediately exercisable in full all unmatured options
held by the Executive at the Date of Termination,
whether or not otherwise exercisable, effective as of
the Date of Termination. In the event that the
Executive has been granted Incentive Stock Options
pursuant to Section 422A(b)(7) of the Internal Revenue
Code of 1986 (the "Code") which would otherwise become
immediately exercisable hereunder but for the
limitation imposed by Code Section 422A(b)(7), such
options shall only become exercisable as to the
maximum number of shares permitted by Code Section
422A(b)(7) and the balance of such options shall
become exercisable at the earliest date or dates
thereafter permitted by Code Section 422A(b)(7), with
those options with the lowest exercise prices becoming
exercisable at the earliest date or dates.
5. Retirement Benefits.
(a) If the Executive's employment should terminate
under such circumstances as entitle the Executive to
receive payments pursuant to section 3(b) hereof,
then, notwithstanding such termination, the Executive
shall be deemed to continue as an active employee
participant in the Corporation's pension plan for
salaried employees, and the benefits payable to him,
his surviving spouse or contingent annuitant shall be
calculated as if he had been continuously employed by
the Corporation for those years (including parts
thereof) subsequent to the Date of Termination and
prior to the earlier of (i) three years subsequent to
the Date of Termination, and (ii) the Executive's
death or attainment of age 65 (or, if earlier, the
age agreed to by the Executive pursuant to any prior
arrangement), at the covered remuneration set forth
in the following sentences of this subsection. The
covered remuneration for any part of a year remaining
after the Date of Termination shall equal the number
of months remaining in such year times the sum
determined pursuant to section 3(b)(iv)(B) hereof and
divided by twelve. The covered remuneration for the
first full credited year following the Date of
Termination shall equal the sum determined pursuant
to section 3(b)(iv)(B) hereof. The covered
remuneration for the first full credited year after
the first full credited year shall equal the sum of
(i) the covered remuneration for the immediately
preceding year plus (ii) the product of the Annual
Salary Adjustment percentage for such credited years
times the covered remuneration for the immediately
preceding year.
(b) If for any reason whether by law or the terms of the
Corporation's pension plan, such pension plan cannot
either use the above credited years of service and
remuneration above described in subsection 5(a) for
purposes of the Executive's pension benefits
(including surviving spouse and contingent annuitant
benefits) or cannot pay the full amount of benefits
which would result from the foregoing subsections,
then the Corporation hereby contractually agrees to
pay the difference between
(i) the benefits which would be payable if
the pension plan had been able to pay such
benefits based upon the credited years of
service and covered remuneration above
described in subsection 5(a),
and
(ii) the benefits, if any, actually paid
to the Executive, his surviving spouse or
contingent annuitant by the pension plan.
The Corporation shall not be required to fund its
obligation to pay the foregoing difference.
6. Other Benefit Plans.
(a) If the Executive's employment should terminate
under such circumstances as entitle the Executive to
receive payments pursuant to section 3(b) hereof and
if the Executive is a participant in the
Corporation's Executive Benefit Plan (or a plan
providing comparable benefits) shall be in effect
prior to the Change-in-Control, then the Executive
will be deemed for purposes of such Plan (or, if
applicable, the plan providing comparable benefits)
to have continuously remained in the employ of the
Corporation until the earlier of (i) three years
subsequent to the Date of Termination, and (ii) his
death or attainment of age 65 (or the age agreed to
by the Executive pursuant to any prior arrangement),
at a total compensation equal to his total
compensation in effect on the Date of Termination
(provided that in the case of Termination for Good
Reason by the Executive the date immediately
preceding the date of the earliest event which gave
rise to the Termination for Good Reason by the
Executive shall be used instead of the Date of
Termination) and to have made any required
contributions due thereunder. The Executive will be
eligible to receive all benefits under such Plan (or,
if applicable, the plan providing comparable
benefits) payable as though he had so remained in the
Corporation's employ and had made any required
contributions notwithstanding that he neither was so
employed nor made any such contributions.
(b) Except with respect to (i) any Stock Appreciation
Rights and Stock Options, as to which payment is
provided in Section 4(a) hereof, (ii) the
Corporation's pension plan, which is governed by
paragraph 5 hereof, (iii) the Executive Benefit Plan,
and (iv) the Incentive Compensation Plan, the
Executive shall be deemed for purposes of all
employee benefits to have remained in the continuous
employment of the Corporation for a period of three
years following the Date of Termination and shall be
entitled to all of the benefits provided by such
plans as though he had so remained in the employment
of the Corporation.
(c) If for any reason, whether by law or provisions of
the Corporation's employee benefit plans, any
benefits which the Executive would be entitled to
under the foregoing subsections of this section 6
cannot be paid pursuant to such employee benefit
plans, then the Corporation hereby contractually
agrees to pay to the Executive the difference between
the benefits which the Executive would have received
in accordance with the foregoing subsections of this
section if the relevant employee benefit plan could
have paid such benefit and the amount of benefits, if
any, actually paid by such employee benefit plan.
The Corporation shall not be required to fund its
obligation to pay the foregoing difference.
7.Other Employment.
(a) The Executive shall have no duty to seek any other
employment after termination of his employment with
the Corporation and the Corporation hereby waives and
agrees not to raise or use any defense based on the
position that the Executive had a duty to mitigate or
reduce the amounts due him hereunder by seeking other
employment whether suitable or unsuitable.
(b) Should the Executive obtain other employment, then
the only effect of such on the obligations of the
Corporation hereunder shall be that the Corporation
shall be entitled to credit against any payments
which would otherwise be made pursuant to sections 5,
6(a) or 6(b) hereof, any comparable payments to which
the Executive is entitled under the pension or other
employee benefit plans maintained by the Executive's
other employers after termination of his employment
with the Corporation. In no event shall any sums
received by the Executive from any other employment
be credited against or otherwise reduce the amounts
payable by the Corporation pursuant to Sections 3 or
4 hereof.
8.Term.
(a) This Agreement shall be for a term expiring
August 31, 1998 and shall automatically be extended
for successive five year terms at the end of each
preceding term unless termination occurs pursuant to
subsection (b) or (c) below, whichever is applicable.
(b) If a Change-in-Control has occurred, this
Agreement shall remain in effect until terminated on
the date which is three years from the Change-in-
Control.
(c) If a Change-in-Control has not occurred, this
Agreement shall terminate if the Executive's
employment with the Corporation terminates for any
reason whether such termination of employment is by
the Corporation or by the Executive. Otherwise,
prior to a Change-in-Control, this Agreement may only
be terminated by the Corporation upon the giving by
the Corporation of notice of termination at least
thirty days prior to the end of the then term, in
which event this Agreement shall terminate at the end
of such term.
9. Miscellaneous.
(a) This Agreement shall be construed under the laws
of the Commonwealth of Pennsylvania.
(b) This Agreement constitutes the entire
understanding of the parties hereto with respect to
the subject matter hereof and may only be amended or
modified by written agreement signed by the parties
hereto.
(c) The Corporation will require any successor
(whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially
all of the business and/or assets of the Corporation,
by agreement in form and substance satisfactory to
the executive, to expressly assume and agree to
perform this Agreement in the same manner required of
the Corporation and to perform it as if no such
succession had taken place. Failure of the
Corporation to obtain such agreement prior to the
effectiveness of any such succession shall be a
breach of this Agreement and shall entitle the
Executive to terminate employment due to Good Reason
for Termination. As used in this Agreement,
"Corporation" shall mean the Corporation as
hereinbefore defined and any successor to its
business and/or assets as aforesaid which executes
and delivers the agreement provided for in this
subsection (c) or which otherwise becomes bound by
all the terms and provisions of this Agreement by
operation of law.
(d) This Agreement shall inure to the benefit of and be
enforceable by the Executive or his legal
representatives, executors, administrators,
successors, heirs, distributees, devisees and
legatees. If the Executive should die while any
amounts would still be payable to him hereunder if he
had continued to live, all such amounts, unless
otherwise provided herein, shall be paid in
accordance with the terms of this Agreement to his
devisee, legatee or other designee or if there be no
such designee, to his estate.
(e) Any notice or other communication provided for in
this Agreement shall be in writing and, unless
otherwise expressly stated herein, shall be deemed to
have been duly given if mailed by United States
registered mail, return receipt requested, postage
prepaid addressed
in the case of the Executive to his office at the
Corporation with a copy to his residence and in the
case of the Corporation to its principal executive
offices, attention of the Chief Executive Officer.
(f) No provisions of this Agreement may be modified,
waived or discharged unless such waiver, modification
or discharge is agreed to in writing signed by the
Executive and approved by resolution of the Board of
Directors of the Corporation. No waiver by either
party hereto at any time of any breach by the other
party hereto of, or compliance with, any condition or
provision of this Agreement to be performed by such
other party shall be deemed a waiver of similar or
dissimilar provisions or conditions at the same or at
any prior or subsequent time. Except for any
employment agreement with the Executive, no
agreements or representations, oral or otherwise,
express or implied, with respect to the subject
matter hereof have been made by either party which
are not set forth expressly in this Agreement. To
the extent that the provisions of this Agreement are
in conflict with any such employment agreement,
following a Change-in-Control the employment
agreement shall automatically be amended in
accordance with this Agreement and the provisions of
this Agreement shall govern.
(g) The invalidity or unenforceability of any provisions
of this Agreement shall not affect the validity or
enforceability of any other provision of this
Agreement, which shall remain in full force and
effect.
(h) This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an
original but all of which together will constitute
one and the same instrument.
IN WITNESS WHEREOF, this Agreement has been executed on
the date first above written.
ATTEST: DRAVO CORPORATION
/s/ JAMES J. PUHALA By /s/ JOHN R. MAJOR
/s/ DONALD H. STOWE, JR.
<TABLE>
Exhibit 11. Statement Re Computation of Per Share Earnings
<CAPTION>
($ in thousands, except per share amounts)
Years ended December 31,
1995 1994 1993
<S> <C> <C> <C>
Primary
Earnings:
Earnings from continuing operations
before extraordinary item $ 10,981 $ 4,930 $ 35,126
Deduct dividends on preferred stock 2,535 2,544 2,554
Earnings from continuing operations
applicable to common stock 8,446 (2,386) 32,572
Loss from discontinued operations -- (6,554) (35,303)
Earnings (loss) from extraordinary item -- (7,572) --
Cumulative accounting change -- (1,361) --
Net earnings (loss) applicable to
common stock $ 8,446 $(13,101 )$ (2,731)
Shares:
Weighted average number of common
shares outstanding 14,756 14,859 14,835
Dilutive effect of outstanding
options and rights (as determined
by the application of the treasury
stock method at the average market
price for the year) 119 --(1) --(1)
Weighted average number of shares
outstanding, as adjusted 14,875 14,859 14,835
Primary earnings (loss) per share:
Continuing operations $ 0.57 $ 0.16 $ 2.20
Discontinued operations -- (0.44) (2.38)
Extraordinary item -- (0.51) --
Cumulative accounting change -- (0.09) --
Net earnings (loss) per share $ 0.57 $ (0.88) $ (0.18)
Fully Diluted
Earnings:
Net earnings (loss) $ 10,981 $(10,557) $ (177)
Deduct dividends on preferred stock (2) 2,535 2,544 2,554
Net earnings (loss) applicable to
common stock $ 8,446 $(13,101) $ (2,731)
Shares:
Weighted average number of common
shares outstanding 14,756 14,859 14,835
Dilutive effect of outstanding options
and rights (as determined by the
application of the treasury stock
method at the higher of the ending
or average market price for the year) 119 --(1) --(1)
11-1
Exhibit 11. Statement Re Computation of Per Share Earnings (continued)
($ in thousands, except per share amounts)
Years ended December 31,
1995 1994 1993
Fully Diluted (continued)
Shares (continued):
Shares issuable from assumed exercise
of convertible preference stock (2) -- -- --
Weighted average number of shares
outstanding, as adjusted 14,875 14,859 14,835
Fully diluted earnings (loss) per share:
Continuing operations $ 0.57 $ 0.16 $ 2.20
Discontinued operations -- (0.44) (2.38)
Extraordinary item -- (0.51) --
Cumulative accounting change -- (0.09) --
Earnings (loss) per share $ 0.57 $ (0.88) $ (0.18)
Additional Fully Diluted Computation (3)
Earnings:
Net earnings (loss) $ 10,981 $ (10,557) $ (177)
Shares:
Weighted average number of common
shares outstanding 14,756 14,859 14,835
Dilutive effect of outstanding options
and rights (as determined by the
application of the treasury stock
method at the higher of the ending or
average market price for the year) 119 87 66
Shares issuable from assumed exercise of
convertible preference stock 1,685 1,697 1,710
Weighted average number of shares
outstanding, as adjusted 16,560 16,643 16,611
Fully diluted earnings (loss)
per share $ 0.66 $ (0.63) $ (0.01)
</TABLE>
(1) The inclusion of outstanding options and rights in this
computation would have an anti-dilutive effect on earnings per
share.
