THIS DOCUMENT IS A COPY OF THE ANNUAL REPORT ON FORM 10-K FILED ON JUNE 30, 1994
PURSUANT TO A RULE 201 TEMPORARY HARDSHIP EXEMPTION.
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended March 31, 1994
OR
- -- TRANSACTION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-9037
International Technology Corporation
(Exact name of registrant as specified in its charter)
Delaware 33-0001212
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
23456 Hawthorne Boulevard, Torrance, California 90505
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (310) 378-9933
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on which
Title of each class registered
------------------- ----------
Common Stock, $1.00 Par Value New York Stock Exchange; Pacific
Stock Exchange
Preferred Stock Depositary Shares New York Stock Exchange; Pacific
Stock Exchange
9 3/8% Senior Notes Due 1996 New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes ...X....
No ........
The aggregate market value of the registrant's voting stock held by
non-affiliates of the registrant at June 17, 1994, was approximately
$97,590,000 (based upon the closing sale price of its common stock on
the New York Stock Exchange as reported by The Wall Street Journal on
such date.)
At June 17, 1994 the registrant had issued and outstanding an aggregate
of 35,199,861 shares of its common stock.
Documents Incorporated by Reference
Certain information included in the registrant's definitive proxy
statement to be filed with the Securities and Exchange Commission for
the Annual Meeting of Stockholders of the registrant to be held on
September 1, 1994 is incorporated by reference into Part III hereof.
<PAGE>
INTERNATIONAL TECHNOLOGY
ANNUAL REPORT ON FORM 10-K
FOR THE FISCAL YEAR ENDED MARCH 31, 1994
TABLE OF CONTENTS
Item Page
---- ----
PART I
1 Business . . . . . . . . . . . . . . . . . . . . . . . . 2
General . . . . . . . . . . . . . . . . . . . . . . . . 2
Background. . . . . . . . . . . . . . . . . . . . . . . 3
Operations. . . . . . . . . . . . . . . . . . . . . . . 3
Environmental Services (ES) . . . . . . . . . . . . . . 4
Pollution Control Engineering (PCE) . . . . . . . . . . 4
Analytical Services (AS) . . . . . . . . . . . . . . . 4
Construction and Remediation (C&R). . . . . . . . . . . 5
Technology Development. . . . . . . . . . . . . . . . . 6
Customers.. . . . . . . . . . . . . . . . . . . . . . . 6
Competition.. . . . . . . . . . . . . . . . . . . . . . 7
Regulations.. . . . . . . . . . . . . . . . . . . . . . 7
Environmental Contractor Risks . . . . . . . . . . . . 9
Insurance and Risk Management. . . . . . . . . . . . . 11
Discontinued Operations . . . . . . . . . . . . . . . . . 12
Employees . . . . . . . . . . . . . . . . . . . . . . . . 12
2 Properties . . . . . . . . . . . . . . . . . . . . . . . . 12
3 Legal Proceedings. . . . . . . . . . . . . . . . . . . . . 13
4 Submission of Matters to a Vote of Shareholders.. . . . . . 18
Executive Officers of the Company . . . . . . . . . . . . . 19
PART II
5 Market for the Registrant's Common Stock and Related
Shareholder Matters . . . . . . . . . . . . . . . . . . . 21
6 Selected Financial Data . . . . . . . . . . . . . . . . . . 22
7 Management's Discussion and Analysis of Results of
Operations and Financial Condition. . . . . . . . . . . . 22
8 Financial Statements and Supplementary Data . . . . . . . . 33
9 Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure . . . . . . . . . . . 58
PART III
10 Directors and Executive Officers of the Registrant . . . . 58
11 Executive Compensation . . . . . . . . . . . . . . . . . . 58
12 Security Ownership of Certain Beneficial Owners and
Management . . . . . . . . . . . . . . . . . . . . . . . 59
13 Certain Relationships and Related Transactions . . . . . . 59
PART IV
14 Exhibits, Financial Statement Schedules and Reports on
Form 8-K . . . . . . . . . . . . . . . . . . . . . . . 60
<PAGE>
PART I
ITEM 1. BUSINESS.
GENERAL
International Technology Corporation, a Delaware corporation
(the Company or IT), provides a wide range of environmental
management services and technologies including the assessment,
decontamination, and remediation of situations involving
hazardous materials and pollution prevention and minimization.
The Company was incorporated in 1983; the earliest antecedent of
the Company commenced operations in California in 1926.
The Company's services are provided to a broad array of
governmental and commercial entities predominantly in the U.S.
market. The Company's business strategy is to provide its
environmental services on a turnkey basis, particularly by
focusing on its capabilities to manage complex environmental
issues from the initial assessment of the level and extent of
contamination through the design, engineering and execution of
a solution. In recent years, the Company has worked on several
hundred Superfund sites for various governmental and commercial
clients.
Demand for the Company's services is heavily influenced by the
level of enforcement of existing and new environmental laws and
regulations, funding levels for government projects and spending
patterns of commercial clients. Within the last three years,
spending by commercial clients has slowed primarily due to
reduced implementation and enforcement activities by government
regulatory agencies and weak economic conditions. During the
same period, however, the Company has experienced significant
growth in its business with federal, state and local governmen-
tal clients, particularly the U.S. Department of Defense (DOD)
and the U.S. Department of Energy (DOE), resulting in total
federal, state and local governmental revenues constituting 63%
of the Company's revenues in fiscal year 1994. (See Business -
Operations - Customers.)
The operations of the Company are performed subject to a
comprehensive federal, state, and local environmental regulatory
structure. (See Business - Operations - Regulations.) Although
this regulatory structure creates opportunities for the Company,
the analysis, assessment, and remediation of hazardous substanc-
es necessarily involves significant risks, including the
possibility of damages or injuries caused by the escape of
hazardous substances into the environment. (See Business -
Operations - Environmental Contractor Risks, and Legal Proceed-
ings.)
In December 1987, IT adopted a strategic restructuring program
to focus its resources on developing its engineering, consult-
ing, analytical and remediation businesses. The program
included a formal plan to divest its transportation, treatment
and disposal operations, through sale of some facilities and
closure of certain other facilities. Although the Company
believes it has gained valuable, marketable experience through
the closure of its inactive hazardous waste disposal sites in
Northern California, the Company has incurred and will incur
significant closure and post-closure costs for the sites. (See
Business - Discontinued Operations - Transportation, Treatment
and Disposal). Continuing with the ongoing restructuring of its
businesses, the Company sold its pollution control manufacturing
business in fiscal year 1992. (See Business - Discontinued
Operations - Pollution Control Manufacturing.)
Effective April 1, 1993, the Company realigned its existing
business into three areas: Environmental Services (including
Pollution Control Engineering), Analytical Services, and
Construction and Remediation. As a result of this realignment,
there has been a consolidation of domestic environmental
services offices. Further, the Company disposed of most of its
European businesses and refocused on its major domestic busi-
nesses. The success of the Company in developing its capabili-
ties is demonstrated by IT's designation by Engineering News-
Record as the largest hazardous waste design firm for the last
five years.
On June 28, 1994, pursuant to a definitive agreement signed on
May 2, 1994, the Company and an affiliate of Corning Incorporat-
ed (Corning) combined the two companies' environmental analyti-
cal services businesses into a newly formed 50/50 jointly-owned
company (the joint company). The joint company will operate
independently with a separate board of directors comprised of
representation from IT and Corning and will provide services to
the Company on a competitive basis. In connection with the
transaction, IT and Corning will contribute the net assets of
their respective laboratory businesses into the joint company.
The financing of the joint company will be provided by a
$60,000,000 bank line of credit. (See Business - Operations -
Analytical Services.)
BACKGROUND
Hazardous materials management and remediation are widely
acknowledged as a significant national priority. As of December
31, 1992, the United States Environmental Protection Agency
(USEPA) had designated approximately 1,200 sites as Superfund
locations with significant concentrations of hazardous materi-
als, although less than 25% of these sites had undergone
substantial remediation. In addition, there are a large number
of small commercial and governmental sites that will require
cleanup. The assessment, decontamination and remediation of
hazardous sites are governed by increasingly complex environmen-
tal and occupational safety and health regulations administered
by numerous federal, state and local agencies.
The Company's clients, whether in the governmental or the
commercial sector, are continuing to require a turnkey solution,
in which a single supplier or team takes responsibility for the
entire process from identification and assessment through
remediation. Successful remediation of hazardous sites requires
a multidisciplinary approach, since such sites typically involve
a variety of waste which affects air, soil and/or water.
Depending on the circumstances, the required skills may include
analytical chemistry, risk assessment, computer modeling,
ambient air monitoring, process and design engineering, and
construction/remediation. The application of these disciplines
to solve client problems requires substantial operational know-
how, and the Company believes that it is well-positioned to
solve client problems because of the combination of its capabil-
ities and experience. Additionally, the Company's technical
expertise and operational know-how are sought by other firms for
project-specific teaming and joint venture relationships,
thereby allowing the Company access to an increased number of
large scale governmental and commercial programs.
OPERATIONS
The major part of IT's business is the management of complex
projects involving the assessment, planning and execution of the
decontamination and restoration of property, plant and equipment
that have been contaminated by hazardous substances. These
projects include the cleanup of rivers, streams and groundwater
contaminated by chemical substances; buildings, production
facilities and storage sites contaminated with hazardous
chemical and/or radioactive materials; and land disposal sites
where hazardous or toxic substances have been improperly
disposed and pose a threat to the surrounding environment.
These projects require considerable engineering and analytical
work to determine the substances involved, the extent of the
contamination, the appropriate alternatives for containing or
removing the contamination, and the selection of the technolo-
gies for treatment, including transportable treatment equipment,
to perform the cleanup of the site. The Company is involved in
many areas of the United States in the assessment or cleanup
phases of site remedial action projects.
Additionally, the Company performs a variety of consulting
services for clients to help them comply with environmental
and/or health and safety regulations. The Company also provides
assistance to these clients in developing corporate policies and
procedures in areas such as pollution prevention and waste
minimization that integrate environmental regulations into their
business decisions.
Environmental Services (ES)
ES performs consulting services, site assessment/characteriza-
tion, facility decontamination/ decommissioning, and site
remediation. In the remediation area, ES generally handles
projects involving less than $5,000,000 in revenues with larger
projects being handled by Construction and Remediation. ES
represents the largest IT business area, generating approximate-
ly 63% of the Company's revenues in fiscal year 1994. The
Company operates approximately 34 ES regional offices located
across the U.S.
The Company's clients may have need for environmental
management services with respect to contamination of air, water
or soil. Federal legislation such as the Clean Air Act and Safe
Drinking Water Act provide environmental regulations which
require compliance by the Company's clients. Environmental
problems generally require multidisciplinary capabilities.
While some offices specialize in one capability (e.g., air
quality), the typical ES office is staffed by professionals with
expertise in a variety of disciplines and the operating experi-
ence required to provide clients with turnkey, cost-effective
environmental solutions. The turnkey services strategy supports
the Company's marketing efforts toward developing partnering
arrangements with clients in which IT is the primary supplier of
all client environmental management services.
ES provides a wide range of environmental management services
including remedial design, environmental permitting, facility
siting and design, environmental compliance/auditing, risk
assessment/management, environmental assessment/characteriza-
tion, facility decontamination/decommissioning, chemical
packaging services, underground storage tank (UST) or above-
ground storage tank (AST) management, emergency response and
remediation.
Pollution Control Engineering (PCE)
The PCE group of ES provides a broad range of environmental
services including consulting engineering, pollution prevention,
waste minimization, permitting assistance, and equipment design,
installation, and start-up services. Serving domestic and
international clients in industries such as refining, petrochem-
ical, pharmaceutical, chemical and other manufacturing, this
group's particular focus is pollution prevention, waste minimi-
zation and thermal incineration. Although the PCE group
currently represents only a small portion of the Company's
revenues (approximately 3% in fiscal year 1994, which are
included in the revenues of ES above), this group is focused on
a market segment with growth potential. While providing a broad
range of engineering and consulting services, PCE has been
responding to this market through evaluation, redesign and re-
engineering of client manufacturing processes. The Company's
mobile on-site incineration Hybrid Thermal Treatment System
(HTTS) units utilize the thermal construction capabilities of
this group. The HTTS technology has found principal applica-
tions on large scale remediation projects and is suitable for
use at integrated hazardous waste treatment facilities. (See
Business - Operations - Construction and Remediation.)
Analytical Services (AS)
On June 28, 1994, pursuant to a definitive agreement signed on
May 2, 1994, the Company and Corning combined the two companies'
environmental analytical services businesses into a newly formed
joint company. The joint company will operate independently
with a separate board of directors comprised of representation
from IT and Corning, and will provide services to the Company on
a competitive basis. In connection with the transaction, IT and
Corning will contribute the net assets of their respective
laboratory businesses into the joint company. Additionally, IT
issued to Corning 333,000 shares of IT common stock and a five-
year warrant to purchase 2,000,000 shares of IT common stock at
$5.00 per share. The financing of the joint company will be
provided by a $60,000,000 bank line of credit. IT's 50 percent
investment in the joint company will be accounted for under the
equity method. An aggressive integration plan will be imple-
mented in the early stages of operations of the joint company.
The plan will include consolidation and closure of redundant lab
facilities and equipment, a reduction in force to eliminate
duplicative overhead and excess capacity and a consolidation of
laboratory management and accounting systems, resulting in
productivity gains achieved through economies of scale.
Consequently, it is estimated that the joint company will incur
a charge for integration of approximately $20,000,000, princi-
pally non-cash, in the quarter ending June 30, 1994. IT will
reflect 50 percent of such charge in its financial statements in
the same quarter. Upon completion of the integration process,
the joint company will have estimated revenues of $150,000,000
and employ approximately 1,300 people in its laboratory network
throughout the United States.
The Company's AS area, now part of the joint company, has
provided qualitative and quantitative analytical chemistry
services to governmental and commercial clients. Prior to the
IT/Corning transaction, the Company operated ten analytical
laboratories located across the U.S. The ten laboratory facili-
ties include: one lab which is dedicated to radiological
analyses; two labs which perform radiological, chemical, and
mixed waste analyses; five labs dedicated to a broad range of
chemical analyses; and two specialty labs, one dedicated to air
analyses and one dedicated to dioxin testing. This group
provides routine and specialty chemical analyses of organic,
inorganic, and biological constituents in chemical and radio-
chemical mixed wastes, air, water and soil; geotechnical
analyses to establish design parameters; and non-routine
analyses of dioxin, pesticides, and polychlorinated biphenyl
compounds (PCBs). The AS area provides specialized analyses of
radioactive and radiochemical mixed wastes including bioassay,
immunoassay, and environmental radiochemistry. Although IT's
analytical services have been frequently utilized as part of
projects performed by ES and C&R, services supporting those
Company business units have represented only approximately 30
percent of AS revenues. The majority of AS revenues resulted
from analytical work performed directly for federal, state and
local governmental agencies or commercial clients which include
other environmental management firms. AS revenues in fiscal
year 1994 represented approximately 14% of the Company's
revenues.
Construction and Remediation (C&R)
C&R provides turnkey capabilities for site cleanups, as well
as remedial construction, mobile treatment, and decontamina-
tion/decommissioning capabilities. In the area of remedial
construction, IT offers diverse services, such as excavation and
isolation, installation of subsurface recovery systems, thermal
treatment solutions, bioremediation approaches, chemical
treatment, soil washing, fixation or stabilization, facility or
site closures, solidification/stabilization, landfill cell
construction, and slurry wall and cap installation. In fiscal
year 1994, C&R generated approximately 23% of the Company's
revenues.
On large scale remediation projects (generally greater than
$5,000,000 in revenues), C&R utilizes IT's various capabilities
to assess, design, and implement environmental solutions, and
design treatment systems. The preferred solution to many
hazardous waste remediation projects is to locate treatment
equipment on site. IT's proprietary HTTS system was designed by
the Company to incinerate large quantities of hazardous waste
on-site. From the introduction of HTTS technology in 1987
through fiscal year 1994, the Company has processed approximate-
ly 639,000 tons of contaminated materials at various projects.
(See Business - Operations - Environmental Contractor Risks.)
Currently, C&R is utilizing the HTTS technology for the
incineration of hazardous materials at the Sikes Disposal Pits
Superfund site near Houston, Texas, which is nearing completion,
and at the Bayou Bonfouca Superfund site in Slidell, Louisiana.
In September 1992, C&R was awarded the thermal remediation
contract at the Superfund site in Times Beach, Missouri. In
April 1994, C&R, with a partner, was the apparent low bidder on
a contract utilizing an HTTS unit at the Texarkana Wood Process-
ing Company Superfund site in Texarkana, Texas; however, award
of this project has been delayed pending a review of the use of
incineration technology at that site requested by a local
Congressman. In June 1994, the Company was the apparent low
bidder for a contract utilizing an HTTS unit at the American
Creosote site in Winnfield, Louisiana. The formal contract
award is expected in 30 days.
Technology Development
IT emphasizes technology development and the innovative
application of existing methods. The Company's technology
development program is directed toward the internal development
of technologies as well as the evaluation of technologies
developed outside the Company. In addition, the Company
operates the USEPA Test & Evaluation Facility in Cincinnati,
Ohio, which is available for private-party use.
The Company's commitment to technology development is
demonstrated by the IT Technical Associates Program which
recognizes associates who have a unique value to the Company due
to their technical qualifications and accomplishments. This
program provides a forum for communication of IT's latest
advances in various technical disciplines to associates and
clients.
The Company's technology development program has continued to
focus on the identification and evaluation of innovative
technologies which present commercialization opportunities for
IT. The Company has obtained an exclusive license for photocat-
alytic oxidation technology applied to the destruction of air
toxics. IT also licensed a chemically-enhanced soil- or waste-
washing process for the treatment of certain refinery wastes and
an analytical method to identify a particular class of toxic
substances in oil industry wastewaters.
Customers
The Company's services are provided to a broad range of
federal, state and local governmental and commercial clients in
the U.S. market. Demand for the Company's services is heavily
influenced by the level of implementation and enforcement of
existing and new environmental regulation and funding levels for
governmental projects and by spending patterns of commercial
clients. Over the last several fiscal years, the Company has
experienced a significant shift in its revenues from the
commercial sector to the governmental sector.
Federal, State and Local Governmental Clients
Due to its technical expertise and turnkey capabilities, the
Company has successfully bid on and executed contracts with
federal and other governmental agencies for the performance of
various CERCLA and RCRA (as defined below) activities. (See
Business - Operations - Regulations.) The Company's governmen-
tal contracts can generally be canceled, delayed or modified at
the sole option of the client and are typically subject to
annual funding limitations and public sector budgeting con-
straints.
The following table shows, for the last three years, the
Company's revenues attributable to federal, state and local
government contracts as a percentage of the Company's total
consolidated revenues:
<TABLE>
<CAPTION>
Year ended March 31,
Source 1994 1993 1992
------ -----------------------
(Percentage of revenues)
<S> <C> <C> <C>
Federal government:
DOD. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33% 19% 12%
DOE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 16 15
Other federal agencies . . . . . . . . . . . . . . . . . . . . . . . 5 10 10
__ __ __
53 45 37
State and local governments . . . . . . . . . . . . . . . . . . . . . . . 10 17 6
-- -- --
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63% 62% 43%
-- -- --
</TABLE>
Commercial Clients
The Company serves numerous commercial clients including
chemical, petroleum and other manufacturing firms, utilities,
and real estate and transportation service companies. A
substantial portion of the Company's commercial work represents
new contracts awarded by existing clients. No single commercial
client accounted for 10% of the Company's revenues in fiscal
years 1994, 1993 or 1992.
Competition
The environmental management industry is very competitive and
requires professional personnel with technical and project
management skills. The Company believes that the principal
competitive factors in all areas of its business are operational
experience, technical proficiency, breadth of services offered,
local presence and price. In certain aspects of the AS and C&R
areas of the Company's business, substantial capital investment
is required for facilities and equipment.
Increased competition, combined with changes in client
procurement procedures, has resulted in recent general market
trends toward lower contract margins, unfavorable changes in
contract terms and conditions in areas such as indemnification
of contractors, and a client preference for fixed-price arrange-
ments for environmental management contracts. Additionally,
certain of the Company's larger competitors have greater
financial resources which allow for better access to bonding and
insurance markets. These larger competitors have a competitive
advantage over the Company in providing the financial assurance
instruments which are frequently required by clients. The entry
of aerospace and other defense contractors, and international
construction and engineering firms into the environmental
management industry has materially increased the level of
competition for major federal governmental contracts and
programs, which have been the primary source of the Company's
revenue over the three-year period ended March 31, 1994.
The Company faces competition from a diverse array of small
and large organizations in each of its three business areas:
- - ES: national or regional environmental management firms;
national, regional and local architectural, engineering and
construction firms; environmental management divisions or
subsidiaries of international engineering, construction and
aerospace companies; and hazardous waste generators which have
developed in-house capabilities similar to those of the
Company.
- - AS: a few national, several regional and many single-location
analytical services' firms; analytical services' divisions or
subsidiaries of national or regional environmental management
companies; and laboratory operations associated with universi-
ties or other nonprofit or governmental agencies.
- - C&R: national environmental management firms; and national or
regional construction firms.
Regulations
The Company and its clients are subject to extensive and
evolving environmental laws and regulations which affect the
demand for many of the services offered by the Company (see
Business - Operations - Environmental Contractor Risks) and
create certain significant risks for the Company in providing
its services and at its inactive disposal sites in Northern
California. (See Notes to Consolidated Financial Statements -
Discontinued operations - Transportation, treatment and dispos-
al.) The principal environmental legislation affecting the
Company and its clients is described below.
National Environmental Policy Act of 1969 (NEPA). Under NEPA,
all federal agencies must consider ecological factors when
dealing with activities that may have an impact on the environ-
ment. Among other things, NEPA was the first federal legisla-
tion to establish guidelines and requirements for environmental
baseline studies, impact assessments and mitigation studies for
a variety of major industrial and governmental projects,
including development and construction of power plants and
transmission lines, pipelines, highways, landfills, mines,
reservoirs and residential and commercial developments.
Resource Conservation and Recovery Act of 1976 (RCRA). RCRA
regulates the treatment, storage and disposal of hazardous and
solid wastes. The 1984 Hazardous and Solid Waste Amendments to
RCRA (HSWA) expanded RCRA's scope by providing for the listing
of additional wastes as hazardous and lowering the quantity
threshold of wastes subject to regulation. HSWA also imposes
restrictions on land disposal of certain wastes, prescribes more
stringent management standards for hazardous waste disposal
sites, sets standards for UST management and provides for
corrective action procedures. Under RCRA, liability and
stringent management standards are imposed on a person who is a
generator or transporter of hazardous waste or an owner or
operator of a waste treatment, storage or disposal facility.
Comprehensive Environmental Response, Compensation and
Liability Act of 1980 (CERCLA). CERCLA addresses cleanup of
sites at which there has been or may be a release of hazardous
substances into the environment. CERCLA assigns liability for
costs of cleanup and damage to natural resources to any person
who, currently or at the time of disposal of a hazardous
substance, owned or operated any facility at which hazardous
substances were deposited; to any person who by agreement or
otherwise arranged for disposal or treatment, or arranged with
a transporter for transport of hazardous substances owned or
possessed by such person for disposal or treatment by others;
and to any person who accepted hazardous substances for trans-
port to disposal or treatment facilities or sites from which
there is a release or threatened release of hazardous substanc-
es. CERCLA authorizes the federal government either to clean up
these sites itself or to order persons responsible for the
situation to do so. CERCLA created the Superfund to be used by
the federal government to pay for the cleanup efforts. Where
the federal government expends money for remedial activities, it
must seek reimbursement from the potentially responsible parties
(PRPs). CERCLA imposes strict, joint and several retroactive
liability upon such parties. CERCLA was amended in 1986 by the
Superfund Amendments and Reauthorization Act (SARA) which
authorizes increased federal expenditures and imposes more
stringent cleanup standards and accelerated timetables. SARA
also contains provisions which expand the enforcement powers of
the USEPA. CERCLA's authorization to expend funds expires in
September 1994 and its taxing authority expires in December
1995. Although it is expected that Congress will reauthorize
the statute, the scope of the changes to the statute and the
level of funding to be provided are not yet certain, as are the
potential impacts upon the Company's business.
Clean Air Act and 1990 Amendments. The Clean Air Act requires
compliance with national ambient air quality standards (NAAQS)
and empowers the USEPA to establish and enforce limits on the
emission of various pollutants from specific types of facili-
ties. The Clean Air Act Amendments of 1990 modify the Clean Air
Act in a number of significant areas. Among other things, they
establish new programs and deadlines for achieving compliance
with NAAQS, controls for hazardous air pollutants, a national
permit program for all major sources of pollutants and create
significant new penalties, both civil and criminal, for viola-
tions of the Clean Air Act.
Other Federal and State Environmental Laws. The Company's
services are also utilized by its clients in complying with, and
the Company's operations are subject to regulation under, among
others, the following federal laws: the Toxic Substances
Control Act, the Clean Water Act, the Safe Drinking Water Act,
the Occupational Safety and Health Act and the Hazardous
Materials Transportation Act. In addition, many states have
passed Superfund-type legislation and other regulations and
policies to cover more detailed aspects of hazardous materials
management. The State of California, for example, has consis-
tently been a leader in enacting and implementing hazardous
materials legislation. This legislation, and similar laws in
other states, address such topics as air pollution control, UST
and AST management, water quality, solid waste, hazardous waste,
surface impoundments, site cleanup and wastewater discharge.
Several states have modeled their environmental laws and
regulations on those of California.
Environmental Contractor Risks
Although the Company believes that it generally benefits from
increased environmental regulations affecting business, and from
enforcement of those regulations, increased regulation and
enforcement also create significant risks for the Company.
These risks include potentially large civil and criminal
liabilities from violations of environmental laws and regula-
tions and liabilities to customers and to third parties for
damages arising from performing services for clients. (For a
discussion of the environmental regulatory risks posed by the
Company's Northern California sites, see Notes to Consolidated
Financial Statements - Discontinued operations - Transportation,
treatment and disposal.)
Liabilities Arising out of Environmental Laws and Regulations
All facets of the Company's business are conducted in the
context of a rapidly developing and changing statutory and
regulatory framework. The Company's operations and services are
affected by and subject to regulation by a number of federal
agencies including the USEPA, Occupational Safety and Health
Administration (OSHA), and Nuclear Regulatory Commission as well
as applicable state and local regulatory agencies. (For a
description of certain applicable laws and regulations, see
Business - Operations - Regulations.)
Increasingly, there are efforts to expand the reach of CERCLA
to make contractor firms responsible for cleanup costs by
claiming that environmental contractors are owners or operators
of hazardous waste facilities or that they arranged for treat-
ment, transportation or disposal of hazardous substances.
Several recent court decisions have accepted these claims.
Should the Company be held responsible under CERCLA for damages
caused while performing services or otherwise, it may be forced
to bear such liability by itself, notwithstanding the potential
availability of contribution or indemnity from other parties.
Other environmental statutes and regulations also pose risks
for the Company. For example, the Company's employee health and
safety practices, particularly its activities at hazardous waste
sites, are extensively regulated by OSHA. RCRA and similar
state statutes regulate the Company's practices for the treat-
ment, transportation, storage, disposal and other handling of
hazardous materials. Substantial fines and penalties may be
imposed not only for the mishandling of such substances, but
also for failure to keep proper records and other administrative
practices. The Company's failure to observe such laws and/or
the terms and conditions of licenses and permits it holds under
these and other laws, could adversely impact the Company's
ability to carry on one or more of its service areas as present-
ly constituted.
Increased regulation under RCRA may adversely affect the
Company's services in other ways. For example, the USEPA, on
May 18, 1993, citing its authority under RCRA, announced the
Draft Strategy imposing additional requirements and costs on
incineration facilities, the effect of which has been a "freeze"
on the permitting of any new fixed-base hazardous waste inciner-
ators or cement kilns. Although the "freeze" is presently
scheduled to expire in late 1994, the effects of the USEPA
policy may continue for an undetermined period thereafter. The
USEPA initiated these actions after highly publicized protests
against a new fixed-base hazardous waste incinerator facility in
Ohio. In public remarks at the time these plans were announced,
USEPA stated that its freeze will not affect on-site incinera-
tion of hazardous waste at Superfund sites, such as projects
utilizing the Company's HTTS on-site incineration units.
Although the potential exists for increased demand for the
Company's on-site incineration capabilities, as well as for the
Company's services to assist facility owners and operators to
comply with the new requirements, expansion of USEPA's program
to cover on-site incineration, if it were to occur, could
increase the compliance costs or hinder or prevent the Company
from fully participating in on-site incineration projects using
its HTTS technology. On May 9, 1994, the USEPA issued a new
policy which, while seemingly affirming incineration as an
allowable remedy under CERCLA, calls for additional procedures
and studies to be conducted before incineration may be selected
as a remedy, or which may result in the deselection of incinera-
tion as a remedy, at a Superfund site. The impact upon the
Company's business of this new policy, as well as court chal-
lenges to USEPA's May 1993 action, cannot yet be predicted. The
heightened scrutiny of incineration as a treatment solution is
likely to lead to delays and added costs in permitting the
Company's HTTS units, a significant portion of which the Company
expects will be borne by clients. One of the Company's pro-
jects, as well as one anticipated contract (see Business -
Operations - Construction and Remediation), have been affected
by such delays. Public opposition to the use of certain
remedies, such as incineration, the cost of those remedies, and
CERCLA changes under consideration reducing requirements for
"permanent remedies" such as incineration, may also cause the
USEPA and/or private parties to prefer other remedies in
Superfund remediations which may have a material adverse impact
on the Company's business. (See Management's Discussion and
Analysis of Results of Operations and Financial Condition -
Results of Operations - Continuing Operations - Revenues.)
Potential Liabilities Involving Customers and Third Parties
In performing services for its customers, the Company could
potentially be liable for breach of contract, personal injury,
property damage, and negligence, including claims for lack of
timely performance and/or for failure to deliver the service
promised (including improper or negligent performance or design,
failure to meet specifications, and breaches of express or
implied warranties). The damages available to a customer,
should it prevail in its claims, are potentially large and could
include consequential damages.
Many of those contracting for environmental management
services, particularly those involving large scale remediations,
seek to shift to contractors the risk of completing the project
in the event the contamination is either more extensive or
difficult to resolve than originally anticipated. The Company
has from time to time been involved in claims and litigation
involving disputes over such issues. (See Legal Proceedings.)
Environmental management contractors, in connection with work
performed for customers, also potentially face liabilities to
third parties from various claims including claims for property
damage or personal injury stemming from a release of toxic
substances or otherwise. Claims for damage to third parties
could arise in a number of ways, including through a sudden and
accidental release or discharge of contaminants or pollutants
during the performance of services, through the inability --
despite reasonable care -- of a remedial plan to contain or
correct an ongoing seepage or release of pollutants through the
inadvertent exacerbation of an existing contamination problem,
or through reliance on reports prepared by the Company.
Personal injury claims could arise contemporaneously with
performance of the work or long after completion of the project
as a result of alleged exposure to toxic substances. In
addition, increasing numbers of claimants assert that companies
performing environmental remediation should be adjudged strictly
liable, i.e., liable for damages even though its services were
performed using reasonable care, on the grounds that the
Company's services involved "abnormally dangerous activities".
Customers frequently attempt to shift various of the liabili-
ties arising out of remediation of their own environmental
problems to contractors through contractual indemnities. Such
provisions seek to require the Company to assume liabilities for
damage or injury to third parties and property and for environ-
mental fines and penalties. The Company has adopted risk
management policies designed to address these problems, but
cannot assure their adequacy. (See Business - Operations -
Insurance and Risk Management.)
Over the past two years, the USEPA has constricted signifi-
cantly the circumstances under which it will indemnify its
contractors against liabilities incurred in connection with
CERCLA projects. There are other proposals both in Congress and
at the regulatory agencies to further restrict indemnification
of contractors from third party claims. These changes may have
a material adverse effect on the Company's business.
Government Contracting Risk
As a major provider of services to government agencies, the
Company also faces the risks associated with government con-
tracting, which include substantial civil and criminal fines and
penalties for, among other matters, failure to follow procure-
ment integrity and bidding rules, employing improper billing
practices or otherwise failing to follow cost accounting
standards, receiving or paying kickbacks or filing false claims.
Government contracting requirements are complex, highly techni-
cal and subject to varying interpretations. Additionally, the
USEPA recently announced that it will hold contractors as well
as their federal agency clients, responsible for regulatory and
permit violations at federal facilities. As a result of its
government contracting business, the Company has been, is, and
expects in the future to be, the subject of audits and investi-
gations by governmental agencies. (See Legal Proceedings.) In
addition to the potential damage to the Company's business
reputation, the failure to comply with the terms of one or more
of its government contracts could also result in the Company's
suspension or debarment from future government contract projects
for a significant period of time. The fines and penalties which
could result from non-compliance with appropriate standards and
regulations, or the Company's suspension or disbarment, could
have a material adverse effect on the Company's business,
particularly in light of the increasing importance to the
Company of work for various government agencies. (See Business -
Operations - Customers.)
Insurance and Risk Management
The Company has adopted a range of insurance and risk
management programs designed to reduce potential liabilities,
including an insurance program, policies to seek indemnity where
possible in its contracts, other contract administration
procedures, and employee health, safety, training, and environ-
mental monitoring programs. In addition, as a result of the
substantial increase over the past several years in the percent-
age of the Company's revenues derived from work for governmental
agencies, the Company has been actively implementing a govern-
ment contracts compliance program. The Company cannot assure
the adequacy of the program and compliance failure could have a
material adverse effect on the Company's business.
The Company's insurance program in effect from April 1994
through March 1995 includes $5,000,000 of coverage each for
commercial general liability, product liability, automotive
liability and employers' liability. Workers' compensation
insurance is provided to statutory limits. The commercial
general liability and product liability policies are issued on
a "claims-made" basis. All listed coverages are provided under
an arrangement with an insurance company pursuant to which the
Company's captive insurance subsidiary (the Captive) is required
to indemnify the insurance carrier against all losses and costs
of defense up to a maximum of $5,000,000 for each policy per
fiscal year (except for employers' liability and workers'
compensation which have a $250,000 per occurrence loss limit and
automotive liability which has a $5,000,000 per occurrence loss
limit) and to support the indemnity commitment with appropriate
letters of credit. The Company has caused to be issued
$11,435,000 in letters of credit to support the Captive's
existing or anticipated obligations to indemnify the insurance
carrier, which amount is adjusted at least annually. From a
risk management perspective, all policies provided by the
Captive are, in effect, a self-insurance layer. Additionally,
the Company has $70,000,000 in excess liability policies
insuring claims in excess of the $5,000,000 covered by the
policies noted above. The Company also has other insurance
policies with various self-insured retentions or deductibles for
the management of its risk including but not limited to all risk
property coverage, contractor's pollution liability, profession-
al errors and omissions, and directors' and officers' liability
insurance coverage.
Environmental Impairment Liability (EIL) coverage is provided
through the Captive which has issued a $32,000,000 policy
exclusively for IT's inactive treatment, storage and disposal
sites located in Northern California. (See Notes to Consolidat-
ed Financial Statements - Discontinued operations - Transporta-
tion, treatment and disposal.) This coverage meets the current
requirements of both federal and state law.