(2) The inclusion of preference stock in the fully dilutive
computation would have an anti-dilutive effect on earnings per
share.
(3) This calculation is submitted in accordance with Securities
Exchange Act of 1934 Regulation S-K, paragraph 229.601 (b)
(11) although it is contrary to paragraph 40 of APB Opinion
No. 15 because it produces an anti-dilutive result in 1995,
1994 and 1993.
11-2
FINANCIAL REVIEW
OVERVIEW
Dravo Corporation's financial results following its first year
operating as a lime company were positive. Demand was robust
throughout the year in most lime markets, and spot market pricing
was strong. Earnings from continuing operations increased not
only compared to 1994's actual results, which included Dravo
Basic Materials (DBM), the construction aggregates operation that
was divested at the end of 1994, but on a pro forma basis as
well. Dampening 1995 performance, however, were a series of
startup problems and delays encountered in connection with the
expansion of the company's Black River facility in northern
Kentucky. Production levels and operational cost targets were
not met during the initial startup period. However, toward the
end of the year and continuing through early 1996, production
rates and costs were more in line with expectations.
Progress continued in resolving discontinued operations issues.
A contract dispute with Continental Energy Associates (CEA)
related to CEA's Hazleton Gasification Facility was resolved.
The company paid $2.8 million as its share of the settlement. CEA
had claimed damages as high as $35 million. The settlement was
within the amount provided in the previously established reserve
for discontinued operations for legal fees anticipated to
litigate the claim and, therefore, did not impact current
earnings.
Earnings for the year were $11.0 million, or $0.57 per share. In
1994, Dravo reported a net loss of $10.6 million, or $0.88 per
share. A charge to discontinued operations of $6.5 million was
recorded in 1994 for legal fees and to provide for the settlement
of a lawsuit brought in Venezuela for contract services provided
in the mid-1970s. Also, an extraordinary charge of $7.6 million,
or $0.51 per share, was recorded to reflect the write-off of fees
associated with debt instruments that were prepaid or
substantially altered as a result of the DBM asset sale. A one-
time charge of $1.4 million, or $0.09 per share, reflects the
cumulative accounting effect of the adoption of Statement of
Financial Accounting Standards No. 112, "Employers Accounting for
Postemployment Benefits."
In 1993, earnings from continuing operations were $35.1 million,
or $2.20 per share. Included in the 1993 earnings results was a
$24.9 million deferred tax benefit. Loss on discontinued
operations was $35.3 million, or $2.38 per share. The net loss
of $177,000 equaled $0.18 per share after payment of preferred
dividends.
RESULTS OF OPERATIONS
CONTINUING OPERATIONS
Revenue: Revenue in 1995 was $146.1 million compared to $278.1
million in 1994, which included DBM for the entire year. Lime
revenue in 1994 was $125.7 million. The increased lime revenue
in 1995 was mainly due to first-year shipments to American
Electric Power's Gavin station under a 15-year supply contract.
Shipments under a new supply agreement with the Henderson
Municipal Power and Light Station operated by Big Rivers Electric
Cooperative and strong spot market pricing in 1995 also
contributed to the revenue increase.
Revenue of $278.1 million during 1994 was up slightly over 1993's
level. Lime revenue of $125.7 million was down compared to 1993
due to price concessions granted in return for multi-year
extensions of long-term lime supply contracts and weather-related
problems in the first quarter. The impact of these items was
partially mitigated, however, by increased demand for non-utility
lime in 1994. Demand was especially strong for metallurgical
lime used in making steel and aluminum.
Costs and Expenses: Gross profit of $36.5 million was $7.5
million lower in 1995 than in 1994, which included DBM. Margins,
however, were much improved: 25 percent in 1995 versus 16 percent
last year. The improved margins reflect the dilutive effect the
aggregates business had on the company's margins before the
divestiture. Gross margins on lime sales were slightly higher
than last year's pro forma results, but the increase was less
than expected because of start-up related production costs at
Black River.
Gross profit of $44.0 million in 1994 was down $5.3 million from
1993. Lime and aggregates operations located in the Ohio River
Valley were negatively affected by a severe winter that caused
operating difficulties during the first quarter. Price
concessions on long-term lime supply contracts impacted gross
profit, as did an unscheduled seven-week outage at one of the
company's electric utility customer's generating stations.
Production costs at the Black River operation were higher as
personnel were added in preparation for expanded underground
mining and start-up of the two new lime kilns. Also, the write-
off of equipment being replaced as part of the plant expansion
and modernization project affected profit margins.
-12-
<PAGE>
Selling expense of $5.0 million was lower primarily due to the
DBM sale. Selling expense also varies due to amounts of research
and development expense that can be billed to third parties.
These research activities involve a variety of lime-related
technologies, with particular emphasis on air pollution control.
Depending on the project, reimbursement may be made by
governmental agencies, public utilities or private groups for all
or a portion of project costs. Research and development costs
and billings to third parties are detailed in Note 16, Research
and Development, in the Notes to Consolidated Financial
Statements.
General and administrative expenses were $6.3 million lower in
1995 than last year due to personnel reductions following the DBM
sale and consolidation of the company's administrative functions
at Dravo's Pittsburgh headquarters. On a pro forma basis,
administrative expenses were higher because of differences
between actual experience and the assumptions used in preparing
the pro forma analysis. Expenses in 1994 were reduced by more
than six percent from 1993. The reduction reflects lower
staffing levels, employee and retiree medical expenses, and
travel expenses, as well as lower charges related to the
amortization of a non-cancelable lease obligation on a downtown
Pittsburgh office building.
Equity in earnings of joint ventures includes, in 1995, the
company's share in two 50-percent owned joint ventures: a
contract phosphate rock mining operation in Idaho and a small
contract coke operation in Wyoming. Prior to 1995, the company
also had a 50-percent share in a shell dredging operation located
off the Louisiana coast. Earnings from joint ventures were down
$1.1 million from 1994 due to higher maintenance expense at the
Idaho facility and the sale of the shell dredging operation as
part of the DBM transaction. In 1994, results for the shell
dredging operation were significantly improved over 1993. The
phosphate mining operation's profitability varies depending on
mining conditions and its single contract customer's
requirements. Strong demand led to improved results in 1994 over
1993.
Other income includes the gain on the sale of property, plant and
equipment. In 1995, the amount is insignificant. The $1.1
million gain in 1994 includes the sale of the company's airplane,
$324,000, and $487,000 from the sale, after accrued expenses, of
DBM's assets. See Note 3, Dispositions, in the Notes to
Consolidated Financial Statements for a further discussion of the
DBM sale transaction. In 1993, a gain was recognized on the sale
of property in Baton Rouge, Louisiana, and excess floating
equipment, mainly barges.
The decline in interest income from 1994 reflects the collection,
early in 1995, of an interest bearing note receivable. In 1994,
interest income was lower due to a lower balance on this same
note receivable and the cessation of an interest accrual on
another note.
Interest expense of $4.8 million in 1995 was significantly lower
than 1994's expense of $12.4 million. The reduction reflects
lower debt levels as the company prepaid $85.5 million of loans
early in 1995 from cash received from the DBM transaction. Lower
interest rates and the capitalization of interest associated with
the Black River expansion also lowered expense. Interest expense
in 1994 was $3.2 million higher than 1993. The higher expense
was due to higher interest rates on a prime rate-based line of
credit and fees paid to a prospective lender whose participation
in the Black River financing package was terminated by the
company. Capitalized interest on major capital projects amounted
to $2.8 million and $1.4 million in 1995 and 1994, respectively.
No interest was capitalized in 1993.
Income tax expense of $340,000 represents an accrual for state
income taxes. Significant net operating loss carryforwards
(NOLs) exist that shelter the company's income from most federal,
and some state, income taxes. In 1994, income tax expense of
$597,000 included an accrual of $300,000 for federal alternative
minimum tax arising from the sale of DBM assets. In 1993, a
benefit for income taxes of $24.9 million was recorded under the
provisions of Statement of Financial Accounting Standards No. 109
(SFAS 109), "Accounting for Income Taxes." Management believes
that, due to the large proportion of revenue generated by long-
term supply contracts, income can be reasonably projected for
purposes of determining whether the realization of the asset
resulting from the utilization of NOLs in future years is more
likely than not. The amount of the net deferred tax asset
reflects that portion of the gross deferred tax asset that
management believes, based on current projections and estimates,
is more likely than not to be realized. After the recognition of
all NOLs have been reflected in the consolidated financial
statements, the company's tax rate will return to a more normal,
higher effective rate
In conjunction with the sale of DBM's assets, existing loan
agreements were substantially altered, including a $35 million
reduction in the amount available under a revolving credit
facility. Also, while negotiating a $50 million financing
agreement with Prudential Power Funding for the Black River
expansion, the company purchased a call option that enabled it to
prepay on May 17, 1995, without penalty, amounts outstanding
under the financing agreement. With Prudential Power Funding's
consent, the entire amount borrowed was prepaid. The fees
associated with these agreements were written off as
extraordinary items in 1994.
-13-
<PAGE>
Effects of inflation: Inflation rates have been low over the
past three years and as a result have not had a significant
effect on the company's operations. In addition, Dravo Lime's
long-term lime supply contracts provide for price increases for
specific production expenses, such as labor, fuel and
electricity.
DISCONTINUED OPERATIONS
A contract dispute with Continental Energy Associates (CEA) was
resolved in 1995. The company's share of the settlement, $2.8
million, did not necessitate an additional provision for
discontinued operations. In 1994, a previously established
provision for discontinued operations was increased $6.6 million.
The additional charge was taken to cover a $4.5 million
settlement involving an alleged breach of contract by the company
for work performed between 1973 and 1978 in Venezuela. The
balance of the provision was, for the most part, estimated legal
fees for the CEA dispute and an insurance claim. As noted, the
CEA dispute was subsequently settled. The second matter involves
the company's assertion that it is entitled to a defense and
indemnity under its contracts of insurance for environmental
clean-up costs in Hastings, Nebraska. See Note 8, Contingent
Liabilities, in the Notes to Consolidated Financial Statements
for a further discussion of the Hastings matter.