Although the Company believes its insurance program to be
appropriate for the management of its risk, its insurance
policies may not fully cover risks arising from the Company's
operations. The exclusion of certain pollution and other
liabilities from some insurance policies, or losses in excess of
the coverage, may cause all or a portion of one or more losses
not to be covered by such insurance. Further, the cost and
limited availability of insurance has resulted in the Company's
use of self-insurance through the Captive, thus exposing the
Company to additional liabilities.
DISCONTINUED OPERATIONS
Pollution Control Manufacturing
On February 24, 1992, the Company entered into an agreement
for the sale of the manufacturing operations of IT's Pollution
Control Systems division which closed on May 15, 1992. This
business, located in Tulsa, Oklahoma and Hull, England, designed
and manufactured combustion, hydrocarbon vapor recovery, waste
treatment and other environmental control systems for domestic
and international clients.
Transportation, Treatment and Disposal
In December 1987, the Company's Board of Directors adopted a
strategic restructuring program which included a formal plan to
divest the transportation, treatment and disposal operations
through sale of some facilities and closure of certain other
facilities. These operations included the handling and trans-
portation of clients' wastes and their treatment and/or disposal
at Company or third party-owned facilities. On June 22, 1989,
the Company completed the sale of IT's active treatment and
disposal operations in Imperial Valley and at Bakersfield,
California, as well as its transportation business. The
Company's four inactive treatment, storage and disposal sites
located in Northern California were not included in this
transaction. Substantial progress has been made to date toward
the closure of these facilities, with two of these sites closed
and the others in the process of closure.
There are substantial financial implications related to the
Transportation, Treatment and Disposal discontinued operations.
For further information regarding the Company's discontinued
operations, see Notes to Consolidated Financial Statements -
Discontinued operations, Management's Discussion and Analysis of
Results of Operations and Financial Condition - Liquidity and
Capital Resources, and Legal Proceedings.
EMPLOYEES
At March 31, 1994, the Company employed 3,264 regular
employees. Of these employees, 2,834 were employed in opera-
tions, 52 in discontinued operations, and 378 in sales, corpo-
rate office and group administration.
At March 31, 1994, none of the Company's employees were repre-
sented by labor unions under collective bargaining agreements.
The Company employs union labor from time to time on a project
basis. The Company cannot predict whether any of its employees
who currently are not represented by unions will elect to be so
represented in the future. The Company considers its relations
with its employees to be good and has not experienced a signifi-
cant work stoppage in the past nine years.
ITEM 2. PROPERTIES.
IT owns or leases property in 25 states, the District of
Columbia, and the United Kingdom. Excluding its discontinued
operations, the Company owns approximately 58 acres and leases
approximately 1,050,000 square feet of property for various
uses, including equipment yards, laboratories, engineering and
services offices, sales offices, and corporate and regional
offices. Management considers the facilities adequate for the
present and anticipated activities of the Company.
Additionally, the Company owns approximately 3,900 acres
related to its discontinued operations, principally in Northern
California and Louisiana, of which approximately 500 acres have
been used for hazardous waste disposal facilities and approxi-
mately 2,200 are adjacent to those facilities.
ITEM 3. LEGAL PROCEEDINGS.
Class Action Lawsuits
In re International Technology Corporation - Securities Liti-
gation (C.D.Cal., Master File No. CV-88-440- RMT) was a class
action arising out of the public offering of 3,525,000 shares of
the Company's common stock pursuant to a prospectus dated
September 29, 1987 and subsequent trading activity. Plaintiffs
alleged that the Company and certain of its past and present
directors and officers and the Company's underwriters were
responsible for the issuance of false and misleading statements
actionable under the Securities Act of 1933, the Securities Ex-
change Act of 1934, and the common law. After several court-
sponsored mandatory settlement conferences, the parties reached
a settlement which was approved by the Court. The settlement
provided for the creation of a total settlement fund of
$12,000,000 plus interest from December 14, 1992. The Company's
contribution to the settlement agreement was 1,872,759 shares of
newly issued, freely tradeable common stock with a market value
at the date of issuance of approximately $6,350,000. In fiscal
year 1993, the Company recorded a charge to earnings for the
$6,350,000 value of these shares with a corresponding credit to
stockholders' equity and accrued $950,000 of litigation costs to
be paid in cash. The dismissal of the action is now final, with
no rights of appeal.
Mancino et al. v. Hutchison et al. - (Los Angeles Superior
Court, Case No. CA001120) was a purported class action lawsuit
filed in state court in July 1988, on behalf of stockholders and
noteholders of the Company alleging state securities law
violations and fraud and negligent misrepresentation in connec-
tion with the purchase of shares of the Company's common stock
and 9 3/8% senior notes by members of the purported class
between January 1986 and April 1987. The complaint also named
as defendants the underwriters who performed services in
connection with the senior note offering. In addition, the com-
plaint alleged that certain of the Company's officers and
directors sold shares of the Company's common stock at artifi-
cially inflated prices based on undisclosed information about
the Company. The plaintiffs sought unspecified damages,
including punitive damages plus costs associated with the
litigation. Upon motions filed by all defendants, the Court
dismissed this lawsuit with prejudice on January 3, 1990.
Plaintiff filed an appeal of this dismissal on February 15, 1990
in the California Court of Appeal for the Second Appellate
District, which was denied on May 3, 1991. On June 12, 1991,
plaintiff filed a petition for review with the California
Supreme Court regarding this appeal, and review of the case was
granted by the Court. The California Supreme Court affirmed the
Court of Appeals, and the dismissal is now final. Additional-
ly, in December 1989, plaintiffs in this lawsuit filed another
class action in federal court (Mancino et al. v. International
Technology Corporation, et al., U.S.D.C. - Central District No.
89 - 7244 RMT) which contains essentially the same factual
allegations and damage claims as those set forth in the dis-
missed state action, except that it has been brought only on
behalf of the stockholders of the Company and raises a claim
under the Securities Exchange Act of 1934. The Company is
defending the action vigorously. Discovery on this action was
in progress when, by order dated March 11, 1992, the federal
court granted the Company's motion for reconsideration of its
earlier denied motion for judgment on the pleadings and, on
March 31, 1992, judgment was entered against the plaintiffs'
claims. In dismissing the plaintiffs' claims, the court accepted
defendants' arguments based on a 1991 United States Supreme
Court decision which declared a uniform statute of limitations
for such actions. Congress has since passed Section 27A of the
Securities Exchange Act of 1934, which purports to reinstate the
formerly applicable statute of limitations for actions pending
on the date of the Supreme Court's decision. The plaintiffs
moved the court to reconsider its March 11, 1992 order in part
based upon a recent Ninth Circuit Court of Appeal case upholding
the constitutionality of Section 27A, which motion was granted
on May 11, 1993. The court has set a trial date of January 10,
1995.
After consultation with outside counsel and in consideration
of the availability of insurance coverage, management believes
the outcome of the Mancino actions will not have a material
adverse effect on the consolidated financial condition of the
Company.
Motco
On December 4, 1991, the Company announced the suspension of
work on the Motco project, the cleanup of a Superfund site in
Texas, and the filing of a $56,000,000 breach of contract
lawsuit, captioned IT Corporation v. Motco Site Trust Fund and
Monsanto Company in the United States District Court for the
Southern District of Texas, Houston Division, Civil Action No.
H-91-3532, against the Motco Trust, the potentially responsible
party (PRP) group that agreed to finance remediation of the site
and Monsanto Company, the leader of the PRP group.
In January 1988, the Company was retained by the Motco Trust
to destroy waste contained in pits at the site using two
transportable incinerators designed and operated by IT. Based
on information provided to IT in the Motco Trust's request for
proposal, the Company bid and was awarded a fixed-price contract
for approximately $33,000,000 which was subsequently increased
to approximately $38,000,000 through change orders. Of that
amount, approximately $21,000,000 has been paid to the Company.
In early 1991, IT advised the Motco Trust and Monsanto that it
would cost substantially more to complete the project because
the scope of work had changed and because the chemical makeup,
quantities and mixture of waste at the site were dramatically
different from that portrayed by data provided to IT in Motco
Trust's request for proposal. Additionally, the project was
impacted by other actions of the Motco Trust and Monsanto,
including the pumping of contaminated water and waste into the
Motco pits from an unrelated project which was managed by the
Motco Trust and Monsanto.
IT continued work at the site in good faith while negotiations
were occurring with the Motco Trust and Monsanto. Approximately
$31,000,000 of direct costs were incurred in excess of those
recovered under the contract and recorded as a contract claim
receivable and are included in noncurrent assets in the Com-
pany's consolidated balance sheet at March 31, 1994 and 1993.
IT has not recognized any overhead cost recovery or profit on
this project to date. IT sued to recover costs and profit of
approximately $56,000,000.
On December 26, 1991, the Motco Trust and Monsanto filed an
answer to IT's lawsuit and asserted a counterclaim against IT.
In their answers to IT's lawsuit, the Motco Trust and Monsanto
denied liability to IT on the grounds that the Motco Trust had
executed a change order on or about September 28, 1990 address-
ing many of the claims and purported underlying events alleged
in the lawsuit and had received a full release from IT regarding
those matters, that IT has failed to mitigate the damages
alleged to have been incurred by IT, that IT has failed to
manage and control its costs with respect to its work on the
project, and that IT's lawsuit fails to state a claim upon which
relief can be granted as it claims extra-contractual compensa-
tion. Monsanto also denies any separate liability from that of
the Motco Trust.
In its counterclaim, the Motco Trust seeks recovery of
$27,000,000 of monetary damages including all payments to third
parties to complete performance of the project, all penalties or
other liabilities to any governmental entity, and any related
damages which occur as a result of the breach of contract by IT
which is alleged to have occurred upon the filing of the lawsuit
by IT and concurrent suspension of work at the site.
The case was tried to a jury during March and April of 1994.
As a result of that trial, the jury rendered a special verdict
in IT's behalf wherein they found that Monsanto had breached its
contract with IT, had defrauded IT and had provided IT with
information which constituted a negligent misrepresentation as
to the waste characteristics. The jury found that the amount of
damages caused IT as a result of these acts was in the amount of
$52,800,000. The jury also found that Monsanto should pay
punitive damages in the amount of $28,550,000, together with
attorneys' fees in the amount of approximately $2,300,000. The
jury further found that IT did not commit fraud against the
defendants, that any breach of contract IT may have committed
was excused, and that Motco Trust should not recover on its
$27,000,000 counterclaim.
Monsanto has filed a motion for judgment notwithstanding the
verdict, and, alternatively, for a new trial. If the Court
orders a new trial, the verdict will be set aside pending a
retrial before a new jury. If Monsanto's motions with the trial
court are denied, the judgment is subject to appeal.
After consideration of the merits of the Company's position in
the lawsuit and after consultations with its outside counsel,
management believes that, subject to the inherent uncertainties
of litigation, the Company more likely than not will recover the
contract claim receivable recorded to date and prevail on Motco
Trust's counterclaim. However, if this matter is resolved in an
amount significantly lower than the contract claim receivable
recorded by IT or if the Motco Trust prevails in its counter-
claim and recovers any significant amount of damages, a material
adverse effect to the consolidated financial condition of the
Company would result.
Central Garden
On July 14, 1992, the Company responded to an emergency call
to clean up a chemical spill at a finished product warehouse
facility leased by Central Garden & Pet Supply Company (Central)
in Baton Rouge, Louisiana. While cleanup was under way, a fire
began which damaged the warehouse facility. In addition to the
owner of the facility, Central and two other lessees of the
finished product warehouse facility (an electrical supply
company and a pharmaceutical company) incurred significant
property damage and substantial loss of inventory.
On August 2, 1992, a petition for damages was filed against
the Company and Central by residents of a nearby apartment
complex alleging personal injuries caused by the release of
hazardous and noxious materials into the atmosphere as a result
of the fire (Gravois et al. v. IT Corporation, et al., #92-649,
U.S. District Court, Central District of Louisiana). Central
filed an answer, cross-claim, and third-party complaint. In the
complaint and cross-claim, Central alleges, among other things,
that the Company was the cause of the fire in failing to
exercise proper care in the cleanup of the spill, and was
responsible for the property damage, loss of contents, loss of
profits and other economic injury, and expenses incurred in the
cleanup. Further, Central claims a set-off for monies due the
Company for cleanup services rendered by the Company after the
fire and seeks indemnity for any damages assessed against
Central. The Company has responded to the complaint and cross-
claim alleging, among other things, improper storage and
handling of hazardous materials by Central. This case was
remanded to state court for lack of diversity jurisdiction (19th
Judicial District Court, Parish of East Baton Rouge, Louisiana,
#383,887). The Company has also filed its own cross-complaint
against Central for services rendered after the fire and has
denied responsibility for the fire, raised certain defenses, and
further claimed that Central was not entitled to a set-off. The
monies due the Company for services rendered to Central approxi-
mate $1,700,000 and are included in accounts receivable in the
Company's consolidated balance sheet at March 31, 1994 and 1993.
Neither Central nor the nearby residents have formally specified
the damages they seek, although, based on early discovery, it
appears Central claims losses in the $3,000,000 range for
destruction of inventory, plus unspecified additional damages,
including other amounts it may be required to pay as a result of
the fire, for which it seeks indemnity from IT.
A complaint has also been filed in state court in this matter
by the insurer for the electrical supply company against the
Company, Central, the lessor and certain insurers (American
Manufacturers Mutual Insurance Company v. IT Corporation, et
al., 19th Judicial District Court, Parish of East Baton Rouge,
Louisiana, #390,241). While the complaint does not specify the
damages sought, an earlier demand was made for approximately
$1,800,000.
In addition, the owner of the adjacent pharmaceutical company
and its insurers have filed suit against the Company, Central,
the lessor, a construction company which built a fire wall that
allegedly did not meet the building code, the manufacturer of
the chemicals which were spilled and certain insurers (Bergen
Brunswig Drug Co., et al. v. IT Corporation et al., 19th
Judicial District Court, Parish of East Baton Rouge, Louisiana,
#393,056). While damages have not been formally specified, it
appears plaintiff is claiming loss of the warehouse inventory
valued in excess of $9,000,000, as well as business interrup-
tion. The lessor has also filed a cross-claim and third party
complaint against the Company and others in this action.
Several other actions arising out of the fire have recently
been filed which the Company believes are substantially duplica-
tive of the previously filed cases in the types and amounts of
relief sought.
These matters are at a relatively early stage, and trial dates
have not been set. A discovery schedule has been established
which contemplates completion in the fall of 1994 as to the
issues of factual causation. The Company is unable at this time
to predict the outcome and is defending the actions vigorously.
The Company's insurance carrier has been notified of the matter
and is a defendant in one of the actions. The Company's carrier
is defending the actions subject to a reservation of its rights
to contest coverage at a later date. The Company has filed a
protective action seeking determination of coverage (Interna-
tional Technology Corporation, et al., v. National Union
Insurance Company, etc., et al., Los Angeles County, California
Superior Court, #BC079193).
Helen Kramer
On May 3, 1993, the Company received an administrative
subpoena from the Office of the Inspector General (OIG) of the
USEPA seeking documents relating to certain of the Company's
claims which were submitted to the U.S. Army Corps of Engineers
with regard to the Helen Kramer remediation contract, a substan-
tially completed project which the Company performed in joint
venture. Since August 1992, the Defense Contract Audit Agency
(DCAA) has been conducting an audit of certain claims submitted
by the joint venture. The Company has been informed that there
is a federal civil and criminal investigation into the claims.
The Company is also aware that one of its employees who provided
procurement support for the Helen Kramer project has been
subpoenaed to appear before a federal grand jury in Philadel-
phia, Pennsylvania. This matter is at a very preliminary stage.
The Company is cooperating fully with the government's investi-
gation. In addition, by letter dated October 3, 1993, a
shareholder of the Company alleged that the acts giving rise to
the OIG's investigation constituted, among other things, a waste
of the Company's assets, and demanded that the Company institute
an action against those responsible for the alleged wrongdoing.
The Company is investigating the shareholder's claims fully.
(See Business - Operations - Environmental Contractor Risks and
Notes to Consolidated Financial Statements - Summary of signifi-
cant accounting policies - Contract accounting and accounts
receivable.)
Other Legal Proceedings
The actions discussed below relate to the transportation,
treatment and disposal discontinued operations of the Company
and have been considered in the provision for loss on disposi-
tion. (See Notes to Consolidated Financial Statements -
Discontinued operations - Transportation, treatment and dispos-
al.)
Operating Industries, Inc. Superfund Site
In June 1986, IT was notified by the USEPA that its subsidi-
aries and predecessors, IT Corporation, Routh Transportation and
William H. Hutchison & Sons, Inc., (the IT subsidiaries), were
PRPs for actual and threatened releases of hazardous wastes at
the Operating Industries, Inc. (OII) site in Monterey Park,
California, which is on the National Priorities List (NPL) of
Superfund sites. The USEPA named the IT subsidiaries as PRPs
because they allegedly disposed of hazardous substances at OII
between 1948 and 1984.
Between February 1988 and December 1991, IT was advised by
USEPA of the opportunity to settle its alleged liabilities
concerning the OII site by entering into Partial Consent Decrees
(PCDs) with respect to the USEPA's prior response costs and the
first two interim remedial measures at the site and by perform-
ing services or paying for the third interim remedial measure.
The claims by the USEPA against IT with respect to the various
PCDs entered to date total approximately $8,500,000 (including
certain USEPA oversight costs but without any allowance for any
mitigating factors or IT's defenses). The PRP steering commit-
tee is also seeking cost recovery of approximately $2,700,000
from IT for the first two PCDs. IT believes that there is
substantial duplication between the claims of the USEPA and the
PRP steering committee.
The current PCDs, which address certain USEPA response costs
and call for completing certain interim remedial measures, do
not address the final remedy for site cleanup or for long-term
monitoring of the site. These costs, and the cost of possible
additional interim remedial measures, are anticipated to be
substantial. USEPA has announced it will continue to look to
the PRPs to perform or finance performance of interim remedial
measures at the site and will pursue those who fail to agree to
do so.
According to USEPA records, IT allegedly arranged for disposal
of two percent (2%) of the known volume of waste liquids
received at the site during its operating life. IT is currently
disputing such volume calculations. Based on the nature of the
waste streams handled by the IT subsidiaries and their conduct
in handling them, IT believes that its proper share of responsi-
bility for the site is less than the share attributed to it by
the USEPA and the PRP steering committee.
Most but not all of the major volume PRPs elected to enter
into the various PCDs. IT elected not to enter any of the PCDs.
To date, no cost recovery action has been filed against the
Company; however, either the USEPA or the PRPs which entered the
PCDs could bring such an action at any time. The Company has
advised its liability carriers as to the pendency of the USEPA's
claim and requested indemnification and legal representation.
These carriers dispute the scope of their coverage obligation to
IT.
IT has met with the USEPA to propose and negotiate a release
from alleged liability for past costs in return for IT undertak-
ing remediation work at the OII site. No response has been
received to IT's formal proposal. The PRP steering committee
has entered into a series of short-term tolling agreements
extending the statute of limitations on its potential claim
against the IT subsidiaries and has informed the IT subsidiaries
of its desire to explore settlement of its potential claims for
contribution.
Other Site Cleanup Actions
In addition to the OII matter identified above, the Company
has been identified as a PRP for actual or threatened releases
of hazardous substances under California's State Superfund
Statute in the following two instances:
- - On September 25, 1987, the Company was served with a Remedial
Action Order (RAO) issued by the California Department of
Health Services, now California EPA Department of Toxic
Substances Control (DTSC), concerning the GBF Pittsburg
landfill site near Antioch, California, a site which has been
proposed by the USEPA to be added to the NPL under CERCLA. IT
and seventeen (17) other firms and individuals were character-
ized as responsible parties in the RAO and directed to
undertake investigation and potential remediation of the site
which consists of two (2) contiguous parcels. From 1968
through 1974, a predecessor to IT Corporation operated a
portion of one parcel as a liquid hazardous waste site. The
activity ceased in 1974, and the disposal site was closed
pursuant to a closure plan approved by the appropriate
Regional Water Quality Control Board (RWQCB). Both of the
parcels have since served as a municipal and industrial waste
site and, until March 1992, continued to accept municipal
waste. Water quality samples from monitoring wells in the
vicinity of the site were analyzed by the property owner in
August 1986 and indicated the presence of volatile organics
and heavy metals along the periphery of the site.
Additional PRPs, consisting primarily of known waste genera-
tors, were subsequently served with an amended RAO by the
DTSC. IT and other PRPs (the PRP group) are participating on
a voluntary basis to further investigate the nature and extent
of any subsurface contamination beneath the site and beyond
its borders. During fiscal year 1992, the PRP group submitted
Remedial Investigation and Feasibility Study reports to the
DTSC. In fiscal year 1994, the PRP group completed a supple-
mental remedial investigation and a revised baseline risk
assessment. The studies indicate that groundwater quality
impact is not affecting drinking water supplies and is not
attributable solely to the portion of the site previously
operated by IT's predecessor. The current owner/operator at
the site was ordered to cease the municipal landfill opera-
tions and close the site and, pursuant to a court approved
settlement, ceased accepting waste.
In June 1993, the Company was notified of the DTSC's intent to
issue a revised RAO and Imminent and Substantial Endangerment
Order (ISE Order). In July 1993, the DTSC issued a revised
RAO and ISE Order to the Company and 72 other respondents.
While it primarily restates previous RAOs, it also requires
the respondents to undertake additional tasks including a
portion of the closure activities of the entire municipal
landfill and the design and installation of interim caretaker
measures. A conceptual design for an interim groundwater
treatment facility was submitted to DTSC in April 1994. The
terms of the new order and/or partial closure of the landfill
and remediation of groundwater contamination at the entire
site may result in significant costs. Due to the early stage
of this matter, it cannot be determined what impact, if any,
the new order will have on the Company. The Company intends
to resist any attempts to cause it to assume liabilities in
excess of those associated with the portion of the site
previously operated by IT's predecessor.
- - In November 1987, the Company was advised that the DTSC had
issued an RAO to certain owners of the real property and the
operator of an underground injection well operation known as
the Rio Bravo site. The site located near Shafter, California
is under investigation by the DTSC for storage and disposal
activities conducted between May 1984 and January 1985. From
available information, it appears that, between December 10,
1984 and January 10, 1985, IT transported loads of liquid
wastes to the site, primarily for one client.
The DTSC listed Rio Bravo on its Bond Expenditure Plan in
January 1987, issued a remedial investigative order, and began
cleanup activity. By letter dated February 21, 1989, the DTSC
notified IT that it was identified as a PRP under California
law for having transported waste to the site, and that the
Company and other PRPs could be liable for cleanup costs for
the site. In March 1991, the DTSC issued an ISE Order naming
IT and 98 other individuals and firms as responsible parties
and directing them to assume responsibility for assessment and
remediation of the Rio Bravo site. A PRP group consisting of
generators and transporters, including IT, is implementing the
terms of the ISE Order and is seeking to recover response
costs from non-settling PRPs. To date, the group has not
sought payment from IT or any other transporter PRP for past
costs or implementation of the ISE Order. The DTSC has
advised IT and the other PRPs that it is seeking to recover
its oversight costs, and the PRP group is attempting to settle
the DTSC's claim for past response costs.
The Company has been, and from time to time may be, named as a
PRP at other sites as a result of its transportation, treatment
and disposal discontinued operations.
The Company is subject to other claims and lawsuits in the
ordinary course of its business. In the opinion of management,
all such other pending claims are either adequately covered by
insurance or, if not insured, will not individually or in the
aggregate result in a material adverse effect on the consolidat-
ed financial condition of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SHAREHOLDERS.
There were no matters submitted to a vote of the Company's
common shareholders during the fourth quarter of fiscal year
1994.
EXECUTIVE OFFICERS OF THE COMPANY
The following table provides information as of June 29, 1994
regarding the Company's executive officers and the positions
they hold with the Company. The officers are appointed annually
by the Board of Directors to serve at the discretion of the
Board.
<TABLE>
<CAPTION>
First
elected as
Term as director or
director officer of
Name Age Position expires the Company
---- --- -------- --------- ----------
<S> <C> <C> <C> <C>
Robert B. Sheh 54 President and Chief 1994 1992
Executive Officer
Larry M. Hart 53 Senior Vice President and ---- 1993
Chief Operating Officer
Anthony J. DeLuca 47 Senior Vice President and ---- 1990
Chief Financial Officer
James R. Mahoney 55 Senior Vice President, ---- 1991
Corporate Development
and Sales
Eric Schwartz 47 Senior Vice President, General ---- 1992
Counsel and Secretary
Lawrence D. Andersen 60 Vice President, Environmental ---- 1994
Services
Raymond J. Pompe 60 Vice President, Construction ---- 1988
and Remediation
</TABLE>
Mr. Sheh joined the Company in July 1992 as President and
Chief Executive Officer and a Director. Prior to joining the
Company, Mr. Sheh was President of The Ralph M. Parsons Company,
a subsidiary of The Parsons Corporation, since 1989. Mr. Sheh
had a broad range of management responsibilities during his 21
years with Parsons, including international operations, corpo-
rate business development and management of major divisional
operations. Parsons is a major international engineering and
construction company, which serves the energy, natural resource,
environmental and defense industries. Mr. Sheh serves on the
Board of Directors of Davidson & Associates, Inc.
Mr. Hart joined the Company in November 1993 as Senior Vice
President and Chief Operating Officer. Prior to joining the
Company, Mr. Hart served from 1967 to 1993 in several capacities
for Fluor Daniel, Inc., a major engineering and construction
firm. At Fluor Daniel, Inc., Mr. Hart served as Executive
Project Leader for several multi-billion dollar construction
projects, President of the Power Business Sector, and a Fluor
Daniel Group Executive.
Mr. DeLuca joined the Company in April 1990 as Senior Vice
President and Chief Financial Officer. Prior to then, he was
with the public accounting firm Ernst & Young for 20 years,
including the last 8 years as a partner in the firm.
Mr. Mahoney joined the Company in January 1991 as Senior Vice
President and Director of Technology and was named Senior Vice
President, Corporate Development and Sales in April 1992. Prior
to joining the Company, Mr. Mahoney was Director of the National
Acid Precipitation Assessment Program, a U.S. government
research and assessment program, from 1988 to 1991. From 1984
to 1988, Mr. Mahoney served in various environmental managerial
capacities with Bechtel Group, Incorporated, a major construc-
tion firm.
Mr. Schwartz joined the Company in October 1992. Prior to
joining the Company, Mr. Schwartz served in various capacities
for Tosco Corporation, an energy company, from 1978 to 1992,
including that of Executive Vice President, Finance, Administra-
tion and General Counsel, a member of its Board of Directors and
a consultant. From 1972 to 1978, Mr. Schwartz was associated
with the law firm of Cleary, Gottlieb, Steen & Hamilton.
In April 1994, Mr. Andersen was elected Vice President,
Environmental Services of the Company. Mr. Andersen joined the
Company in June 1992 as the Director of the Groundwater Services
Group and most recently served as Director of Environmental
Services, West. Prior to joining the Company, he served as
Senior Vice President - Operations of Canonie Environmental
Services Corporation, a nationwide environmental engineer-
ing/construction firm, from 1989 to 1992. From 1984 to 1989,
Mr. Andersen served in various capacities, including Vice
President - Operations, for Warzyn Inc., a privately-owned
environmental, civil and geotechnical consulting engineering
company. From 1965 to 1984, he was employed by D'Appolonia
Consulting Engineers, a privately-owned engineering/consulting
company, in various positions including Vice President, Eastern
Region.
Mr. Pompe joined the Company in 1988 as Vice President,
Construction and Remediation. Prior to joining the Company, Mr.
Pompe was employed by Dravo Corporation, a major construction
firm, from 1956 to 1988 in various executive capacities, most
recently as Senior Vice President responsible for construction
projects.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SHAREHOLDER
MATTERS.
The Company's common stock is listed on the New York Stock
Exchange (NYSE) under the symbol of ITX. The following table
sets forth the high and low sale prices, as reported by the
NYSE.
<TABLE>
<CAPTION>
Quarter ended High Low
------------- ---- ---
<S> <C> <C>
June 30, 1992 . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6 3/8 $ 4 3/4
September 30, 1992. . . . . . . . . . . . . . . . . . . . . . . . . 5 7/8 4 1/2
December 31, 1992 . . . . . . . . . . . . . . . . . . . . . . . . . 5 3/4 4 3/4
March 31, 1993. . . . . . . . . . . . . . . . . . . . . . . . . . . 7 1/4 5 1/2
June 30, 1993 . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 7/8 4 3/4
September 30, 1993. . . . . . . . . . . . . . . . . . . . . . . . . 5 3/4 4 1/8
December 31, 1993 . . . . . . . . . . . . . . . . . . . . . . . . . 4 1/4 3 1/2
March 31, 1994. . . . . . . . . . . . . . . . . . . . . . . . . . . 3 5/8 2 7/8
</TABLE>
On June 17, 1994, the closing sale price of the common stock
on the NYSE as reported by The Wall Street Journal was $3.00 per
share. On that date there were 2,521 shareholders of record.
The Company has not paid a cash dividend on its common stock
for the three years ended March 31, 1994. The Company has no
present intention to pay cash dividends on its common stock for
the foreseeable future in order to retain all earnings for in-
vestment in the Company's business. IT's credit agreements pro-
hibit cash dividends on common stock.
ITEM 6. SELECTED FINANCIAL DATA.
The following table sets forth income statement information
for the Company's continuing operations and other financial
information for each of the five years in the period ended March
31, 1994. (See Notes to Consolidated Financial Statements -
Discontinued operations.)
<TABLE>
<CAPTION> Year ended March 31,
1994 1993 1992 1991 1990
-----------------------------------------------------------
(In thousands, except per share data)
INCOME STATEMENT INFORMATION
<S> <C> <C> <C> <C> <C>
Revenues $392,803 $410,539 $420,453 $373,085 $286,107
Income (loss) from continuing operations
(net of preferred stock dividends) (3,241) (2,082) 8,895 14,618 11,827
Income (loss) per share
from continuing operations (.09) (.06) .27 .44 .36
Weighted average shares 34,762 33,530 33,425 33,401 32,490
OTHER FINANCIAL INFORMATION
Working capital 63,522 60,281 71,730 48,788 53,705
Total assets 359,203 369,178 382,317 356,459 307,306
Long-term debt 68,625 115,811 136,413 101,408 76,077
Long-term accrued liabilities 38,993 52,470 56,500 59,554 69,636
Stockholders' equity 160,548 106,178 98,531 105,687 86,831
</TABLE>
No cash dividends were paid on common shares for any period.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION.
RESULTS OF OPERATIONS
CONTINUING OPERATIONS
Overview
The Company operates in one industry segment and provides a
range of services to clients principally in the United States
which, effective April 1, 1993, were Environmental Services,
Analytical Services, and Construction and Remediation. The
Company may compete for contracts which utilize only one of its
services; however, the Company's principal strategy is to market
its services on a turnkey basis. There are operating and
economic synergies between these service areas, as they are
complementary and often used in combination.
On June 28, 1994, pursuant to a definitive agreement signed on
May 2, 1994, the Company and an affiliate of Corning Incorporat-
ed (Corning) combined the two companies' environmental analyti-
cal services businesses into a newly formed 50/50 jointly-owned
company (the joint company). The joint company will operate
independently with a separate board of directors comprised of
representation from IT and Corning, and will provide services to
the Company on a competitive basis. In connection with the
transaction, IT and Corning will contribute the net assets of
their respective laboratory businesses into the joint company.
Additionally, IT issued to Corning 333,000 shares of IT common
stock and a five-year warrant to purchase 2,000,000 shares of IT
common stock at $5.00 per share. The financing of the joint
company will be provided by a $60,000,000 bank line of credit.
IT's 50 percent investment in the joint company will be account-
ed for under the equity method. An aggressive integration plan
will be implemented in the early stages of operations of the
joint company. The plan will include consolidation and closure
of redundant lab facilities and equipment, a reduction in force
to eliminate duplicative overhead and excess capacity and a
consolidation of laboratory management and accounting systems,
resulting in productivity gains achieved through economies of
scale. Consequently, it is estimated that the joint company
will incur a charge for integration of approximately
$20,000,000, principally non-cash, in the quarter ending June
30, 1994. IT will reflect 50 percent of such charge in its
financial statements in the same quarter. Upon completion of
the integration process, the joint company will have estimated
revenues of $150,000,000 and employ approximately 1,300 people
in its laboratory network throughout the United States.
The Company's financial performance in fiscal year 1994
continued to be impacted by weak market demand, particularly in
the commercial sector, due to the effect on the environmental
management industry of the sluggish U.S. economy. The Company
increased its volume of business in the federal governmental
sector as spending programs remained strong; however, the growth
in federal governmental revenues was more than offset by the
decline in the commercial market due to lower demand for
environmental engineering consulting services (and related
analytical laboratory support), as well as small remediation and
groundwater services projects. Pricing pressures resulting from
weak client demand and increased competition adversely impacted
gross margins in the Environmental Services and Analytical
Services areas.
Revenues
The following table provides information on revenues attribut-
able to the business areas of the Company.
<TABLE>
<CAPTION>
Year ended March 31,
1994 1993 1992
-----------------------------------------------------------------------------
Percentage
revenue Percentage
Gross increase Gross revenue Gross
margin (decrease) margin (decrease) margin
Revenues percentage 1993-1994 Revenues percentage 1992-1993 Revenues percentage
----------------------------------------------------------------------------------------------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Environmental Services $248,184 16.4% (12.3)% $282,913 18.9% (0.1)% $283,217 19.2%
Analytical Services 55,218 10.1 (2.9) 56,848 15.2 (6.3) 60,642 9.8
Construction and
Remediation 89,401 13.4 26.3 70,778 15.6 (7.6) 76,594 11.4
------- ------- -------
Total $392,803 14.8 (4.3) $410,539 17.8 (2.4) $420,453 16.4
------- ------- -------
</TABLE>
Over the three-year period ended March 31, 1994, only the
Construction and Remediation service area reported revenue
growth. Revenues for the Environmental Services and Analytical
Services areas peaked in fiscal year 1992 and have thereafter
been adversely impacted by recessionary pressures, primarily in
the commercial sector. An increasing percentage of the Com-
pany's revenues during this three-year period was earned through
executing governmental contracts for various federal, state and
local agencies. Although governmental clients continue to spend
at high levels, many commercial clients have reduced and
deferred environmental expenditures pending further improvement
in the U.S. economy and increased regulation and enforcement.
Revenues from federal, state and local governmental contracts
accounted for 63% of the Company's revenue in fiscal year 1994,
compared to 62% and 43% in fiscal years 1993 and 1992, respec-
tively. Federal governmental revenues are derived principally
from work performed for the U.S. Department of Energy (DOE) and
the U.S. Department of Defense (DOD). In the near term, the
Company expects that the percentage of total revenues from the
execution of federal, state and local governmental contracts
will continue to be substantial.
Revenues for fiscal year 1994 declined $17,736,000 or 4.3%,
from fiscal year 1993 levels as revenue decreases were experi-
enced in Environmental Services and Analytical Services for the
reasons noted above. Construction and Remediation experienced
a significant 26.3% year-to-year increase in revenues primarily
because of higher levels of work performed on large thermal
remediation projects and various federal governmental programs.
During fiscal year 1994, a significant percentage of the
Company's revenues continued to be derived from large, complex
thermal remediation contracts utilizing the Company's Hybrid
Thermal Treatment System (HTTS) technology, many of which are
fixed-price. This type of contract accounted for 63% of
Construction and Remediation revenues in fiscal year 1994
compared to 58% in fiscal year 1993 and 53% in fiscal year 1992.
To date, the Company has entered into five of such contracts,
while two others where the Company is the apparent low bidder
are pending awards. Certain of the contracts are executed in
joint venture with other companies. The first contract utiliz-
ing the HTTS technology was substantially completed in fiscal
year 1990. Work under a second contract was suspended during
fiscal year 1992 and is currently being litigated due to a
contractual dispute. (See Notes to Consolidated Financial
Statements - Commitments and contingencies.) A third contract
is currently in progress utilizing the HTTS technology to
incinerate contaminated materials. This contract is scheduled
to be completed in fiscal year 1995. Activities on a fourth
contract awarded in fiscal year 1992 utilizing the HTTS technol-
ogy began that year, with incineration of materials having begun
in fiscal year 1994 and continuing into fiscal year 1996. A
fifth contract utilizing HTTS equipment was awarded in fiscal
year 1993 and permit applications have been submitted for
regulatory agency review and public hearings. In April 1994,
C&R, with a partner, was the apparent low bidder on a contract
utilizing an HTTS unit; however, award of this project has been
delayed pending a review of the use of incineration technology
at that site requested by a local Congressman. In June 1994,
the Company was the apparent low bidder for a contract utilizing
an HTTS unit. The formal contract award is expected in 30 days.
On May 18, 1993, the U.S. Environmental Protection Agency
(USEPA), citing its authority under RCRA, announced the Draft
Strategy imposing additional requirements and costs on incinera-
tion facilities, the effect of which has been a "freeze" on the
permitting of any new fixed-base hazardous waste incinerators or
cement kilns. Although the "freeze" is presently scheduled to
expire in late 1994, the effects of the USEPA policy may
continue for an undetermined period thereafter. On May 9, 1994,
the USEPA issued a new policy which, while seemingly affirming
incineration as an allowable remedy under the Comprehensive
Environmental Response, Compensation and Liability Act (CERCLA),
calls for additional procedures and studies to be conducted
before incineration may be selected as a remedy, or which may
result in the deselection of incineration as a remedy, at a
Superfund site. The impact upon the Company's business of this
new policy, as well as court challenges to USEPA's May 1993
action, cannot yet be predicted. If policies were implemented
or regulations were changed such that the Company was unable to
permit and use incinerators at future remediation projects due
to either regulatory or market factors, the Company would have
to find alternative uses for its HTTS equipment, which currently
has a net book value of approximately $40,000,000. If alterna-
tive uses, such as foreign installations, were not found or were
uneconomical, there could be a material adverse effect to the
Company's consolidated financial condition due to impairment of
HTTS assets as well as lost project opportunities.
The Company has a number of contracts for projects which are
in progress or have not yet commenced. At March 31, 1994, these
contracts represent a backlog of approximately $640,000,000 in
contract revenues (including $274,000,000 of which is scheduled
to be completed during fiscal year 1994) compared with
$391,000,000 at March 31, 1993. This increase is due principal-
ly to the receipt by the Company of two major contracts at the
DOE Hanford site, one of which is for Analytical Services and
the other of which is described below. At March 31, 1994 and
1993, the Company's total backlog included $141,000,000 and
$32,000,000, respectively, of Analytical Services' backlog. The
$141,000,000 ($15,000,000 of which is current backlog) will be
transferred to the new IT/Corning joint company.
Although the Company has significant contracts with various
governmental agencies which provide for a general undefined
scope of work, the backlog reported above includes only the
value of the defined task orders under such contracts. The
Company estimates it will receive $600,000,000 over the next
five years of additional future project work under existing
governmental indefinite delivery order contracts.
Backlog revenues are expected to be earned primarily over the
next one to five years, with a substantial portion of the
backlog consisting of governmental contracts which are of a
defined scope, some of which are subject to annual funding. In
accordance with industry practices, substantially all of the
Company's contracts are subject to cancellation by the customer;
however, the Company has not experienced cancellations which
would have a material effect on backlog amounts shown.
In January 1993, the Company was a participant on a team which
was awarded a five-year contract (with a three-year option) to
perform environmental work at the DOE site in Hanford, Washing-
ton under the Environmental Restoration Management Contract
(ERMC) program. Although the scope and value of the work under
the cost-plus-award-fee contract will be more accurately defined
in the initial phases of the project, it is estimated that the
minimum value of the contract is approximately $800,000,000 for
the first five years. The Company's estimated portion is
approximately 20-30 percent of the contract value. On February
22, 1994, the DOE upheld the award of the ERMC program to the
team which included IT. Previously, the contract award had been
under protest by two losing competitors.
The Company's backlog at any given time is subject to changes
in scope of services required by the contracts as well as
increases or decreases in costs relating to the contracts in
backlog. The increased volume of contracts performed subject to
such scope changes has also increased the number of contract
claims requiring negotiations with clients in the ordinary
course of business, leading to some estimates of claim amounts
being included in revenues. When such amounts are finalized,
any changes from the estimates are reflected in earnings.
The Company expects a long-term growth trend from Construction
and Remediation revenues due to increasing federal, state and
local legislation and enforcement, including CERCLA which, as
reauthorized, provides for approximately $1,800,000,000 per year
in funding for the cleanup of high priority hazardous waste
sites through September 30, 1994. An increasing number of
sites, particularly those involving federal agencies such as the
DOD and the DOE, are nearing completion of investigative stages
and will require remedial action. The Company expects that
larger remedial actions in the commercial sector, however, will
continue to be deferred until there is improvement in the U.S.
economy or a more vigorous enforcement climate.
The impact on the Company's business of the possible expira-
tion of CERCLA cannot yet be predicted. Although it is expected
that Congress will reauthorize the statute, the scope of the
changes to the statute, the level of funding to be provided and
the timing of reauthorization and implementation of the changes
are not yet certain. Among the changes proposed are standard-
ization of cleanup levels, reduction of requirements for
permanent remedial treatment and other modifications designed to
speed remediation of contaminated sites as well as modification
or elimination of CERCLA's liability allocation scheme.
Although these changes may create greater demand for certain of
the Company's services such as on-site containment and similar
types of remediation, they may decrease demand for certain other
services, such as engineering, design and incineration.
Additionally, a delay in reauthorization of CERCLA or a short-
term reauthorization, could result in a delay in expenditures
for site cleanups.
The Company's ability to successfully bid and negotiate
additional large contracts is constrained in some instances by
the Company's limited ability to obtain performance and payment
bonds, as a result of both the Company's current financial
condition and the limited availability of such bonds from
traditional corporate sureties to meet the requirements of firms
engaged in large scale environmental remediation projects.
Where bonding is a requirement and unavailable to the Company,
the Company will continue to pursue contracts through joint
ventures with partners able to provide necessary bonding, or may
provide letters of credit available under the Company's revolv-
ing credit facility in place of bonds. (See Liquidity and
Capital Resources.)
With the completion of the IT/Corning transaction, the Company
will no longer record any revenue in the Analytical Services
area; however, since roughly 30 percent of Analytical Services
area revenue has been derived from Environmental Services or
Construction and Remediation projects, revenue will now be
recorded in those two business areas related to analytical
services subcontracts performed by the joint company for IT,
similar to other third party subcontracts.
Fiscal year 1995 revenues for Environmental Services and
Construction and Remediation are expected to continue to
increase in the governmental sector. Generally, growth in all
areas is partially dependent upon the Company's ability to
attract, train and retain qualified professional staff.
Gross Margin
Gross margin percentage for fiscal year 1994 decreased in all
of the Company's service areas. Analytical Services experienced
a significant decline in gross margin percentage in fiscal year
1994 because of increased pricing pressure in the chemical
analysis area due to weak customer demand, and decreased
utilization of laboratory capacity resulting from start-up
delays on certain governmental projects in the radiochemical
analysis area. The substantial increase in Analytical Services'
gross margin percentage from fiscal year 1992 to fiscal year
1993 was primarily attributable to increased utilization of
radiochemical mixed waste capacity and the benefit of continuing
cost containment programs which were initially implemented in
the fourth quarter of fiscal year 1992 and included the closure
of the San Jose, California laboratory. (See Restructuring
Charges.)
In fiscal year 1994, Environmental Services' gross margin
percentage declined from the prior year level due to overall
pricing pressure resulting from generally lower commercial
client demand leading to increased competition which has caused
lower hourly billing rates on time-and-material contracts as
well as lower bidding margins required to win small remediation
and groundwater services projects. Environmental Services'
gross margins in fiscal year 1993 were essentially equal to
those of the prior year.
Construction and Remediation gross margin percentage for the
current fiscal year decreased primarily because fiscal year 1993
gross margin was favorably affected by a positive margin
adjustment related to the closeout of a thermal remediation
project which was completed in a prior fiscal year. Construc-
tion and Remediation project margins were depressed in fiscal
year 1992 due to the nonrecognition of any overhead cost
recovery or profit on the Motco Site Trust Fund contract. (See
Notes to Consolidated Financial Statements - Commitments and
contingencies.)
The Company's ability to improve upon fiscal year 1994 gross
margins is heavily dependent on increasing utilization of
professional staff and successfully bidding new contracts at
adequate margin levels. The Company does not expect any
significant margin improvement until current industry pricing
pressures are relieved as a result of commercial clients
requiring increased services due to greater enforcement of
environmental regulations. Additionally, since the cost of HTTS
equipment is generally recovered over three or more projects,
margins in Construction and Remediation are dependent on
successful performance of existing contracts and on winning new
contracts utilizing existing HTTS equipment upon the completion
of previous projects; otherwise, depreciation on HTTS equipment
idle for significant periods of time will continue to negatively
affect gross margin.
Selling, General and Administrative Expenses
Selling, general and administrative expenses averaged 12.1% of
revenues during the three fiscal years ended March 31, 1994.
Selling, general and administrative expenses were 12.4%, 11.9%
and 11.9% of revenues in fiscal years 1994, 1993 and 1992,
respectively.
In the fourth quarter of fiscal year 1994, selling, general
and administrative expenses include $4,500,000 related to the
actuarially determined value of contractual retirement benefits
to be provided to its former Chairman of the Board (who was also
Chief Executive Officer from 1975 through 1992) who retired from
that position effective April 1, 1994. Such retirement agree-
ment is currently subject to further review by a special
committee of the Board of Directors. Ongoing selling, general and
administrative expense for discount amortization related to this retirement
agreement will initially be approximately $300,000 per year and will decline
over time.
Selling, general and administrative expenses excluding the
above item decreased $4,760,000 or 9.7% in fiscal year 1994 from
the prior year level due to the elimination of management layers
in the Environmental Services area as a result of actions taken
in late fiscal year 1993 involving organizational realignment,
the elimination of administrative costs in Europe, and ongoing
reductions in certain corporate office administrative costs.
Excluding the $4,500,000 charge, selling, general and adminis-
trative expenses would have been 11.2% of revenues, down from
11.9% of revenues in the prior year.
Selling, general and administrative expenses declined
$1,131,000 or 2.3% in fiscal year 1993 from the prior year level
through cost containment efforts, but remained at 11.9% of
revenues because of the decrease in revenues reported for fiscal
year 1993.
Maintaining selling, general and administrative expenses at
the adjusted fiscal year 1994 level of 11.2% of revenues is
dependent upon continuing cost controls; however, management
believes some decrease in this percentage is achievable if
revenues increase significantly. The Company expects to reduce
selling, general and administrative expenses essentially
proportionally to the lost revenues from Analytical Services as
a result of the IT/Corning transaction.
Restructuring Charges
In connection with the realignment and streamlining of the
Company's organization which was initiated in the fourth quarter
of fiscal year 1993, the Company incurred a pre-tax restructur-
ing charge of $8,378,000 which represented 2.0% of annual
revenues. The restructuring charge includes costs for the
consolidation of facilities in the United States through office
combinations or shutdowns, related asset writeoffs, severance
payments to employees, and the disposition of most of the
Company's European operations through either closure or sale.
At the end of fiscal year 1992, the Company implemented a
restructuring program which was the result of an evaluation of
operational capacity, productivity and overhead costs. The
program included staff reductions, facility closures of several
unproductive engineering offices and the San Jose, California
laboratory, and related asset writeoffs and lease termination
accruals. In fiscal year 1992, the $6,997,000 restructuring
charge represented 1.7% of revenues.
Other Income (Expense)
In April 1994, the Company was notified that planning
permission was denied for an integrated treatment facility
located in Salt End, North Humberside, England. The Company
wrote off its investment in the facility, reporting a $2,500,000
non-cash charge to continuing operations in the fourth quarter
of fiscal year 1994. (See European Operations.)
At December 31, 1992, the Company accrued a provision of
$1,981,000 for the writeoff of nonrecoverable costs invested in
a U.K. joint venture.
At December 31, 1992, the Company accrued a provision of
$6,300,000 for the anticipated settlement of certain class
action shareholder litigation. The litigation was tentatively
settled in the quarter ending March 31, 1993, and an additional
$1,000,000 provision was taken at that time, principally for
related litigation costs. (See Notes to Consolidated Financial
Statements - Class action lawsuit.)
On April 9, 1992, the Company, in connection with a secondary
public offering, sold its investment in stock options of EXEL
Limited, an offshore casualty insurance company, for $3,733,000
in cash. The Company reported a pre-tax gain of $3,483,000 in
the first quarter of fiscal year 1993.
On July 26, 1991, in an initial public offering, the Company
sold its investment in the common stock of EXEL Limited for
$12,035,000 in cash. The Company reported a pre-tax gain on
this transaction of $7,285,000 in the second fiscal quarter of
fiscal year 1992.
Interest, Net
Net interest expense has averaged 2.4% of revenues for the
past three fiscal years. Net interest expense was 2.1%, 2.7%
and 2.3% of revenues in fiscal years 1994, 1993 and 1992,
respectively. The following table shows net interest expense
for the three fiscal years ended March 31, 1994.
<TABLE>
<CAPTION>
Year ended March 31,
1994 1993 1992
-----------------------------------------
(In thousands)
<S> <C> <C> <C>
Interest incurred . . . . . . . . . . . . . . . . . . $ 9,326 $11,716 $11,926
Interest incurred allocated to discontinued
operations. . . . . . . . . . . . . . . . . . . . . - (40) (575)
Capitalized interest. . . . . . . . . . . . . . . . . (893) (518) (1,434)
Interest income . . . . . . . . . . . . . . . . . . . (160) (43) (307)
------ ------ ------
Interest expense. . . . . . . . . . . . . . . . . . $ 8,273 $11,115 $ 9,610
------ ------ ------
</TABLE>
In fiscal year 1994, interest incurred declined $2,390,000 or
20.4% from the level of the prior fiscal year. The net proceeds
of $57,130,000 received by the Company from the public offering
of 2,400,000 depositary shares (see Notes to Consolidated
Financial Statements - Preferred stock) were utilized to repay
outstanding cash advances under the Company's credit facility
and to repay $25,000,000 of the Company's senior notes (see
Notes to Consolidated Financial Statements - Long-term debt).
These actions significantly reduced interest incurred for the
third and fourth quarters of fiscal year 1994. During the first
six months of fiscal year 1994, which were prior to the public
offering, net interest expense declined slightly from the level
of the prior year primarily because of lower average borrowings
under the Company's revolving credit line resulting from
improved cash flows from the Company's operating activities.
For fiscal year 1994, capitalized interest increased because of
the higher level of capitalized costs related to a major
Company-wide systems project included in construction-in-
progress.
Net interest expense increased in fiscal year 1993 from fiscal
year 1992 primarily because of lower capitalized interest.
Capitalized interest in fiscal year 1993 declined $916,000 or
63.9% from the prior year level due to the completion of the
Company's fourth and fifth HTTS units in the fourth quarter of
fiscal year 1992. Interest incurred declined slightly in fiscal
year 1993 principally because of lower interest rates. The
closing of the sale of the pollution control manufacturing
discontinued operations also resulted in the cessation of the
allocation of interest incurred to discontinued operations early
in fiscal year 1993.
Income Taxes
In fiscal year 1994, the Company recorded an income tax
benefit of $124,000. This amount differs from the $418,000
benefit which would be implied at a 34% federal statutory rate
primarily due to the partial nondeductibility of certain
expenses and a provision for state taxes. Excluding the effect
of expenses recorded in the fourth quarter of fiscal year 1994
of $2,500,000 related to the writeoff of a permit in the U.K.
and $4,500,000 for certain retirement benefits, the Company's
effective tax rate for fiscal year 1994 would have been 39%.
During the third quarter of fiscal year 1993, the Company
adopted Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes" (SFAS No. 109), effective April 1,
1992. The cumulative effect on prior years of this change in
accounting principle increased net income in fiscal year 1993 by
$13,000,000. Under the new standard, the Company's tax provi-
sion from continuing operations at March 31, 1993, exclusive of
the one-time cumulative adjustment, was $1,160,000, despite the
fact the Company realized a pre-tax loss of $922,000. The
income tax provision differs from the $313,000 benefit which
would be implied at a 34% federal statutory rate as a result of
the partial nondeductibility of certain expenses as well as a
provision for state taxes. (See Notes to Consolidated Financial
Statements - Income taxes.)
During fiscal year 1992, prior to the adoption of SFAS No.
109, the effective tax rate was 8.5%. This rate is below the
34% federal statutory rate due to the utilization of the
Company's financial accounting net operating loss (NOL) carry-
forwards as allowed by SFAS No. 96, which was used by the
Company to account for income taxes in that year. The genera-
tion of NOL carryforwards was primarily related to cash expendi-
tures made for closure activities of transportation, treatment
and disposal discontinued operations which are deductible for
tax purposes when paid.
European Operations
The Company had committed expenditures for developing a market
position in Europe from 1988 through 1993. As part of its
organizational realignment and restructuring at the end of
fiscal year 1993, the Company decided to significantly reduce
its European operations, which resulted in the sale or closure
of various businesses. In the near future, the Company intends
to fund only project-specific opportunities in the European
market.
As part of its European activities, the Company incurred costs
related to the filing of a permit for an integrated facility for
chemical and thermal treatment of municipal waste in the United
Kingdom. In April 1994, planning permission was denied for the
facility. The Company has provided for the writeoff of its
investment in the facility, reporting a $2,500,000 non-cash
charge to continuing operations in the fourth quarter of fiscal
year 1994. See Other Income (Expense).
DISCONTINUED OPERATIONS
Pollution Control Manufacturing
On February 24, 1992, the Company entered into an agreement
for the sale of the manufacturing operations of IT's Pollution
Control Systems (PCS) division located in Tulsa, Oklahoma and
Hull, England. This business designed and manufactured combus-
tion, hydrocarbon vapor recovery, waste treatment and other
environmental control systems for domestic and international
clients. The sale closed on May 15, 1992 when the Company
received $20,888,000 in cash for certain assets and liabilities
of the business. Additionally, the Company received payments
totaling $1,789,000 during fiscal year 1993 in settlement of
certain post-closing adjustments.
In the third quarter of fiscal year 1993, the Company recorded
a charge of $3,809,000 (net of income tax benefit of $2,176,000)
to adjust the net gain of $13,088,000 (net of provision for
income taxes of $575,000) which had been recorded in fiscal year
1992 from the sale of the PCS manufacturing business. This
charge resulted from unexpected cost overruns in connection with
the completion and closeout of certain projects retained by the
Company as well as some difficulties the Company has experienced
in collecting receivables and limiting its warranty obligations
on certain projects for which the Company retained financial
responsibility. At March 31, 1994, several warranty issues
remain open, including certain matters which are in litigation.
Transportation, Treatment and Disposal
In the fourth quarter of fiscal year 1993, the Company
recorded an increase in the provision for loss on disposition of
its discontinued transportation, treatment and disposal business
of $6,800,000, with no offsetting income tax benefit. This
increased provision principally relates to estimated additional
costs resulting from delays in the regulatory approval process
and associated closure plan revisions pertaining to the closure
of the Company's inactive disposal sites located in Northern
California.
In the fourth quarter of fiscal year 1992, the Company
recorded an increase in the provision for loss on disposition of
its discontinued transportation, treatment and disposal business
of $32,720,000, net of income tax benefit of $2,280,000. The
provision for loss included the write-off of the Company's
$30,400,000 investment in the disposal and transportation
operations of Laidlaw Environmental Services of California. The
remaining loss represented expected costs related to a waste
disposal site where IT has been named as a potentially responsi-
ble party and an increase in costs related to the closure of the
Company's disposal sites in Northern California, principally due
to delays in the regulatory approval process.
For further information regarding the Company's discontinued
operations, see Notes to Consolidated Financial Statements -
Discontinued operations.
LIQUIDITY AND CAPITAL RESOURCES
Working capital increased by $3,241,000 or 5.4%, to
$63,522,000 at March 31, 1994 from $60,281,000 at March 31,
1993. The current ratio at March 31, 1994 was 1.70:1 which
compares to 1.64:1 at March 31, 1993. On September 27, 1993,
the Company completed a public offering at $25 per share of
2,400,000 depositary shares, each representing 1/100th of a
share of 7% Cumulative Convertible Exchangeable Preferred Stock
(see Notes to Consolidated Financial Statements - Preferred
stock). The Company received net cash proceeds of $57,130,000
from the public offering.
Long-term debt decreased to $68,625,000 at March 31, 1994 from
$115,811,000 at March 31, 1993. On November 15, 1993, the
Company prepaid at par value $25,000,000 of its 9 3/8% Senior
Notes (the Notes), utilizing the proceeds from the public
offering of depositary shares. On March 31, 1994, the Company
prepaid the $4,952,000 balloon payment due June 30, 1995 on an
11.63% secured equipment loan. (See Notes to Consolidated
Financial Statements - Long-term debt.) The Company's ratio of
debt (including current portion) to equity was 0.46:1, 1.13:1
and 1.43:1 at March 31, 1994, 1993 and 1992, respectively.
Cash provided by operating activities for fiscal year 1994
totaled $17,998,000, a $911,000 increase from the $17,087,000 of
cash provided by operating activities in the prior fiscal year.
Capital expenditures were $14,745,000, $15,624,000 and
$33,243,000 for fiscal years 1994, 1993 and 1992, respectively.
During fiscal years 1994 and 1993, capital expenditures were
much reduced from the fiscal year 1992 level due principally to
the absence of any aquisitions, the modest level of spending on
HTTS unit enhancements and increased management attention to
capital spending. In September 1992, the Company was awarded a
fifth contract utilizing HTTS equipment. Approximately
$6,000,000 of equipment enhancements may be required during
fiscal years 1995 and 1996 to fulfill this contract. Overall,
management believes capital expenditures in fiscal year 1995
will be somewhat lower than 1994 levels due to modest revenue
growth focused in areas such as DOE Hanford ERMC, which do not
require major capital investments, completion of a major
Company-wide systems project, and the elimination of all capital
requirements for the Analytical Services business upon closing
of the IT/Corning transaction. Depreciation will decline due to
the IT/Corning transaction as well. Closure costs at the
Company's Northern California disposal sites in fiscal year 1995
are expected to be higher than the $12,179,000 spent in fiscal
year 1994 as interim construction costs are anticipated to
increase at the Vine Hill site while continuing at the same
level at the Panoche site. The Company has accrued approximate-
ly $49,000,000 as of March 31, 1994 primarily to complete
closure and post-closure, most of which is expected to be spent
through fiscal year 1998.
With regard to the transportation, treatment and disposal
discontinued operations, a number of items could potentially
affect the liquidity and capital resources of the Company,
including changes in closure and post-closure costs, realization
of excess and residual land values, demonstration of financial
assurance and resolution of other regulatory and legal contin-
gencies. (See Notes to Consolidated Financial Statements -
Discontinued operations - Transportation, treatment and dispos-
al.)
At March 31, 1994, a deferred tax asset in the amount of
$14,790,000 (net of a valuation allowance of $13,519,000) is
included in the Company's consolidated balance sheet. The asset
represents the tax benefit of future tax deductions and net
operating loss, alternative minimum and investment tax carry-
forwards. The asset will be realized principally as closure
expenditures related to the Company's Northern California
disposal sites over the next several years are deductible in the
years the expenditures are made but only to the extent the
Company has sufficient levels of taxable income. The Company
will evaluate the adequacy of the valuation allowance and the
realizability of the deferred tax asset on an ongoing basis.
The Company's current banking arrangement provides for a
revolving credit facility of up to $95,000,000 through September
30, 1995. The amount of the credit facility was reduced from
$120,000,000 to $95,000,000 in March 1994 in connection with the
extension of the availability period from July 31, 1994 to
September 30, 1995. Additionally, the Company has an 11.63%
loan secured by certain HTTS equipment amortizing through May
31, 1995 with a balance of $5,835,000 at March 31, 1994. Due to
the Company's fourth quarter loss in fiscal year 1994, amend-
ments were required to certain of the Company's loan covenants
in both of these agreements in order to maintain compliance.
Terms of these amendments were approved subsequent to March 31,
1994 and the Company is in compliance with such amended terms.
In aggregate, at March 31, 1994, letters of credit totaling
approximately $55,500,000 were outstanding against the Company's
credit facility, including $29,000,000 issued to partially
fulfill financial assurance requirements of the Company's
inactive disposal facilities, with the remainder being used to
satisfy insurance and bonding requirements. Additionally, the
Company had $17,000,000 of cash advances outstanding under the
line, for total line usage of approximately $72,500,000. The
maximum amount available under the Company's line is
$95,000,000; however, the amount of current availability is
limited to the amount of collateral available to secure the loan
as calculated in accordance with the loan agreement, principally
70-80 percent of the Company's eligible accounts receivable. At
March 31, 1994, approximately $17,000,000 was available under
the line. Availability fluctuates from month to month depending
on the level of accounts receivable outstanding.
The Company's ability to obtain additional secured borrowings
is limited as a result of certain negative pledges related to
assets (primarily HTTS units) utilized on certain of the
Company's projects and the nature of its other assets.
The Company's analytical services joint company agreements
with Corning contain general provisions which could affect
liquidity including restrictions on joint company dividends to
the partners, buy-sell provisions obligating the Company to sell
its interests in the joint company in certain circumstances and
to contribute up to an additional $5,000,000 to the joint
company under certain circumstances, and requirements that the
Company indemnify the joint company and Corning from certain
liabilities arising prior to the closing of the transaction. In
connection with the transaction, the Company will transfer to
the joint company the accounts receivable of its Analytical
Services division in the approximate amount of $10,000,000,
which, pursuant to the terms of the Company's credit agreements,
will decrease the receivables available as collateral for
borrowing by approximately $7,000,000. The credit agreements
for the joint company prohibit the Company from pledging its
interest in the joint company to other lenders, including the
Company's current lenders.
Although the Company paid down $25,000,000 of the Notes, the
remaining $50,000,000 of Notes outstanding will come due on July
1, 1996, if not paid off prior to that time. Management is
currently evaluating its strategic alternatives for repaying or
refinancing the Notes.
Over the past two years, the Company's liquidity has required
careful management. Although consummation of the September 1993
public offering and application of the net proceeds principally
to reduce debt has improved the Company's financial leverage and
provided it with greater liquidity and flexibility to address
its cash needs, the Company will continue to have significant
cash requirements, including working capital, capital expendi-
tures, expenditures for the closure of its inactive disposal
sites, debt service including repayment or refinancing of the
remaining $50,000,000 of the Notes, dividend obligations on the
depositary shares and contingent liabilities. Since the
Company's September 1993 public offering, bank availability has
declined approximately $20,000,000 due to operating cash
requirements, the normal amortization and prepayment on the
11.63% secured equipment loan totaling over $7,000,000, and
reductions in receivables collateral. On June 29, 1994, after
giving effect to the formation of the joint company with
Corning, the Company had bank availability of approximately
$16,000,000. Any proceeds related to the disposition of the
Motco litigation could be used to address the above cash needs
of the Company. (See Notes to Consolidated Financial Statements
- - Commitments and contingencies.)
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND FINANCIAL STATEMENT
SCHEDULES FOR THE THREE YEARS IN THE PERIOD ENDED MARCH 31, 1994
<TABLE>
<CAPTION>
Consolidated Financial Statements. Page
- --------------------------------- -----
<S> <C>
Report of Ernst & Young, Independent Auditors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Consolidated Balance Sheets ----- March 31, 1994 and 1993 35
Consolidated Statements of Operations ----- Three Years Ended
March 31, 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Consolidated Statements of Stockholders' Equity ----- Three
Years Ended March 31, 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Consolidated Statements of Cash Flows ----- Three Years Ended
March 31, 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Financial Statement Schedules.
II. Loans receivable from employees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-1
V. Property, plant and equipment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-2
VI. Accumulated depreciation on property, plant and
equipment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-3
VIII. Valuation and qualifying accounts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-4
X. Supplementary income statement information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S-4
</TABLE>
Schedules not filed herewith are omitted because of the
absence of conditions under which they are required or because
the information called for is shown in the consolidated finan-
cial statements or notes thereto.
REPORT OF ERNST & YOUNG, INDEPENDENT AUDITORS
The Board of Directors
International Technology Corporation
We have audited the accompanying consolidated balance sheets of
International Technology Corporation at March 31, 1994 and 1993
and the related consolidated statements of operations, stock-
holders' equity and cash flows for each of the three years in
the period ended March 31, 1994. These financial statements are
the responsibility of the Company's management. Our responsi-
bility is to express an opinion on these financial statements
based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred
to above present fairly, in all material respects, the consoli-
dated financial position of International Technology Corporation
at March 31, 1994 and 1993 and the consolidated results of
operations and cash flows for each of the three years in the
period ended March 31, 1994 in conformity with generally
accepted accounting principles.
In December 1987, the Company adopted a plan to divest the
transportation, treatment and disposal operations through sale
and in part closure. In connection with the plan, the Company
recorded a provision, which was increased in 1993 and 1992, for
the estimated net loss involved in the ultimate divestiture of
these operations. Although the basis for the provision appears
reasonable, as more fully explained in the note "Discontinued
operations - Transportation, treatment and disposal," the
ultimate effect of the divestiture is dependent on future
events, the outcome of which cannot be determined at this time.
Accordingly, the ultimate loss could be greater or less than the
amount recorded.
As more fully explained in the note "Commitments and contingen-
cies - Motco," the Company has recorded a contract claim
receivable related to the Motco Site Trust Fund (Motco Trust)
contract, the realization of which is dependent on future events
involving the resolution of the Company's lawsuit against Motco
Trust and Motco Trust's counterclaim against the Company. No
provision for any contingent asset or liability that may result
from the lawsuits has been recorded in the financial statements.
Although an initial jury finding favorable to the Company has
been rendered, the ultimate outcome of this litigation cannot be
determined at this time.
ERNST & YOUNG
Los Angeles, California
May 23, 1994, except for
the note "Long-term debt"
as to which the date is
June 29, 1994
INTERNATIONAL TECHNOLOGY CORPORATION
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31,
1994 1993
-------------------------
ASSETS (In thousands)
<S> <C> <C>
Current assets:
Cash and cash equivalents. . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 10,646 $ 8,659
Accounts receivable, less allowance for doubtful
accounts of $3,183,000 and $3,011,000, respectively . . . . . . . . . . . . 126,910 129,824
Prepaid expenses and other current assets. . . . . . . . . . . . . . . . . . . . 7,674 5,879
Deferred income taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,329 10,638
------- -------
Total current assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . 154,559 155,000
------- -------
Property, plant and equipment, at cost:
Land and land improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,127 2,136
Buildings and leasehold improvements . . . . . . . . . . . . . . . . . . . . . . 25,930 25,906
Machinery and equipment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 154,929 149,250
------- -------
182,986 177,292
Less accumulated depreciation and amortization. . . . . . . . . . . . . . . 91,557 73,261
------- -------
Net property, plant and equipment. . . . . . . . . . . . . . . . . . . 91,429 104,031
------- -------
Construction-in-progress. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,451 17,145
Cost in excess of net assets of acquired businesses . . . . . . . . . . . . . . . . . 10,469 11,323
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36,129 36,476
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,461 3,498
Long-term assets of discontinued operations . . . . . . . . . . . . . . . . . . . . . 41,705 41,705
------- -------
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $359,203 $369,178
------- -------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 27,314 $ 38,046
Accrued wages and related liabilities. . . . . . . . . . . . . . . . . . . . . . 20,297 21,798
Billings in excess of revenues . . . . . . . . . . . . . . . . . . . . . . . . . 9,315 2,529
Other accrued liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,365 15,739
Short-term debt, including current portion of long-term debt . . . . . . . . . . 5,268 4,695
Net current liabilities of discontinued operations . . . . . . . . . . . . . . . 16,478 11,912
------- -------
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . 91,037 94,719
------- -------
Long-term debt. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68,625 115,811
Long-term accrued liabilities of discontinued operations. . . . . . . . . . . . . . . 32,547 49,292
Other long-term accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . 6,446 3,178
Commitments and contingencies
Stockholders' equity:
Preferred stock, $100 par value; 180,000 shares
authorized; 24,000 shares issued and outstanding
at March 31, 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,400 -
Common stock, $1 par value; 100,000,000 shares
authorized; 35,201,052 and 33,239,593
shares issued and outstanding, respectively . . . . . . . . . . . . . . . . 35,201 33,240
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . 168,817 109,217
Common stock to be issued. . . . . . . . . . . . . . . . . . . . . . . . . . . . - 6,350
Deficit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (45,870) (42,629)
------- -------
Total stockholders' equity. . . . . . . . . . . . . . . . . . . . . . . . . 160,548 106,178
------- -------
Total liabilities and stockholders' equity . . . . . . . . . . . . . . . . . . . $359,203 $369,178
------- -------
</TABLE>
See accompanying notes to consolidated financial statements.
INTERNATIONAL TECHNOLOGY CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
<TABLE>
<CAPTION>
Year ended March 31,
1994 1993 1992
---------------------------------------------
<S> <C> <C> <C>
Revenues. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 392,803 $ 410,539 $ 420,453
Cost and expenses:
Cost of revenues. . . . . . . . . . . . . . . . . . . . . . . . . 334,616 337,266 351,374
Selling, general and administrative expenses. . . . . . . . . . . 48,644 48,904 50,035
Restructuring charges . . . . . . . . . . . . . . . . . . . . . . - 8,378 6,997
------- ------- -------
Operating income . . . . . . . . . . . . . . . . . . . . . . . . . 9,543 15,991 12,047
Interest, net . . . . . . . . . . . . . . . . . . . . . . . . . . . (8,273) (11,115) (9,610)
Other income (expense). . . . . . . . . . . . . . . . . . . . . . . (2,500) (5,798) 7,285
-------- ------- -------
Income (loss) from continuing operations before
income taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . (1,230) (922) 9,722
Benefit (provision) for income taxes. . . . . . . . . . . . . . . . 124 (1,160) (827)
-------- ------- -------
Income (loss) from continuing operations. . . . . . . . . . . . . . (1,106) (2,082) 8,895
Discontinued operations (net of income taxes):
Income from operations:
Pollution control manufacturing. . . . . . . . . . . . . . . . - - 2,147
Gain (loss) from disposition:
Pollution control manufacturing. . . . . . . . . . . . . . . . - (3,809) 13,088
Transportation, treatment and disposal . . . . . . . . . . . . - (6,800) (32,720)
-------- ------- -------
Loss before cumulative effect of change in
accounting for income taxes . . . . . . . . . . . . . . . . . . . (1,106) (12,691) (8,590)
Cumulative effect of change in accounting for
income taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . - 13,000 -
--------- ------- -------
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . (1,106) 309 (8,590)
Less preferred stock dividends. . . . . . . . . . . . . . . . . . . (2,135) - -
--------- ------- -------
Net income (loss) applicable to common stock. . . . . . . . . . . . $ (3,241) $ 309 $ (8,590)
--------- ------- -------
Net income (loss) per share:
Continuing operations (net of preferred stock dividends) $ (.09) $ (.06) $ .27
Discontinued operations:
From operations. . . . . . . . . . . . . . . . . . . . . . . . - - .06
From disposition . . . . . . . . . . . . . . . . . . . . . . . - (.32) (.59)
--------- ------- -------
(.09) (.38) (.26)
Cumulative effect of change in accounting for
income taxes . . . . . . . . . . . . . . . . . . . . . . . . . - .39 -
--------- ------- -------
$ (.09) $ .01 $ (.26)
--------- ------- -------
</TABLE>
See accompanying notes to consolidated financial statements.