In 1993, a $35.3 million charge was recorded. The provision was
primarily to cover a settlement agreement with the City of Long
Beach, California, which included the company giving up its claim
to unpaid receivables and interest totaling $18 million. The
provision also recognized an increase in the estimated
environmental clean-up costs at the Hastings superfund site,
write-off of a note receivable due to an unfavorable court ruling
and additional legal fees.
FINANCIAL POSITION AND LIQUIDITY
Significant changes on the company's balance sheet from December
31, 1994 to year-end 1995 resulted principally from the
collection of a $120.5 million receivable from Martin Marietta
Materials, Inc. (Martin Marietta) relating to the sale of DBM.
The company completed negotiations on December 30, 1994 for the
sale of substantially all the assets and certain liabilities of
DBM to Martin Marietta effective January 3, 1995. The balance
sheet at December 31, 1994, reflected the effect of the sale
transaction, in that the assets and liabilities sold were removed
and a $120.5 million receivable from Martin Marietta recorded.
In early 1995, the receivable was satisfied with cash, a portion
of which was used to prepay $85.5 million of debt. The
substantial reduction in accounts payable resulted from the
satisfaction of DBM payables outstanding at December 31, 1994.
Long-term debt increased $21.8 million from year-end 1994 due to
$27.9 million borrowed under a revolving credit facility,
partially offset by $6.1 million reclassified from long-term debt
to a current obligation. The increase in the outstanding debt
under the revolving credit facility is due primarily to funding
the Black River expansion project.
The company has sufficient funds and borrowing capacity to meet
its anticipated operating and capital needs. To minimize
interest charges, cash balances are kept low through a banking
arrangement that uses excess cash held in the company's accounts
to reduce the amount of overnight borrowing on the revolving
credit agreement.
Effective October 1, 1995, a revolving credit/letter of credit
facility provided by a consortium of lenders that includes First
Alabama Bank; PNC Bank, N.A.; and Bank of America Illinois was
increased to $65 million. Interest on the revolver equals either
the base lending rate of Regions Financial Corporation, First
Alabama Bank's parent, or, at the option of the company, the
Eurodollar interest rate plus two percent. The facility expires
July 31, 1997, but includes renewal provisions.
The company intends to use a portion of the line of credit to
finance construction of a new kiln and related material-handling
equipment at its Maysville facility. On July 31, 1997, up to $17
million borrowed under the facility may be converted to a five-
year term loan. Also on July 31, 1997, the amount available
under the revolver will be reduced from $65 million to $45
million.
Obligations under the revolving credit/letter of credit facility
and senior term notes are secured by a pledge of the stock of
Dravo Lime Company and Dravo Basic Materials Company along with
Dravo Lime Company's accounts receivable and finished goods
inventories. Additionally, certain contract rights, patents and
mortgages on the company's Maysville, Black River and Longview
plants have been pledged as collateral. The agreements contain
uniform restrictive covenants that require the company to
maintain minimum net worth levels and fixed charge ratios on a
consolidated basis; restrict incurrence of debt, liens and lease
obligations; restrict the sale of significant assets; and limit
payment of dividends. These restrictions are not expected to
have an adverse impact on the company's ability to meet its
obligations.
All known outstanding discontinued operations items have been
classified as current or long-term based on the estimated timing
of future cash receipts and disbursements. The discontinued
operations liabilities do not have a material adverse impact on
liquidity because cash payments needed to satisfy them are spread
over several years.
-14-
<PAGE>
In January, 1995, the Board of Directors approved a program
whereby the company was authorized to purchase up to 250,000
shares of its common stock on the open market. During the year,
over 228,000 shares were repurchased. The shares are being held
in the treasury and will be used for general corporate purposes.
DIVIDENDS
The company's loan agreement contains a covenant that limits
common stock dividend payments. A common stock dividend may not
be declared if that dividend plus all other common dividends paid
after September 30, 1995, exceeds 25 percent of cumulative
earnings from continuing operations after September 30, 1995.
Cumulative earnings exclude gains from the sale of capital
assets, extraordinary gains and unremitted earnings of joint
ventures. At December 31, 1995, cumulative earnings since
September 30, 1995, from which dividends could be declared
totaled $2.8 million. No dividends on common stock were
declared. Dividends on the $3.0875 cumulative, convertible,
exchangeable, Series D Preference Stock and the $2.475 cumulative
convertible Series B Preference Stock were declared quarterly
throughout each of the last three years. All declared preference
dividends have been paid on a timely basis.
COMMON STOCK MARKET PRICE
The principal market on which Dravo's common stock is traded is
the New York Stock Exchange under the symbol, DRV. The high and
low common stock sales prices for each quarterly period in 1995
and 1994 as reported for New York Stock Exchange composite
transactions were:
<TABLE>
1995 1994
<CAPTION>
Quarter High Low High Low
<S> <C> <C> <C> <C>
First 11 3/4 10 13 3/8 10 1/4
Second 14 3/4 10 1/4 12 1/4 10
Third 14 3/4 12 1/2 12 5/8 9 1/2
Fourth 13 5/8 11 1/2 12 9 3/4
</TABLE>
OUTLOOK
Continuing operations: Dravo Corporation successfully completed
its first year operating as a lime business. With over two-
thirds of production capacity committed under long-term utility
and merchant lime contracts, and the balance expected to be sold
into strong spot markets, the company foresees building on the
progress made in 1995.
A major expansion at Black River, despite delays and start-up
problems, is now performing at the level envisioned in the
project design. The next major capital project, the installation
of a new kiln and related material-handling equipment at the
company's Maysville, Kentucky, facility, is scheduled for
completion in early 1997. The project will cost approximately
$20 million and will add 350,000 tons of annual capacity. A
smaller, but important project, will be the refurbishing of an
older-existing kiln at Black River. The project will increase
production of the kiln while significantly reducing its
production costs.
The Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards No. 123, "Accounting for Stock-
Based Compensation" (SFAS 123) in October, 1995. Financial
statements presented for fiscal 1996 will measure the fair value
of stock-based compensation awarded to employees in 1995 and
thereafter. SFAS 123 allows companies a choice between
continuing to account for stock-based awards using the intrinsic
value, as prescribed by Accounting Principles Board Opinion No.
25 (APB 25), or the fair value. If the company chooses to
continue following APB 25, the pro forma effect the fair value
methodology would have had on net income and earnings per share
will be disclosed. The company has not yet determined the
magnitude of the difference between the intrinsic value and fair
value approaches nor the method it will choose to account for
stock-based compensation.
The FASB also issued SFAS 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of"
(SFAS 121). SFAS is effective for fiscal years beginning after
December 31, 1995. The effect of adopting SFAS 121 will be
immaterial to the company.
Discontinued operations: The company formerly operated a metal
fabrication facility in Hastings, Nebraska. The federal
Environmental Protection Agency (EPA) has notified the company it
believes the company is a potentially responsible party (PRP) for
the clean-up of soil and groundwater contamination at four sub-
sites in the Hastings area. See Note 8, Contingent Liabilities,
in the Notes to Consolidated Financial Statements for further
discussion of the company's estimate of total clean-up costs and
its share of those costs.
Management believes the provision for losses on discontinued
operations is adequate at this time. However, in establishing
the provision and monitoring it, the costs of exiting
discontinued businesses and pursuing the company's rights through
litigation were estimated. A ruling by the courts or a
settlement of the disputes that is adverse to Dravo's position,
or other unforeseen developments, could require a future
additional provision for discontinued operations.
-15-
<PAGE>
DRAVO CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
<TABLE>
December 31,
1995 1994
<CAPTION>
(In thousands)
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 1,086 $ 2,027
Receivable from sale of Dravo Basic
Materials Company (Note 3) -- 120,464
Accounts receivable, net of allowance for
uncollectibles of $934 and $108 24,251 20,138
Notes receivable (Note 15) 1,296 2,803
Inventories (Note 4) 14,194 12,638
Net assets of discontinued
operations (Note 2) 923 --
Other current assets 1,322 2,067
Total current assets 43,072 160,137
Advances to and equity in joint ventures 2,466 2,536
Notes receivable (Note 15) 3,497 5,061
Other assets 23,205 21,281
Deferred income taxes (Note 13) 24,853 24,853
Property, plant and equipment:
Land 6,164 6,127
Mine development 9,218 8,376
Building and improvements 11,562 9,722
Machinery and other equipment 198,891 171,108
225,835 195,333
Less accumulated depreciation
and amortization 109,667 101,872
Net property, plant and equipment 116,168 93,461
Total assets $213,261 $307,329
</TABLE>
See accompanying notes to consolidated financial statements.
-16-
<PAGE>
DRAVO CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
<TABLE>
December 31,
<CAPTION>
1995 1994
(In thousands,
except share amounts)
LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C> <C>
Current liabilities:
Current portion of long-term
notes (Notes 5 and 15) $ 6,099 $ 85,077
Accounts payable - trade 17,969 36,257
Accrued insurance 1,639 2,265
Accrued retirement contribution 2,423 2,388
Net liabilities of discontinued
operations (Note 2) -- 13,547
Other current liabilities 5,177 14,264
Total current liabilities 33,307 153,798
Long-term notes (Notes 5 and 15) 64,292 42,440
Other liabilities 6,290 5,900
Net liabilities of discontinued
operations (Note 2) 9,517 8,445
Redeemable preference stock (Notes 6 and 15):
Par value $1, issued 200,000 shares:
cumulative, convertible, exchangeable
Series D (entitled in liquidation
to $20.0 million) 20,000 20,000
Shareholders' equity (Notes 6 and 12):
Preference stock, par value $1, authorized
1,878,870 shares: Series B, $2.475
cumulative, convertible, issued 25,386
and 28,386 shares (entitled in liquidation
to $1.4 million and $1.6 million);
Series D, reported above 25 28
Common stock, par value $1, authorized
35,000,000 shares: issued 15,055,237
and 14,985,839 shares 15,055 14,986
Other capital 60,818 63,554
Retained earnings 8,464 18
Treasury stock at cost;
347,691 and 119,221 common shares (4,507) (1,840)
Total shareholders' equity 79,855 76,746
Total liabilities and shareholders'
equity $213,261 $307,329
</TABLE>
See accompanying notes to consolidated financial statements.
-17-
<PAGE>
DRAVO CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations
<TABLE>
<CAPTION>
Years ended December 31,
(In thousands, except per share data) 1995 1994 1993
<S> <C> <C> <C>
Revenue $146,067 $278,052 $277,590
Cost of revenue 109,541 234,018 228,266
Gross profit 36,526 44,034 49,324
Selling expenses 5,009 7,116 7,602
General and administrative expenses 16,228 22,497 24,058
Earnings from operations 15,289 14,421 17,664
Other income (expense):
Equity in earnings (loss)
of joint ventures 572 1,672 (18)
Other income 182 1,088 692
Interest income 85 754 1,327
Interest expense (4,807) (12,408) (9,194)
Net other expense (3,968) (8,894) (7,193)
Earnings before taxes from
continuing operations 11,321 5,527 10,471
Income tax expense (benefit) (Note 13) 340 597 (24,655)
Earnings from continuing operations 10,981 4,930 35,126
Loss on discontinued operations (Note 2) -- 6,554 35,303
Earnings (loss) before extraordinary item
and cumulative accounting change 10,981 (1,624) (177)
Extraordinary item (Note 14) -- (7,572) --
Cumulative effect of accounting
change (Note 10) -- (1,361) --
Net earnings (loss) 10,981 (10,557) (177)
Preference dividends 2,535 2,544 2,554
Net earnings (loss) available
for common stock $ 8,446 $(13,101) $ (2,731)
Weighted average shares outstanding 14,875 14,859 14,835
Primary earnings (loss) per share:
Continuing operations $ 0.57 $ 0.16 $ 2.20
Discontinued operations -- (0.44) (2.38)
Extraordinary item -- (0.51) --
Cumulative effect of accounting change -- (0.09) --
Net earnings (loss) $ 0.57 $ (0.88) $ (0.18)
</TABLE>
See accompanying notes to consolidated financial statements.