INTERNATIONAL TECHNOLOGY CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
For the three years ended March 31, 1994
(In thousands)
<TABLE>
<CAPTION>
Additional Common
Preferred Common paid-in stock to
stock stock capital be issued Deficit Total
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance at March 31, 1991 . . . . . . $ - $ 32,649 $107,354 $ - $(34,316) $105,687
Issuance of common stock. . . . . . - 351 1,299 - - 1,650
Cumulative translation adjustment . - - - - (216) (216)
Net loss. . . . . . . . . . . . . . - - - - (8,590) (8,590)
------- ------- ------- -------- ------- -------
Balance at March 31, 1992 . . . . . . - 33,000 108,653 - (43,122) 98,531
Issuance of common stock. . . . . . - 240 564 - - 804
Common stock to be issued . . . . . - - - 6,350 - 6,350
Cumulative translation adjustment . - - - - 184 184
Net income. . . . . . . . . . . . . - - - - 309 309
------- ------- ------- -------- ------- -------
Balance at March 31, 1993 - 33,240 109,217 6,350 (42,629) 106,178
Net proceeds from public offering
of depositary shares . . . . . . 2,400 - 54,730 - - 57,130
Issuance of common stock. . . . . . - 1,961 4,870 (6,350) - 481
Dividends paid on preferred stock . - - - - (2,135) (2,135)
Net loss. . . . . . . . . . . . . . - - - - (1,106) (1,106)
-------- ------- -------- -------- ------- -------
Balance at March 31, 1994 . . . . . . $ 2,400 $ 35,201 $168,817 $ - $(45,870) $160,548
-------- ------- ------- -------- ------- -------
</TABLE>
See accompanying notes to consolidated financial statements.
INTERNATIONAL TECHNOLOGY CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Year ended March 31,
1994 1993 1992
---------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . $ (1,106) $ 309 $ (8,590)
Adjustments to reconcile net income (loss) to net cash
provided by (used for) operating activities:
Net loss from disposition of
discontinued operations . . . . . . . . . . . . . . . . - 10,609 19,632
Depreciation and amortization. . . . . . . . . . . . . . . 22,372 19,771 19,947
Deferred income taxes . . . . . . . . . . . . . . . . . . (654) 52 (2,173)
Gain on sale of investment in EXEL Limited . . . . . . . . - (3,483) (7,285)
Writeoff of costs incurred in U.K. investments . . . . . . 2,500 1,981 -
Provision for settlement of stockholders lawsuit . . . . . - 6,350 -
Cumulative effect of change in accounting . . . . . . . .
for income taxes . . . . . . . . . . . . . . . . . . . . - (13,000) -
Changes in assets and liabilities, net of effects
from acquisitions and dispositions of businesses:
Decrease (increase) in receivables . . . . . . . . . . . . 2,914 (8,879) (46,169)
Increase in prepaid expenses and
other current assets . . . . . . . . . . . . . . . . . . (2,475) (597) (980)
(Decrease) increase in accounts payable. . . . . . . . . . (10,732) 2,291 6,735
(Decrease) increase in accrued wages
and related liabilities. . . . . . . . . . . . . . . . . (1,501) 2,941 (48)
Increase (decrease) in billings in
excess of revenues . . . . . . . . . . . . . . . . . . . 6,786 (2,760) (418)
(Decrease) increase in other
accrued liabilities. . . . . . . . . . . . . . . . . . . (3,374) 803 11,356
Increase in other long-term accrued liabilities. . . . . . 3,268 699 2,479
------- ------- -------
Net cash provided by (used for) operating
activities . . . . . . . . . . . . . . . . . . . . . . . . . 17,998 17,087 (5,514)
------- ------- -------
Cash flows from investing activities:
Sales and maturities of marketable securities . . . . . . . . . - - 3,887
Capital expenditures. . . . . . . . . . . . . . . . . . . . . . (14,745) (15,624) (33,243)
Proceeds from sale of pollution control
manufacturing business . . . . . . . . . . . . . . . . . . . - 22,677 -
Proceeds from sale of investment in
EXEL Limited . . . . . . . . . . . . . . . . . . . . . . . . - 3,733 12,035
Other, net. . . . . . . . . . . . . . . . . . . . . . . . . . . 2,050 1,319 1,078
Investment activities of transportation, treatment and . . . .
disposal discontinued operations . . . . . . . . . . . . . . (12,179) (10,671) (16,686)
------- ------- -------
Net cash (used for) provided by investing activities. . . . . . (24,874) 1,434 (32,929)
------- ------- -------
Cash flows from financing activities:
Repayments of long-term borrowings. . . . . . . . . . . . . . . (89,648) (50,550) (80,391)
Long-term borrowings. . . . . . . . . . . . . . . . . . . . . . 43,035 30,440 115,844
Net proceeds from public offering
of depositary shares . . . . . . . . . . . . . . . . . . . . 57,130 - -
Dividends paid on preferred stock . . . . . . . . . . . . . . . (2,135) - -
Issuances of common stock . . . . . . . . . . . . . . . . . . . 481 804 1,650
------- ------- -------
Net cash provided by (used for) financing
activities . . . . . . . . . . . . . . . . . . . . . . . . . 8,863 (19,306) 37,103
------- ------- -------
Net increase (decrease) in cash and cash equivalents. . . . . . . 1,987 (785) (1,340)
Cash and cash equivalents at beginning of year. . . . . . . . . . 8,659 9,444 10,784
------- ------- -------
Cash and cash equivalents at end of year. . . . . . . . . . . . . $ 10,646 $ 8,659 $ 9,444
------- ------- -------
</TABLE>
See accompanying notes to consolidated financial statements.
INTERNATIONAL TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Summary of significant accounting policies:
Basis of presentation and principles of consolidation
The consolidated financial statements include International
Technology Corporation (IT or the Company) and its wholly owned
subsidiaries. The Company also includes its proportionate
interest in joint ventures which were entered into for the purpose
of executing large remediation projects and in which the Company
does not have in excess of 50% of voting control. Intercompany
transactions are eliminated. Certain other reclassifications have
been made to prior year consolidated financial statements in order
to conform to the current year presentation.
Cash equivalents
Cash equivalents include highly liquid investments with an
original maturity of three months or less, principally commercial
paper.
Contract accounting and accounts receivable
The Company primarily derives its revenues from providing
environmental management services in the United States, principal-
ly to federal, state and local governmental entities, large
industrial companies, utilities and waste generators. Services
are performed under time-and-material, cost-reimbursement, fixed-
price and unit-bid contracts.
Revenues from time-and-material and cost-reimbursement contracts
are recognized as costs are incurred. Estimated fees on such
contracts and revenues on fixed-price and certain unit-bid
contracts are recognized under the percentage-of-completion method
determined based on the ratio of costs incurred to estimated total
costs. Anticipated losses on contracts are recorded as identi-
fied. Certain contracts include provisions for revenue adjust-
ments to reflect scope changes and other matters, including
claims, which require negotiations with clients in the ordinary
course of business, leading to some estimates of claim amounts
being included in revenues. When such amounts are finalized, any
changes from the estimates are reflected in earnings.
Unbilled receivables typically represent amounts earned under
the Company's contracts but not yet billable according to the
contract terms, which usually consider the passage of time,
achievement of certain milestones or completion of the project.
Unbilled receivables, included in accounts receivable, were
$16,316,000 and $14,751,000 at March 31, 1994 and 1993, respec-
tively. Generally, unbilled receivables are expected to be billed
and collected in the subsequent fiscal year. Included in unbilled
receivables at March 31, 1994 is approximately $7,000,000 of
claims related to the Helen Kramer project which is subject to a
governmental investigation. (See Commitments and contingencies.)
At March 31, 1994 and 1993, an approximately $31,000,000 claim
receivable related to the Motco Site Trust Fund (Motco) contract,
a major fixed-price remediation contract, is included in non-
current other assets as a result of the Company's lawsuit
involving the Motco Trust. (See Commitments and contingencies.)
Billings in excess of revenues represent amounts billed in
accordance with contract terms, which are in excess of the amounts
includable in revenue determined based on the policies discussed
above.
At March 31, 1994, accounts receivable are primarily concentrat-
ed in federal, state and local governmental entities and in
commercial clients in which the Company does not believe there is
any undue credit risk.
Property, plant and equipment
The cost of property, plant and equipment is depreciated using
the straight-line method over the estimated useful lives of the
individual assets, except for the Hybrid Thermal Treatment
System (HTTS) transportable incineration units, which are
generally depreciated on the basis of operating days.
Capitalized interest
Interest incurred on qualified capital expenditures is
capitalized and is included in the cost of such constructed
assets. Interest incurred was $9,326,000, $11,716,000 and
$11,926,000 for fiscal years 1994, 1993 and 1992, respectively.
Total interest capitalized was $893,000, $518,000 and $1,434,000
for fiscal years 1994, 1993 and 1992, respectively.
Income taxes
The Company adopted Statement of Financial Accounting
Standards No. 109 (SFAS No. 109) as of April 1, 1992 and
reported the cumulative effect of the change in accounting for
income taxes in the consolidated statement of operations for
fiscal year 1993. Since the Company reported the effect of the
adoption of SFAS No. 109 as a cumulative effect of a change in
accounting principle, financial statements for years prior to
fiscal year 1993 have not been restated and are presented in
accordance with the previous standard used by the Company, SFAS
No. 96. (See Income taxes.)
Intangible assets
Cost in excess of net assets of acquired businesses is
amortized over 20 years on a straight-line basis. At March 31,
1994 and 1993, accumulated amortization is $6,671,000 and
$5,818,000, respectively. Other intangibles, arising principal-
ly from acquisitions, are amortized on a straight-line basis
over periods not exceeding 20 years. The Company regularly
reviews the individual components of its intangible assets and
recognizes, on a current basis, any diminution in value.
Per share information
Per share information is based on the weighted average number
of outstanding common shares and common share equivalents during
each period which aggregated 34,762,280 in 1994, 33,530,420 in
1993 and 33,425,360 in 1992.
Common share equivalents include dilutive stock options and
common shares to be issued in connection with the settlement of
a class action stockholders' lawsuit. (See Class action
lawsuit.)
In fiscal year 1994, the computation of net income per share,
assuming the conversion into common shares of the Company's 7%
Cumulative Convertible Exchangeable Preferred Stock, is antidi-
lutive. (See Preferred stock.)
Fair value of financial instruments
In accordance with the requirements of Statement of Financial
Accounting Standards No. 107, "Disclosures about Fair Value of
Financial Instruments," the following methods and assumptions
were used by the Company in estimating its fair value disclo-
sures for financial instruments:
Cash and cash equivalents: The carrying amount reported in
the balance sheet approximates its fair value.
Long and short-term debt: The fair value of the 9 3/8 %
senior notes is based upon the quoted market price. A
reasonable estimate of fair value for the 11.63% secured loan
was based upon a discounted cash flow analysis. The carrying
amount of other debt, including borrowings under the Company's
revolving credit facility, approximates its fair value.
The carrying amounts and estimated fair values of the
Company's financial instruments are:
<TABLE>
<CAPTION>
March 31,
1994 1993
----------------------------------------------------------------------
Carrying Estimated Carrying Estimated
amount fair value amount fair value
----------------------------------------------------------------------
(In thousands)
<S> <C> <C> <C> <C>
Cash and cash equivalents $10,646 $10,646 $ 8,659 $ 8,659
Long and short-term debt:
9 3/8% senior notes 50,000 49,375 75,000 72,750
11.63% secured loan 5,835 5,927 15,199 15,990
Revolving credit facility 17,000 17,000 29,000 29,000
Other 1,058 1,058 1,307 1,307
</TABLE>
Accrued contractual retirement benefits
In the fourth quarter of fiscal year 1994, the Company
recorded a nonrecurring $4,500,000 provision to selling, general
and administrative expenses in the consolidated statement of
operations related to the actuarially determined present value
of contractual retirement benefits to be provided to its former
Chairman of the Board (who was also Chief Executive Officer from
1975 through 1992) who retired from that position effective
April 1, 1994. Such retirement agreement is currently subject
to further review by a special committee of the Board of
Directors. The noncurrent portion of this obligation is
reported in other long-term accrued liabilities in the consoli-
dated balance sheet. Terms of the retirement agreement call for
total payments by the Company of approximately $400,000 per year
through the year 2003 and approximately $300,000 per year
thereafter for the duration of the former executive's lifetime.
Consolidated statements of cash flows supplemental disclosures:
Supplemental cash flow information is:
<TABLE>
<CAPTION>
Year ended March 31,
1994 1993 1992
---------------------------------------------
(In thousands)
<S> <C> <C> <C>
Interest paid, net of amounts
capitalized $ 8,767 $10,869 $10,226
Interest received 107 32 77
Income taxes paid 1,241 1,243 1,420
Income tax refunds received 1,783 724 103
</TABLE>
Discontinued operations:
Pollution control manufacturing
On February 24, 1992, the Company entered into an agreement
for the sale of the manufacturing operations of IT's Pollution
Control Systems (PCS) division located in Tulsa, Oklahoma and
Hull, England. This business designed and manufactured combus-
tion, hydrocarbon vapor recovery, waste treatment and other
environmental control systems for domestic and international
clients. The sale closed on May 15, 1992 when the Company
received $20,888,000 in cash for certain assets and liabilities
of the business. Additionally, the Company received payments
totaling $1,789,000 during fiscal year 1993 in settlement of
certain post-closing adjustments.
In the third quarter of fiscal year 1993, the Company recorded
a charge of $3,809,000 (net of income tax benefit of $2,176,000)
to adjust the net gain of $13,088,000 (net of provision for
income taxes of $575,000) which had been recorded in fiscal year
1992 from the sale of the PCS manufacturing business. This
charge resulted from unexpected cost overruns in connection with
the completion and closeout of certain projects retained by the
Company as well as from difficulties the Company has experienced
in collecting receivables and limiting its warranty obligations
on certain projects for which the Company retained financial
responsibility. At March 31, 1994, several warranty issues
remain open, including certain matters which are in litigation.
Information regarding the results of PCS discontinued
operations prior to February 24, 1992 is as follows:
<TABLE>
<CAPTION>
Year ended
March 31, 1992 (1)
--------------
(In thousands)
<S> <C>
Revenues $45,162
Cost of revenues 37,064
Selling, general and administrative 5,284
Interest, net 559
Income taxes 108
------
Income from discontinued operations $ 2,147
------
</TABLE>
(1) Amounts include activity to February 24, 1992, the effective date of the
discontinuance.
Transportation, treatment and disposal
In December 1987, the Company's Board of Directors adopted a
strategic restructuring program which included a formal plan to
divest the transportation, treatment and disposal operations
through sale of some facilities and closure of certain other
facilities. As of March 31, 1994, two of the Company's inactive
disposal sites have been formally closed and the other two are
in the process of closure. In connection with the divestiture
at December 31, 1987, the Company recorded a provision for loss
on disposition of transportation, treatment and disposal
discontinued operations in the amount of $110,069,000, net of
income tax benefit of $24,202,000, which included the estimated
net loss on sale or closure and the results of operations of the
active disposal sites and the transportation business through
the then estimated sale date. At March 31, 1992, the Company
increased the provision for loss on disposition by the amount of
$32,720,000, net of income tax benefit of $2,280,000, principal-
ly due to the write-off of the $30,400,000 contingent purchase
price from the earlier sale of certain assets. The remaining
loss represented expected costs related to a waste disposal site
where IT has been named as a potentially responsible party (PRP)
and an increase in costs related to the closure of the Company's
disposal sites in Northern California, principally due to delays
in the regulatory approval process. At March 31, 1993, the
Company increased the provision for loss on disposition by
$6,800,000, with no offsetting income tax benefit, related to
estimated additional costs resulting from further delays in the
regulatory approval process and associated closure plan revi-
sions. The Company has incurred costs of $12,179,000 in 1994,
$10,671,000 in 1993 and $16,686,000 in 1992 relating to the site
closure plans and related construction. The Company expects to
incur significant closure and post-closure costs over the next
several years. At March 31, 1994, the Company's consolidated
balance sheet included accrued liabilities of approximately
$49,000,000 to complete the closure and post-closure of its
disposal sites and related matters.
On June 22, 1989, the Company completed the sale of its active
treatment and disposal operations in Imperial Valley and at
Bakersfield, California and its transportation business for
approximately $85,000,000 including $54,600,000 of cash plus
$30,400,000 which represented the contingent portion of the
purchase price in the form of a 30 percent equity interest in
the purchaser's subsidiary formed to purchase the business.
This equity interest was subject to a put and call agreement,
the ultimate realization of which was dependent on a formula
related to the cumulative earnings of the subsidiary from the
date of closing through August 31, 1992. On March 31, 1993, the
Company received $400,000 pursuant to this agreement. At March
31, 1992, the Company had written off its interest in the
subsidiary since the severe shortfall in the subsidiary's
earnings at that time indicated that insignificant value would
be generated from the investment.
The Company has closed two of the inactive disposal sites and
is pursuing formal permanent closure of its Panoche and Vine
Hill disposal sites, for which there will be significant closure
and post-closure costs over the next several years. Closure and
post-closure plans for the Panoche facility were revised to
incorporate regulatory agency comments in March 1991 and an
Environmental Impact Report (EIR), required by California law
prior to plan approval, is being prepared by the California EPA
Department of Toxic Substances Control (DTSC). The Company
expects final determination on closure plans in time for
implementation of closure construction in fiscal year 1996
through fiscal year 1998. The California Supreme Court in
December 1991 reversed a lower court decision regarding an
aspect of the closure plan at Panoche relating to the County of
Solano's authority in the closure process and the method of
closure of peripheral waste areas at the facility (the Buffer
Zone Areas). During fiscal year 1993, the Company was required
to submit additional information and closure designs for the
Buffer Zone Areas, including a design for excavation and
relocation on-site of significant quantities of wastes and
soils. Clean closure by excavation and relocation on-site of
materials in the Buffer Zone Areas will be evaluated in the EIR.
The additional study of this and other alternatives has resulted
in delays to the closure plan approval. The delays have
resulted in additional costs for monitoring and maintaining the
facility, conducting engineering and permitting activities, and
charges for the EIR contractor. A determination to excavate and
relocate a substantial amount of materials in the Buffer Zone
Areas would increase costs substantially which would have a
material adverse effect on the consolidated financial condition
of the Company.
Progress on the Vine Hill Complex facility closure plan
continues, with a revised closure plan submitted to the DTSC in
August 1991. In April 1992, the Company received and subse-
quently responded to comments on the plan from DTSC. An EIR is
being prepared by DTSC. The Company expects the plan to be
approved late in fiscal year 1995 or early in fiscal year 1996;
however, significant solidification work which will ultimately
be required for closure will occur prior to that time. The
Company is targeting completion of the closure by the end of
fiscal year 1996. Delay in the closure plan approval process at
this site or further delays at the Panoche site would cause an
increase in the provision for discontinued operations.
Closure construction was completed for the Montezuma Hills
site and the Benson Ridge facility in December 1991 and December
1992, respectively. Upon completion of closure construction,
the Company is required to perform post-closure monitoring and
maintenance of its disposal sites for at least 30 years.
Operation of the sites in the closure and post-closure periods
is subject to numerous federal, state and local regulations.
The Company may be required to perform unexpected remediation
work at the sites in the future or to pay penalties for alleged
noncompliance with regulatory permit conditions.
Regulations of the DTSC and the USEPA require that owners and
operators of hazardous waste treatment, storage and disposal
facilities provide financial assurance for closure and post--
closure costs of those facilities. The Company has provided
financial assurance equal to its estimate for closure costs at
March 31, 1994, which could be subject to increase at a later
time as a result of regulatory requirements, in the form of
letters of credit totalling approximately $29,000,000 and a
trust fund containing approximately $9,000,000, and has pur-
chased annuities which will ultimately mature over the next 31
years to pay for its estimates of post-closure costs as part of
a consent order with the DTSC entered on June 27, 1989. Among
other provisions, the consent order requires IT to revise its
financial assurance estimates on March 1 of each year to reflect
inflation adjustments and any changes in the cost estimates
resulting from completion of interim closure procedures and from
revisions in the closure and post-closure plans. Thereafter,
the Company has sixty (60) days to adjust its financial assur-
ance mechanisms to reflect the changed costs. IT has completed
cost revisions required at March 1, 1994 and provided financial
assurance on the amounts called for by the cost revisions. The
DTSC is reviewing the revised amounts and is discussing certain
aspects of the cost estimates with the Company.
IT's inactive disposal sites are subject to the Resource
Conservation and Recovery Act and other federal laws including
the Toxic Substances Control Act, the Clean Water Act, the
Clean Air Act and the regulations of the Occupational Safety and
Health Act. The provisions of the Comprehensive Environmental
Response, Compensation and Liability Act and its amendments
generally do not presently affect the Company's four inactive
disposal sites, but do apply in some cases to former business
operations where the Company is an alleged generator or trans-
porter of waste or former operator of a disposal site owned by
others. California has been one of the leading states in
regulating the transportation, treatment and disposal of
hazardous waste substances. Under the Hazardous Waste Control
Act, the DTSC administers a comprehensive regulatory program.
California operations are also subject to regulation by the
State Water Resources Control Board, the California Air Resourc-
es Board, Regional Water Quality Control Boards (RWQCBs), Air
Quality Management Districts and various other state authori-
ties. At the local level, treatment and disposal sites are also
subject to zoning and land use restrictions, and other ordinanc-
es.
The California Toxic Pits Cleanup Act of 1984 (TPCA) required
operators of certain surface impoundments to cease discharging
liquid hazardous wastes into these units by a statutory dead-
line, unless the units were retrofitted to meet minimum tech-
nology requirements. The Company has taken reasonable measures
and has made substantial progress toward compliance at the Vine
Hill Complex, but cannot fully meet statutory requirements until
final closure plans have been approved. The Company has
discussed its TPCA compliance activities with the applicable
RWQCB. Although substantial civil penalties are available for
noncompliance with TPCA, the Company does not expect that
penalties, if imposed, would be material to the Company's
financial condition, given the circumstances and the Company's
good faith efforts to achieve compliance and conclude closure.
Closure and post-closure costs are incurred over a significant
number of years and are subject to a number of variables
including, among others, completion of negotiations regarding
specific site closure and post-closure plans with applicable
regulatory agencies. Such closure costs are comprised princi-
pally of engineering, design and construction costs and of
caretaker and monitoring costs during closure. The Company has
estimated the impact of closure and post-closure costs in the
provision for loss on disposition of transportation, treatment
and disposal discontinued operations; however, closure and
post-closure costs could be higher than estimated if regulatory
agencies were to require closure and/or post-closure procedures
significantly different than those in the plans developed by the
Company. Certain revisions to the closure procedures could also
result in impairment of the residual land values attributed to
certain of the sites.
The carrying value of the long-term assets of transportation,
treatment and disposal discontinued operations of $41,705,000 at
March 31, 1994 is principally comprised of residual land at the
inactive disposal sites and assumes that sales will occur at
current market prices estimated by the Company based on certain
assumptions (entitlements, development agreements, etc.), taking
into account market value information provided by independent
real estate appraisers. During fiscal year 1992, the Company
entered into an agreement with a real estate developer to
develop some of this property as part of a larger development in
the local area involving a group of developers. The entitlement
process has been delayed due to uncertainties over the Company's
closure plans for its adjacent disposal site and local community
review of growth strategy. If the developers' plans change or
the developers are unable to obtain entitlements as planned, the
carrying value of this property could be significantly impaired.
With regard to this property or any of the other residual land,
there is no assurance as to the timing of sales or the Company's
ability to ultimately liquidate the land for the sale prices
assumed. If the assumptions used to determine such prices are
not realized, the value of the land could be materially differ-
ent from the current carrying value.
The USEPA and the DTSC are investigating certain transporta-
tion and disposal activities conducted by numerous companies,
including the Company or its predecessors, involving certain
disposal sites in California, including the Operating Indus-
tries, Inc. (OII) Superfund site. In connection with the OII
action, the Company did not elect to join various proposed
settlements with the USEPA for the first three interim remedial
measures. The claims against the Company by the USEPA for these
costs total approximately $8,500,000 and the claims by the PRP
steering committee approximate $2,700,000. (The Company
believes there is substantial duplication between the USEPA's
and the PRP steering committee's claims.) The claims to date do
not include certain future costs for site remediation and long-
term monitoring and maintenance which are expected to be
substantial. Based on the nature of the waste streams handled
by the Company's subsidiaries and their conduct in handling the
wastes, the Company believes its proper share of responsibility
for the site is less than the share attributed to it by the
USEPA and the PRP steering committee. Accordingly, the Company
has not been able to agree to USEPA's or the PRP steering
committee's claims. IT has met with the USEPA to propose and
negotiate a release from alleged liability for past costs in
return for IT undertaking remediation work at the site but the
USEPA has not responded to the proposal. The Company has
advised its liability insurance carriers as to the pendency of
the USEPA's claim and requested indemnification and legal
representation. The carriers dispute the scope of their
coverage obligations to IT. The Company has also been named as
a PRP in several other investigations, and has either denied
responsibility and/or is participating with others named by the
USEPA and/or the DTSC in conducting investigations as to the
nature and extent of contamination at the sites.
The provision for loss on disposition of transportation,
treatment and disposal discontinued operations is based on
various assumptions and estimates, including those discussed
above. The adequacy of the provision for loss has been currently
reevaluated in light of the developments since the adoption of
the divestiture plan, and management believes that the provision
as adjusted is reasonable; however, the ultimate effect of the
divestiture on the consolidated financial condition of the
Company is dependent upon future events, the outcome of which
cannot be determined at this time. Outcomes significantly
different from those used to estimate the provision for loss
could result in a material adverse effect on the consolidated
financial condition of the Company.
Long-term debt:
Long-term debt consists of the following:
<TABLE>
<CAPTION>
March 31,
1994 1993
----------------------------
(In thousands)
<S> <C> <C>
9 3/8% senior notes, due 1996. . . . . . . . . . . . . . . . . . . . . $ 50,000 $ 75,000
11.63% secured loan. . . . . . . . . . . . . . . . . . . . . . . . . . 5,835 15,199
Revolving credit facility. . . . . . . . . . . . . . . . . . . . . . . 17,000 29,000
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,058 1,307
------- -------
73,893 120,506
Less current portion . . . . . . . . . . . . . . . . . . . . . . . . 5,268 4,695
------- -------
$ 68,625 $115,811
------- -------
</TABLE>
Aggregate amounts of long-term debt maturing in the five years
following March 31, 1994 and thereafter are $5,268,000,
$18,168,000, $50,151,000, $67,000, $66,000 and $173,000,
respectively.
In July 1986, the Company issued $75,000,000 principal amount
of senior notes, 9 3/8%, due July 1, 1996, with interest payable
semiannually. The notes are redeemable at the Company's option
at par after July 1, 1993. On November 15, 1993, the Company
prepaid at par value $25,000,000 of the senior notes, utilizing
the proceeds from the public offering of depositary shares (see
Preferred stock).
On June 25, 1990, an asset-based lender funded a $25,000,000
five-year installment loan at a fixed interest rate of 11.63%.
The loan is secured by certain of the Company's HTTS equipment.
On March 31, 1994, the Company prepaid the $4,952,000 balloon
payment due June 30, 1995 on the loan in return for a partial
release of collateral, leaving $5,835,000 outstanding which will
be amortized over its original schedule through May 31, 1995.
The loan agreement contains certain financial ratio covenants,
including working capital, interest coverage and leverage
requirements. Due to the Company's fourth quarter loss in
fiscal year 1994, an amendment was required to the loan agree-
ment to maintain compliance. Terms of the amendment were
approved subsequent to March 31, 1994 and the Company is in
compliance with such amended terms.
The Company's current banking arrangement provides for a
revolving credit facility of up to $95,000,000 through September
30, 1995 and is secured principally by accounts receivable. In
general, interest on borrowings under this line is at the bank's
reference rate plus 1.75%, or in the case of Eurodollar borrow-
ings, at the interbank offered rate plus 2.75%. The Company is
subject to a 0.5% per annum charge on the unused portion of the
commitment. The line of credit agreement stipulates that the
Company must maintain certain minimum working capital, financial
ratios and net worth requirements. In addition, the agreement
includes certain other restrictive covenants, including limita-
tions on the payment of cash dividends on common stock (and, if
the Company is in default under the line, on the preferred
stock), the repurchase of stock, the purchase or sale of
significant assets, the aggregate amount of capital expendi-
tures, and the incurrence of debt. Due to the Company's fourth
quarter loss in fiscal year 1994, amendments were required to
certain of the Company's loan covenants in order to maintain
compliance. Terms of these amendments were approved subsequent
to March 31, 1994 and the Company is in compliance with such
amended terms.
At March 31, 1994, the Company had $17,000,000 of borrowings
outstanding against its credit facility. Additionally, standby
letters of credit totaling approximately $55,500,000 were
outstanding at March 31, 1994 related to financial assurance for
the Company's inactive disposal facilities (see Discontinued
operations - Transportation, treatment and disposal), and the
Company's insurance and bonding requirements, leaving approxi-
mately $22,500,000 unused. However, the amount of current
availability under the Company's line is limited to the amount
of collateral available in accordance with the loan agreement,
principally 70-80 percent of the Company's eligible accounts
receivable. At March 31, 1994, approximately $17,000,000 was
available under the line. Availability fluctuates from month to
month depending on the level of accounts receivable outstanding.
Income taxes:
The benefit for income taxes consists of the following:
<TABLE>
<CAPTION>
Year ended March 31,
1994 1993 1992
-------------------------------------------------------
(In thousands)
<S> <C> <C> <C>
Current:
Federal $ (104) $ (2,356) $ 125
State 422 1,288 1,278
------- ------- -------
318 (1,068) 1,403
------- ------- -------
Deferred:
Federal (442) 831 (2,322)
State - (779) 149
------- ------- -------
(442) 52 (2,173)
------- ------- -------
Total benefit $ (124) $ (1,016) $ (770)
------- ------- -------
</TABLE>
The (benefit) provision for income taxes is included in the statements
of operations as follows:
<TABLE>
<CAPTION>
Year ended March 31,
1994 1993 1992
-------------------------------------------------------
(In thousands)
<S> <C> <C> <C>
Continuing operations $ (124) $ 1,160 $ 827
Discontinued operations:
From operations - - 108
From disposition - (2,176) (1,705)
------- ------ -------
Total benefit $ (124) $ (1,016) $ (770)
------- ------- --------
</TABLE>
A reconciliation of the provision for income taxes on
continuing operations computed by applying the federal statutory
rate of 34% to income from continuing operations before income
taxes and the reported provision (benefit) for income taxes of
continuing operations is as follows:
Year ended March 31,
1994 1993 1992
-----------------------------
(In thousands)
Income tax provision (benefit) computed at
statutory federal income tax rate $ (418) $ (313) $ 3,305
State income taxes, net of federal tax
benefit, if any 422 650 675
Equity in loss of foreign subsidiaries (374) - 475
Amortization of cost in excess of net assets
of acquired businesses 212 212 300
Benefit from utilization of financial accounting
net operating loss carryforwards - - (4,318)
Other (principally nondeductible items) 34 611 390
------- ------- ------
Total provision (benefit) $ (124) $ 1,160 $ 827
------- ------- -------
At March 31, 1994, the Company had net operating loss (NOL)
carryforwards of approximately $52,300,000 for tax reporting
purposes expiring primarily in 2007 through 2009. The Company
also has tax credit carryforwards of approximately $2,496,000
which expire in various years through 2002 and Alternative
Minimum Tax credit carryforwards of approximately $1,809,000.
During the third quarter of fiscal year 1993, the Company
adopted SFAS No. 109, retroactive to April 1, 1992. This
statement supersedes SFAS No. 96 which the Company adopted
effective April 1, 1988. As allowed under SFAS No. 109, the
Company reported the effect of the adoption of SFAS No. 109 as
a cumulative effect of a change in accounting for income taxes
of $13,000,000 of income and prior year consolidated financial
statements were not restated. SFAS No. 109 retains the princi-
pal objectives of SFAS No. 96; however, the new standard applies
less restrictive criteria for recognizing deferred tax assets.
Unlike the prior standard, SFAS No. 109 permits consideration of
future events to assess the likelihood that tax benefits will be
realized in future years. To the extent that current available
evidence about the future raises doubt about the realization of
the deferred tax asset, a valuation allowance must be estab-
lished.
Upon adoption of SFAS No. 109, the Company recorded a deferred
tax asset of $22,667,000 as of April 1, 1992 representing the
tax benefit of future federal and state tax deductions, net
operating loss, alternative minimum and investment tax carry-
forwards and established a valuation allowance of $7,700,000
against that asset. This allowance may be adjusted based upon
the Company's ability or inability to demonstrate with reason-
able certainty there will be sufficient taxable income as may be
required to utilize tax benefits related to the balance of the
asset. At March 31, 1993, the Company increased the valuation
allowance to $10,119,000 due to the relative uncertainty that the
tax benefits from the additional provision for loss from
discontinued operations recorded in the fourth quarter of fiscal
year 1993 would be realized. At March 31, 1994, the Company
increased the valuation allowance to $13,519,000, principally
due to the recognition of additional state deferred tax assets,
principally state NOL carryforwards, and the relative uncertain-
ty that such state benefits will be fully utilized. At March
31, 1994 and 1993, the Company had deferred tax assets and
liabilities as follows:
March 31,
1994 1993
--------------------------
(In thousands)
Deferred tax assets:
Closure accruals - discontinued operations $ 21,630 $ 25,223
Net operating loss carryforwards 17,784 8,062
Alternative minimum tax credit carryforwards 1,809 1,866
Investment and other tax credit carryforwards 2,496 2,496
Other, net 6,684 7,835
------- -------
Gross deferred tax asset 50,403 45,482
Valuation allowance for deferred tax asset (13,519) (10,119)
------- -------
Total deferred tax asset 36,884 35,363
------- ------
Deferred tax liabilities:
Tax depreciation in excess of book depreciation (11,793) (10,926)
Asset basis difference - discontinued operations (10,301) (10,301)
--------- --------
Total deferred tax liabilities (22,094) (21,227)
--------- --------
Net deferred tax asset $ 14,790 $ 14,136
--------- --------
Net current asset $ 9,329 $ 10,638
Net noncurrent asset 5,461 3,498
--------- --------
Net deferred tax asset $ 14,790 $ 14,136
--------- --------
Commitments and contingencies:
Lease commitments
The Company's operating lease obligations are principally for
buildings and equipment. Generally, the Company is responsible
for property taxes and insurance on its leased property. At
March 31, 1994, future minimum rental commitments under noncan-
celable operating leases with terms longer than one year
aggregate $49,521,000 and require payments in the five succeed-
ing years and thereafter of $12,939,000, $12,177,000,
$8,573,000, $4,613,000, $3,694,000, and $7,525,000, respective-
ly.
Rental expense related to continuing operations was
$14,912,000, $17,467,000 (including $2,014,000 of the restruc-
turing charge) and $18,668,000 (including $2,969,000 of the
restructuring charge) for fiscal years 1994, 1993 and 1992,
respectively.
Contingencies
Class action lawsuit
In July 1988, a purported class action lawsuit was filed in
California state court on behalf of stockholders and noteholders
of the Company alleging securities law violations and fraud and
negligent misrepresentation in connection with the purchase of
shares of the Company's common stock and 9 3/8% senior notes by
members of the purported class between January 1986 and April
1987. The complaint also named as defendants the underwriters
who performed services in connection with the senior note
offering. In addition, the complaint alleged that certain of
the Company's officers and directors sold shares of the Com-
pany's common stock at artificially inflated prices based on
undisclosed information about the Company. The plaintiffs
sought unspecified damages, including punitive damages plus
costs associated with the litigation. Upon motions filed by all
defendants, the Court dismissed this lawsuit with prejudice on
January 3, 1990. Plaintiff filed an appeal of this dismissal on
February 15, 1990 in the California Court of Appeal for the
Second Appellate District, which was denied on May 3, 1991. On
June 12, 1991, plaintiff filed a petition for review with the
California Supreme Court regarding this appeal and review of the
case was granted by the Court. The California Supreme Court
affirmed the Court of Appeals, and the dismissal is now final.
Additionally, in December 1989, plaintiffs in this lawsuit
filed another class action in federal court which contains
essentially the same allegations and damage claims as those set
forth in the dismissed state action, except that it has been
brought only on behalf of the stockholders of the Company and
raises a claim under the Securities Exchange Act of 1934. The
Company is defending the action vigorously. Discovery on this
action was in progress when, by order dated March 11, 1992, the
federal court granted the Company's motion for reconsideration
of its earlier denied motion for judgment on the pleadings and,
on March 31, 1992, judgment was entered against the plaintiffs'
claims. In dismissing the plaintiffs' claims, the court accepted
defendants' arguments based on a 1991 United States Supreme
Court decision which declared a uniform statute of limitations
for such actions. Congress has since passed Section 27A of the
Securities Exchange Act of 1934, which purports to reinstate the
formerly applicable statute of limitations for actions pending
on the date of the Supreme Court's decision. The plaintiffs
moved the court to reconsider its March 11, 1992 order in part
based upon a recent Ninth Circuit Court of Appeal case upholding
the constitutionality of Section 27A which motion was granted on
May 11, 1993. The court has set a trial date of January 10,
1995. After consultation with outside counsel and in consider-
ation of the availability of insurance coverage, management
believes the outcome of this matter will not have a material
adverse effect on the consolidated financial condition of the
Company.
Motco
On December 4, 1991, the Company announced the suspension of
work on the Motco project, the cleanup of a Superfund site in
Texas, and the filing of a $56,000,000 breach of contract
lawsuit against the Motco Trust, the potentially responsible
party (PRP) group that agreed to finance remediation of the site
and Monsanto Company, the leader of the PRP group.
In January 1988, the Company was retained by the Motco Trust
to destroy waste contained in pits at the site using two
transportable incinerators designed and operated by IT. Based
on information provided to IT in the Motco Trust's request for
proposal, the Company bid and was awarded a fixed-price contract
for approximately $33,000,000 which was subsequently increased
to approximately $38,000,000 through change orders. Of that
amount, approximately $21,000,000 has been paid to the Company.
In early 1991, IT advised the Motco Trust and Monsanto that it
would cost substantially more to complete the project because
the scope of work had changed and because the chemical makeup,
quantities and mixture of waste at the site were dramatically
different from that portrayed by data provided to IT in Motco
Trust's request for proposal. Additionally, the project was
impacted by other actions of the Motco Trust and Monsanto,
including the pumping of contaminated water and waste into the
Motco pits from an unrelated project which was managed by the
Motco Trust and Monsanto.
IT continued work at the site in good faith while negotiations
were occurring with the Motco Trust and Monsanto. Approximately
$31,000,000 of direct costs were incurred in excess of those
recovered under the contract and recorded as a contract claim
receivable and are included in noncurrent assets in the Com-
pany's consolidated balance sheet at March 31, 1994 and 1993.
IT has not recognized any overhead cost recovery or profit on
this project to date. IT sued to recover costs and profit of
approximately $56,000,000.
On December 26, 1991, the Motco Trust and Monsanto filed an
answer to IT's denied liability to IT on the grounds that the Motco Trust had
executed a change order on or about September 28, 1990 address-
ing many of the claims and purported underlying events alleged
in the lawsuit and had received a full release from IT regarding
those matters, that IT has failed to mitigate the damages
alleged to have been incurred by IT, that IT has failed to
manage and control its costs with respect to its work on the
project, and that IT's lawsuit fails to state a claim upon which
relief can be granted as it claims extra-contractual compensa-
tion. Monsanto also denies any separate liability from that of
the Motco Trust.
In its counterclaim, the Motco Trust seeks recovery of
$27,000,000 of monetary damages including all payments to third
parties to complete performance of the project, all penalties or
other liabilities to any governmental entity, and any related
damages which occur as a result of the breach of contract by IT
which is alleged to have occurred upon the filing of the lawsuit
by IT and concurrent suspension of work at the site.
The case was tried to a jury during March and April of 1994.
As a result of that trial, the jury rendered a special verdict
in IT's behalf wherein they found that Monsanto had breached its
contract with IT, had defrauded IT and had provided IT with
information which constituted a negligent misrepresentation as
to the waste characteristics. The jury found that the amount of
damages caused IT as a result of these acts was in the amount of
$52,800,000. The jury also found that Monsanto should pay
punitive damages in the amount of $28,550,000, together with
attorneys' fees in the amount of approximately $2,300,000. The
jury further found that IT did not commit fraud against the
defendants, that any breach of contract IT may have committed
was excused, and that Motco Trust should not recover on its
$27,000,000 counterclaim.
Monsanto has filed a motion for judgment notwithstanding the
verdict, and, alternatively, for a new trial. If the Court
orders a new trial, the verdict will be set aside pending a
complete retrial before a new jury. If Monsanto's motions with
the trial court are denied, the judgment is subject to appeal.
After consideration of the merits of the Company's position in
the lawsuit and after consultations with its outside counsel,
management believes that, subject to the inherent uncertainties
of litigation, the Company more likely than not will recover the
contract claim receivable recorded to date and prevail on Motco
Trust's counterclaim. However, if this matter is resolved in an
amount significantly lower than the contract claim receivable
recorded by IT or if the Motco Trust prevails in its counter-
claim and recovers any significant amount of damages, a material
adverse effect to the consolidated financial condition of the
Company would result.
Central Garden
On July 14, 1992, the Company responded to an emergency call
to clean up a chemical spill at a finished product warehouse
facility leased by Central Garden & Pet Supply Company (Central)
in Baton Rouge, Louisiana. While cleanup was under way, a fire
began which damaged the warehouse facility. In addition to the
owner of the facility, Central and two other lessees of the
finished product warehouse facility (an electrical supply
company and a pharmaceutical company) incurred significant
property damage and substantial loss of inventory.
On August 2, 1992, a petition for damages was filed against
the Company and Central by residents of a nearby apartment
complex alleging personal injuries caused by the release of
hazardous and noxious materials into the atmosphere as a result
of the fire. Central filed an answer, cross-claim, and third-
party complaint. In the complaint and cross-claim, Central
alleges, among other things, that the Company was the cause of
the fire in failing to exercise proper care in the cleanup of
the spill, and was responsible for the property damage, loss of
contents, loss of profits and other economic injury, and
expenses incurred in the cleanup. Further, Central claims a
set-off for monies due the Company for cleanup services rendered
by the Company after the fire and seeks indemnity for any
damages assessed against Central. The Company has responded to
the complaint and cross-claim alleging, among other things,
improper storage and handling of hazardous materials by Central.
This case was remanded to state court for lack of diversity
jurisdiction. The Company has also filed its own cross-com-
plaint against Central for services rendered after the fire and
has denied responsibility for the fire, raised certain defenses,
and further claimed that Central was not entitled to a set-off.
The monies due the Company for services rendered to Central
approximate $1,700,000 and are included in accounts receivable
in the Company's consolidated balance sheet at March 31, 1994
and 1993. Neither Central nor the nearby residents have
formally specified the damages they seek, although, based on
early discovery, it appears Central claims losses in the
$3,000,000 range for destruction of inventory, plus unspecified
additional damages, including other amounts it may be required
to pay as a result of the fire, for which it seeks indemnity
from IT.
A complaint has also been filed in state court in this matter
by the insurer for the electrical supply company against the
Company, Central, the lessor and certain insurers. While the
complaint does not specify the damages sought, an earlier demand
was made for approximately $1,800,000.
In addition, the owner of the adjacent pharmaceutical company
and its insurers have filed suit against the Company, Central,
the lessor, a construction company which built a fire wall that
allegedly did not meet the building code, the manufacturer of
the chemicals which were spilled and certain insurers. While
damages have not been formally specified, it appears plaintiff
is claiming loss of the warehouse inventory valued in excess of
$9,000,000, as well as business interruption. The lessor has
also filed a cross-claim and third party complaint against the
Company and others in this action.
Several other actions arising out of the fire have recently
been filed which the Company believes are substantially duplica-
tive of the previously filed cases in the types and amounts of
relief sought.
These matters are at a relatively early stage, and trial dates
have not been set. A discovery schedule has been established
which contemplates completion in the fall of 1994 as to the
issues of factual causation. The Company is unable at this time
to predict the outcome and is defending the actions vigorously.
The Company's insurance carrier has been notified of the matter
and is a defendant in one of the actions. The Company's carrier
is defending the actions subject to a reservation of its rights
to contest coverage at a later date. The Company has filed a
protective action seeking determination of coverage.
Helen Kramer
On May 3, 1993, the Company received an administrative
subpoena from the Office of the Inspector General (OIG) of the
USEPA seeking documents relating to certain of the Company's
claims which were submitted to the U.S. Army Corps of Engineers
with regard to the Helen Kramer remediation contract, a substan-
tially completed project which the Company performed in joint
venture. Since August 1992, the Defense Contract Audit Agency
(DCAA) has been conducting an audit of certain claims submitted
by the joint venture. The Company has been informed that there
is a federal civil and criminal investigation into the claims.
The Company is also aware that one of its employees who provided
procurement support for the Helen Kramer project has been
subpoenaed to appear before a federal grand jury in Philadel-
phia, Pennsylvania. This matter is at a very preliminary stage.
The Company is cooperating fully with the government's investi-
gation. In addition, by letter dated October 3, 1993, a
shareholder of the Company alleged that the acts giving rise to
the OIG's investigation constituted, among other things, a waste
of the Company's assets, and demanded that the Company institute
an action against those responsible for the alleged wrongdoing.
The Company is investigating the shareholder's claims fully.
Other
Various other claims and actions, considered normal to the
Company's business, have been asserted and are pending against
the Company. Management believes that such claims and actions
are either adequately covered by insurance, or if not insured,
will not, in the aggregate, have a material adverse effect on
the consolidated financial condition of the Company.
The Company maintains a liability insurance program which
includes commercial general liability, product liability,
automotive liability, employers' liability, workers' compensa-
tion, all risk property coverage, contractor's pollution
liability, professional errors and omissions, and directors' and
officers' liability insurance coverage. A portion of the
Company's commercial general liability, automotive liability and
workers' compensation insurance is provided through arrangements
which require the Company to indemnify the insurance carriers
for all losses and expenses under the policies and to support
the indemnity commitments with letters of credit.
Environmental Impairment Liability coverage is provided
through the Company's captive insurance subsidiary, which has
issued a $32,000,000 policy exclusively for IT's inactive
treatment, storage and disposal sites located in Northern
California. See Discontinued operations - Transportation,
treatment and disposal for information regarding certain legal
and governmental proceedings affecting the Company's treatment,
storage and disposal sites.
Restructuring charges:
In connection with the realignment and streamlining of the
Company's organization which was initiated in the fourth quarter
of fiscal year 1993, the Company incurred a pre-tax restructur-
ing charge of $8,378,000. The restructuring charge included
costs for the consolidation of facilities in the United States
through office combinations or shutdowns, related asset write-
offs, severance payments to employees, and the disposition of
most of the Company's European operations through either closure
or sale.
At the end of fiscal year 1992, the Company implemented a
restructuring program which was the result of an evaluation of
operational capacity, productivity and overhead costs. The
program included staff reductions, facility closures of several
unproductive engineering offices and the San Jose, California
laboratory, and related asset writeoffs and lease termination
accruals. In fiscal year 1992, the Company recorded a
$6,997,000 restructuring charge.
Governmental regulation:
The Company is subject to extensive regulation by applicable
federal, state and local agencies. All facets of the Company's
business are conducted in the context of a rapidly developing
and changing statutory and regulatory framework, aggressive
governmental enforcement and a highly visible political environ-
ment. The Company's operations must satisfy stringent laws and
regulations applicable to performance. Future changes in
regulations may have an adverse effect on the Company's busi-
ness.
Preferred stock:
In a September 1993 public offering, the Company issued
2,400,000 depositary shares, each representing a 1/100th
interest in a share of the Company's 7% Cumulative Convertible
Exchangeable Preferred Stock (Preferred Stock). The depositary
shares entitle the holder to all proportional rights and
preferences of the Preferred Stock, including dividend, liquida-
tion, conversion, redemption and voting rights and preferences.
The net proceeds from the issuance were $57,130,000.
The Preferred Stock ranks as to dividends and liquidation,
prior to the Company's common stock and Series A Junior Partici-
pating Cumulative Preferred Stock, if issued. (See Stockholder
Rights Plan.) The dividend per annum and liquidation preference
for each share of Preferred Stock are $175 and $2,500, respec-
tively, and for each depositary share are $1.75 and $25,
respectively. Dividends on the Preferred Stock and depositary
shares are cumulative and payable quarterly.
The Preferred Stock is convertible at the option of the holder
into shares of the Company's common stock at a conversion price
of $5.84 per share. On any dividend payment date on or after
September 30, 1996, the Preferred Stock is exchangeable at the
option of the Company, in whole but not in part, for 7% Convert-
ible Subordinated Debentures Due 2008 in a principal amount
equal to $2,500 per share of Preferred Stock (equivalent to $25
per depositary share). The Preferred Stock may be redeemed at
any time on or after September 30, 1996, at the option of the
Company, in whole or in part, initially at a price of $2,622.50
per share of Preferred Stock (equivalent to $26.225 per deposi-
tary share) and thereafter at prices declining to $2,500 per
share of Preferred Stock (equivalent to $25 per depositary
share) on or after September 30, 2003.
The Preferred Stock is non-voting, except that holders are
entitled to vote as a separate class to elect two directors if
the equivalent of six or more quarterly dividends (whether
consecutive or not) on the Preferred Stock is in arrears. Such
voting rights will continue until such time as the dividend
arrearage on the Preferred Stock has been paid in full.
Stock incentive plans:
The Company has a 1991 Stock Incentive Plan (1991 Plan) which
provides for the issuance of the Company's common stock or any
other security or benefit with a value derived from the value of
its common stock. Options are granted at exercise prices equal
to or greater than the quoted market price at the date of the
grant. At March 31, 1994, the maximum number of shares of the
Company's common stock that may be issued pursuant to awards
granted under the 1991 Plan is 1,377,758. At April 1 of each
fiscal year, the maximum number of shares available for award
under the 1991 Plan will be increased by an amount which
represents 2% of the number of shares of the Company's common
stock which are issued and outstanding at that date. During the
fiscal year ended March 31, 1994, the first series of options
were granted under the 1991 Plan, which expires in fiscal year
1996.
The Company also had a 1983 Stock Incentive Plan (1983 Plan)
which provided for the granting of incentive and non-qualified
stock options and stock appreciation rights and the issuance of
restricted common stock. Options granted under the 1983 Plan
and outstanding at March 31, 1994, will expire at various dates
through July 3, 2003. No stock appreciation rights were granted
under the 1983 Plan. No shares are available for grant under
the 1983 Plan, which expired in September 1993.
Changes in the number of shares represented by outstanding
options under the 1991 Plan and the 1983 Plan during the fiscal
years ended March 31, 1994, 1993 and 1992 are summarized as
follows:
Year ended March 31,
1994 1993 1992
-------------------------------------
Outstanding at beginning
of year 2,787,152 2,640,578 2,891,057
Options granted
(1994, $3.125 - $5.875 per share;
1993, $4.875 - $7.00 per share;
1992, $7.625 - $9.75 per share) 1,007,200 797,500 366,865
Options exercised
(1994, $2.75 - $4.625 per share;
1993, $3.00 - $5.50 per share;
1992, $2.75 - $8.00 per share) (170,583) (239,539) (335,663)
Options expired and forfeited (436,750) (411,387) (281,681)
--------- -------- ---------
Outstanding at end of year (1994,
$3.125 - $11.00 per share) 3,187,019 2,787,152 2,640,578
--------- --------- ---------
Vested options 1,484,947 1,390,574 1,179,960
--------- --------- ---------
Stockholder Rights Plan:
On December 14, 1989, the Company adopted a Stockholder Rights
Plan (the Rights Plan), pursuant to which the Company distribut-
ed one stock purchase right (a Right) with respect to each share
of common stock outstanding on the December 26, 1989 record
date. The Rights Plan provides that in the event that any
person becomes the beneficial owner of 20% or more of the
outstanding shares of common stock (a 20% Stockholder) or
commences a tender offer or exchange offer, the consummation of
which would cause such person to become a 20% Stockholder, each
Right will entitle the holder (other than a 20% Stockholder) to
purchase, at any time on or after the tenth business day
following the date of such event, at the then-current exercise
price (initially $35), one two-thousand-five-hundredth of a
share of Series A Junior Participating Cumulative Preferred
Stock, par value $100, of the Company, which one two-thousand-
five-hundredth of a share is designed to have a value approxi-
mately equal to the value of one share of common stock. In the
event that any person becomes a 20% Stockholder, each previously
unexercised Right will entitle the holder (other than the 20%
Stockholder) to purchase, at any time on or after the tenth
business day following the date of such event, shares of common
stock having a market value equal to two times the then-current
exercise price. In the event that, at any time on or after the
date that a person becomes a 20% Stockholder, the Company is
merged into another corporation or 50% or more of the Company's
assets are sold, then each previously unexercised Right will
entitle the holder (other than the 20% Stockholder) to purchase,
at any time on or after such date, shares of common stock of the
acquiring corporation having a market value equal to two times
the exercise price. In connection with the Rights Plan, the
Company has designated 40,000 shares of its authorized preferred
stock as Series A Junior Participating Cumulative Preferred
Stock.
The Rights may be redeemed by the Company at a price of $.01
per Right at any time until they become exercisable to purchase
common stock of the Company or another corporation. The Company
may redeem the Rights only with the concurrence of a majority
(but not less than three) of the independent directors. The
Rights, which do not have voting rights and are not entitled to
dividends, expire on December 14, 1999.
Class action lawsuit:
In fiscal year 1994, 1,872,759 shares of common stock valued
at $6,350,000 were issued in settlement of a class action
lawsuit alleging certain securities law violations emanating
from a 1987 offering of common stock. A charge of $7,300,000
was taken to other expense in the consolidated statement of
operations in fiscal year 1993 to provide for this settlement
and related expenses.
Major customers:
A total of 53%, 45% and 37% of the Company's revenues during
fiscal years 1994, 1993 and 1992, respectively, were from
federal governmental agencies, primarily the U.S. Department of
Defense (DOD) and the U.S. Department of Energy (DOE). In
fiscal years 1994, 1993 and 1992, the DOD provided 33%, 19% and
12%, respectively, of the Company's revenues. The DOE provided
15%, 16% and 15% of the Company's revenues during fiscal years
1994, 1993 and 1992, respectively.
Employee benefit plans:
The Company has a defined contribution, contributory pension
and profit sharing plan (the Plan), covering all employees with
one year of continuous service. The Company funds current costs
as accrued, and there are no unfunded vested benefits. The Plan
requires a minimum annual Company contribution of 4% and allows
a maximum contribution of up to 8% of participants' eligible
compensation up to $235,840, $228,860 and $222,220 for fiscal
years 1994, 1993 and 1992, respectively. In fiscal years 1992
through 1994, 4% of participants' eligible compensation was
annually contributed to the Plan.
Pension and profit sharing expense was $3,987,000, $3,580,000
and $3,170,000 for fiscal years 1994, 1993 and 1992, respective-
ly.
The Company presently provides certain health care benefits
for retirees who are over age 60 and have completed a specified
number of years of service. In fiscal year 1994, the Company
contributed approximately $50,000 toward these benefits.
Statement of Financial Accounting Standards No. 106 (SFAS No.
106), "Employers' Accounting for Postretirement Benefits Other
Than Pensions," which became effective for the Company in fiscal
year 1994, requires accrual, during the years that the employee
renders the necessary service, of the expected cost of providing
these benefits to an employee and the employee's covered
dependents. Under SFAS No. 106, the Company is recognizing its
Accumulated Postretirement Benefit Obligation (APBO or Transi-
tion Obligation) of $733,000 on a delayed basis as a component
of net periodic postretirement benefit cost and will amortize
this cost over 20 years. Annual total expense for postretire-
ment benefits under SFAS No. 106 including amortization of the
APBO in fiscal year 1994 was $250,000.
Events subsequent to March 31, 1994 (unaudited):
On June 28, 1994, pursuant to a definitive agreement signed on
May 2, 1994, the Company and an affiliate of Corning Incorporat-
ed (Corning) combined the two companies' environmental analyti-
cal services businesses into a newly formed 50/50 jointly-owned
company (the joint company). The joint company will operate
independently with a separate board of directors comprised of
representation from IT and Corning, and will provide services to
the Company on a competitive basis. In connection with the
transaction, IT and Corning will contribute the net assets of
their respective laboratory businesses into the joint company.
Additionally, IT issued to Corning 333,000 shares of IT common
stock and a five-year warrant to purchase 2,000,000 shares of IT
common stock at $5.00 per share. The financing of the joint
company will be provided by a $60,000,000 bank line of credit.
IT's 50 percent investment in the joint company will be account-
ed for under the equity method. An aggressive integration plan
will be implemented in the early stages of operations of the
joint company. The plan will include consolidation and closure
of redundant lab facilities and equipment, a reduction in force
to eliminate duplicative overhead and excess capacity and a
consolidation of laboratory management and accounting systems,
resulting in productivity gains achieved through economies of
scale. Consequently, it is estimated that the joint company
will incur a charge for integration of approximately
$20,000,000, principally non-cash, in the quarter ending June
30, 1994. IT will reflect 50 percent of such charge in its
financial statements in the same quarter.
Quarterly results of operations (In thousands, except per share
data) (unaudited):
First Second Third Fourth
quarter quarter quarter quarter
-----------------------------------------------------
1994:
Revenues . . . $ 102,549 $ 100,665 $ 92,524 $ 97,065
Gross margin . 17,249 16,319 13,380 11,239
Net income (loss) 1,962 1,692 726 (5,486)
Net income (loss)
applicable
to common stock 1,962 1,657 (324) (6,536)
Net income (loss)
per share (net of
preferred stock
dividends) . $ .06 $ .05 $ (.01) $ (.19)
---------- ----------- ---------- ---------
1993:
Revenues . . . $ 102,558 $ 102,811 $ 101,673 $ 103,497
Gross margin . 19,235 18,842 18,019 17,177
Income (loss)
from continuing
operations . 4,790 2,127 (4,346) (4,653)
Loss from
discontinued
operations. . - - (3,809) (6,800)
Income (loss)
before cumulative
effect of
change in
accounting
for income taxes. 4,790 2,127 (8,155) (11,453)
Cumulative effect of
change in accounting
for income taxes 13,000 - - -
Net income (loss). 17,790 2,127 (8,155) (11,453)
Net income (loss)
per share:
Continuing
operations . $ .14 $ .06 $ (.13) $ (.13)
Discontinued
operations. - - (.11) (.20)
Cumulative effect
of change in
accounting
for income
taxes . . . . . .39 - - -
--------- ----------- ---------- ---------
Net income (loss)
per share . . $ .54 $ .06 $ (.24) $ (.33)
--------- ----------- ---------- ----------
Beginning with the second quarter of fiscal year 1994, net
income (loss) applicable to common stock represents net income
(loss) after preferred dividends on the Company's 7% Cumulative
Convertible Exchangeable Preferred Stock. (See Preferred
stock.)
In the fourth quarter of fiscal year 1994, the Company
recorded a $3,000,000 ($.09 per share ) after tax provision
related to the actuarially determined value of contractual
retirement benefits to be provided to its former Chairman of the
Board (who was also Chief Executive Officer from 1975 to 1992)
who retired from that position effective April 1, 1994. (See
Summary of significant accounting policies - Accrued contractual
retirement benefits.) In addition, the Company wrote off its
investment in a planned treatment facility in the U.K. in the
amount of $1,600,000 ($.05 per share) after tax in the fourth
quarter of fiscal year 1994.
During the fourth quarter of fiscal year 1993, the results of
continuing operations were impacted by two items. The Company
recorded an approximate $5,900,000 ($.17 per share) after tax
restructuring charge for the consolidation of operations in the
United States and the disposition of most of the Company's
European operations. (See Restructuring charges.) Additional-
ly, the Company provided for an approximately $700,000 ($.02 per
share) after tax adjustment to the initial provision for the
anticipated settlement of the stockholders' lawsuit. (See Class
action lawsuit.)
During the third quarter of fiscal year 1993, the Company
recorded charges to continuing operations related to the
following: approximately $5,400,000 ($.16 per share) after tax
for the initial anticipated settlement of a stockholders'
lawsuit (see Class action lawsuit); and approximately $1,700,000
($.05 per share) after tax for the writeoff of nonrecoverable
costs invested in a U.K. joint venture.
During the first quarter of fiscal year 1993, the results of
continuing operations were affected by the approximately
$2,200,000 ($.07 per share) after tax gain on the sale of the
Company's investment in common stock options of EXEL Limited, an
offshore casualty insurance company.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.
There were none.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The section entitled "Election of Directors" in the regi-
strant's Definitive Proxy Statement to be filed with the
Securities and Exchange Commission for the Annual Meeting of
Stockholders scheduled for September 1, 1994 (the Proxy State-
ment) is incorporated herein by reference. See also "Executive
Officers of the Company" in Part I of this report for certain
information concerning the Company's executive officers.
ITEM 11. EXECUTIVE COMPENSATION.
The section entitled "Executive Compensation" in the Proxy
Statement is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
The section entitled "Beneficial Ownership of Shares" in the
Proxy Statement is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The section entitled "Certain Transactions" in the Proxy
Statement is incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K.
Financial Statement Schedules
II. Loans receivable from employees. . . . . . . . . . . S-1
V. Property, plant and equipment. . . . . . . . . . . . S-2
VI. Accumulated depreciation on property, plant and equip
ment . . . . . . . . . . . . . . . . . . . . . . . S-3
VIII. Valuation and qualifying accounts. . . . . . . . . . S-4
X. Supplementary income statement information . . . . . S-4
Schedules not filed herewith are omitted because of the
absence of conditions under which they are required or because
the information called for is shown in the consolidated finan-
cial statements or notes thereto.
Exhibits
These Exhibits are numbered in accordance with the Exhibit
Table of Item 601 of Regulation S-K.
Exhibit No. Description
- -----------------------------------------------------------------------------
2 Omitted - Inapplicable.
3(i) Certificate of Incorporation of the registrant as amended
by Amendment to Certificate of Incorporation filed
September 17, 1987, with Delaware Secretary of State.(2)
3(ii) Bylaws of the registrant as amended through June 2, 1994.
4(i) 1. Rights Agreement dated as of December 14, 1989 by
and between International Technology Corporation
and Bank of America National Trust and Savings
Association, as Rights Agent.(3)
2. Amendment No. 1 to Rights Agreement.(9)
4(iii) 1. Indenture dated as of June 15, 1986 between Inter-
national Technology Corporation and Continental
Illinois National Bank and Trust Company of Chicago
relating to the Company's 9 3/8% Senior Notes due
1996.(1)
2. Certificate of Designations of Series A Junior
Participating Cumulative Preferred Stock, $100 par
value.(8)
3. Certificate of Amendment of Certificate of Designa-
tions of Series A Junior Participating Cumulative
Preferred Stock, $100 par value.(9)
4. Certificate of Designations with respect to the
registrant's 7% Cumulative Convertible Exchangeable
Preferred Stock, $100 par value.(9)
5. Indenture for the registrant's 7% Convertible
Subordinated Debentures Due 2008.(9)
9 Omitted - Inapplicable.
10(ii) 1. Secured Loan Agreement dated as of April 20, 1990
among the registrant, IT Corporation and Household
Commercial of California, Inc.(5)
2. First Amendment to Secured Loan Agreement among the
registrant, IT Corporation, Household Bank, f.s.b.
as assignee of Household Commercial of California,
Inc. dated as of June 16, 1992.(9)
3. Second Amendment to Secured Loan Agreement among
the registrant, IT Corporation, Household Bank,
f.s.b. as assignee of Household Commercial of
California, Inc. dated as of June 28, 1993.(9)
4. Third Amendment to Secured Loan Agreement among the
registrant, IT Corporation, Household Bank, f.s.b.
as assignee of Household Commercial of California,
Inc. dated as of November 11, 1993.
5. Fourth Amendment to Secured Loan Agreement among
the registrant, IT Corporation, Household Bank,
f.s.b. as assignee of Household Commercial of
California, Inc. dated as of February 11, 1994.
6. Fifth Amendment to Secured Loan Agreement among the
registrant, IT Corporation, Household Bank, f.s.b.
as assignee of Household Commercial of California,
Inc. dated as of March 31, 1994.
7. Sixth Amendment to Secured Loan Agreement among the
registrant, IT Corporation, Household Bank, f.s.b.
as assignee of Household Commercial of California,
Inc. dated as of June 28, 1994.
8. Syndicated Credit Agreement dated as of August 27,
1991 among the registrant, IT Corporation and Bank
of America National Trust and Savings Association,
as agent for the bank group.(7)
9. First Amendment to Credit Agreement and Waiver
among the registrant, IT Corporation, Bank of
America National Trust and Savings Association and
certain other signatory banks, dated as of June 19,
1992.(9)
10. Second Amendment to Credit Agreement and Waiver
among the registrant, IT Corporation, Bank of
America National Trust and Savings Association and
certain other signatory banks, dated as of June 28,
1993.(9)
11. Third Amendment to Credit Agreement and Waiver
among the registrant, IT Corporation, Bank of
America National Trust and Savings Association and
certain other signatory banks, dated as of March
24, 1994.
12. Fourth Amendment to Credit Agreement and Waiver
among the registrant, IT Corporation, Bank of
America National Trust and Savings Association and
certain other signatory banks, dated as of June 24,
1994.
13. Asset Transfer Agreement among MetPath Inc., the
registrant and IT Corporation dated as of May 2,
1994.
14. Securities Acquisition Agreement between the regis-
trant and MetPath Inc. dated as of May 2, 1994.
10(iii) 1. Directors' Retirement Program.(4)
2. Description of Special Turn-a-Round Plan (Fiscal Year
1995 Management Incentive Plan) of the registrant.
3. 1983 Stock Incentive Plan, as amended.(8)
4. Retirement Plan of IT, as amended by Amendment No.
1 and Amendment No. 2.(1)
5. Form of Severance Benefit Agreement between the
registrant and certain officers of the regis-
trant.(5)
6. 1991 Stock Incentive Plan.(6)
7. Agreement dated July 14, 1992 between Robert B.
Sheh and the registrant.(8)
8. Agreement dated November 4, 1993 between Larry M.
Hart and the registrant.
9. Agreements dated November 5, 1993 between E. Brian
Smith and the registrant.
10. Retirement Agreement dated March 3, 1994 between
Murray H. Hutchison and the registrant.
11 1. Computation of Per Share Earnings for the three
years ended March 31, 1994.
12 Omitted - Inapplicable.
13 Omitted - Inapplicable.
16 Omitted - Inapplicable.
18 Omitted - Inapplicable.
21 1. List of the registrant's subsidiaries.
22 Omitted - Inapplicable.
23 Consent of Independent Auditors.
24 Omitted - Inapplicable.
27 1. Financial Data Schedule for the year ended March
31, 1994.
2. Financial Data Schedule for the quarter ended March
31, 1994.
28 Omitted - Inapplicable.
99 Omitted - Inapplicable.
__________
(1) Previously filed with the Securities and Exchange
Commission as an Exhibit to the registrant's Registration
Statement on Form S-l (No. 33-6310) and incorporated
herein by reference.
(2) Previously filed with the Securities and Exchange
Commission as an Exhibit to the registrant's Annual
Report on Form 10-K for the year ended March 31, 1988 and
incorporated herein by reference.
(3) Previously filed with the Securities and Exchange
Commission as an Exhibit to registrant's Form 8-K dated
December 14, 1989 and incorporated herein by reference.
(4) Previously filed with the Securities and Exchange
Commission as an Exhibit to the registrant's Annual
Report on Form 10-K for the year ended March 31, 1989 and
incorporated herein by reference.
(5) Previously filed with the Securities and Exchange
Commission as an Exhibit to the registrant's Amended
Annual Report on Form 10-K for the year ended March 31,
1990 and incorporated herein by reference.
(6) Previously filed with the Securities and Exchange
Commission as an Exhibit to registrant's Registration
Statement on Form S-8 (No. 33-52974) and incorporated
herein by reference.
(7) Previously filed with the Securities and Exchange
Commission as an Exhibit to registrant's Form 8-K dated
September 4, 1991 and incorporated herein by reference.
(8) Previously filed with the Securities and Exchange
Commission as an Exhibit to the registrant's Annual
Report on Form 10-K for the year ended March 31, 1993 and
incorporated herein by reference.
(9) Previously filed with the Securities and Exchange
Commission as an Exhibit to registrant's Registration
Statement on Form S-3 (No. 33-65988) and incorporated
herein by reference.
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, in Torrance, California on the 29th day of June 1994.
INTERNATIONAL TECHNOLOGY
CORPORATION
By ROBERT B. SHEH
Robert B. Sheh
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 dates
indicated.