-18-
<PAGE>
DRAVO CORPORATION AND SUBSIDIARIES
Consolidated Statements of Retained Earnings
<TABLE>
<CAPTION>
Years ended December 31,
(In thousands, except per share data) 1995 1994 1993
<S> <C> <C> <C>
Retained earnings at beginning of year $ 18 $ 13,119 $ 15,850
Net earnings (loss) 10,981 (10,557) (177)
10,999 2,562 15,673
Dividends declared: 1995 1994 1993
Series B preference
stock $ 2.475 $ 2.475 $ 2.475 65 74 84
Series D preference
stock 12.350 12.350 12.350 2,470 2,470 2,470
2,535 2,544 2,554
Retained earnings at end of year $ 8,464 $ 18 $13,119
</TABLE>
See accompanying notes to consolidated financial statements.
-19-
<PAGE>
DRAVO CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Years ended December 31,
(In thousands) 1995 1994 1993
<S> <C> <C> <C>
Cash flows from operating activities:
Earnings from continuing operations $ 10,981 $ 4,930 $ 35,126
Adjustments to reconcile earnings from
continuing operations to net cash provided
(used) by continuing operations activities:
Depreciation and amortization 9,536 17,626 17,985
Change in accounting principle -- (1,361) --
Gain on sale of assets (182) (1,088) (692)
Equity in joint ventures 70 (116) (2,155)
Changes in assets and liabilities, net of
effects from DBM disposition:
Increase in accounts receivable (4,113) (143) (5,410)
Decrease in notes receivable 568 464 1,008
Decrease (increase) in inventories (1,556) 3,909 6,311
Decrease (increase) in other current assets 745 (869) 721
Increase in other assets (5,150) (6,302) (2,373)
Increase in deferred income taxes -- -- (24,853)
Increase (decrease) in accounts payable
and accrued expenses (27,142) 7,873 947
Increase (decrease) in income taxes payable (144) 329 (20)
Increase in other liabilities 390 3,178 71
Total adjustments (26,978) 23,500 (8,460)
Net cash provided (used) by continuing
operations activities (15,997) 28,430 26,666
Loss from discontinued operations -- (6,554) (35,303)
Increase (decrease) in net liabilities of
discontinued operations (13,099) (4,592) 21,647
Proceeds from repayment of notes receivable
from sale of discontinued operations 2,200 1,600 1,992
Net cash used by discontinued
operations activities (10,899) (9,546) (11,664)
Net cash used by extraordinary item -- (7,572) --
Net cash provided (used) by
operating activities $(26,896) $11,312 $ 15,002
</TABLE>
See accompanying notes to consolidated financial statements
-20-
<PAGE>
DRAVO CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Years ended December 31,
(In thousands) 1995 1994 1993
<S> <C> <C> <C>
Cash flows from investing activities:
Proceeds from sale of assets $120,867 $ 2,148 $ 1,249
Additions to property, plant and equipment (33,144) (44,757) (13,646)
Other, net 3 509 (553)
Net cash provided (used) by
investing activities 87,726 (42,100) (12,950)
Cash flows from financing activities:
Net borrowing under revolving
credit agreements 27,948 19,300 4,600
Principal payments under long-term notes (85,259) (4,736) (4,446)
Principal payments under capital
lease obligations -- -- (306)
Proceeds from issuance of long-term notes 185 19,945 391
Proceeds from issuance of common stock 557 42 101
Purchase of treasury stock (2,667) -- --
Dividends (2,535) (2,544) (2,554)
Net cash provided (used) by
financing activities (61,771) 32,007 (2,214)
Net increase (decrease) in cash
and cash equivalents (941) 1,219 (162)
Cash and cash equivalents at beginning of year 2,027 808 970
Cash and cash equivalents at end of year $ 1,086 $ 2,027 $ 808
Supplemental disclosures of cash flow information:
Cash paid (received) during the year for:
Interest (net of amount capitalized) $ 5,695 $12,408 $ 9,195
Income tax 175 (143) 487
</TABLE>
See accompanying notes to consolidated financial statements.
-21-
<PAGE>
DRAVO CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Note 1: Summary of Significant Accounting Policies
Description of Business: The consolidated financial
statements include the accounts of Dravo Corporation and its
majority-owned subsidiaries (the company). The principal
subsidiary is Dravo Lime Company, one of the nation's
largest lime producers. Lime is sold to electric utility
companies under long-term contracts and to the pulp and
paper, metals, chemicals, municipal and construction
markets. Three major utility companies, with whom the
company has long-term contracts, each accounted for more
than 10 percent of consolidated revenue in 1995. The company
completed a transaction on December 30, 1994 in which it
sold substantially all the assets and certain liabilities of
Dravo Basic Materials Company, Inc. (DBM), a former
principal subsidiary. The assets and liabilities sold are
removed from the company's December 31, 1995 and 1994
consolidated balance sheets. The December 31, 1994 and 1993
consolidated statements of operations and consolidated
statements of cash flows include the results of DBM for the
entire year.
Principles of Consolidation: Significant intercompany
balances and transactions have been eliminated in the
consolidation process.
Use of Estimates: 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 amount of
revenues and expenses during the reporting period. Actual
results could differ from those estimates.
Cash and Cash Equivalents: For purposes of reporting cash
flows, the company considers all highly liquid debt
instruments purchased with a maturity of three months or
less to be cash equivalents.
Inventories: Inventories are valued at average production
cost or market, whichever is lower. The cost of products
produced includes raw materials, direct labor and operating
overhead.
Property, Plant, Equipment and Depreciation: Property,
plant and equipment are stated at cost. The cost of
buildings, equipment and machinery is depreciated over
estimated useful lives on a straight-line basis.
Expenditures for maintenance and repairs which do not
materially extend the lives of assets are expensed
currently. The asset cost and accumulated depreciation are
removed from the accounts for assets sold or retired, and
any resulting gain or loss is included in other income and
expense.
DRAVO CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Note 1: Summary of Significant Accounting Policies
(continued)
Income Taxes: Deferred income taxes reflect the tax
consequences on future years of differences between the tax
bases of assets and liabilities and their financial
reporting amounts. Future tax benefits, such as net
operating loss carryforwards, are recognized to the extent
that realization of such benefits are more likely than not.
Earnings Per Share: Primary earnings per share are based on
net earnings less preference dividends declared in the year,
divided by the weighted average sum of common shares
outstanding during the year and common share equivalents.
Shares exercisable as employee stock options and stock
appreciation rights are considered common share equivalents
except when their inclusion would be anti-dilutive. Primary
common share equivalents are calculated based on the average
common stock price for the year. Fully diluted earnings per
share are based on net earnings, divided by the sum of the
weighted average number of common shares outstanding during
the year, weighted average number of shares resulting from
the assumed conversion of issued preference shares to common
shares and common share equivalents. Fully diluted common
share equivalents are calculated based on the higher of the
average or ending common stock price for the year. Fully
diluted earnings per share are anti-dilutive in 1995, 1994
and 1993 and are not presented.
Note 2: Discontinued Operations
In December, 1987, Dravo's Board of Directors approved a
major restructuring program which concentrated the company's
future direction exclusively on opportunities involving its
natural resources business. An additional charge of $6.5
million was taken in 1994 for discontinued operations. The
charge included $4.5 million to settle a claim that alleged
the company breached a contract relating to engineering and
procurement services rendered between 1973 and 1978 for a
sugar cane processing facility in Venezuela. The provision
also included amounts for legal fees anticipated to pursue
-22-
<PAGE>
various lawsuits and claims, the most significant being the
Hastings insurance litigation discussed in Note 8,
Contingent Liabilities, and a contract dispute with
Continental Energy Associates (CEA). The CEA dispute was
settled in 1995 and did not exceed the amount provided in
the discontinued operations provision.
A $35.3 million provision for discontinued operations
expenses was recorded in 1993. The provision covered the
write-off of receivables and accrual of a settlement
relating to a resource recover facility built in Long Beach,
California; updated estimates of the potential costs to
clean-up soil and groundwater contamination at a former
operation located in Hastings, Nebraska; write-down of a
receivable from a Portland, Maine, utility to reflect a jury
award; and estimated legal fees.
The company received cash proceeds of $2.2 million in 1995,
$1.6 million in 1994 and $2.0 million in 1993 from the
repayment of notes received from the previous sales of
discontinued businesses.
The remaining discontinued operations' assets and
liabilities for the respective years ended December 31
relate to non-cancelable leases, environmental, insurance,
legal and other matters associated with exiting the
engineering and construction business and are presented
below:
<TABLE>
(In thousands) 1995 1994
<CAPTION>
<S> <C> <C>
Current assets:
Accounts and retainers receivable $ 122 $ 24
Other 7,185 --
Total current assets 7,307 24
Accounts and retainers receivable 333 444
Other 309 5,121
Total assets $ 7,949 $ 5,589
Current liabilities:
Accounts and retainers payable $ 140 $ 63
Accrued loss on leases 2,240 2,315
Other 4,004 11,193
Total current liabilities 6,384 13,571
Accrued loss on leases 3,328 5,632
Other 6,831 8,378
Total liabilities $16,543 $27,581
Net liabilities and accrued loss
on leases of discontinued operations $(8,594) $(21,992)
</TABLE>
DRAVO CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Note 3: Dispositions
The company completed a transaction on December 30, 1994 in which
it sold to Martin Marietta Materials, Inc. (Martin Marietta),
effective January 3, 1995, substantially all the assets of its
construction aggregates business. Assets sold included the
assets, properties and leases of Dravo Basic Materials Company,
Inc. (DBM), a wholly owned subsidiary of the company, and
Atchafalaya Mining Company, Inc. (AMC), a wholly owned subsidiary
of DBM, used in the production, marketing, distribution and sale
of various aggregate products. Also sold was the capital stock
of Dravo Bahama Rock Limited (DBR), a wholly owned foreign
subsidiary of DBM.
The company, DBM and AMC retained substantially all obligations
and liabilities which arose from, or in connection with,
operations prior to the sales transaction. After expenses, a net
pre-tax gain of $487,000 was recorded as other income.
The assets and liabilities sold to Martin Marietta were removed
from the company's December 31, 1994 balance sheet, and a
corresponding receivable from the sale of DBM of $120.5 million
was recorded. The December 31, 1994 consolidated statement of
operations includes the results of DBM for the entire year.
The following pro forma consolidated statement of operations
presents the results of operations assuming the disposition of
DBM had been completed as of the beginning of 1994. Adjustments
have been made to exclude the results of DBM, to decrease
interest expense for loans prepaid in early 1995 from the sale
proceeds, and to record interest income at overnight investment
rates for cash assumed to have been received in excess of
liabilities paid. Pro forma data is provided for comparative
purposes only and does not purport to be indicative of the
results which actually would have been obtained if the
disposition had taken place prior to the pro forma dates.