<TABLE>
<S> <C> <C>
RALPH S. CUNNINGHAM
Ralph S. Cunningham Chairman of the Board of June 29, 1994
Directors
ROBERT B. SHEH June 29, 1994
Robert B. Sheh Director, President and
Chief Executive Officer
DONALD S. BURNS
Donald S. Burns Director June 29, 1994
ROBERT W. DAVIS
Robert W. Davis Director June 29, 1994
ROBERT R. DOCKSON
Robert R. Dockson Director June 29, 1994
_________________
Michael N. Hammes Director June ____, 1994
JOHN H. HUTCHISON
John H. Hutchison Director June 29, 1994
MURRAY H. HUTCHISON
Murray H. Hutchison Director June 29, 1994
JAMES C. MCGILL
James C. McGill Director June 29, 1994
JACK O. VANCE
Jack O. Vance Director June 29, 1994
ANTHONY J. DELUCA
Anthony J. DeLuca Senior Vice President June 29, 1994
and Chief Financial Officer
(Principal Financial Officer)
PHILIP H. OCKELMANN
Philip H. Ockelmann Vice President, Treasurer and Controller June 29, 1994
(Principal Accounting Officer)
</TABLE>
INTERNATIONAL TECHNOLOGY CORPORATION
Schedule II -- Loans receivable from employees (1)
(In thousands)
<TABLE>
<CAPTION>
Balance at
beginning Balance
of period Loans Repayments Other end of period
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Year ended March 31, 1994:
Brian J. Baxter . . . . . . $ 87 $ - $ - $ (12) (2) $ 75
Jon S. Holmgren . . . . . . 60 - (60) - -
James R. Mahoney. . . . . . 180 - - (10) (2) 170
Frank C. Rice . . . . . . . 45 - - (8) (2) 37
Michael C. Salmon . . . . . 95 - - (5) (2) 90
Robert B. Sheh. . . . . . . - 200 - (10) (2) 190
E. Brian Smith. . . . . . . 150 - - (150) (3) -
Raymond W. Stockstill . . 60 - (60) - -
------- ------- ------- ------- ------
$ 677 $ 200 $ (120) $ (195) $ 562
------- ------- ------- ------- ------
Year ended March 31, 1993:
Brian J. Baxter . . . . . .$ 100 $ - $ - $ (13) $ 87
Jon S. Holmgren . . . . . . 70 - - (10) 60
James R. Mahoney. . . . . . 190 - - (10) 180
Frank C. Rice . . . . . . . 53 - - (8) 45
Michael C. Salmon . . . . . - 100 - (5) 95
E. Brian Smith. . . . . . . 175 - - (25) 150
Raymond W. Stockstill . . . 70 - - (10) 60
-------- -------- -------- -------- -------
$ 658 $ 100 $ - $ (81)(2) $ 677
-------- -------- -------- -------- -------
Year ended March 31, 1992:
Brian J. Baxter . . . . . . $ 112 $ - $ - $ (12) $ 100
Jon S. Holmgren . . . . . . 80 - - (10) 70
James R. Mahoney. . . . . . 200 - - (10) 190
Frank C. Rice . . . . . . . 60 - - (7) 53
E. Brian Smith. . . . . . . 200 - - (25) 175
Raymond W. Stockstill . . . 80 - - (10) 70
-------- --------- --------- ------- -------
$ 732 $ - $ - $ (74)(2) $ 658
-------- --------- --------- ------- -------
</TABLE>
(1) Amounts relate to interest-free loans to certain officers and employees
principally for real estate purchases in connection with relocations
and are classified as long-term assets in the consolidated financial
statements.
(2) Represents annual forgiveness of loans based on continuing service to
the Company.
(3) Represents loan forgiveness resulting from an employment termination
agreement with this former President and Chief Operating Officer of the
Company.
INTERNATIONAL TECHNOLOGY CORPORATION
Schedule V -- Property, plant and equipment (1)
(In thousands)
<TABLE>
<CAPTION>
Balance at Balan
beginning Additions Sales or at en
of period at cost retirements Other (3) of period
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Year ended March 31, 1994:
Land and land improvements. . . $ 2,136 $ - $ (9) $ - $ 2,127
Buildings and leasehold
improvements. . . . . . . . . 25,906 273 (249) - 25,930
Machinery and equipment . . . . 149,250 9,906 (4,227) - 154,929
------- ------- ------- -------- --------
177,292 10,179 (4,485) - 182,986
Construction-in-progress. . . . 17,145 4,566 (2) (2,260) - 19,451
------- ------- ------- -------- --------
$ 194,437 $ 14,745 $ (6,745) $ - $ 202,437
------- ------- ------- -------- --------
Year ended March 31, 1993:
Land and land improvements. . . $ 2,277 $ 7 $ (148) $ - $ 2,136
Buildings and leasehold
improvements. . . . . . . . . 26,034 535 (663) - 25,906
Machinery and equipment . . . . 147,830 7,763 (6,343) - 149,250
------- ------- ------- -------- --------
176,141 8,305 (7,154) - 177,292
Construction-in-progress. . . . 10,465 7,319 (2) (639) - 17,145
------- ------- ------- -------- --------
$ 186,606 $ 15,624 $ (7,793) $ - $ 194,437
------- ------- ------- -------- --------
Year ended March 31, 1992:
Land and land improvements. . . $ 2,181 $ 115 $ (19) $ - $ 2,277
Buildings and leasehold
improvements. . . . . . . . . 22,688 3,857 (311) (200) 26,034
Machinery and equipment . . . . 127,588 31,936 (7,251) (4,443) 147,830
------- ------- ------- -------- --------
152,457 35,908 (7,581) (4,643) 176,141
Construction-in-progress. . . . 13,130 (2,665) (2) - - 10,465
------- ------- ------- -------- --------
$ 165,587 $ 33,243 $ (7,581) $ (4,643) $ 186,606
------- ------- ------- -------- --------
</TABLE>
(1) Estimated useful lives of the elements of property, plant and equipment are
as follows:
Land improvements. . . . . . . . . . . . . . . . . . . . 10-20 years
Buildings and leasehold improvements . . . . . . . . . . 3-20 years
Machinery and equipment. . . . . . . . . . . . . . . . . 3-10 years
(2) Represents net changes in period, excluding write-offs.
(3) Represents primarily property, plant and equipment classified as
discontinued operations or transferred to/from discontinued operations.
(See Notes to Consolidated Financial Statements - Discontinued operations.)
INTERNATIONAL TECHNOLOGY CORPORATION
Schedule VI -- Accumulated depreciation on property, plant and equipment
(In thousands)
<TABLE>
<CAPTION>
Balance at Provision Balan
beginning charged Sales or at en
of period to income retirements Other (1) of period
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Year ended March 31, 1994:
Land and land improvements. . . $ 415 $ 20 $ - $ - $ 435
Buildings and leasehold
improvements. . . . . . . . . 7,873 1,440 (81) - 9,232
Machinery and equipment . . . . 64,973 19,736 (2,819) - 81,890
------- ------- ------- -------- --------
$ 73,261 $ 21,196 $ (2,900) $ - $ 91,557
------- ------- ------- -------- --------
Year ended March 31, 1993:
Land and land improvements. . . $ 383 $ 40 $ (8) $ - $ 415
Buildings and leasehold
improvements. . . . . . . . . 6,483 1,463 (73) - 7,873
Machinery and equipment . . . . 52,763 16,860 (4,650) - 64,973
------- ------- ------- -------- --------
$ 59,629 $ 18,363 $ (4,731) $ - $ 73,261
------- ------- ------- -------- --------
Year ended March 31, 1992:
Land and land improvements. . . $ 347 $ 39 $ (3) $ - $ 383
Buildings and leasehold
improvements. . . . . . . . . 5,010 1,534 (232) 171 6,483
Machinery and equipment . . . . 43,183 16,644 (4,787) (2,277) 52,763
------- ------- ------- ------- --------
$ 48,540 $ 18,217 $ (5,022) $ (2,106) $ 59,629
------- ------- ------- ------- --------
</TABLE>
(1) Represents primarily accumulated depreciation on property, plant and
equipment classified as discontinued operations or transferred to/from
discontinued operations. (See Notes to Consolidated - Discontinued
operations.)
INTERNATIONAL TECHNOLOGY CORPORATION
Schedule VIII -- Valuation and qualifying accounts
(In thousands)
<TABLE>
<CAPTION>
Balance at Provision Accounts Balance
beginning charged written at end
of period to income off of period
---------------------------------------------------------------
<S> <C> <C> <C> <C>
Year ended March 31, 1994:
Allowance for doubtful
accounts. . . . . . . . . . . . . . . . . . . . . $ 3,011 $ 846 $ (674) $ 3,183
Year ended March 31, 1993:
Allowance for doubtful
accounts. . . . . . . . . . . . . . . . . . . . . $ 4,114 $ 1,307 $ (2,410) $ 3,011
Year ended March 31, 1992:
Allowance for doubtful
accounts. . . . . . . . . . . . . . . . . . . . . $ 4,166 $ 1,715 $ (1,767) $ 4,114
</TABLE>
INTERNATIONAL TECHNOLOGY CORPORATION
Schedule X -- Supplementary income statement information
(In thousands)
<TABLE>
<CAPTION>
Charged to cost and expenses(1)
Year ended March 31,
1994 1993 1992
---------------------------------------------
<S> <C> <C> <C>
Maintenance and repairs $ 7,049 $ 6,667 $ 6,575
</TABLE>
(1)Represents cost and expenses of continuing operations.
Exhibit 11.1
INTERNATIONAL TECHNOLOGY CORPORATION
COMPUTATION OF PER SHARE EARNINGS
(In thousands, except per share data)
<TABLE>
<CAPTION>
Year ended March 31,
1994 1993 1992
---------------------------------------------
<S> <C> <C> <C>
Primary earnings per share:
Income (loss) from continuing operations. . . . . . . . . . . . . $ (1,106) $ (2,082) $ 8,895
Discontinued operations (net of income taxes):
Income from operations:
Pollution control manufacturing. . . . . . . . . . . . . . . - - 2,147
Gain (loss) from disposition:
Pollution control manufacturing. . . . . . . . . . . . . . . - (3,809) 13,088
Transportation, treatment and disposal . . . . . . . . . . . - (6,800) (32,720)
---------- ----------- ----------
Loss before cumulative effect of change in
accounting for income taxes. . . . . . . . . . . . . . . . . . (1,106) (12,691) (8,590)
Cumulative effect of change in accounting
for income taxes . . . . . . . . . . . . . . . . . . . . . . . - 13,000 -
---------- ----------- ----------
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . (1,106) 309 (8,590)
Less preferred stock dividends. . . . . . . . . . . . . . . . . . (2,135) - -
---------- ----------- ----------
Net income (loss) applicable to common stock . . . . . . . . . . . . . $ (3,241) $ 309 $ (8,590)
---------- ----------- ----------
Average number of common shares outstanding . . . . . . . . . . . 33,484 33,058 32,840
Average common equivalent shares from stock
options computed on the treasury stock
method using average market prices . . . . . . . . . . . . . . 24 180 585
Average number of common shares to be issued. . . . . . . . . . . 1,254 292 -
---------- ----------- ---------
Shares used in computation . . . . . . . . . . . . . . . . . . . . . . 34,762 33,530 33,425
---------- ----------- ---------
Net income (loss) per share:
Continuing operations (net of preferred stock dividends) $ (.09) $ (.06) $ .27
Discontinued operations:
From operations. . . . . . . . . . . . . . . . . . . . . . . . - - .06
From disposition . . . . . . . . . . . . . . . . . . . . . . . - (.32) (.59)
---------- ----------- ---------
(.09) (.38) (.26)
Cumulative effect of change in accounting
for income taxes . . . . . . . . . . . . . . . . . . . . . . . - .39 -
---------- ----------- ---------
Net income (loss) per share. . . . . . . . . . . . . . . . . . . . . . $ (.09) $ .01 $ (.26)
---------- ----------- ---------
Fully diluted earnings per share result in less than 3% dilution and
therefore are not presented.
Exhibit 21.1
INTERNATIONAL TECHNOLOGY CORPORATION
LIST OF SUBSIDIARY COMPANIES
Enviro-Measure, Inc.
ISOBAR, Inc.
IT Corporation
IT Environmental Programs, Inc.
IT Environmental Services, Inc.
IT Italia, Inc.
IT Italia, s.r.l.
IT Tulsa Holdings, Inc. (formerly IT-McGill Pollution Control
Systems, Inc.)
International Technology Corporation of Delaware
International Technology Europe PLC
McKittrick Mud Company, Inc.
Princeton Aqua Science
Underground Resource Management, Inc.
Universal Professional Insurance Company
IT Corporation Limited (formerly IT-McGill Limited)
IT Europe Pollution Control Engineering, Ltd. (formerly IT-McGill
Pollution Control Systems, Ltd.)
IT Espana, Inc.
IT International Technology Espana, S.A.
IT Deutschland, Inc.
IT International Technology Deutschland GmbH
EXHIBIT 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the addition of the financial statement schedules,
listed in the accompanying Index to Consolidated Financial
Statements and Financial Statement Schedules for the three years
in the period ended March 31, 1994, to the consolidated finan-
cial statements of International Technology Corporation covered
by our report dated May 23, 1994, except for the note "Long-term
debt" as to which the date is June 29, 1994, included in this
Annual Report (Form 10-K) for the year ended March 31, 1994.
We also consent to the incorporation by reference in the
Registration Statements (Form S-8; No. 2-95647 and No. 33-11486)
and in the related Prospectuses pertaining to the International
Technology Corporation 1983 Stock Incentive Plan, in the
Registration Statement (Form S-3; No. 33-24040)
of International Technology Corporation and in the related Prospectus,
and in the Registration Statement (Form S-8; No. 33-52974) and in the
related Prospectus pertaining to the International Technology
Corporation 1991 Stock Option Plan of our report referred to
above with respect to the consolidated financial statements and
schedules of International Technology Corporation included in
this Annual Report (Form 10-K) for the year ended
March 31, 1994.
ERNST & YOUNG
Los Angeles, California
June 29, 1994
Exhibit 27.1
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
International Technology Corporation's Consolidated Balance Sheet as
of March 31, 1994, Consolidated Statement of Operations for the Fiscal
Year Ended March 31, 1994 and related Notes to Consolidated Financial
Statements, all of which were filed with the SEC on June 29, 1994 on
Form 10-K for the fiscal year ended March 31, 1994 (commission file
number 1-9037) AND QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
(Amounts in thousands except per share data)
</TABLE>
<TABLE>
<CAPTION>
Item Number Item Description Amount
----------- --------------------------------------------------------- ---------
<S> <C> <C>
5-02 (1) cash and cash items $ 10,646
5-02 (2) marketable securities -
5-02 (3)(a)(1) notes and accounts receivable - trade 126,910
5-02 (4) allowance for doubtful accounts -
5-02 (6) inventory -
5-02 (9) total current assets 154,559
5-02 (13) property, plant and equipment 182,986
5-02 (14) accumulated depreciation 91,557
5-02 (18) total assets 359,203
5-02 (21) total current liabilities 91,037
5-02 (22) bonds, mortgages and similar debt 68,625
5-02 (28) preferred stock - mandatory redemption -
5-02 (29) preferred stock - no mandatory redemption 2,400
5-02 (30) common stock 35,201
5-02 (31) other stockholders' equity 122,947
5-02 (32) total liabilities and stockholders' equity 359,203
5-03 (b)(1)(a) net sales of tangible products -
5-03 (b)(1) total revenues 392,803
5-03 (b)(2)(a) cost of tangible goods sold -
5-03 (b)(2) total costs and expenses applicable to sales and revenues 383,260
5-03 (b)(3) other costs and expenses 2,500
5-03 (b)(5) provision for doubtful accounts and notes -
5-03 (b)(8) interest and amortization of debt discount 8,273
5-03 (b)(10) income (loss) before taxes and other items (1,230)
5-03 (b)(11) income tax expense (benefit) (124)
5-03 (b)(14) income (loss) continuing operations (1,106)
5-03 (b)(15) discontinued operations -
5-03 (b)(17) extraordinary items -
5-03 (b)(18) cumulative effects - changes in accounting principles -
5-03 (b)(19) net income (loss) (1,106)
5-03 (b)(20) earnings per share - primary $ (0.09)
5-03 (b)(20) earnings per share - fully diluted -<PAGE>
Exhibit
</TABLE>
Exhibit 27.2
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
International Technology Corporation's Consolidated Balance Sheet as
of March 31, 1994, Consolidated Statement of Operations for the fourth
quarter of the Fiscal Year Ended March 31, 1994 and related Notes to
onsolidated Financial Statements, all of which were filed with the SEC
on June 29, 1994 on Form 10-K for the fiscal year ended March 31, 1994
(commission file number 1-9037) AND QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
(Amounts in thousands except per share data)
<TABLE>
<CAPTION>
Item Number Item Description Amount
----------- ------------------------------------------------------ ----------
<S> <C> <C>
5-02 (1) cash and cash items $ 10,646
5-02 (2) marketable securities -
5-02 (3)(a)(1) notes and accounts receivable - trade 126,910
5-02 (4) allowance for doubtful accounts -
5-02 (6) inventory -
5-02 (9) total current assets 154,559
5-02 (13) property, plant and equipment 182,986
5-02 (14) accumulated depreciation 91,557
5-02 (18) total assets 359,203
5-02 (21) total current liabilities 91,037
5-02 (22) bonds, mortgages and similar debt 68,625
5-02 (28) preferred stock - mandatory redemption -
5-02 (29) preferred stock - no mandatory redemption 2,400
5-02 (30) common stock 35,201
5-02 (31) other stockholders' equity 122,947
5-02 (32) total liabilities and stockholders' equity 359,203
5-03 (b)(1)(a) net sales of tangible products -
5-03 (b)(1) total revenues 97,065
5-03 (b)(2)(a) cost of tangible goods sold -
5-03 (b)(2) total costs and expenses applicable to sales and revenues 101,311
5-03 (b)(3) other costs and expenses 2,500
5-03 (b)(5) provision for doubtful accounts and notes -
5-03 (b)(8) interest and amortization of debt discount 1,548
5-03 (b)(10) income (loss) before taxes and other items (8,294)
5-03 (b)(11) income tax expense (benefit) (2,808)
5-03 (b)(14) income (loss) continuing operations (5,486)
5-03 (b)(15) discontinued operations -
5-03 (b)(17) extraordinary items -
5-03 (b)(18) cumulative effects - changes in accounting principles -
5-03 (b)(19) net income (loss) (5,486)
5-03 (b)(20) earnings per share - primary $ (0.19)
5-03 (b)(20) earnings per share - fully diluted -<PAGE>
</TABLE>
EXHIBIT 3(ii)
As of June 2, 1994
AMENDED AND RESTATED BYLAWS OF
INTERNATIONAL TECHNOLOGY CORPORATION
(a Delaware corporation)
ARTICLE I
Offices
Section 1.01 Registered Office. The registered
office of INTERNATIONAL TECHNOLOGY CORPORATION (hereinafter
called the "Corporation") in the State of Delaware shall be
at No. 100 West Tenth Street, City of Wilmington, County of
New Castle, and the name of the registered agent in charge
thereof shall be The Corporation Trust Company.
Section 1.02 Principal Office. The principal office for
the transaction of the business of the Corporation shall be
at 336 West Anaheim Street, Wilmington, California 90744.
The Board of Directors (hereinafter called the "Board") is
hereby granted full power and authority to change said
principal office from one location to another.
Section 1.03 Other Offices. The Corporation may also
have an office or offices at such other place or places,
either within or without the State of Delaware, as the Board
may from time to time determine or as the business of the
Corporation may require.
ARTICLE II
Meetings of Stockholders
Section 2.01 Annual Meetings. Annual meetings of
the stockholders of the Corporation for the purpose of
electing directors and for the transaction of such other
proper business as may come before such meetings may be held
at such time, date and place as the Board shall determine by
resolution.
Section 2.02 Special Meetings. Special meetings of the
stockholders may be called at any time by the Board, the
Chairman of the Board or the President. Special meetings of
stockholders may not be called by any other person or
persons. Written notice of a special meeting shall be given
as provided in Section 2.04 of these Bylaws.
Section 2.03 Place of Meetings. All meetings of the
stockholders shall be held at such places, within or without
the State of Delaware, as may from time to time be
designated by the person or persons calling the respective
meeting and specified in the respective notices or waivers
of notice thereof.
Section 2.04 Notice of Meetings. Except as otherwise
required by law, notice of each meeting of the stockholders,
whether annual or special, shall be given not less than
ten (10) nor more than sixty (60) days before the date of
the meeting to each stockholder of record entitled to vote
at such meeting by delivering a typewritten or printed
notice thereof to him personally, or by depositing such
notice in the United States mail, in a postage prepaid
envelope, directed to him at his post office address
furnished by him to the Secretary of the Corporation for
such purpose or, if he shall not have furnished to the
Secretary his address for such purpose, then at his post
office address last known to the Secretary, or by
transmitting a notice thereof to him at such address by
telegraph, cable, or wireless. Except as otherwise
expressly required by law, no publication of any notice of a
meeting of the stockholders shall be required. Every notice
of a meeting of the stockholders shall state the place, date
and hour of the meeting, and, in the case of a special
meeting, shall also state the purpose or purposes for which
the meeting is called. Notice of any meeting of
stockholders shall not be required to be given to any
stockholder who shall have waived such notice and such
notice shall be deemed waived by any stockholder who shall
attend such meeting in person or by proxy, except as a
stockholder who shall attend such meeting for the express
purpose of objecting, at the beginning of the meeting, to
the transaction of any business because the meeting is not
lawfully called or convened. Except as otherwise expressly
required by law, notice of any adjourned meeting of the
stockholders need not be given if the time and place thereof
are announced at the meeting at which the adjournment is
taken.
Section 2.05 Quorum. Except in the case of any meeting
of or the election of directors summarily ordered as
provided by law, the holders of record of a majority in
voting interest of the shares of stock of the Corporation
entitled to be voted thereat, present in person or by proxy,
shall constitute a quorum for the transaction of business at
any meeting of the stockholders of the Corporation or any
adjournment thereof. In the absence of a quorum at any
meeting or any adjournment thereof, a majority in voting
interest of the stockholders present in person or by proxy
and entitled to vote thereat or, in the absence therefrom of
all the stockholders, any officer entitled to preside at or
to act as a secretary of, such meeting may adjourn such
meeting from time to time. At any such adjourned meeting at
which a quorum is present any business may be transacted
which might have been transacted at the meeting as
originally called.
Section 2.06 Voting.
(A) Each stockholder shall, at each meeting of the
stockholders, be entitled to vote in person or by proxy each
share or fractional share of the stock of the Corporation
having voting rights on the matter in question and which
shall have been held by him and registered in his name on
the books of the Corporation:
(i) on the date fixed pursuant to Section 6.06
of these Bylaws as the record date for the determination of
stockholders entitled to notice of and to vote at such
meeting, or,
(ii) if no such record date shall have been so
fixed, then (a) at the close of business on the day next
preceding the day on which notice of the meeting shall be
given or (b) if notice of the meeting shall be waived, at
the close of business on the day next preceding the day on
which the meeting shall be held.
(B) Shares of its own stock belonging to the
Corporation or to another corporation, if a majority of the
shares entitled to vote in the election of directors in such
other corporation is held, directly or indirectly, by the
Corporation shall neither be entitled to vote nor be counted
for quorum purposes. Persons holding stock of the
Corporation in a fiduciary capacity shall be entitled to
vote such stock. Persons whose stock is pledged shall be
entitled to vote, unless in the transfer by the pledgor on
the books of the Corporation he shall have expressly
empowered the pledges to vote thereon, in which case only
the pledgee, or his proxy, may represent such stock and vote
thereon. Stock having voting power standing of record in
the names of two or more persons, whether fiduciaries,
members of a partnership, joint tenants in common, tenants
by entirety or otherwise, or with respect to which two or
more persons have the same fiduciary relationship, shall be
voted in accordance with the provisions of the General
Corporation Law of the State of Delaware.
(C) Any such voting rights may be exercised by the
stockholder entitled thereto in person or by his proxy
appointed by an instrument in writing, subscribed by such
stockholder or by his attorney thereunto authorized and
delivered to the secretary of the meeting; provided,
however, that no proxy shall be voted or acted upon after
three years from its date unless said proxy shall provide
for a longer period. The attendance at any meeting of a
stockholder who may theretofore have given a proxy shall not
have the effect of revoking the same unless he shall in
writing so notify the secretary of the meeting prior to the
voting of the proxy. At any meeting of the stockholders all
matters, except as otherwise provided in the Certificate of
Incorporation, in these Bylaws or by law, shall be decided
by the vote of a majority in voting interest of the
stockholders present in person or by proxy and entitled to
vote thereat and thereon, a quorum being present. The vote
at any meeting to the stockholders on any question need not
be by ballot, except as otherwise provided in the
Certificate of Incorporation or unless so directed by the
chairman of the meeting. On a vote by ballot each ballot
shall be signed by the stockholder voting, or by his proxy,
if there be such proxy, and it shall state the number of
shares voted.
Section 2.07 List of Stockholders. The Secretary of the
Corporation shall prepare and make, at least ten (10) days
before every meeting of stockholders, a complete list of the
stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name
of each stockholder. Such list shall be open to the
examination of any stockholder, for any purpose germane to
the meeting, during ordinary business hours, for a period of
at least ten (10) days prior to the meeting, either at a
place within the city where the meeting is to be held, which
place shall be specified in the notice of the meeting, or,
if not so specified, at the place where the meeting is to be
held. The list shall also be produced and kept at the time
and place of the meeting during the whole time thereof, and
may be inspected by any stockholder who is present.
Section 2.08 Inspectors. The Chairman of the Board
shall, in advance of any meeting of stockholders, appoint
one or more inspectors to act at the meeting and make a
written report thereof. Each inspector, before entering
upon the discharge of his duties, shall take and sign an
oath faithfully to execute the duties of the inspector with
strict impartiality and according to the best of his
ability. The inspectors shall (i) ascertain the number of
shares outstanding in the voting power of each,
(ii) determine the shares represented at a meeting and the
validity of proxies and ballots, (iii) count all votes and
ballots, (iv) determine and retain for a reasonable period
of a record of the disposition of any challenges made to any
determination by the inspectors, and (v) certify their
determination of the number of shares represented at the
meeting, and account of all votes and ballots. The
inspectors may appoint or retain other persons or entities
to assist the inspectors in the performance of the duty of
the inspectors. The inspectors need not be stockholders of
the Corporation, and any officer of the Corporation may be
an inspector with respect to any vote other than a vote for
or against a proposal in which such officer shall have a
material interest.
SECTION 2.09 Advance Notice of Stockholder Proposals.
At any meeting of the stockholders, only such business shall
be conducted as shall have been brought before the meeting
(i) by or at the direction of the Board or (ii) by any
stockholder of the Corporation who complies with the notice
procedures set forth in this Section 2.09. For business to
be properly brought before any meeting of the stockholders
by a stockholder, the stockholder must have given notice
thereof in writing to the Secretary of the Corporation at
the principal executive offices of the Corporation, which
written notice must be received by the Secretary of the
Corporation not less than 60 days in advance of such meeting
or, if later, the fifteenth day following the first public
disclosure of the date of such meeting (by mailing of notice
of the meeting or otherwise). A stockholder's notice to the
Secretary shall set forth as to each matter the stockholder
proposes to bring before the meeting (1) a brief description
of the business desired to be brought before the meeting and
the reasons for conducting such business at the meeting,
(2) the name and address, as they appear on the
Corporation's books, of the stockholder proposing such
business, (3) the class, series and number of shares of the
Corporation that are beneficially owned by the stockholder,
and (4) any material interest of the stockholder in such
business. In addition, the stockholder making such proposal
shall promptly provide any other information reasonably
requested by the Corporation. Notwithstanding anything in
these Bylaws to the contrary, no business shall be conducted
at any meeting of the stockholders except in accordance with
the procedures set forth in this Section 2.09. The Chairman
of any such meeting shall direct that any business not
properly brought before the meeting shall not be considered.
SECTION 2.10 Stockholder Action by Written Consent.
(A) In order that the Corporation may determine the
stockholders entitled to consent to corporate action in
writing without a meeting, the Board may fix a record date,
which record date shall not precede the date upon which the
resolution fixing the record date is adopted by the Board,
and which date shall not be more than 10 days after the date
upon which the resolution fixing the record date is adopted
by the Board. Any stockholder of record seeking to have the
stockholders authorize or take corporate action by written
consent shall, by written notice to the Secretary, request
the Board to fix a record date. The Board shall promptly,
but in all events within 10 days after the date upon which
such request is received, adopt a resolution fixing the
record date. If no record date has been fixed by the Board
within 10 days of the date upon which such request is
received, the record date for determining stockholders
entitled to consent to corporate action in writing without a
meeting, when no prior action by the Board is required by
applicable law, shall be the first date on which a signed
written consent setting forth the action taken or proposed
to be taken is delivered to the Corporation by delivery to
its registered office in the State of Delaware, its
principal place of business, or an officer or agent of the
Corporation having custody of the book in which proceedings
of meetings of stockholders are recorded, addressed to the
attention of the Secretary. Delivery shall be by hand or by
certified or registered mail, return receipt requested. If
no record date has been fixed by the Board and prior action
by the Board is required by applicable law, the record date
for determining stockholders entitled to consent to
corporate action in writing without a meeting shall be at
the close of business on the day on which the Board adopts
the resolution taking such prior action.
(B) In the event of the delivery to the Corporation of a
written consent or consents purporting to authorize or take
corporate action and/or revocations related to any such
consents (each such written consent and any revocation
thereof is referred to in this Section 2.10(B) as a
"Consent"), the Secretary of the Corporation shall provide
for the safekeeping of such Consents and shall, as soon as
practicable after receipt thereof, conduct such reasonable
investigation as he deems necessary or appropriate for the
purpose of ascertaining the validity of such Consents and
all matters incident thereto, including, without limitation,
whether the holders of shares having the requisite voting
power to authorize or take the action specified in the
Consents have given consent; provided, however, that the
Chairman of the Board, in his discretion, may designate an
inspector to act with respect to such Consents and such
inspector shall discharge the functions of the Secretary of
the Corporation under this Section 2.10(B). If after such
investigation the Secretary or the inspector (as the case
may be) shall determine that any action purportedly taken by
such Consents has been validly taken, that fact shall be
certified on the records of the Corporation kept for the
purpose of recording the proceedings of meetings of the
stockholders and the Consents shall be filed with such
records. In conducting the investigation required by this
Section 2.10(B), the Secretary or the inspector (as the case
may be) may, at the expense of the Corporation, retain to
assist them special legal counsel and any other necessary or
appropriate professional advisors, and such other personnel
as they may deem necessary or appropriate.
ARTICLE III
Board of Directors
Section 3.01 General Powers. The property,
business and affairs of the Corporation shall be managed by
the Board.
Section 3.02 Number. In accordance with paragraph SIXTH
of the Certificate of Incorporation of this Corporation, the
number of Directors of the Corporation is fixed at ten.
Section 3.03 Election of Directors. The directors shall
be elected annually by the stockholders of the Corporation
and the persons receiving the greatest number of votes, up
to the number of directors to be elected, shall be the
persons then elected. The election of directors is subject
to any provisions contained in the Certificate of
Incorporation relating thereto, including any provisions for
a classified board and for cumulative voting. Nominations
for the election of directors may be made by the Board or a
Committee thereof or by any stockholder entitled to vote in
the election of directors; provided, however, that a
stockholder may nominate a person for election as a director
at a meeting only if written notice of such stockholder's
intent to make such nomination has been given by such
stockholder to, and received by, the Secretary of the
Corporation at the principal executive offices of the
Corporation not later than 60 days in advance of such
meeting or, if later, the fifteenth day following the first
public disclosure of the date of such meeting (by mailing of
notice or otherwise). Each such notice shall set forth:
(i) the name and address of the stockholder who intends to
make the nomination and of the person or persons to be
nominated; (ii) a representation that the stockholder is a
holder of record of stock of the Corporation entitled to
vote at such meeting and intends to appear in person or by
proxy at the meeting and nominate the person or persons
specified in the notice; (iii) a description of all
arrangements or understandings between the stockholder and
each nominee and any other person or persons (naming such
person or persons) pursuant to which the nomination or
nominations are to be made by the stockholder; (iv) such
other information regarding each nominee proposed by such
stockholder as would be required to be included in a proxy
statement filed pursuant to the rules and regulations of the
Securities and Exchange Commission had the nominee been
nominated, or intended to be nominated, by the Board; and
(v) the consent of each nominee to serve as a director of
the Corporation if so elected. In addition, the stockholder
making such nomination shall promptly provide any other
information reasonably requested by the Corporation. No
person shall be eligible for election as a director of the
Corporation unless nominated in accordance with the
procedures set forth in this Section 3.03. The Chairman of
any meeting of stockholders shall direct that any nomination
not made in accordance with these procedures be disregarded.
Section 3.04 Resignations. Any director of the
Corporation may resign at any time by giving written notice
to the Board or to the Secretary of the Corporation. Any
such resignation shall take effect at the time specified
therein, or, if the time be not specified, it shall take
effect immediately upon its receipt; and unless otherwise
specified therein, the acceptance of such resignation shall
not be necessary to make it effective.
Section 3.05 Vacancies. Except as otherwise provided in
the Certificate of Incorporation, any vacancy in the Board,
whether because of death, resignation, disqualification, an
increase in the number of directors, or any other cause, may
be filled by vote of the majority of the remaining
directors, although less than a quorum. Each director so
chosen to fill a vacancy shall hold office until his
successor shall have been elected and shall qualify or until
he shall resign or shall have been removed.
Section 3.06 Place of Meeting, Etc. The Board may hold
any of it meetings at such place or places within or without
the State of Delaware as the Board may from time to time by
resolution designate or as shall be designated by the person
or persons calling the meeting or in the notice or a waiver
of notice of any such meeting. Directors may participate in
any regular or special meeting of the Board by means of
conference telephone or similar communications equipment
pursuant to which all persons participating in the meeting
of the Board can hear each other, and such participation
shall constitute presence in person at such meeting.
Section 3.07 First Meeting. The Board shall meet as
soon as practicable after each annual election of directors
and notice of such first meeting shall not be required.
Section 3.08. Regular Meetings. Regular meetings of the
Board may be held at such times as the Board shall from time
to time by resolution determine. If any day fixed for a
regular meeting shall be a legal holiday at the place where
the meeting is to be held, then the meeting shall be held at
the same hour and place on the next succeeding business day
not a legal holiday. Except as provided by law, notice of
regular meetings need not be given.
Section 3.09 Special Meetings. Special meetings of the
Board may be called at any time by the Board, the Chairman
of the Board or the President, to be held at the principal
office of the Corporation, or at such other place or places,
within or without the State of Delaware, as the person or
persons calling the meeting may designate. Notice of all
special meetings of the Board shall be mailed to each
director, addressed to him at his residence or usual place
of business, at least four (4) days before the day on which
the meeting is to be held, or shall be sent to him at such
place by telegram or given personally, on the second day, or
sooner, before the day on which the meeting is to be held.
Such notice may be waived by any director and any meeting
shall be a legal meeting without notice having been given if
all the directors shall be present thereat or if those not
present shall, either before or after the meeting, sign a
written waiver of notice of, or a consent to, such meeting
or shall after the meeting sign the approval of the minutes
thereof. All such waivers, consents or approvals shall be
filed with the corporate records or be made a part of the
minutes of the meeting.
Section 3.10 Quorum and Manner of Acting. Except as
otherwise provided in these Bylaws or bylaw, the presence of
a majority of the total number of directors then in office
as directors shall be required to constitute a quorum for
the transaction of business at any meeting of the Board, and
all matters shall be decided at any such meeting, a quorum
being present, by the affirmative votes of a majority of the
directors present. In the absence of a quorum, a majority
of directors present at any meeting may adjourn the same
from time to time until a quorum shall be present. Notice
of any adjourned meeting need not be given. The directors
shall act only as a Board, and the individual directors
shall have no power as such.
Section 3.11 Action by Consent. Any action required or
permitted to be taken at any meeting of the Board of any
committee thereof may be taken without a meeting if a
written consent thereto is signed by all members of the
Board or of such committee, as the case may be, and such
written consent is filed the minutes of proceedings of the
Board or committee.
Section 3.12 Compensation. No stated salary need be
paid directors, as such, for their services, but, by
resolution of the Board, a fixed sum and expenses of
attendance, if any, may be allowed for attendance at each
regular or special meeting of the Board or an annual
directors' fee may be paid; provided that nothing herein
contained shall be construed to preclude any director from
serving the Corporation in any other capacity and receiving
compensation therefor. Members of special or standing
committees may be allowed like compensation for attending
committee meetings.
Section 3.13 Committees. The Board may, by resolution
passed by a majority of the whole Board, designate one or
more committees, each committee to consist of one or more of
the directors of the Corporation. Any such committee, to
the extent provided in the resolution of the Board, shall
have and may exercise all the powers and authority of the
Board in the management of the business and affairs of the
Corporation, and may authorize the seal of the Corporation
to be affixed to all papers which may require it; but no
such committee shall have any power or authority in
reference to amending the Certificate of Incorporation,
adopting an agreement of merger or consolidation,
recommending to the stockholders the sale, lease or exchange
of all or substantially all of the Corporation's property
and assets, recommending to the stockholders a dissolution
of the Corporation or a revocation of the dissolution or
amending the Bylaws of the Corporation; and unless the
resolution of the Board expressly so provides, no such
committee shall have the power or authority to declare a
dividend or to authorize the issuance of stock. Any such
committee shall keep written minutes of its meetings and
report the same to the Board at the next regular meeting of
the Board.
Section 3.14 Officers of the Board. The Board shall
have a Chairman of the Board and may, at the discretion of
the Board, have a Vice Chairman. The Chairman of the Board
and the Vice Chairman shall be appointed from time to time
by the Board and shall have such powers and duties as shall
be designated by the Board.
Section 3.15 Chairman of the Board. The Chairman of the
Board shall preside at all meetings of stockholders, the
Board and the Executive Committee of the Board at which he
is present.
He shall have the power to call special meetings of the
Board, to determine the order of business and the procedure
for meetings of the stockholders and meetings of the Board,
and to appoint, subject to approval of the Board, the
members and chairpersons of the various committees
designated by the Board. The Chairman of the Board shall be
a member ex officio of all committees designated by the
Board, other than those on which he serves as a voting
member, except that, so long as the Chairman of the Board is
designated by the Board the Chief Executive Officer of the
Corporation, he shall not be a member of either the Audit
Committee or of the Compensation Committee of the Board;
provided, however, that a Chairman of the Board who is also
the Chief Executive Officer may attend meetings of the
Compensation Committee to provide information and respond to
inquiries, but without any vote on any matter considered by
the Committee. In the event the Chairman of the Board is
designated by the Board as the Chief Executive Officer of
the Corporation, he shall have, subject to the direction of
the Board, general and active supervision and management
over the business, operations and affairs of the Corporation
and over its several officers, agents and employees. The
Chairman of the Board shall exercise and perform such other
powers and duties as may from time to time be assigned by
the Board.
Although the Chairman of the Board shall not be an
employee or officer of the Corporation, the position of
Chairman shall be subject to the provisions of Article IV
hereof, including Sections 4.02 (Election), 4.04 (Removal
and Resignation), 4.05 (Vacancies) and 4.11 (Compensation)
as though the Chairman of the Board were an officer of the
Corporation.
ARTICLE IV
Officers
Section 4.01 Number. The officers of the
Corporation shall be a President, one or more Vice
Presidents, a Secretary and a Treasurer. The Corporation
may also have, at the discretion of the Board, one or more
Assistant Vice Presidents, one or more Assistant
Secretaries, one or more Assistant Treasurers and such other
officers as may be appointed in accordance with the
provisions of Section 4.03 of this Article IV. One person
may hold two or more offices, except that the Secretary may
not also hold the office of President.
Section 4.02 Election. The officers of the Corporation,
except such officers as may be appointed in accordance with
Section 4.03 or 4.05, shall be chosen annually by the Board,
and each shall hold office until his successor shall have
been duly chosen and shall qualify or until his resignation,
removal or other disqualification for service.
Section 4.03 Subordinate Officers, Etc. The Board may
appoint such other officers as the business of the
Corporation may require, each of whom shall have such
authority and perform such duties as are provided in these
Bylaws or as the Board may from time to time specify, and
shall hold office until he shall resign or shall be removed
or otherwise disqualified to serve.
Section 4.04 Removal and Resignation. Any officer may
be removed, either with or without cause, by a majority of
the directors at the time in office, at any regular or
special meeting of the Board, or except in the case of an
office chosen by the Board, by any officer upon whom such
power of removal may be conferred by the Board.
Any officer may resign at any time by giving written
notice to the Board, the Chairman of the Board, the
President or the Secretary of the Corporation. Any such
resignation shall take effect at the date of the receipt of
such notice or at any later time specified therein; and
unless otherwise specified therein, the acceptance of such
resignation shall not be necessary to make it effective.
Section 4.05 Vacancies. A vacancy in any office because
of death, resignation, removal, disqualification, or other
cause, may be filled in the manner prescribed in these
Bylaws for regular appointments to such office.
Section 4.06 Chairman of the Board. The Chairman of the
Board shall not be an employee or officer of the
Corporation, unless he is designated by the Board as the
Chief Executive Officer of the Corporation. The duties of
the Chairman are set forth in Section 3.15 above.
Section 4.07 President.
(A) In the event the Chairman of the Board is designated
by the Board as the Chief Executive Officer of the
Corporation, the President shall be the Chief Operating
Officer of the Corporation, and subject to the direction of
the Board and the Chairman of the Board and Chief Executive
Officer, shall have general responsibility for the
operation, administration and direction of the business of
the Corporation and its several offices, agents and
employees, and shall see that all resolutions and orders of
the Board and of the Chairman of the Board and Chief
Executive Officer are carried into effect.
(B) In the event the Chairman of the Board is not
designated by the Board as the Chief Executive Officer of
the Corporation, the President shall have, subject to the
direction of the Board, general and active supervision and
management over the business, operations and affairs of the
Corporation and over its several officers, agents and
employees. The President shall exercise and perform such
other powers and duties as may from time to time be assigned
by the Board.
Section 4.08 Vice Presidents. In the absence or
disability of the President, the Vice Presidents in order of
their rank as fixed by the Board or, if not ranked, the Vice
President designated by the Board, shall perform all the
duties of the President, and when so acting shall have all
the powers of, and be subject to all the restrictions upon,
the President.
Section 4.09 Secretary. The Secretary shall, if
present, record the proceedings of all meetings of the
Board, of the stockholders, and of all committees of which a
secretary shall not have been appointed, in one or more
books provided for that purpose. The Secretary shall see
that all notices are duly given in accordance with these
Bylaws and as required by law. The Secretary shall be
custodian of the seal of the Corporation and shall affix and
attest the seal to all documents to be executed on behalf of
the Corporation under its seal. In general, the Secretary
shall perform all the duties incident to the office of
Secretary and such other duties as may from time to time be
assigned by the Board.
Section 4.10 Treasurer. The Treasurer is the chief
financial officer of the Corporation and shall keep and
maintain, or cause to be kept and maintained adequate and
correct accounts of the properties and business transactions
of the Corporation.
Section 4.11 Compensation. The compensation of the
officers, agents or employees of the Corporation shall be
fixed from time to time by the Board. The Board may
delegate to any officer of the Corporation or any committee
of the Board the power to fix the compensation of any
officer, agent or employee of the Corporation. No officer
shall be prevented from receiving such compensation by
reason of the fact that such officer is also a director of
the Corporation.
ARTICLE V
Contracts, Checks, Drafts, Bank Accounts, Etc.
Section 5.01 Execution of Contracts. The Board,
except as in these Bylaws otherwise provided, may authorize
any officer or officers, agent or agents, to enter into any
contract or execute any instrument in the name of and on
behalf of the Corporation, and such authority may be general
or confined to specific instances.
Section 5.02 Checks, Drafts, Etc. All checks, drafts or
other orders for payment of money, notes or other evidence
of indebtedness, issued in the name of or payable to the
Corporation, shall be signed or endorsed by such person or
persons and in such manner as, from time to time, shall be
determined by resolution of the Board. Each such officer,
assistant, agent or attorney shall give such bond, if any,
as the Board may require.
Section 5.03 Deposits. All funds of the Corporation not
otherwise employed shall be deposited from time to time to
the credit of the Corporation in such banks, trust companies
or other depositories as the Board may select, or as may be
selected by any officer or officers, assistant or
assistants, agent or agents, or attorney or attorneys of the
Corporation to whom such power shall have been delegated by
the Board. For the purpose of deposit and for the purpose
of collection for the account of the Corporation, the
President, any Vice President or the Treasurer (or any other
officer or officers, assistant or assistants, agent or
agents, or attorney or attorneys of the Corporation who
shall from time to time be determined by the Board) may
endorse, assign and deliver checks, drafts and other orders
for the payment of money which are payable to the order of
the Corporation.
Section 5.04 General and Special Bank Accounts. The
Board may from time to time authorize the opening and
keeping of general and special bank accounts with such
banks, trust companies or other depositories as the Board
may select or as may be selected by any officer or officers,
assistant or assistants, agent or agents, or attorney or
attorneys of the Corporation to whom such power shall have
been delegated by the Board. The Board may make such
special rules and regulations with respect to such bank
accounts, not inconsistent with the provisions of these
Bylaws, as it may deem expedient.
ARTICLE VI
Shares and Their Transfer
Section 6.01 Certificates for Stock. Every owner
of stock of the Corporation shall be entitled to have a
certificate or certificates, to be in such form as the Board
shall prescribe, certifying the number and class of shares
of the stock of the Corporation owned by him. The
certificates representing shares of such stock shall be
numbered in the order in which they shall be issued and
shall be signed in the name of the Corporation by the
President or a Vice President, and by the Secretary or an
Assistant Secretary or by the Treasurer or an Assistant
Treasurer. Any of or all of the signatures on the
certificates may be a facsimile. In case any officer,
transfer agent or registrar who has signed, or whose
facsimile signature has been placed upon, any such
certificate, shall have ceased to be such officer, transfer
agent or registrar before such certificate is issued, such
certificate may nevertheless be issued by the Corporation
with the same effect as though the person who signed such
certificate, or whose facsimile signature shall have been
placed thereupon, were such officer, transfer agent or
registrar at the date of issue. A record shall be kept of
the respective names of the persons, firms or corporations
owing the stock represented by such certificates, the number
and class of shares represented by such certificates,
respectively, and the respective dates thereof, and in case
of cancellation, the respective dates of cancellation.
Every certificate surrendered to the Corporation for
exchange or transfer shall be cancelled, and no new
certificate or certificates shall be issued in exchange for
any existing certificate until such existing certificate
shall have been so cancelled, except in cases provided for
in Section 6.05.
Section 6.02 Stock Purchase Plans. The Corporation may
adopt and carry out a stock purchase plan or agreement or
stock option plan or agreement providing for the issue and
sale for such consideration as may be fixed of its unissued
shares, or of issued shares acquired or to be acquired, to
one or more of the employees or directors of the Corporation
or of a subsidiary or to a trustee on their behalf and for
the payment of such shares in installments or at one time,
and may provide for aiding any such persons in paying for
such shares by compensation for services rendered,
promissory notes or otherwise.
Any such stock purchase plan or agreement or stock option
plan or agreement may include, among other features, the
fixing of eligibility for participation therein, the class
and price of shares to be issued or sold under the plan or
agreement, the number of shares which may be subscribed for,
the method of payment therefor, the reservation of title
until full payment therefor, the effect of the termination
of employment and option or obligation on the part of the
Corporation to repurchase the shares upon termination of
employment, restrictions upon transfer of the shares, the
time limits of and termination of the plan and any other
matters, not in violation of applicable law, as may be
included in the plan as approved or authorized by the Board
or any committee of the Board.
Section 6.03 Transfers of Stock. Transfers of shares of
stock of the Corporation shall be made only on the books of
the Corporation by the registered holder thereof, or by his
attorney thereunto authorized by power of attorney duly
executed and filed with the Secretary, or with a transfer
clerk or a transfer agent appointed as provided in
Section 6.04, and upon surrender of the certificate or
certificates for such shares properly endorsed and the
payment of all taxes thereon. The person in whose name
shares of stock stand on the books of the Corporation shall
be deemed the owner thereof for all purposes as regards the
Corporation. Whenever any transfer of shares shall be made
for collateral security, and not absolutely, such fact shall
be so expressed in the entry or transfer if, when the
certificate or certificates shall be presented to the
Corporation for transfer, both the transferor and the
transferee request the Corporation to do so.
Section 6.04 Regulations. The Board may make such rules
and regulations as it may deem expedient, not inconsistent
with these Bylaws, concerning the issue, transfer and
registration of certificates for shares of the stock of the
Corporation. It may appoint, or authorize any officer or
officers to appoint, one or more transfer clerks or one or
more transfer agents and one or more registrars, and may
require all certificates for stock to bear the signature or
signatures of any of them.
Section 6.05 Lost, Stolen, Destroyed, and Mutilated
Certificates. In any case of loss, theft, destruction, or
mutilation of any certificate of stock, another may be
issued in its place upon proof of such loss, theft,
destruction, or mutilation and upon the giving of a bond of
indemnity to the Corporation in such form and in such sum as
the Board may direct; provided, however, that a new
certificate may be issued without requiring any bond when,
in the judgment of the Board, it is proper so to do.
Section 6.06 Fixing Date for Determination of
Stockholders of Record. In order that the Corporation may
determine the stockholders entitled to notice of or to vote
at any meeting of stockholders or any adjournment thereof,
or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to
exercise any rights in respect of any other change,
conversion or exchange of stock or for the purpose of any
other lawful action, the Board may fix, in advance, a record
date, which shall not be more than 60 nor less than 10 days
before the date of such meeting, nor more than 60 days prior
to any other action. If in any case involving the
determination of stockholders for any purpose other than
notice of or voting at a meeting of stockholders, the Board
shall not fix such a record date, the record date for
determining stockholders for such purpose shall be the close
of business on the day on which the Board shall adopt the
resolution relating thereto. A determination of
stockholders entitled to notice of or to vote at a meeting
of stockholders shall apply to any adjournment of such
meeting; provided, however, that the Board may fix a new
record date for the adjourned meeting.
ARTICLE VII
Indemnification
Section 7.01 Indemnification of Directors,
Officers, Employees, and Agents. The Corporation shall
indemnify to the full extent authorized by law any person
who was or is a party or is threatened to be made a party to
any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or
investigative (including without limitation an action by or
in the right of the Corporation) by reason of the fact that
such person is or was a director, officer, employee or agent
of the Corporation or any predecessor of the Corporation, or
is or was serving at the request of the Corporation or any
predecessor of the Corporation as a director, officer,
employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses
(including attorneys' fees) judgments, fines and amounts
paid in settlement actually and reasonably incurred by him
in connection with such action, suit or proceeding if he
acted in good faith and in a manner he reasonably believed
to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct
was unlawful. The termination of any action, suit or
proceeding by judgment, order, settlement, conviction, or
upon a plea of nolo contendere or its equivalent, shall not,
of itself, create a presumption that the person did not act
in good faith and in a manner which he reasonably believed
to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or
proceeding, that he had reasonable cause to believe that his
conduct was unlawful. The right of indemnity provided
herein shall not be exclusive, and the Corporation may
provide indemnification to any person, by agreement or
otherwise, on such terms and conditions as the Board of
Directors may approve. Any agreement for indemnification of
any director, officer, employee or other person may provide
indemnification rights which are broader or otherwise
different from those set forth herein.
Section 7.02 Other Rights and Remedies. The
indemnification provided by this Article shall not be deemed
exclusive of any other rights to which one seeking
indemnification may be entitled under any Bylaws, agreement,
vote of stockholders or disinterested directors or
otherwise, both as to action in an official capacity and as
to action in another capacity while holding such office, and
shall continue as to a person who has ceased to be a
director, officer, employee or agent and shall inure to the
benefit of the heirs, executors and administrators of such a
person.
Section 7.03 Insurance. Upon resolution passed by the
Board, the Corporation may purchase and maintain insurance
on behalf of any person who is or was a director, officer,
employee or agent of the Corporation, or is or was serving
at the request of the Corporation as a director, officer,
employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against any liability
asserted against him and incurred by him in any such
capacity or arising out of his status as such, whether or
not the Corporation would have the power to indemnify him
against such liability under the provisions of this Article.
Section 7.04 Certain Definitions. For purposes of this
Article, (1) references to "the Corporation" shall include,
in addition to the resulting corporation, any constituent
corporation (including any constituent of a constituent)
absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority
to indemnify its directors, officers and employees or
agents, so that any person who is or was a director,
officer, employee or agent of such constituent corporation
or agent of another corporation, partnership, joint venture,
trust or other enterprise, shall stand in the same position
under the provisions of this Article with respect to the
resulting or surviving corporation as he would have with
respect to such constituent corporation if its separate
existence had continued; (2) references to "other
enterprises" shall include employee benefit plans;
(3) references to "fines" shall include any excise taxes
assessed on a person with respect to an employee benefit
plan; (4) references to "serving at the request of the
Corporation" shall include any service as a director,
officer, employee or agent of the Corporation which imposes
duties on, or involves services by, such director, officer,
employee or agent with respect to an employee benefit plan,
its participants, or beneficiaries; and (5) a person who
acted in good faith and in a manner he reasonably believed
to be in the interest of the participants and beneficiaries
of an employee benefit plan shall be deemed to have acted in
a manner "not opposed to the best interests of the
Corporation" as referred to in this Article.
ARTICLE VIII
Miscellaneous
Section 8.01 Seal. The Board shall provide a
corporate seal, which shall be in the form of a circle and
shall bear the name of the Corporation and words and figures
showing that the Corporation was incorporated in the State
of Delaware and the year of incorporation.
Section 8.02 Waiver of Notices. Whenever notice is
required to be given by these Bylaws or the Certificate of
Incorporation or bylaw, the person entitled to said notice
may waive such notice in writing, either before or after the
time stated therein, and such waiver shall be deemed
equivalent to notice.
Section 8.03 Fiscal Year. The fiscal year of the
Corporation shall begin on the first day of April in each
year.
Section 8.04 Amendments. These Bylaws, or any of them,
may be altered, amended or repealed, and new Bylaws may be
made by the Board, by vote of a majority of the number of
directors then in office as directors, acting at any meeting
of the Board. These Bylaws or any of them, except
Sections 3.02, 3.03 and this Section 8.04, may be altered,
amended or repealed and new Bylaws may be made by the vote
of the holders of not less than a majority of the
outstanding shares of voting stock of the Corporation at an
annual meeting of stockholders, without previous notice, or
at any special meeting of stockholders, provided that such
proposed amendment, modification, repeal or adoption is
given in the notice of special meeting. Sections 3.02, 3.03
and this Section 8.04 may be altered, amended or repealed by
the vote of the holders of not less than two-thirds of the
total voting power of all outstanding shares of voting stock
of the Corporation, at an annual meeting of stockholders,
without previous notice, or at any special meeting of
stockholders, provided that notice of such proposed
amendment, modification, repeal or adoption is given in the
notice of special meeting.
EXHIBIT 10(ii).4
THIRD AMENDMENT
TO SECURED LOAN AGREEMENT
This Third Amendment to Secured Loan Agreement (this "Amend-
ment") is entered into as of this 15th day of November, 1993 and is
by and between Household Bank, f.s.b. ("Bank") as assignee of
Household Commercial of California, Inc. ("Commercial") and
International Technology Corporation ("Guarantor") and IT Corpora-
tion ("Borrower").
WHEREAS, Commercial, Borrower, and Guarantor entered into that
certain Secured Loan Amendment dated as of April 20, 1990 as
amended by that certain First Amendment to Secured Loan Agreement
dated as of June 16, 1992, that certain Second Amendment to Secured
Loan Agreement dated June 28, 1993, the "Agreement");
WHEREAS, Commercial has assigned and transferred its interest
under the Agreement to Bank; and
WHEREAS, Bank, Borrower and Guarantor wish to amend certain
financial covenants in the Agreement;
NOW, THEREFORE, IN CONSIDERATION OF THE PREMISES AND FOR OTHER
GOOD AND VALUABLE CONSIDERATION, THE RECEIPT AND SUFFICIENCY OF
WHICH IS HEREBY ACKNOWLEDGED, THE PARTIES HERETO HEREBY AGREE AS
FOLLOWS:
1. Section 10B.2 of the Agreement shall be deleted in its
entirety and in its place substituted the following as Section
10B.2:
"EBIT". Guarantor will not permit the ratio of EBIT to
Debt Service (as defined below) for any period of four
consecutive fiscal quarters ending on the date set forth
below to be less than the Required Ratio of EBIT to Debt
Service as set forth below (for purposes of this Agree-
ment, "Debt Service", for any period shall mean the sum
of (i) Net Interest Expense with respect to Funded Debt
for such period plus (ii) current maturities of Funded
Debt as of the end of such period):
Four Consecutive Fiscal Required Ratio of
Quarter Period Ending: EBIT to Debt Services:
September 30, 1993 -.40:1.0
December 31, 1993 .31:1.0
March 31, 1994 1.50:1.0
June 30, 1994 1.15:1.0
September 30, 1994 1.30:1.0
December 31, 1994 1.47:1.0
March 31, 1995 1.50:1.0
2. Lender hereby waives its right to declare a default
pursuant to Section 12.1.12 of the Agreement solely by reason of
the settlement by Guarantor of the lawsuit styled In re: Interna-
tional Technology Corporation-Securities Litigation CC.D.Cal.,
Master File No. CV-88-440 RMT) on the terms and conditions set
forth on Exhibit A attached hereto.
3. Except as amended hereby, all of the remaining terms and
conditions of the Agreement shall remain in full force and effect,
and each party signing below agrees that, except as modified
hereby, its obligations under the Agreement shall remain in full
force and effect.
GUARANTOR:
INTERNATIONAL TECHNOLOGY CORPORATION
By: ANTHONY J. DELUCA
Name Printed: Anthony J. DeLuca
Title: CFO
BORROWER:
IT CORPORATION
By: ANTHONY J. DELUCA
Name Printed: Anthony J. DeLuca
Title: CFO
HOUSEHOLD BANK, f.s.b.
By: MICHAEL J. URLICH
Name Printed: Michael J. Urlich
Title: Vice President
EXHIBIT 10(ii).5
FOURTH AMENDMENT
TO SECURED LOAN AGREEMENT
This Fourth Amendment to Secured Loan Agreement (this
"Amendment") is entered into as of this 11th day of February, 1994
and is by and between Household Bank, f.s.b. ("Bank") as assignee
of Household Commercial of California, Inc. ("Commercial") and
International Technology Corporation ("Guarantor") and IT Corpora-
tion ("Borrower").
WHEREAS, Commercial, Borrower, and Guarantor entered into that
certain Secured Loan Amendment dated as of April 20, 1990 as
amended by that certain First Amendment to Secured Loan Agreement
dated as of June 16, 1992, that certain Second Amendment to Secured
Loan Agreement dated June 28, 1993, and that certain Third
Amendment to Secured Loan Agreement dated November 15, 1993 (the
"Agreement"); and
WHEREAS, Commercial has assigned and transferred its interest
under the Agreement to Bank; and
WHEREAS, Bank, Borrower and Guarantor wish to provide a period
of time in which collateral appraisals in connection with a
proposed prepayment by Borrower of a balloon payment due in June,
1995 in return for Bank's consideration of a modification of
Section 10B.2 of the Agreement (based upon such payment) for the
remaining term of the Agreement.
NOW, THEREFORE, IN CONSIDERATION OF THE PREMISES AND FOR OTHER
GOOD AND VALUABLE CONSIDERATION, THE RECEIPT AND SUFFICIENCY OF
WHICH IS HEREBY ACKNOWLEDGED, THE PARTIES HERETO HEREBY AGREE AS
FOLLOWS:
1. Lender hereby waives its right to declare a Default
pursuant to Section 10B.2 of the Agreement from the date hereof
until 12:00 noon CST on March 25, 1994 provided no other Default or
Event of Default exists under the Agreement.
2. Except as amended hereby, all of the remaining terms and
conditions of the Agreement shall remain in full force and effect,
and each party signing below agrees that, except as modified
hereby, its obligations under the Agreement shall remain in full
force and effect.
GUARANTOR:
INTERNATIONAL TECHNOLOGY CORPORATION
By: ANTHONY J. DELUCA
Name Printed: Anthony J. DeLuca
Title: CFO
BORROWER:
IT CORPORATION
By: ANTHONY J. DELUCA
Name Printed: Anthony J. DeLuca
Title: CFO
HOUSEHOLD BANK, f.s.b.
By: MICHAEL J. URLICH
Name Printed: Michael J. Urlich
Title: Vice President
EXHIBIT 10(ii).6
FIFTH AMENDMENT
TO SECURED LOAN AGREEMENT AND WAIVER DOCUMENT
This Fifth Amendment to Secured Loan Agreement (this "Amend-
ment") is entered into as of this 31st day of March, 1994 and is by
and between Household Bank, f.s.b. ("Bank") as assignee of
Household Commercial of California, Inc. ("Commercial") and
International Technology Corporation ("Guarantor") and IT Corpora-
tion ("Borrower").
WHEREAS, Commercial, Borrower, and Guarantor entered into that
certain Secured Loan Amendment dated as of April 20, 1990 as
amended by that certain First Amendment to Secured Loan Agreement
dated as of June 16, 1992, that certain Second Amendment to Secured
Loan Agreement dated June 28, 1993, that certain Third Amendment to
Secured Loan Agreement dated November 15, 1993 and that certain
Fourth Amendment to Secured Loan Agreement ("Fourth Amendment")
dated February 11, 1994 (the "Agreement"); and
WHEREAS, Commercial has assigned and transferred its interest
under the Agreement to Bank; and
WHEREAS, Bank, Borrower and Guarantor wish to (i) upon payment
of certain amounts by Borrower, amend certain provisions of the
Agreement relating to debt service coverage, (ii) upon payment of
certain amounts by Borrower, make permanent the waiver granted by
Bank to Borrower pursuant to the Fourth Amendment for the compli-
ance period ending December 31, 1993, and (iii) indicate Bank's
agreement to a prepayment of the Note by Borrower in the amount of
$4,952,007.58 in consideration of the release of certain collateral
by Bank.
NOW, THEREFORE, IN CONSIDERATION OF THE PREMISES AND FOR OTHER
GOOD AND VALUABLE CONSIDERATION, THE RECEIPT AND SUFFICIENCY OF
WHICH IS HEREBY ACKNOWLEDGED, THE PARTIES HERETO HEREBY AGREE AS
FOLLOWS:
1. Upon receipt of $150,000.00 as an amendment fee by Bank,
Bank shall automatically be deemed to agree that Borrower's non-
compliance with Section 10B.2 of the Agreement prior to the
amendment thereof by this Fifth Amendment for the four consecutive
fiscal quarter measurement period ending December 31, 1993 shall
not be deemed to constitute a Default under the Agreement.
2. Section 3.2 of the Agreement is hereby deleted in its
entirety and in its place substituted the following:
SECTION 3.2 INSTALLMENTS. The principal of, and accrued
interest on, the Note (as Amended and Restated as of
March 31, 1994) shall be payable in an initial install-
ment payable on April 30, 1994, then in thirteen (13)
equal installments in the amount set forth in the Note,
on the last day of each month, with a final installment
in the amount necessary to pay the Note in full provided,
however, that upon any acceleration of the Note, all
unpaid principal of and accrued interest on the Note
shall be immediately due and payable.
3. Section 10.B.2 of the Agreement is hereby deleted in its
entirety and in its place substituted the following:
"10.B.2(a) Debt Service Coverage Ratio. The
Guarantor will have on a consolidated basis, as of
the end of each fiscal quarter, for the preceding
twelve (12) month period a "Debt Service Coverage
Ratio" of no less than 1.35 to 1.0. Such Debt
Service Coverage Ratio shall be:
(x) The sum of (i) the consolidated net
income of the Guarantor for the respective
twelve-month period, before net interest
expense and taxes plus (ii) depreciation
expense during such period less capital expen-
ditures made during such period divided by
(y) The sum of (i) net interest expense for
such period, (ii) tax expense for such period
less deferred taxes not currently paid, (iii)
the principal payments which are scheduled to
become due on long term indebtedness (but
excluding outstanding advances or letters of
credit under any revolving credit agreement of
Guarantor) during the twelve-month period
commencing on the date of calculation, and
(iv) dividends paid during such period.
10.B.2(b) Adjusted Debt Service Coverage Ratio.
The Guarantor will have on a consolidated basis, as
of the end of each fiscal quarter for the preceding
twelve (12) month period an "Adjusted Debt Service
Coverage Ratio" of no less than 0.80 to 1.0. Such
ratio shall be:
(x) The sum of (i) the consolidated net
income of the Guarantor for the respective
twelve-month period, before net interest
expense and taxes plus (ii) depreciation
expense during such period less capital expen-
ditures made during such period divided by
(y) The sum of (i) net interest expense for
such period, (ii) tax expense for such period
less deferred taxes not currently paid, (iii)
the principal payments which are scheduled to
become due on long term indebtedness (but
excluding outstanding advances or letters of
credit under any revolving credit agreement of
Guarantor) during the twelve-month period
commencing on the date of calculation, (iv)
expenditures (both capital and ordinary) made
during such period in connection with the
closure of any of the Guarantor's past or
present hazardous waste disposal sites, and
(v) dividends paid during such period.
In calculating the amount described in clause (b)(y)(iv) above,
there shall be excluded (x) any amounts included in the Guarantor's
income statement as expenses, and (y) any amounts funded by the
dedicated trust fund or annuities purchased for this purpose."
4. This Fifth Amendment and the waivers and amendments
contemplated hereby are not effective and operative until, and the
effectiveness hereof are expressly conditioned upon, (i) receipt by
Bank of (a) an amendment fee of $150,000.00, (b) as agreed by the
parties, receipt by Bank of a prepayment in the amount of
$4,952,007.58 on the Note and (c) receipt by bank of the payment of
principal plus interest due March 31, 1994, in the amount of
$495,747.40. In consideration of the prepayment specified above in
4(b), and the payment specified in 4(c), Bank agrees to, simulta-
neously with Bank's receipt of such prepayment, release Bank's
security interest in the Collateral described on Exhibit "A"
attached hereto.
5. Upon the making of the prepayment on the Note described
in Section 3, above, Borrower shall execute an Amended and Restated
Promissory Note in the form attached hereto as Exhibit "B" which
shall amend and restate the Note and which shall evidence Liabili-
ties of Borrower to Bank.
6. Except as amended hereby, all of the remaining terms and
conditions of the Agreement shall remain in full force and effect,
and each party signing below agrees that, except as modified
hereby, its obligations under the Agreement shall remain in full
force and effect.
GUARANTOR:
INTERNATIONAL TECHNOLOGY CORPORATION
By: ANTHONY J. DELUCA
Name Printed: Anthony J. DeLuca
Title: CFO
BORROWER:
IT CORPORATION
By: ANTHONY J. DELUCA
Name Printed: Anthony J. DeLuca
Title: CFO
HOUSEHOLD BANK, f.s.b.
By: MICHAEL J. URLICH
Name Printed: Michael J. Urlich
Title: Vice President
EXHIBIT 10(ii).7
SIXTH AMENDMENT
TO SECURED LOAN AGREEMENT
This Sixth Amendment to Secured Loan Agreement (this
"Amendment") is entered into as of the _______ day of June, 1994
and is by and between Household Bank, f.s.b. ("Bank") as assignee
of Household Commercial of California, Inc. ("Commercial") and
International Technology Corporation ("Guarantor") and IT
Corporation ("Borrower").
WHEREAS, Commercial, Borrower, and Guarantor entered into that
certain Secured Loan Agreement dated as of April 20, 1990 (as
amended by that certain First Amendment to Secured Loan Agreement
dated as of June 16, 1992, that certain Second Amendment to Secured
Loan Agreement dated June 28, 1993, that certain Third Amendment to
Secured Loan Agreement dated as of November 15, 1993, that certain
Fourth Amendment to Secured Loan Agreement dated as of February 11,
1994, and that certain Fifth Amendment to Secured Loan Agreement
dated as of March 31, 1994, the "Agreement");
WHEREAS, Commercial has assigned and transferred its interest
under the Agreement to Bank; and
WHEREAS, Bank, Borrower and Guarantor wish to amend certain
financial covenants in the Agreement;
NOW, THEREFORE, IN CONSIDERATION OF THE PREMISES AND FOR OTHER
GOOD AND VALUABLE CONSIDERATION, THE RECEIPT AND SUFFICIENCY FOR
WHICH IS HEREBY ACKNOWLEDGED, THE PARTIES HERETO HEREBY AGREE AS
FOLLOWS:
1.A. Section 10.B.2(a) of the Agreement is amended by amending
and restating thereof in its entirety to read as follows:
"Debt Service Coverage Ratio. The Guarantor will have on a
consolidated basis as at the end of each fiscal quarter for
the preceding twelve (12) month period, a Debt Service
Coverage Ratio of not less than the corresponding ratio for
such period set forth in the table below:
Debt Service
Fiscal Quarter Ending Coverage Ratio
March 31, 1994 1.30 to 1.00
June 30, 1994 1.08 to 1.00
September 30, 1994 1.08 to 1.00
December 31, 1994 1.25 to 1.00
March 31, 1995 1.35 to 1.00
Such Debt Service Coverage Ratio shall be calculated as:
(x) The sum of (i) the consolidated net income of the
Guarantor for the respective twelve-month period, before
net interest expense and taxes plus (ii) depreciation
expense during such period less capital expenditures made
during such period divided by
(y) The sum of (i) net interest expense for such period,
(ii) tax expense for such period less deferred taxes not
currently paid, (iii) the principal payments which are
scheduled to become due on long term indebtedness (but
excluding outstanding advances or letters of credit under
any revolving credit agreement of Guarantor) during the
twelve-month period commencing on the date of calcula-
tion, and (iv) dividends paid during such period.
In calculating the amount described in clause (x)(i)
above, there shall be excluded (a) up to $4,500,000 in pre-tax
charges otherwise included in selling, general and
administrative expenses as reflected in the Guarantor's
financial statements relating to the Murray Hutchison
retirement benefits for the period ending March 31, 1994, (b)
up to $2,500,000 in pre-tax write-offs associated with
Guarantor's Saltend project for the period ended March 31,
1994, and (c) up to $10,000,000 in charges in the first and/or
second quarter of fiscal year 1995 in connection with the
restructuring of Guarantor's analytical laboratory business
into a joint company with Corning, Inc."
2. Section 10.B.2(b) of the Agreement is amended by amending
and restating it in its entirety to read as follows:
"Adjusted Debt Service Coverage Ratio. The Guarantor
will have on a consolidated basis as of the end of each fiscal
quarter for the preceding twelve (12) month period, an
adjusted debt service coverage ratio not less than the
corresponding ratio set forth in the table below:
Fiscal Quarter Ending Ratio
March 31, 1994 .75 to 1.00
June 30, 1994 .58 to 1.00
September 30, 1994 .54 to 1.00
December 31, 1994 .58 to 1.00
March 31, 1995 .78 to 1.00
Such ratio shall be calculated as:
(x) The sum of (i) the consolidated net income of the
Guarantor for the respective twelve-month period, before
net interest expense and taxes plus (ii) depreciation
expense during such period less capital expenditures made
during such period divided by
(y) The sum of (i) net interest expense for such period,
(ii) tax expense for such period less deferred taxes not
currently paid, (iii) the principal payments which are
scheduled to become due on long term indebtedness (but
excluding outstanding advances or letters of credit under
any revolving credit agreement of Guarantor) during the
twelve-month period commencing on the date of
calculation, (iv) expenditures (both capital and
ordinary) made during such period in connection with the
closure of any of the Guarantor's past or present
hazardous waste disposal sites, and (v) dividends paid
during such period.