-23-
<PAGE>
(In thousands, except per share data)
<TABLE>
<CAPTION>
December 31,
1995 1994
Actual Pro Forma
(Unaudited)
<S> <C> <C>
Revenue $146,067 $125,661
Cost of revenue 109,541 94,859
Gross profit 36,526 30,802
Selling expenses 5,009 4,530
General and administrative expenses 16,228 12,872
Earnings from operations 15,289 13,400
Other income (expense):
Equity in earnings of joint ventures 572 1,115
Other income 182 199
Interest income 85 1,727
Interest expense (4,807) (5,717)
Net other expense (3,968) (2,676)
Earnings before taxes from
continuing operations 11,321 10,724
Income tax expense 340 489
Earnings from continuing operations $ 10,981 $ 10,235
Earnings per share, continuing operations$ 0.57 $ 0.52
</TABLE>
Note 4: Inventories
<TABLE>
Inventories for the respective years ended December 31 are
classified as follows:
<CAPTION>
(In thousands) 1995 1994
<S> <C> <C>
Finished goods $ 1,677 $ 1,834
Materials and supplies 12,517 10,804
Net inventories $14,194 $12,638
</TABLE>
Note 5: Notes Payable
<TABLE>
Notes payable at December 31 include the following:
<CAPTION>
(In thousands)
1995 1994
<S> <C> <C>
Short-term:
Current portion of long-term notes $ 6,099 $ 85,077
Total short-term 6,099 85,077
Long-term:
Variable rate revolving line of credit 27,950 55,800
Variable rate note -- 6,297
9.95% notes -- 2,800
10.13% notes -- 19,944
11.21% notes, payable through 2002 41,800 41,800
Other notes, payable through 2005 641 876
70,391 127,517
Deduct: Current portion of notes 6,099 85,077
Total long-term notes $64,292 $ 42,440
</TABLE>
The following is a description of the terms and conditions
of the company's major debt instruments:
The $27.9 million note payable was borrowed under a $65.0
million revolving credit/letter of credit facility with
First Alabama Bank; PNC Bank, N.A.; and Bank of America
Illinois. Interest on the revolver equals either the base
lending rate of Regions Financial Corporation, First Alabama
Bank's parent, or , at the option of the company, the
Eurodollar interest rate plus two percent. The facility
expires July 31, 1997, but includes renewal provisions.
The company intends to use a portion of the line of credit
to finance construction of a new kiln and related material-
handling equipment at its Maysville facility. On July 31,
1997, up to $17.0 million borrowed under the facility may be
converted to a five-year term loan. Also on July 31, 1997,
the amount available under the revolver will be reduced from
$65.0 million to $45.0 million.
The variable rate note, 9.95 percent promissory notes and
10.13 percent construction notes were prepaid early in 1995
from a portion of the Dravo Basic Materials sale proceeds.
The 11.21 percent term notes require quarterly interest
payments and annual principal repayments in the amount of
$6.0 million beginning January, 1996.
Obligations under the revolving credit/letter of credit
facility and the 11.21 percent term notes are secured by a
pledge of the stock of Dravo Lime Company and Dravo Basic
Materials Company along with Dravo Lime Company's accounts
receivable and finished goods inventories. Additionally,
certain contract rights, patents and mortgages on the
company's Maysville, Black River and Longview plants have
been pledged as collateral. The agreements contain uniform
restrictive covenants that require the company to maintain
minimum net worth levels and fixed charge ratios on a
consolidated basis; restrict incurrence of debt, liens and
lease obligations; restrict the sale of significant assets,
and limit payment of dividends. The company may not declare
a common stock dividend if that dividend plus all other
common dividends paid after September 30, 1995, exceed 25
percent of cumulative earnings from continuing operations
after September 30, 1995. Cumulative earnings exclude gains
from the sale of capital assets, extraordinary gains and
unremitted earnings of joint ventures. At December 31,
1995, cumulative earnings since September 30, 1995, from
which dividends could be declared totaled $2.8 million. No
dividends on common stock were declared.
<PAGE>
Assets pledged under certain notes and leases had a book
value of $133.4 million at December 31, 1995.
In February, 1993, the company entered into an interest rate
swap agreement with Continental Bank, N.A. on the $41.8
million fixed rate long-term notes payable. The transaction
was accounted for as a hedge of those notes. On December
30, 1994, the company paid $1.4 million to terminate the
swap agreement.
Amounts payable on long-term debt due in 1996 and thereafter
are: 1996, $6.1 million; 1997, $6.1 million; 1998, $6.1
million; 1999, $6.0 million; 2000, $6.0 million; and after
2000, $12.1 million.
Note 6: Redeemable Preference Stock
The company has outstanding 200,000 shares of cumulative,
convertible, exchangeable, Series D Preference Stock.
Cumulative dividends of $3.0875 per share are payable
quarterly. Each share of preference stock may be converted,
at the option of the holder, into 8.0 shares of common
stock. The stock is also exchangeable, at the option of the
company, for 12.35 percent Senior Subordinated Convertible
notes due September 21, 2001. The 12.35 percent Senior
Subordinated Notes would contain the same conversion rights,
restrictions and other terms as the preference stock.
The company may redeem the Series D Preference Stock, in
whole or in part, after January 21, 1996, for $100 per share
plus accrued dividends, provided that the market price of
common stock as of the date of the decision to redeem the
shares, as defined in the Certificate of Designations,
Preferences and Rights for the Series D Preference Stock,
shall be at least equal to 175 percent of the conversion
price for the preference stock. Mandatory annual redemption
of the lesser of 50,000 shares or the number of shares then
outstanding begins September 21, 1998, at $100 per share
plus accrued dividends. In the event of liquidation of the
company, the holders of outstanding Series D Preference
Stock shall be entitled to receive a distribution of $100
per share plus all accumulated and unpaid dividends.
The company had outstanding 25,386 and 28,386 shares of
cumulative, convertible Series B Preference Stock on
December 31, 1995 and 1994, respectively. Cumulative annual
dividends of $2.475 per share are payable quarterly. Each
share of Series B Preference Stock may be converted at the
option of the holder to 3.216 shares of common stock. In
the event of the company's liquidation, the holders of the
Series B Preference Stock are entitled to $55 per share plus
all accumulated and unpaid dividends.
Note 7: Commitments
Total rental expense for 1995, 1994, and 1993 was $3.1
million, $35.2 million and $34.4 million, respectively. The
minimum gross rentals under non-cancelable operating leases
for these years were $13.0 million, $17.3 million and $17.5
million, respectively. Of these amounts, $10.5 million,
$10.5 million and $10.4 million in 1995, 1994 and 1993,
respectively, were provided for in the discontinued
operations provision.
The minimum future rentals under non-cancelable operating
leases and future rental receipts from subleases to third
parties as of December 31, 1995 are indicated in the
following table. Of the $10.7 million net minimum payments,
$5.6 million relates to, and has been expensed as part of,
discontinued operations.
<TABLE>
Minimum Future Rentals and Rental Receipts
<CAPTION>
(In thousands)
<S> <C>
1996 $ 12,382
1997 12,051
1998 3,757
1999 --
2000 --
After 2001 --
Total minimum payments required 28,190
Less: Sublease rental receipts (17,514)
Net minimum payments $ 10,676
</TABLE>
A joint venture phosphate mining operation, in which the
company is a 50 percent partner, has credit available under
a bank loan agreement for equipment purchases. The company
would be required to repay the entire loan in the event of a
failure of both the joint venture and the other partner. At
December 31, 1995 and 1994, $4.6 million and $2.9 million,
respectively, was borrowed under the agreement.
At December 31, 1995 and 1994, the company had outstanding
letters of credit totaling $5.0 million and $7.5 million,
respectively.
Note 8: Contingent Liabilities
The company has been notified by the federal Environmental
Protection Agency (EPA) that the EPA believes the company is a
potentially responsible party (PRP) for the clean-up of soil and
groundwater contamination at four sub-sites in Hastings,
Nebraska. The Hastings site is one of the EPA's priority sites
for taking remedial action under the Comprehensive Environmental
Response, Compensation and Liability Act (CERCLA).
At one of these sub-sites, a municipal landfill, the company
believes it could not have disposed of hazardous wastes at the
particular sub-site because the landfill was
-25-
<PAGE>
closed prior to the
time the company and its predecessor initiated the operation
which generated the type of hazardous substances found at this
sub-site. Other PRPs, including the local municipality, have
agreed to perform the remedial investigation and to design soil
and groundwater remedies at this sub-site. The company has
agreed to participate in an EPA-initiated allocation proceeding
for this sub-site.
The company has also been notified by the EPA that the EPA
considers it a PRP at another municipal landfill in Hastings. At
least three other parties (including the City of Hastings) are
considered by the EPA to be PRPs at this second sub-site. At
this sub-site, the company has concluded that the City of
Hastings is responsible for a proper closure of the landfill and
the remediation of any release of hazardous substances. In
January, 1994, EPA invited the company and the other PRPs to make
an offer to conduct a remedial investigation and feasibility
study (RI/FS) of this sub-site and stated that the EPA was in the
process of preparing a work plan for the RI/FS. None of the PRPs
has volunteered to undertake the RI/FS.
With respect to the third sub-site, the company and two other
PRPs have been served with administrative orders directing them
to undertake soil remediation and interim groundwater remediation
at that sub-site. The company is currently complying with these
orders while reserving its right to seek reimbursement from the
United States for its costs if it is determined it is not liable
for response costs or if it is required to incur costs because of
arbitrary, capricious or unreasonable requirements imposed by the
EPA.
The EPA has taken no legal action with respect to its demand that
the company and the other PRPs pay its past response costs. A total
of five parties have been named by the EPA as PRPs at this sub-
site, but two of them have been granted de minimis status. The
company believes other persons should also be named as PRPs.
The fourth sub-site is a former naval ammunition depot which was
subsequently converted to an industrial park. The company and
its predecessor owned and operated a manufacturing facility in
this industrial park. To date, the company's investigation
indicates that it did not cause the release of hazardous
substances in this sub-site during the time it owned and operated
the facility. The United States has undertaken to conduct the
remediation of this sub-site.
In addition to sub-site clean-up, the EPA is seeking a clean-up
of area-wide contamination associated with all of the sub-sites
in and around Hastings, Nebraska. The company, along with other
Hastings PRPs, has recommended that the EPA adopt institutional
controls as the area-wide remedy in Hastings. The EPA has
indicated some interest in this proposal but has decided to first
conduct an area-wide remedial investigation before choosing a
remedy.
On August 10, 1992 the company filed suit in the Alabama District
Court against its primary liability insurance carriers and one of
its predecessor's insurers, seeking a declaratory judgment that
the company is entitled to a defense and indemnity under its
contracts of insurance (including certain excess policies
provided by one of the primary carriers) with regard to the third
Hastings sub-site. The company has settled the claim against its
predecessor's insurer, but the case against the company's
insurers is still in litigation. An award of punitive damages is
also being sought against the company's insurers for their bad
faith in failing to investigate the company's claim and/or
denying the company's claim. The company has notified its
primary and excess general liability carrier, as well as the
excess carrier of its predecessor, of the receipt of its notice
of potential liability at the first, second and fourth sub-sites.
Estimated total clean-up costs, including capital outlays and
future maintenance costs for soil and groundwater remediation of
approximately $18 million, are based on independent engineering
studies. Included in the discontinued operations provision is
the company's estimate that it will participate in 33 percent of
these remediation costs. The company's estimated share of the
costs is based on its assessment of the total clean-up costs, its
potential exposure, and the viability of other named PRPs.
Other claims and assertions made against the company will be
resolved, in the opinion of management, without material
additional charges to earnings.
The company has asserted claims that management believes to be
meritorious, but no estimate can be made at present of the timing
or the amount of recovery.
Note 9: Retirement Plans
The company has several defined benefit plans covering
substantially all employees. Benefits for the salaried plan are
based on salary and years of service, while hourly plans are
based on negotiated benefits and years of service. The company's
funding policy is to make contributions as are necessary to
provide assets sufficient to meet the benefits to be paid to plan
members in accordance with the requirements of the Employee
Retirement Income Security Act of 1974. Plan assets are composed
primarily of government securities and corporate debt and
equities.
-26-
<PAGE>
<TABLE>
The status of combined employee pension benefit plans as of
December 31, 1995 and 1994 is shown below:
<CAPTION>
1995 1994
Plans which have Plans which have Plans which have Plans which have
funded assets accumulated funded assets accumulated
in excess of benefit in excess of benefit
accumulated obligations accumulated obligations
benefit in excess of benefit in excess of
(In thousands) obligations funded assets obligations funded assets
<S> <C> <C> <C> <C>
Actuarial present
value of projected
benefit obligation:
Vested employees $179,649 $27,100 $147,801 $21,567
Non-vested employees 277 855 284 1,710
Accumulated benefit
obligation 179,926 27,955 148,085 23,277
Effect of projected
future salary increases 3,264 1,410 2,130 398
Total projected
benefit obligation 183,190 29,365 150,215 23,675
Plan assets 182,661 19,555 148,303 18,357
Assets less than projected
benefit obligation (529) (9,810) (1,912) (5,318)
Unamortized net (asset)
liability existing
at transition date 0 325 (687) 367
Unrecognized net loss from
actuarial experience 22,450 7,187 20,888 2,755
Adjustment to recognize
minimum liability -- (6,175) -- (2,922)
Prepaid (accrued)
pension expense $ 21,921 $(8,473) $ 18,289 $ (5,118)
</TABLE>
The sale of Dravo Basic Materials' assets resulted in the termination
of employment for essentially all Dravo Basic Materials employees
and certain executive and administrative employees of a subsidiary
company. As a result, the company recognized a charge in 1994 for
pension curtailment and special termination benefits expense. The
components of 1995, 1994 and 1993 net periodic pension (income)
expense are as follows:
<TABLE>
Years ended December 31,
1995 1994 1993
(In thousands)
<CAPTION>
<S> <C> <c > <C>
Service cost of benefits
earned during the year $ 470 $ 1,023 $ 901
Interest cost on projected
benefit obligation 14,356 13,981 14,431
Actual (return) loss on
plan assets (52,972) 14,570 (30,951)
Net amortization (deferral) 38,446 (29,521) 15,566
Curtailment and special
termination benefits expense -- 921 --
Net pension (income)
expense for year $ 300 $ 974 $ (53)
Expected long-term rate of
return on assets used to determine
net pension (income) expense 9.0% 8.0% 9.0%
</TABLE>
The following assumptions were used for the valuation of the
pension obligations as of December 31:
<TABLE>
1995 1994 1993
<CAPTION>
<S> <C> <C> <C>
Discount rate 7.25% 8.55% 7.5%
Rate of increase in
compensation levels 5.0% 5.0% 5.0%
</TABLE>
Note 10: Postretirement and Postemployment Benefits
The company provides health care and life insurance benefits for
retired employees. Employees may become eligible for certain
benefits if they meet eligibility qualifications while working
for the company. Previously, the company paid all cost increases
for employees who retired prior to 1985 and who did not elect to
participate in a plan in which they paid cost increases, in
exchange for expanded benefits, in excess of a specified amount.
For employees retiring after 1984, the company's liability was
limited to a fixed contribution amount for each participant or
dependent. Recently, the company communicated to all Medicare-
eligible retirees that, commencing in 1996, it will participate
in various Medicare HMOs. The retiree will have the option of
joining a Medicare HMO or selecting other health care plans;
however, the company will contribute a fixed amount toward the
cost of the coverage regardless of the plan selected. The
accumulated postretirement benefit obligation (APBO) at December
31, 1995, as presented in the following table, reflects the
implementation of this initiative.
The provisions of Statement of Financial Accounting Standards No.
106, "Employers' Accounting for Postretirement Benefits Other
Than Pensions," were adopted effective January 1, 1993. The
company accrues for the expected cost of providing postretirement
benefits to
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<PAGE>
the employee and the employee's beneficiaries and
covered dependents during the years of employment service.
Expense in 1994 includes a $471,000 curtailment loss resulting
from the termination of essentially all Dravo Basic Materials
employees and certain executive and administrative employees of a
subsidiary company due to the Dravo Basic Materials asset sale.
No funds are segregated for future postretirement obligations.
The company is amortizing its accumulated postretirement benefit
obligation (APBO) over a 20-year period. The APBO was calculated
using a discount rate of 7.25 percent and a health care cost
trend rate of 9.0 percent in 1996, gradually declining to 5.25
percent in 2001. An increase in the health care cost trend rate
of one percent would increase the APBO at December 31, 1995, by
$331,000 and the total service and interest rate components of
the 1995 postretirement benefit cost by $90,000.
Postretirement benefit cost for 1995, 1994 and 1993 includes the
following components:
<TABLE>
(In thousands) 1995 1994 1993
<CAPTION>
<S> <C> <C> <C>
Service cost - benefits earned
during the period $ 44 $ 105 $ 177
Interest cost on accumulated
postretirement benefit obligation 2,683 2,659 2,887
Amortization of accumulated
postretirement benefit obligation 1,705 1,789 1,789
Curtailment loss -- 471 --
Postretirement benefit cost $4,432 $5,024 $4,853
</TABLE>
<TABLE>
The postretirement benefit plans' funded status reconciled with
the amount included in the company's consolidated balance sheets
at December 31 is as follows:
<CAPTION>
(In thousands) 1995 1994
<S> <C> <C>
Accumulated postretirement
benefit obligation:
Retirees and related beneficiaries $ 21,505 $ 30,248
Other fully eligible participants 1,284 1,601
Other active participants not fully eligible 866 747
Accumulated postretirement
benefit obligation: 23,655 32,596
Unrecognized transition obligation (15,122) (30,822)
Unrecognized net loss (6,536) (134)
Accrued postretirement
benefit liability $ 1,997 $ 1,640
</TABLE>
The company adopted the provisions of Statement of Financial
Accounting Standards No. 112, "Employers' Accounting for
Postemployment Benefits" (SFAS 112) effective January 1, 1994.
SFAS 112 requires accrual of the estimated cost of benefits
provided by the employer to former or inactive employees,
including their beneficiaries and covered dependents, after
employment but before retirement. A charge of $1.4 million was
recorded in the first quarter as a cumulative effect for a change
in accounting principle to recognize the company's estimated
liability for postemployment benefits covered by SFAS 112.
Note 11: Stock Options, Stock Appreciation Rights and
Performance Shares
The company has outstanding to executives and key employees
common stock options and stock appreciation rights (collectively,
rights) under four plans: the 1978 Plan, the 1983 Plan, the 1988
Plan and the 1994 Plan. Under the 1988 and 1994 Plans, options
may be granted either alone or in tandem with related stock
appreciation rights, or stock appreciation rights may be granted
separately. The 1983 Plan provided for the granting of options,
stock appreciation rights (either separate or in tandem with a
related option) and performance shares. The price of stock
options and the basis of stock appreciation rights so granted is
the fair market value on the date of grant. Rights cannot be
exercised until one year after the grant date and expire ten
years from date of grant. Any incremental value of stock
appreciation rights and performance shares granted is recognized
as expense, while a decline in the market value of the stock is
recognized as a reduction in expense to the extent previously
recognized. There was no change in the incremental value during
the last three years. The exercise of options does not
necessitate a charge or credit to income.
No additional grants can be made from the 1978 or 1983 Plans,
both of which have expired. There were no performance shares
outstanding at December 31, 1995 and 1994.
Prices per share of outstanding rights at December 31, 1994 were
$5.94 to $19.31. During 1995 grants were awarded at prices of
$10.69 to $14.06, rights were exercised at $5.94 to $11.88 and
rights were forfeited at $10.25 to $19.31. Rights outstanding at
December 31, 1995, are exercisable at prices ranging from $5.94
to $19.31 per share.
-28-
<PAGE>
<TABLE>
The following summary shows the changes in outstanding rights:
<CAPTION>
1978 1983 1988 1994
Plan Plan Plan Plan Total
<S> <C> <C> <C> <C> <C>
Outstanding at
December 31, 1994 53,200 239,050 982,300 12,000 1,286,550
Granted -- -- -- 417,500 417,500
Exercised -- (1,250) (58,500) -- (59,750)
Forfeited (33,750) (42,000) (90,000) (6,000) (171,750)
Outstanding at
December 31, 1995 19,450 195,800 833,800 423,500 1,472,550
Rights exercisable:
December 31, 1994 53,200 239,050 919,800 -- 1,212,050
December 31, 1995 19,450 195,800 833,800 6,000 1,055,050
Shares available for future grant:
December 31, 1994 -- -- -- 988,000 988,000
December 31, 1995 -- -- 90,000 576,500 666,500
</TABLE>
The Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-
Based Compensation" (SFAS 123) in October, 1995. Financial
statements presented for fiscal 1996 will measure the fair value
of stock-based compensation awarded to employees in 1995 and
thereafter. SFAS 123 allows companies a choice between
continuing to account for stock-based awards using the intrinsic
value, as prescribed by Accounting Principles Board Opinion No.
25 (APB 25), or the fair value. If the company chooses to
continue following APB 25, the pro forma effect the fair value
methodology would have had on net income and earnings per share
will be disclosed. The company has not yet determined the
magnitude of the difference between the intrinsic value and fair
value approaches nor the method it will choose to account for
stock-based compensation.
Note 12: Shareholders' Equity
<TABLE>
Components of shareholders' equity at December 31 (except
retained earnings which is set forth in the Consolidated
Statements of Retained Earnings) are presented below:
<CAPTION>
Preference Common Other Treasury
(In thousands) Stock Stock Capital Shares
<S> <C> <C> <C> <C>
Balance, January 1, 1993 $35 $14,945 $65,960 $(1,840)
Common shares issued through:
Retirement of Series B
preference stock (9,648) (3) 10 (7)
Common stock options
exercised (12,700) 13 88
Recognition of minimum
liability on pension plan (2,781)
Balance, December 31, 1993 $32 $14,968 $63,260 $(1,840)
Common shares issued through:
Retirement of Series B
preference stock (12,864) (4) 13 (9)
Common stock options
exercised (5,151) 5 37
Recognition of minimum
liability on pension plan 266
Balance, December 31, 1994 $28 $14,986 $63,554 $(1,840)
Common shares issued through:
Retirement of Series B
preference stock (9,648) (3) 9 (6)
Common stock options
exercised (59,750) 60 496
Purchase of treasury
shares (228,470) (2,667)
Recognition of minimum
liability on pension plan (3,226)
Balance, December 31, 1995 $25 $15,055 $60,818 $(4,507)
</TABLE>
-29-
<PAGE>
Note 13: Income Taxes
<TABLE>
Income before taxes and provisions for income tax expense
(benefit) from continuing operations at December 31 are:
<CAPTION>
(In thousands) 1995 1994 1993
<S> <C> <C> <C>
Income before taxes $11,321 $ 5,527 $ 10,471
Current federal income taxes $ -- $ 350 $ --
Deferred federal income taxes -- -- (24,853)
Current state income taxes 340 247 198
Total $ 340 $ 597 $(24,655)
</TABLE>
<TABLE>
The actual income tax expense attributable to earnings from
continuing operations for the years ended December 31, 1995, 1994
and 1993 differed from the amounts computed by applying the U. S.
federal tax rate of 34 percent to pretax earnings from continuing
operations as a result of the following:
<CAPTION>
(In thousands) 1995 1994 1993
<S> <C> <C> <C>
Computed "expected" tax expense $3,849 $ 1,879 $ 3,560
Alternative minimum tax -- 300 --
Percentage depletion (992) (1,880) (3,374)
State income taxes, net of federal
income tax benefit 224 163 131
Other items 51 135 (119)
Benefit of operating
loss carryforwards (2,792) -- (24,853)
Provision (benefit) for income tax $ 340 $ 597 $(24,655)
</TABLE>
The significant components of the deferred income tax benefit
attributable to income from continuing operations for the years
ended December 31 are as follows:
<TABLE>
(In thousands) 1995 1994 1993
<CAPTION>
<S> <C> <C> <C>
Deferred tax (benefit) expense (exclusive of the
effects of other components listed below) $ (6,058) $ 1,340 $ (2,431)
Increase (decrease) in balance of the valuation
allowance for deferred tax assets 6,058 (1,340) (22,422)
Total $ -- $ -- $(24,853)
</TABLE>
<TABLE>
The tax effects of temporary differences that give rise to
significant portions of the deferred tax assets and deferred tax
liabilities at December 31 are as follows:
<CAPTION>
1995 1994
<S> <C> <C>
Deferred tax assets:
Provision for discontinued operations $ 3,008 $ 7,477
Accounts receivable, principally due
to allowance for doubtful accounts 302 296
Inventories, principally due to additional
costs inventoried for tax purposes
pursuant to the Tax Reform Act of 1986 19 215
Compensated absences, principally due to
accrual for financial reporting purposes 500 745
Net operating loss carryforwards 67,229 61,713
Investment tax credit carryforwards 1,722 2,543
Other 1,022 721
Total gross deferred tax assets 73,802 73,710
Less valuation allowance (36,381) (30,323)
Net deferred tax assets 37,421 43,387
Deferred tax liabilities:
Properties and equipment, principally due
to depreciation 6,417 13,682
Pension accrual 6,151 4,682
Other -- 170
Total gross deferred tax liabilities 12,568 18,534
Net deferred tax asset $ 24,853 $ 24,853
</TABLE>
The net change in the total valuation allowance for the years
ended December 31, 1995 and 1994 was an increase of $6.1 million
and a decrease of $1.3 million, respectively.
The company adopted Statement of Financial Accounting Standards
No. 109, "Accounting for Income Taxes," (SFAS 109), effective
January 1, 1993. The statement requires that deferred income
taxes reflect the tax consequences on future years of differences
between the tax bases of assets and liabilities and their bases
for financial reporting purposes. In addition, SFAS 109 requires
the recognition of future tax benefits, such as net operating
loss carryforwards (NOLs), to the extent that realization of such
benefits are more likely than not. There was no cumulative
effect of this accounting change at the time of adoption.
-30-
<PAGE>
<TABLE>
The company had NOLs of approximately $192.1 million at December
31, 1995, because of losses associated with discontinued
businesses. These NOLs expire as follows:
<CAPTION>
(In thousands)
<S> <C>
2002 $ 18,039
2003 76,662
2004 39,012
2005 17,428
2006 7,336
2007 1,629
2008 15,031
2009 12,171
2010 4,776
</TABLE>
Tax benefits of $4.9 million for investment tax credits expiring
in 1996 and later are also being carried forward.
Under the provisions of SFAS 109, NOLs represent temporary
differences that enter into the calculation of deferred tax
assets and liabilities. At January 1, 1993, primarily as a
result of the NOLs, the company was in a net deferred tax asset
position under SFAS 109. The full amount of the deferred tax
asset was offset by a valuation allowance due to uncertainties
associated with unresolved issues related to discontinued
operations.
In the fourth quarter of 1993, the company reduced its valuation
allowance resulting in a net deferred tax asset of $24.9 million.
Two factors contributed to the reduction in the valuation
allowance. First was the
resolution of long-standing litigation between the company and
the City of Long Beach, California, regarding a waste-to-energy
plant the company built for the city and the ability to quantify,
relying upon advice of legal counsel, the potential financial
impact of the remaining uncertainties associated with previously
discontinued operations. Second, the company was awarded a
contract to supply American Electric Power's Gavin plant with
450,000 tons of lime annually for 15 years commencing in 1995.
In addition, the company had pending the renewal of existing
contracts which were finalized in 1994 and raised utility lime
sales backlog to $800 million. With these contracts in place,
nearly 65 percent of the company's annual revenue was projected
to be generated from long-term contracts. As a result, the
company believed that revenue and income from its lime subsidiary
could be reasonably projected over the life of its long-term
contracts.
The amount of the net deferred tax asset was not adjusted in
1995. In assessing the valuation allowance, estimates were made
as to the potential financial impact on the company should
resolution of the remaining substantive uncertainty associated
with discontinued operations substantially exceed management's
estimates. The uncertainty involves the Hastings, Nebraska,
environmental matter and is discussed more fully in Note 8,
Contingent Liabilities. Management's position is to vigorously
pursue its claims against other PRPs and to contest the liability
for environmental clean-up. In determining the appropriate
valuation allowance, however, management has used the upper limit
of the potential financial impact estimated for this matter.
Also, operating profits were lower than forecasted in 1995
primarily due to higher-than-expected expenses incurred during
start-up of the Black River expansion project. The lower profit,
expenses related to discontinued operations and recognition for
tax purposes of fees and expenses totaling $9.5 million
associated with loans prepaid from funds received from the sale
of Dravo Basic Materials' assets created a tax loss and generated
additional NOLs.
Management believes that, with the resolution of the Black River
start-up problems, the company will generate sufficient future
taxable income to realize the entire deferred tax asset prior to
expiration of any NOLs and that the realization of a $24.9
million net deferred tax asset is more likely than not. Income
projections for the contract lime business are based on
historical information adjusted for contract terms. In order to
fully realize the net deferred tax asset, the company will need
to generate future taxable income of approximately $73.2 million
prior to the expiration of the NOLs.
Historically, Dravo Lime's cumulative taxable earnings for the
past five years total $55.5 million. There can be no assurance,
however, that the company will generate any earnings or any
specific level of continuing earnings.
Note 14: Extraordinary Item
In conjunction with the sale of Dravo Basic Materials' assets,
existing loan agreements were substantially altered, including a
$35 million reduction in the amount available under a revolving
credit facility. Also, while negotiating a financing agreement
with Prudential Power Funding for the Black River expansion, the
company purchased a call option that enabled it to prepay on May
17, 1995, without penalty, amounts outstanding under the
financing agreement. Cash received from the Dravo Basic
Materials asset sale equaling the outstanding principal on the
Prudential Power Funding facility, interest through May 16, 1995
and an exit fee was placed in escrow. With Prudential Power
Funding's consent, the entire amount borrowed was prepaid. The
fees associated with these agreements were written off as
extraordinary items in 1994.
-31-
<PAGE>
Note 15: Fair Value of Financial Instruments
The fair value of financial instruments without extended
maturities equals their carrying values. The estimated fair
value of financial instruments with extended maturities at
December 31 is presented below:
<TABLE>
(In thousands)
<CAPTION>
1995 1994
Carrying Fair Carrying Fair
Value Value Value Value
<S> <C> <C> <C> <C>
Notes payable $70,391 $72,124 $127,517 $126,220
Series D Preference Stock 20,000 23,242 20,000 21,347
</TABLE>
The carrying amounts of notes receivable approximate fair value.
The fair value of notes payable and the Series D Preference Stock
is based upon the amount of future cash flows associated with
each instrument discounted using the company's estimated
borrowing rate for similar debt instruments of comparable
maturity. The Preference Stock fair value also includes an
estimated factor to value the conversion feature.
Fair value estimates are made at a specific point in time, based
on relevant market information and information about the
financial instrument. These estimates are subjective in nature
and involve uncertainties and matters of significant judgment and
therefore cannot be determined with precision. Changes in
assumptions could significantly affect the estimates.
Note 16: Research and Development
<TABLE>
Research and development activity for the years ended December 31
is as follows:
<CAPTION>
(In thousands) 1995 1994 1993
<S> <C> <C> <C>
Total research and development expense $3,558 $4,393 $4,166
Billings to third parties 1,255 2,361 1,915
Net research and development expense $2,303 $2,032 $2,251
</TABLE>
Note 17: Interim Financial Information
<TABLE>
(Unaudited, in millions, First Second Third Fourth
except earnings per share) Quarter Quarter Quarter Quarter
<CAPTION>
<S> <C> <C> <C> <C>
1995
Revenue $33.9 $35.7 $37.8 $38.6
Gross profit 8.7 9.5 9.5 8.8
Earnings before taxes from
continuing operations 2.7 2.9 3.1 2.6
Provision (benefit) for
income taxes 0.2 0.2 0.2 (0.3)
Net earnings 2.5 2.7 2.9 2.9
Earnings per share:
Net earnings 0.13 0.14 0.15 0.15
1994
Revenue $57.7 $72.6 $75.3 $72.5
Gross profit 7.6 12.6 12.7 11.1
Earnings (loss) before taxes
from continuing operations (1.3) 3.8 3.7 (0.7)
Provision (benefit) for
income taxes -- 0.6 (0.2) 0.2
Earnings (loss) from
continuing operations (1.3) 3.2 3.9 (0.9)
Discontinued operations -- -- -- (6.5)
Earnings (loss) before
extraordinary item and
cumulative accounting change (1.3) 3.2 3.9 (7.4)
Extraordinary item -- -- -- (7.5)
Cumulative effect of
accounting change (1.4) -- -- --
Net earnings (loss) (2.7) 3.2 3.9 (14.9)
Earnings (loss) per share:
Continuing operations (0.13) 0.17 0.22 (0.10)
Discontinued operations -- -- -- (0.44)
Extraordinary item -- -- -- (0.51)
Cumulative accounting
change (0.09) -- -- --
Net earnings (loss) (0.22) 0.17 0.22 (1.05)
</TABLE>
-32-
<PAGE>
Management's Report
The consolidated financial statements and other financial
information appearing in this Annual Report were prepared by the
management of Dravo Corporation, which is responsible for their
integrity and objectivity. These financial statements have been
prepared in conformity with generally accepted accounting
principles and include amounts that are based on informed
judgments and estimates of the expected effects of events and
transactions.
Dravo maintains a system of internal controls to provide
reasonable assurance as to the reliability of the financial
records and the protection of assets. This internal control
system is supported by careful selection and training of
qualified personnel, and a broad program of internal audits. In
addition, the company's business ethics policy requires employees
to maintain the highest level of ethical standards in the conduct
of the company's business, and their compliance is regularly
monitored.
The company's financial statements have been audited by KPMG Peat
Marwick LLP, independent certified public accountants. As stated
in their report, their audit was made in accordance with
generally accepted auditing standards and included such study and
evaluation of the company's system of internal accounting
controls as they considered necessary to determine the nature,
timing and extent of the auditing procedures required for
expressing an opinion on the company's financial statements.
The Board of Directors, acting through its Audit Committee
composed exclusively of outside directors, reviews and monitors
the company's financial reports and accounting practices. The
Board of Directors, upon the recommendation of the Audit
Committee, appoints the independent certified public accountants
subject to ratification by the shareholders. The Audit Committee
meets periodically with management, the internal auditors and the
independent auditors. These meetings include discussions of
internal accounting control, results of audit work and the
quality of financial reporting. Financial management as well as
the internal auditors and independent auditors have full and free
access to the Audit Committee.
[KPMG Peat Marwick LLP logo]
Independent Auditors' Report
The Board of Directors and Shareholders
Dravo Corporation:
We have audited the accompanying consolidated balance sheets of
Dravo Corporation and subsidiaries as of December 31, 1995 and
1994, and the related consolidated statements of operations,
retained earnings and cash flows for each of the years in the
three-year period ended December 31, 1995. These consolidated
financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial
position of Dravo Corporation and subsidiaries as of December 31,
1995 and 1994, and the results of their operations and their cash
flows for each of the years in the three-year period ended
December 31, 1995, in conformity with generally accepted
accounting principles.
As discussed in Notes 10 and 13 to the consolidated financial
statements, the company adopted the method of accounting for
postemployment benefits prescribed by Statement of Financial
Accounting Standards No. 112 in 1994 and the methods of
accounting for postretirement benefits other than pensions and
income taxes prescribed by Statements of Financial Accounting
Standards Nos. 106 and 109, respectively, in 1993.
/s/ KPMG PEAT MARWICK LLP
KPMG Peat Marwick LLP
Pittsburgh, Pennsylvania
January 24, 1996
-33-
<PAGE>
Five-Year Summary
<TABLE>
Years ended December 31, 1995 1994 1993 1992 1991
<CAPTION>
(Amounts in millions, except per share
data and average mineral resource prices)
<S> <C> <C> <C> <C> <C>
Summary of operations:
Revenue $146.1 $278.1 $277.6 $273.0 $295.7
Gross profit 36.5 44.0 49.3 51.7 57.7
Interest expense 4.8 12.4 9.2 10.5 11.2
Depreciation expense 9.5 17.6 18.0 18.6 17.7
Earnings before taxes
from continuing operations 11.3 5.5 10.5 12.7 16.1
Provision (benefit) for
income taxes 0.3 0.6 (24.6) 2.4 3.9
Earnings from continuing
operations 11.0 4.9 35.1 10.3 12.2
Loss from discontinued
operations, net of
income taxes -- (6.5) (35.3) -- (38.5)
Extraordinary item -- (7.5) -- 1.6 --
Cumulative accounting change -- (1.4) -- -- --
Net earnings (loss) 11.0 (10.5) (0.2) 11.9 (26.3)
Preferred dividends declared 2.5 2.5 2.6 2.6 2.6
Capital expenditures 33.1 44.8 13.6 8.5 19.7
Employees at year end 756 768 1,416 1,421 1,556
Summary of financial position:
Total assets $213.3 $307.3 $272.1 $268.5 $271.8
Working capital 9.8 6.3 59.5 60.1 45.6
Long-term obligations and
redeemable preference stock 84.3 62.4 108.5 108.1 109.7
Total debt and redeemable
preference stock 90.4 147.5 113.0 112.8 114.4
Property, plant and
equipment, net 116.2 93.5 110.0 114.9 128.5
Shareholders' equity 79.9 76.7 89.5 95.0 85.5
Per common share data:
Earnings from continuing
operations $ 0.57 $ 0.16 $ 2.20 $ 0.52 $ 0.65
Loss from discontinued
operations -- (0.44) (2.38) -- (2.60)
Extraordinary item -- (0.51) -- 0.11 --
Cumulative accounting change -- (0.09) -- -- --
Net earnings (loss) 0.57 (0.88) (0.18) 0.63 (1.95)
Book value 5.33 5.06 6.15 6.27 5.63
Shareholders at year end 2,924 3,192 3,442 3,736 3,893
Mineral resources (in millions of tons):
Proven and probable reserves
Total reserves 522.2 502.1 1,121.2 1,142.1 1,074.7
Tons mined 7.1 23.2 22.8 25.4 24.7
Average market price $ 3.3 $ 5.80 $ 6.01 $ 5.85 $ 6.31
</TABLE>
-34-
<PAGE>
Board of Directors Principal Executives
Carl A. Gilbert Carl A. Gilbert *
President and Chief
Executive Officer, President and
Dravo Corporation Chief Executive Officer
Arthur E. Byrnes Ernest F. Ladd III *
Chairman, Executive Vice President and
Deltec Asset Management Corporation Chief Financial Officer
James C. Huntington, Jr. Marshall S. Johnson *
Retired Senior Vice President, Vice President,
American Standard, Inc. Operations and Engineering
William E. Kassling John R. Major *
Chairman, Chief Executive Officer Vice President, Administration
and President,
Westinghouse Air Brake Company James J. Puhala *
Vice President,
William G. Roth General Counsel and Secretary
Retired Chairman,
Dravo Corporation Richard E. Redlinger *
Vice President, Corporate
Konrad M. Weis Development, and Treasurer
Retired President and
Chief Executive Officer, Donald H. Stowe, Jr.
Bayer USA, Inc. Vice President,
Sales and Technology
Larry J. Walker
Vice President and Controller
*Member of
Management Executive Committee
-35-
<PAGE>
Exhibit 21. Subsidiaries of the Registrant
<TABLE>
Percentage
State or country of voting
in which securities
incorporated owned
<CAPTION>
<S> <S> <C>
Registrant:
Dravo Corporation Pennsylvania --
Subsidiaries of Dravo Corporation:
Dravo Basic Materials
Company, Inc. Alabama 100%
Dravo Equipment Company Delaware 100
Dravo Lime Company Delaware 100
Princeton Ridge, Inc. New Jersey 100
Subsidiary of Dravo Basic Materials
Company, Inc.:
Dravo Natural Resources Company Delaware 50
Subsidiary of Dravo Lime Company:
Dravo Natural Resources Company Delaware 50
</TABLE>
21-1
Exhibit 23. Consents of Experts and Counsel
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
Dravo Corporation:
We consent to incorporation by reference in registration
statements Nos. 33-23632, 2-84462, 2-64137, 33-54179, 333-01689
and 333-01691 on Form S-8, No. 33-17356 on Form S-3, Amendment
No. 1 to No. 2-87555 on Form S-8/S-3, and No. 2-71993 on Form S-
16 amended by Form S-3 of Dravo Corporation, of our report dated
January 24, 1996 relating to the consolidated balance sheets of
Dravo Corporation and subsidiaries as of December 31, 1995 and
1994 and the related consolidated statements of operations,
retained earnings, and cash flows and related schedules for each
of the years in the three-year period ended December 31, 1995
which report appears in, or is incorporated by reference in, the
December 31, 1995 annual report on Form 10-K of Dravo
Corporation. Our report refers to the adoption of the methods of
accounting for postretirement benefits other than pensions,
income taxes and postemployment benefits prescribed by Statements
of Financial Accounting Standards Nos. 106, 109 and 112,
respectively.
/s/ KPMG PEAT MARWICK LLP
Pittsburgh, Pennsylvania
March 27, 1996
23-1
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned
does hereby constitute and appoint Carl A. Gilbert, Ernest F.
Ladd III and James J. Puhala, and each of them, his true and
lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him in his name, place and
stead, in any and all capacities (including his capacity as a
director and/or officer of Dravo Corporation), to sign the Form
10-K Annual Report of Dravo Corporation for the year ended
December 31, 1995 and any and all amendments thereto, and to file
the same, with all exhibits thereto, and all other documents in
connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and
each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and
about the premises, as fully to all intents and purposes as the
undersigned might or could do in person, hereby ratifying and
confirming all that attorneys-in-fact and agents or any of them,
or their or his substitute or substitutes, may lawfully do or
cause to be done by virtue hereof.
WITNESS the due execution hereof this 25th day of
January, 1996.
/s/ ARTHUR E. BYRNES
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned
does hereby constitute and appoint Carl A. Gilbert, Ernest F.
Ladd III and James J. Puhala, and each of them, his true and
lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him in his name, place and
stead, in any and all capacities (including his capacity as a
director and/or officer of Dravo Corporation), to sign the Form
10-K Annual Report of Dravo Corporation for the year ended
December 31, 1995 and any and all amendments thereto, and to file
the same, with all exhibits thereto, and all other documents in
connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and
each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and
about the premises, as fully to all intents and purposes as the
undersigned might or could do in person, hereby ratifying and
confirming all that attorneys-in-fact and agents or any of them,
or their or his substitute or substitutes, may lawfully do or
cause to be done by virtue hereof.
WITNESS the due execution hereof this 25th day of
January, 1996.
s/s JAMES C. HUNTINGTON, JR.
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned
does hereby constitute and appoint Carl A. Gilbert, Ernest F.
Ladd III and James J. Puhala, and each of them, his true and
lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him in his name, place and
stead, in any and all capacities (including his capacity as a
director and/or officer of Dravo Corporation), to sign the Form
10-K Annual Report of Dravo Corporation for the year ended
December 31, 1995 and any and all amendments thereto, and to file
the same, with all exhibits thereto, and all other documents in
connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and
each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and
about the premises, as fully to all intents and purposes as the
undersigned might or could do in person, hereby ratifying and
confirming all that attorneys-in-fact and agents or any of them,
or their or his substitute or substitutes, may lawfully do or
cause to be done by virtue hereof.
WITNESS the due execution hereof this 25th day of
January, 1996.
s/s WILLIAM E. KASSLING
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned
does hereby constitute and appoint Carl A. Gilbert, Ernest F.
Ladd III and James J. Puhala, and each of them, his true and
lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him in his name, place and
stead, in any and all capacities (including his capacity as a
director and/or officer of Dravo Corporation), to sign the Form
10-K Annual Report of Dravo Corporation for the year ended
December 31, 1995 and any and all amendments thereto, and to file
the same, with all exhibits thereto, and all other documents in
connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and
each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and
about the premises, as fully to all intents and purposes as the
undersigned might or could do in person, hereby ratifying and
confirming all that attorneys-in-fact and agents or any of them,
or their or his substitute or substitutes, may lawfully do or
cause to be done by virtue hereof.
WITNESS the due execution hereof this 25th day of
January, 1996.
/s/ WILLIAM G. ROTH
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned
does hereby constitute and appoint Carl A. Gilbert, Ernest F.
Ladd III and James J. Puhala, and each of them, his true and
lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him in his name, place and
stead, in any and all capacities (including his capacity as a
director and/or officer of Dravo Corporation), to sign the Form
10-K Annual Report of Dravo Corporation for the year ended
December 31, 1995 and any and all amendments thereto, and to file
the same, with all exhibits thereto, and all other documents in
connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and
each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and
about the premises, as fully to all intents and purposes as the
undersigned might or could do in person, hereby ratifying and
confirming all that attorneys-in-fact and agents or any of them,
or their or his substitute or substitutes, may lawfully do or
cause to be done by virtue hereof.
WITNESS the due execution hereof this 25th day of
January, 1996.
/s/ KONRAD M. WEIS
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM DRAVO
CORPORATION'S DECEMBER 31, 1995 FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 1086
<SECURITIES> 0
<RECEIVABLES> 26481
<ALLOWANCES> 934
<INVENTORY> 14194
<CURRENT-ASSETS> 43072
<PP&E> 225835
<DEPRECIATION> 109667
<TOTAL-ASSETS> 213261
<CURRENT-LIABILITIES> 33307
<BONDS> 0
<COMMON> 15055
20000
25
<OTHER-SE> 64775
<TOTAL-LIABILITY-AND-EQUITY> 213261
<SALES> 146067
<TOTAL-REVENUES> 146067
<CGS> 109541
<TOTAL-COSTS> 109541
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4807
<INCOME-PRETAX> 11321
<INCOME-TAX> 340
<INCOME-CONTINUING> 10981
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 10981
<EPS-PRIMARY> .57
<EPS-DILUTED> 0
</TABLE>