In calculating the amount described in clause (b)(y)(iv)
above, there shall be excluded (x) any amounts included in the
Guarantor's income statement as expenses, and (y) any amounts
funded by the dedicated trust fund or annuities purchased for
this purpose.
In calculating the amount described in clause (x)(i)
above, there shall be excluded (a) up to $4,500,000 in pre-tax
charges otherwise included in selling, general and
administrative expenses as reflected in the Guarantor's
financial statements relating to the Murray Hutchison
retirement benefits for the period ending March 31, 1994, (b)
up to $2,500,000 in pre-tax write-offs associated with
Guarantor's Saltend project for the period ended March 31,
1994, and (c) up to $10,000,000 in charges in the first and/or
second quarter of fiscal year 1995 in connection with the
restructuring of Guarantor's analytical laboratory business
into a joint company with Corning, Inc."
3. Borrower and Guarantor represent and warrant that an
amendment on terms substantially similar to those set forth in
Sections 1 and 2 hereof have been obtained from and executed by
Guarantor's bank creditors pursuant to a credit agreement dated
August 27, 1991, as amended, as of the date hereof.
4. Except as amended hereby, all of the remaining terms and
conditions of the Agreement shall remain in full force and effect,
and each party signing below agrees that, except as modified
hereby, its obligations under the Agreement shall remain in full
force and effect.
GUARANTOR:
INTERNATIONAL TECHNOLOGY CORPORATION
By: ANTHONY J. DELUCA
Name Printed: Anthony J. DeLuca
Title: CFO
BORROWER:
IT CORPORATION
By: ANTHONY J. DELUCA
Name Printed: Anthony J. DeLuca
Title: CFO
HOUSEHOLD BANK, f.s.b.
By: MICHAEL J. URLICH
Name Printed: Michael J. Urlich
Title: Vice President
EXHIBIT 10(ii).11
THIRD AMENDMENT TO CREDIT AGREEMENT
THIS THIRD AMENDMENT TO CREDIT AGREEMENT (this "Third
Amendment") is made and dated as of March 22, 1994, among
INTERNATIONAL TECHNOLOGY CORPORATION, a Delaware corporation (the
"Company"), IT CORPORATION, a California corporation ("IT
Corporation" or the "Borrower"), each of the banks listed on the
signature pages hereto (each a "Bank" and collectively the
"Banks"), and BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION in its capacity as Agent for the Banks (the "Agent"),
and amends the Credit Agreement dated as of August 27, 1991 among
Borrower, Company, the Banks and the Agent, as amended by a First
Amendment to Credit Agreement and Waiver dated as of June 19,
1992 and a Second Amendment to Credit Agreement and Waiver dated
as of July 6, 1993 (as so amended, the "Agreement").
RECITALS
WHEREAS, the Borrower desires to amend certain
provisions of the Agreement, including the Total Aggregate
Commitment, the calculation of the Maximum Available Amount, and
the pricing of certain extensions of credit hereunder; and
WHEREAS, Bank Hapoalim, B.M., San Francisco Branch
(the "Withdrawing Bank"), does not elect to extend the
availability of the credit facilities provided herein beyond July
31, 1994, and wishes at such time to cease to be a Bank under the
Agreement, and whereas Bank of America National Trust and Savings
Association and The First National Bank of Boston (the "Remaining
Banks") are willing to purchase, assume and accept the
Withdrawing Bank's Assigned Interest (as defined in Section 5
hereof), on the terms and conditions set forth herein, and the
Company and the Borrower are willing to consent to such
assignment;
WHEREAS, the Banks and Agent are willing to amend the
Agreement on the terms and conditions set forth herein;
NOW, THEREFORE, for good and valuable consideration,
the receipt and adequacy of which are hereby acknowledged, the
parties hereby agree as follows:
1. Terms. All capitalized terms used herein shall
have the same meanings as in the Agreement unless otherwise
defined herein. All references to the Agreement shall mean the
Agreement as hereby amended.
2. Amendments to Agreement. The parties hereto hereby
agree to amend the Agreement as follows:
2.1 The definition of "Aggregate Commitment" in
Section 1.1 of the Agreement is hereby amended and restated in
its entirety as follows:
"Aggregate Commitment" of any Bank includes the
Advance Commitment and the L/C Participation Commitment
of such Bank for the respective period, and for the
period from the Amendment Effective Date to the
Assignment Effective Date (each as herein defined) is
in the amount set forth in the related column on the
signature pages hereof, and for the period from the
Assignment Effective Date, if any, and thereafter is in
the amount set forth in the related column on the
signature pages hereof, as such amounts may be adjusted
or amended from time to time.
2.2 The first paragraph of the definition of
"Additional Incremental Margin" in Section 1.1 of the Agreement
is amended and restated in its entirety as follows:
"Additional Incremental Margin" means, as of any
date of determination, the relevant percentages under
the columns "Advances and Financial SBLC's" and
"Performance SBLC's," as the case may be, as set forth
below:
Adjusted Debt Advances and
Service Coverage Financial Performance
Ratio SBLC's SBLC's
less than or
equal to 1.00 0.750% 0.375%
greater than 1.00
but less than
or equal to 1.10 0.400% 0.200%
greater than 1.10 0% 0%
Such definition is further amended by (i) deleting
"(a)" immediately prior to the pricing grid set forth above and
(ii) deleting "(b)" and the pricing grid chart in such clause (b)
in its entirety, and (iii) deleting the words "and the Leverage
Ratio" in the second line of the paragraph following such chart.
2.3 The definition of "Availability Period" in Section
1.1 of the Agreement is hereby amended by deleting the date "July
31, 1994" and inserting the date "September 30, 1995" in
substitution therefor, by deleting the date "April 30, 1993" and
inserting the date "April 30, 1995" in substitution therefor, by
deleting the date "July 31, 1993" and inserting the date "June
30, 1995" in substitution therefor, and by deleting the date
"July 31, 1995" and inserting the date "September 30, 1996" in
substitution therefor.
2.4 Clause (a) of the definition of "Maximum Available
Amount" in Section 1.1 of the Agreement is hereby amended and
restated in its entirety as follows:
(a) the sum, without duplication, of (i) seventy
percent (70%) of the Company's unbilled Receivables,
(ii) seventy percent (70%) of the Company's interest in
Receivables of joint ventures, and (iii) eighty percent
(80%) of the Company's consolidated Receivables (net of
the Company's unbilled Receivables and the Company's
interest in receivables of joint ventures, as described
in (i) and (ii) above net of allowance for doubtful
accounts, and after subtracting (i) any billed
Receivables outstanding more than ninety (90) days from
their respective original billing dates and (ii)
Receivables as to which the Agent does not have a
security interest pursuant to a Security Agreement
entered into in conjunction with this Agreement), in
each case, as shown on the Company's consolidated
balance sheet most recently delivered to the Agent
pursuant to Section 6.10(a) and (b) hereof or in the
most recent report delivered to the Agent by the
Company pursuant to Section 6.10(f) hereof.
2.5 The definition of "Total Aggregate Commitments" in
Section 1.1 of the Agreement is hereby amended and restated in
its entirety as follows:
"Total Aggregate Commitments" means the amount set
forth from time to time on the signature pages hereto
or to any amendment as the Total Aggregate Commitments
and which is, as of the date of the Third Amendment,
Ninety Five Million Dollars ($95,000,000).
2.6 Section 2.1 of the Agreement is amended by (a)
deleting "Sixty Million Dollars ($60,000,000)" in the first
paragraph and inserting "Forty-Five Million Dollars
($45,000,000)" in lieu thereof and (b) inserting the following at
the end of the first paragraph thereof before the period:
"; provided, further, that the Outstanding Credit
Amount shall not exceed $90,000,000 unless the Adjusted
Debt Service Coverage Ratio exceeds 1.00."
2.7 Section 2.4(a) of the Agreement is amended by
inserting the following at the end of the first paragraph thereof
before the period:
"provided, however, that the Outstanding Credit Amount
shall not exceed $90,000,000 unless the Adjusted Debt
Service Coverage Ratio exceeds 1.00.; provided,
further, that any Letter of Credit which expires on a
date after the Amendment Effective Date and prior to
the Assignment Effective Date may be renewed or
extended but shall have an expiration date not greater
than one year from the next preceding expiry date."
2.8 Section 2.4(b) of the Agreement is amended by
inserting the following at the end of such paragraph before the
period:
"provided, further, that the Withdrawing Bank shall
have no obligation, and shall not be deemed to have
purchased, a participation interest in any Letter of
Credit which has an initial date of issuance after the
Amendment Effective Date and having an original expiry
date later than July 31, 1994."
2.9 Section 2.10 of the Agreement is amended by
deleting "and" at the end of Section 2.10(b), inserting "and" at
the end of Section 2.10(c) before the period, and inserting a new
subsection (d) as follows:
"(d) immediately on any date on which the
Outstanding Credit Amount exceeds $90,000,000 when the
Adjusted Debt Service Coverage Ratio is 1.00 or less,
as set forth in the most recent compliance report
delivered pursuant to Section 6.10(d), in the amount of
such excess."
2.10 Section 7.3 of the Agreement is amended by
amending and restating the provisos thereto as follows:
"provided, however, that the Company may prepay a
portion of the Secured Note in an amount not to exceed
$5,000,000, if (i) the obligee thereunder releases its
security interest in collateral subject thereto such
release to be evidenced by copies of appropriate
termination statements, in form and substance
satisfactory to the Agent, which combined with other
equipment, make up the collateral described in Exhibit
J to this Agreement, such total collateral having a net
book value of not less than $11,000,000, (ii) the
Company delivers a certificate to the Agent (with
sufficient copies for each Bank) signed by the
Company's Treasurer certifying that the net book value
of such total collateral is not less than $11,000,000,
and (iii) the Company thereupon immediately grants and
creates in favor of the Agent, a first priority
perfected security interest in and lien on such total
collateral, which collateral shall constitute the
mobile incineration equipment currently in operation at
the Bayou Bonfouca Superfund site, and takes all such
action as may be necessary or appropriate to
effectuate, as determined by the Agent, such grant and
lien, all at the cost and expense of the Company;
provided, further, that the Company may declare and pay
dividends on the Company's 7% Cumulative Convertible
Exchangeable Preferred Stock (or any interest therein)
provided that no declaration or payment of dividends
shall be permitted upon the occurrence and during the
existence of any Event of Default."
3. Representations and Warranties. Borrower and
Company jointly and severally represent and warrant to Banks and
Agent:
3.1 Authorization. The execution, delivery and
performance of this Third Amendment by Borrower and Company have
been duly authorized by all necessary corporate action by
Borrower and Company and the Third Amendment has been duly
executed and delivered by Borrower and Company.
3.2 Binding Obligation. This Third Amendment is a
legal, valid and binding agreement of Borrower and Company,
enforceable against Borrower and Company in accordance with its
terms, except to the extent enforceability thereof may be limited
by applicable law relating to bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or
limiting creditors' rights generally or by the application of
general principles of equity.
3.3 No Legal Obstacle to Agreement. Neither the
execution of this Third Amendment, the making by Borrower of any
borrowings under the Agreement, nor the performance of the
Agreement by Borrower and Company has constituted or resulted in
or will constitute or result in a breach of the provisions of any
Material Agreement, or the violation of any law, judgment, decree
or governmental order, rule or regulation applicable to Borrower
or Company, or result in the creation under any Material
Agreement (other than the Agreement) of any security interest,
lien, charge, or encumbrance upon any of the assets of Borrower
or Company. No approval or authorization of any governmental
authority is required to be obtained by the Company or the
Borrower to permit the execution, delivery or performance by
Borrower or Company of this Third Amendment, the Agreement, or
the transactions contemplated hereby or thereby, or the making of
any borrowing by Borrower under the Agreement.
3.4 Incorporation of Certain Representations. The
representations and warranties set forth in Section 5 of the
Agreement are true and correct in all respects on and as of the
date hereof as though made on and as of the date hereof, after
giving effect to the effectiveness of this Third Amendment.
3.5 Default. No Event of Default under the Agreement
has occurred and is continuing.
4. Conditions, Effectiveness. This Third Amendment
shall be effective as of the date first written above, subject to
the compliance by Borrower and Company as of the date hereof with
its agreements herein contained, and to the delivery of the
following to Agent in form and substance satisfactory to Agent:
4.1 Corporate Resolution. A copy of a resolution
or resolutions passed by the Board of Directors of Borrower and
Company, certified by the Secretary or an Assistant Secretary of
Borrower and Company as being in full force and effect on the
date of this Third Amendment, authorizing the amendments to the
Agreement herein provided for and the execution, delivery and
performance of this Third Amendment and any note or other
instrument or agreement required hereunder.
4.2 Authorized Signatories. A certificate, signed by
the Secretary or an Assistant Secretary of Borrower and Company
and dated the date of this Third Amendment, as to the incumbency
of the person or persons authorized to execute and deliver this
Third Amendment and any instrument or agreement required
hereunder on behalf of Borrower and Company.
4.3 Other Evidence. Such other evidence with respect
to Borrower or Company or any other person as the Agent or any
Bank may reasonably request to establish the consummation of the
transactions contemplated hereby, the taking of all corporate
action in connection with this Third Amendment and the Agreement
and the compliance with the conditions set forth herein.
5. Assignment and Assumption of Withdrawing Bank's
Commitment.
5.1 Conditions Precedent to Assignment. The
assignment herein described shall be effective as of July 31,
1994 (herein, the "Assignment Effective Date"), subject to
compliance by Borrower, Company, the Remaining Banks and the
Withdrawing Bank with their respective agreements herein
contained, and to the delivery of the following to the Agent, in
form and substance satisfactory to Agent and the Remaining Banks.
(a) a certificate from the Borrower and the Company,
certifying that no Default or Event of Default shall
have occurred and be continuing on and as of the
Assignment Effective Date, and
(b) a certificate from the Withdrawing Bank certifying
that the representations and warranties of the
Withdrawing Bank contained in Section 5.3 are true and
correct, on and as of the Assignment Effective Date,
and
(c) receipt of the full amount of funds payable
pursuant to this Section 5, as set forth in a
certificate prepared by the Agent and acknowledged and
agreed to by the Withdrawing Bank, the Remaining Banks,
the Borrower and the Company.
5.2 Effectiveness of Assignment. On the Assignment
Effective Date, if any, the Withdrawing Bank hereby agrees to
sell, transfer and assign, and the Remaining Banks hereby agree
to purchase and assume the Assigned Interest (as herein defined).
The Withdrawing Bank shall be deemed to have relinquished any and
all rights under the Agreement and shall be released from any and
all duties or obligations as a Bank under the Agreement on and as
of the Assignment Effective Date, for all purposes whatsoever,
and shall no longer be deemed a Bank under the Agreement, and all
of such rights, duties and obligations with respect to the
Aggregate Commitment, the L/C Participation Commitment and the
Outstanding Credit Amount, if any, of the Withdrawing Bank (the
"Assigned Interest") shall be sold, transferred, and assigned to
and purchased and assumed by the Remaining Banks on and as of the
Assignment Effective Date, if the conditions in Section 5.1 have
all been satisfied. The Aggregate Commitment of the Withdrawing
Bank shall be terminated completely, and the Aggregate
Commitments of the Remaining Banks shall be adjusted as shown on
the signature pages hereof. Notwithstanding any minimum notice
requirements and minimum funding amounts set forth in the
Agreement, the portion of the Assigned Interest constituting
Advances shall be refunded by the Remaining Banks on the
effective date of such assignment as Reference Rate Advances, and
the Offshore Rate Advances made by the Remaining Banks may
continue as Offshore Rate Advances.
5.3 Representations of Withdrawing Bank. The
Withdrawing Bank hereby represents and warrants to each of the
Remaining Banks and the Borrower, that: (i) it is duly organized
and existing and it has the full corporate power and authority to
take, and has taken, all action necessary to execute and deliver
this assignment; (ii) this assignment of its Assigned Interest
has been duly executed and delivered by the Withdrawing Bank, and
constitutes the legal, valid and binding agreement of the
Withdrawing Bank, enforceable against it in accordance with the
terms hereof, (iii) it is the legal and beneficial owner of the
Assigned Interest, and the Assigned Interest is free and clear of
any lien, security interest, encumbrance or adverse claim; (iv)
no notices to, or consents, authorizations or approvals of, any
person are required, other than those already given or obtained,
for its due execution, delivery and performance of this
agreement, and no further action by, or notice to, or filing
with, any person is required of it for such execution, delivery
or performance.
5.4 Accrued Fees and Interest; Break-Funding Costs.
Borrower agrees to pay or cause to be paid upon demand any and
all amounts payable to the Withdrawing Bank pursuant to Section
2.16, net of any refunds to which Borrower is entitled as a
result of prepayments or otherwise.
5.5 Further Assurances. Each of the Withdrawing
Banks, the Remaining Banks, the Borrower and the Agent hereby
agrees to execute and deliver such other instruments, and take
such other actions, as any party may reasonably request in
connection with the assignment and assumption contemplated in
this Section 5.
5.6 Reallocation of Payments. Any interest,
commissions, fees and other payments accrued to but excluding the
Assignment Effective Date with respect to the Assigned Interest
shall be for the account of the Withdrawing Bank. Any interest,
fees and other payments accrued on and after the Assignment
Effective Date with respect to the Assigned Interest shall be for
the account of the Remaining Banks. Each of the Withdrawing
Banks and the Remaining Banks agree that it will hold in trust
for the other party any interest, commissions, fees and other
amounts which it may receive to which the other party is entitled
pursuant to the preceding sentence, and pay to the other party
any such amounts which it may receive promptly upon receipt.
6. Miscellaneous.
6.1 Effectiveness of the Agreement. Except as hereby
amended, the Agreement shall remain in full force and effect.
6.2 No Waiver. This Third Amendment is specific in
time and in intent and does not constitute, nor should it be
construed as, a waiver of any other right, power or privilege
under the Agreement, or under any agreement, contract, indenture,
document or instrument mentioned in the Agreement; nor does it
preclude any exercise thereof or the exercise of any other right,
power or privilege, nor shall any future waiver of any right,
power, privilege or default hereunder, or under any agreement,
contract, indenture, document or instrument mentioned in the
Agreement, constitute a waiver of any other default of the same
or of any other term or provision.
6.3 Counterparts. This Third Amendment may be
executed in any number of counterparts and all of such
counterparts taken together shall be deemed to constitute one and
the same instrument. This Third Amendment shall not become
effective until Company, Borrower, the Banks, the Agent and the
Guarantors shall have signed a copy hereof, whether the same or
counterparts, and the same shall have been delivered to the Agent
(such date being referred to herein as the "Amendment Effective
Date").
6.4 Jurisdiction. This Third Amendment, and any
instrument or agreement required hereunder, shall be governed by
and construed under the laws of the State of California.
IN WITNESS WHEREOF, the parties hereto have executed
this Agreement by their duly authorized officers as of the day
and year first above written.
INTERNATIONAL TECHNOLOGY
CORPORATION
By
Name:
Title:
IT CORPORATION
By
Name:
Title:
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, as Agent
By
Kay Warren
Vice President
Aggregate Commitment from
Amendment Effective
Date to Assignment
Effective Date (if any):
$59,375,000 BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, as
Aggregate Commitment a Remaining Bank
from and after
Assignment Effective
Date:
$64,771,000 By
Robert W. Troutman
Vice President
Aggregate Commitment THE FIRST NATIONAL BANK OF BOSTON,
from Amendment Effective as a Remaining Bank
Date to Assignment
Effective Date (if any):
$27,708,336 By
Title
Aggregate Commitment
from and after Assignment
Effective Date:
$30,229,000
Aggregate Commitment from
Amendment Effective
Date to Assignment
Effective Date (if any):
$7,916,664 BANK HAPOALIM, B.M.
San Francisco Branch,
as a Withdrawing Bank
Aggregate Commitment
from and after
Assignment Effective
Date:
$0 By
Title
Total Commitments:
$95,000,000 By
Title
CONSENT BY GUARANTORS
The undersigned Guarantors hereby consent to the foregoing Third
Amendment to Credit Agreement and hereby reaffirm their
respective General Continuing General Guaranties, which continue
in full force and effect on and as of the date hereof.
Date: March 22, 1994
INTERNATIONAL TECHNOLOGY CORPORATION
IT ENVIRONMENTAL PROGRAMS
IT ENVIRONMENTAL SERVICES, INC.
IT-TULSA HOLDINGS INC., formerly known as
IT MCGILL POLLUTION CONTROL SYSTEMS, INC.
PRINCETON AQUA SCIENCE
MCKITTRICK MUD COMPANY, INC.
UNDERGROUND RESOURCE MANAGEMENT
UNIVERSAL PROFESSIONAL INSURANCE
COMPANY, INC.
By:
Title:
By:
Title:
EXHIBIT 10(ii).12
FOURTH AMENDMENT TO CREDIT AGREEMENT
THIS FOURTH AMENDMENT TO CREDIT AGREEMENT (this "Fourth
Amendment") is made and dated as of June 24, 1994, among
INTERNATIONAL TECHNOLOGY CORPORATION, a Delaware corporation (the
"Company"), IT CORPORATION, a California corporation ("IT
Corporation" or the "Borrower"), each of the banks listed on the
signature pages hereto (each a "Bank" and collectively the
"Banks"), and BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION in its capacity as Agent for the Banks (the "Agent"),
and amends the Credit Agreement dated as of August 27, 1991 among
Borrower, Company, the Banks and the Agent, as amended by the
First Amendment to Credit Agreement and Waiver dated as of June
19, 1992, the Second Amendment to Credit Agreement and Waiver
dated as of July 6, 1993, and the Third Amendment to Credit
Agreement dated as of March 22, 1994 (as so amended, the
"Agreement").
RECITALS
WHEREAS, the Borrower desires to amend certain
provisions of the Agreement, including certain financial
covenants, and the pricing of certain extensions of credit
hereunder; and
WHEREAS, the Banks and Agent are willing to amend the
Agreement on the terms and conditions set forth herein;
NOW, THEREFORE, for good and valuable consideration,
the receipt and adequacy of which are hereby acknowledged, the
parties hereby agree as follows:
Section 1. Terms. All capitalized terms used herein
shall have the same meanings as in the Agreement unless otherwise
defined herein. All references to the Agreement shall mean the
Agreement as hereby amended.
Section 2. Amendments to Agreement. The parties
hereto hereby agree to amend the Agreement as follows:
2.1 The first paragraph of the definition of
"Additional Incremental Margin" in Section 1.1 of the Agreement
is amended and restated in its entirety as follows:
"Additional Incremental Margin" means, as of any
date of determination, the relevant percentages under
the columns "Advances and Financial SBLC's" and
"Performance SBLC's," as the case may be, as set forth
below:
Adjusted Debt Advances and
Service Coverage Financial
Performance
Ratio SBLC's
SBLC's
less than or
equal to .80 1.000% .500%
greater than .80 but
less than or
equal to 1.00 0.750% 0.375%
greater than 1.00
but less than
or equal to 1.10 0.400% 0.200%
greater than 1.10 0% 0%
2.2 The definition of "Guarantors" in Section 1.1 of
the Agreement is hereby amended and restated in its entirety as
follows:
"Guarantors" means the Company, IT Environmental
Services, Inc., a Connecticut corporation, IT
Environmental Programs, Inc., an Ohio corporation, IT-
Tulsa Holdings, Inc., formerly known as IT McGill
Pollution Control Systems, Inc., an Oklahoma
corporation, McKittrick Mud Company, Inc., a California
corporation, Princeton Aqua Science, a New Jersey
corporation, Underground Resource Management, Inc., a
Texas corporation and Universal Professional Insurance
Company, Inc., a Vermont corporation.
2.3 Section 1.1 is hereby amended by inserting the
following new definitions in appropriate alphabetical order
therein:
"1994 Restructuring" means the proposed
restructuring of the portion of the Company's business
related to the analytical environmental lab business,
and the contribution of certain assets, to Quanterra
Incorporated on terms and conditions set forth in the
Transaction Documents, in substantially the form of (i)
the Asset Transfer Agreement dated as of May 2, 1994,
(ii) the Shareholders' Agreement draft dated June 22,
1994, and the (iii) Equity Investors' Undertaking draft
dated June 20, 1994, in each case with such changes
therein as shall not substantially or materially change
or affect the rights and obligations of the Company or
the Borrower thereunder.
"Transaction Documents" means collectively, the
Asset Transfer Agreement dated as of May 2, 1994, among
MetPath, Inc., International Technology Corporation,
and IT Corporation, the Shareholders' Agreement to be
dated as of June 27, 1994, among International
Technology Corporation, IT Corporation, and MetPath
Inc., and the Equity Investors' Undertaking to be dated
as of June 27, 1994, among MetPath Inc., International
Technology Corporation, IT Corporation, Quanterra
Incorporated, and Citicorp U.S.A., Inc., as Agent,
relating to the 1994 Restructuring.
2.4 Section 2.1 of the Agreement is amended by
deleting the following proviso from the end of the first
paragraph thereof:
"; provided, further, that the Outstanding Credit
Amount shall not exceed $90,000,000 unless the Adjusted
Debt Service Coverage Ratio exceeds 1.00."
2.5 Section 2.4(a) of the Agreement is amended by
deleting the following proviso from the first paragraph thereof:
"provided, however, that the Outstanding Credit Amount
shall not exceed $90,000,000 unless the Adjusted Debt
Service Coverage Ratio exceeds 1.00.;"
2.6 Section 2.10 of the Agreement is amended by
deleting clause (d) thereof in its entirety, by inserting "and"
at the end of clause (b), by deleting "and" at the end of clause
(c) and inserting a period at the end of such clause.
2.7 Section 6.4 of the Agreement is hereby amended by
amending and restating such section in its entirety as follows:
"6.4 Tangible Net Worth. As measured on and as
of the last day of each fiscal quarter of the Company,
beginning with the quarter ended March 31, 1994, the
Company will have on a consolidated basis Tangible Net
Worth at least equal to the sum of (a) $144,000,000,
plus (b) 100% of the Net Proceeds received by the
Company from any public or private offering of any
class of equity securities, excluding, for this
calculation only, any equity issued or offered in
connection with the 1994 Restructuring, plus (c) 50% of
net income (without deduction for losses), on a
quarterly basis."
2.8 Section 6.5 of the Agreement is hereby amended and
restated in its entirety as follows:
"6.5 Leverage Ratio. As measured on and as of
the last day of each fiscal quarter of the Company, the
Company will have a Leverage Ratio no higher than the
corresponding ratio set forth below:
Fiscal Quarter Ending Ratio
June 30, 1994 1.450 to 1.00
September 30, 1994
and each fiscal
quarter thereafter 1.425 to 1.00"
2.9 Section 6.6 of the Agreement is amended by
amending and restating the first paragraph thereof in its
entirety as follows:
"The Company will have on a consolidated basis as
at the end of each fiscal quarter for the preceding
twelve (12) month period, a debt service coverage ratio
not less than the corresponding ratio set forth in the
table below:
Fiscal Quarter Ending Ratio
March 31, 1994 1.30 to 1.00
June 30, 1994 1.08 to 1.00
September 30, 1994 1.08 to 1.00
December 31, 1994 1.25 to 1.00
March 31, 1995 1.35 to 1.00
June 30, 1995 1.35 to 1.00
Such ratio shall be calculated as:"
A new paragraph shall be added to the end of Section
6.6, as follows:
"In calculating the amount described in clause
(a)(i) above, there shall be excluded (a) up to
$4,500,000 in charges otherwise included in selling,
general and administrative expenses as reflected in the
Company's financial statements relating to the Murray
Hutchison retirement benefits for the period ending
March 31, 1994, (b) up to $2,500,000 in write-offs
associated with the Saltend project for the period
ended March 31, 1994, and (c) up to $10,000,000 in
charges in the first and/or second quarter of fiscal
year 1995 in connection with the 1994 Restructuring."
2.10 Section 6.7 of the Agreement is amended by
amending and restating the first paragraph thereof in its
entirety as follows:
"The Company will have on a consolidated basis as
of the end of each fiscal quarter for the preceding
twelve (12) month period, an adjusted debt service
coverage ratio not less than the corresponding ratio
set forth in the table below:
Fiscal Quarter Ending Ratio
March 31, 1994 .75 to 1.00
June 30, 1994 .58 to 1.00
September 30, 1994 .54 to 1.00
December 31, 1994 .58 to 1.00
March 31, 1995 .78 to 1.00
June 30, 1995 .80 to 1.00
Such ratio shall be calculated as:"
A new paragraph shall be added to the end of Section
6.7, as follows:
"In calculating the amount described in clause
(a)(i) above, there shall be excluded (a) up to
$4,500,000 in charges otherwise included in selling,
general and administrative expenses as reflected in the
Company's financial statements relating to the Murray
Hutchison retirement benefits for the period ending
March 31, 1994, (b) up to $2,500,000 in write-offs
associated with the Saltend project for the period
ended March 31, 1994, and (c) up to $10,000,000 in
charges in the first and/or second quarter of fiscal
year 1995 in connection with the 1994 Restructuring."
2.11 Section 7.1 of the Credit Agreement is hereby
amended by adding the following proviso at the end of such
Section:
"and, provided further, that the Borrower shall be
permitted to execute and deliver the Equity Investors'
Undertaking (as described in the definition of
Transaction Documents) pursuant to which the Borrower
may contribute up to, but not more than, $5,000,000 of
capital, provided, that the Borrower shall be
prohibited from making any such payment if, immediately
after making such payment, the Borrower shall have a
pro forma Adjusted Debt Service Coverage Ratio of less
than 1.00 to 1.00 as calculated in the most recent
compliance certificate delivered pursuant to Section
6.10(d) of the Agreement, with the amount of any such
payment being included in the denominator on a pro
forma basis."
Section 3. Consent to 1994 Restructuring. The Agent
and the Banks hereby consent and agree to permit the consummation
of the 1994 Restructuring pursuant to the Transaction Documents.
Section 4. Representations and Warranties. Borrower
and Company jointly and severally represent and warrant to Banks
and Agent:
4.1 Authorization. The execution, delivery and
performance of this Fourth Amendment by Borrower and Company have
been duly authorized by all necessary corporate action by
Borrower and Company and the Fourth Amendment has been duly
executed and delivered by Borrower and Company.
4.2 Binding Obligation. This Fourth Amendment is a
legal, valid and binding agreement of Borrower and Company,
enforceable against Borrower and Company in accordance with its
terms, except to the extent enforceability thereof may be limited
by applicable law relating to bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or
limiting creditors' rights generally or by the application of
general principles of equity.
4.3 No Legal Obstacle to Agreement. Neither the
execution of this Fourth Amendment, the making by Borrower of any
borrowings under the Agreement, nor the performance of the
Agreement by Borrower and Company has constituted or resulted in
or will constitute or result in a breach of the provisions of any
Material Agreement, or the violation of any law, judgment, decree
or governmental order, rule or regulation applicable to Borrower
or Company, or result in the creation under any Material
Agreement (other than the Agreement) of any security interest,
lien, charge, or encumbrance upon any of the assets of Borrower
or Company. No approval or authorization of any governmental
authority is required to be obtained by the Company or the
Borrower to permit the execution, delivery or performance by
Borrower or Company of this Fourth Amendment, the Agreement, or
the transactions contemplated hereby or thereby, or the making of
any borrowing by Borrower under the Agreement.
4.4 Incorporation of Certain Representations. Except
as previously described in writing to the Agent, and acknowledged
by the Agent and the Banks, the representations and warranties
set forth in Section 5 of the Agreement are true and correct in
all respects on and as of the date hereof as though made on and
as of the date hereof, after giving effect to the effectiveness
of this Fourth Amendment.
4.5 Default. Except as previously described in
writing to the Agent, and acknowledged by the Agent and the
Banks, no Event of Default under the Agreement has occurred and
is continuing.
Section 5. Conditions, Effectiveness. This Fourth
Amendment shall be effective as of the date first written above,
subject to the compliance by Borrower and Company as of the date
hereof with its agreements herein contained, and to the delivery
of the following to Agent in form and substance satisfactory to
Agent:
5.1 Corporate Resolution. A copy of a resolution
or resolutions passed by the Board of Directors of Borrower and
Company, certified by the Secretary or an Assistant Secretary of
Borrower and Company as being in full force and effect on the
date of this Fourth Amendment, authorizing the amendments to the
Agreement herein provided for and the execution, delivery and
performance of this Fourth Amendment and any note or other
instrument or agreement required hereunder.
5.2 Authorized Signatories. A certificate, signed by
the Secretary or an Assistant Secretary of Borrower and Company
and dated the date of this Fourth Amendment, as to the incumbency
of the person or persons authorized to execute and deliver this
Fourth Amendment and any instrument or agreement required
hereunder on behalf of Borrower and Company.
5.3 Amendment Fee. An amendment fee in the amount of
$118,750, representing 1/8 of 1% of the Aggregate Commitment, in
immediately available funds, payable to the Agent for the account
of the Banks.
5.4 Other Evidence. Such other evidence with respect
to Borrower or Company or any other person as the Agent or any
Bank may reasonably request to establish the consummation of the
transactions contemplated hereby, the taking of all corporate
action in connection with this Fourth Amendment and the Agreement
and the compliance with the conditions set forth herein.
5.5 1994 Restructuring. The Agent and the Banks shall
have received copies of the Asset Transfer Agreement dated as of
May 2, 1994, the Shareholders' Agreement draft of June 22, 1994,
and the Equity Investors' Undertaking draft of June 20, 1994,
which agreements shall be in form and substance satisfactory to
the Banks, each, individually, in the exercise of its sole
discretion. The Transaction Documents shall be executed in
substantially the forms of such drafts, in each instance with
such changes therein as are satisfactory to the Banks, or that do
not materially change or affect the rights and obligations of the
Company and the Borrower thereunder.
Section 6. Miscellaneous.
6.1 Release of Collateral. The Banks hereby authorize
the Agent to take such action, and execute and deliver any
documents, instruments or certificates as requested by the
Company or the Borrower as may be reasonably necessary in
connection with release of collateral having a book value up to,
but not in excess of, $11,000,000 in order to permit the
consummation of the 1994 Restructuring.
6.2 Effectiveness of the Agreement. Except as hereby
amended, the Agreement shall remain in full force and effect.
6.3 No Waiver. This Fourth Amendment is specific in
time and in intent and does not constitute, nor should it be
construed as, a waiver of any other right, power or privilege
under the Agreement, or under any agreement, contract, indenture,
document or instrument mentioned in the Agreement; nor does it
preclude any exercise thereof or the exercise of any other right,
power or privilege, nor shall any future waiver of any right,
power, privilege or default hereunder, or under any agreement,
contract, indenture, document or instrument mentioned in the
Agreement, constitute a waiver of any other default of the same
or of any other term or provision.
6.4 Counterparts. This Fourth Amendment may be
executed in any number of counterparts and all of such
counterparts taken together shall be deemed to constitute one and
the same instrument. This Fourth Amendment shall not become
effective until Company, Borrower, the Banks, the Agent and the
Guarantors shall have signed a copy hereof, whether the same or
counterparts, and the same shall have been delivered to the Agent
(such date being referred to herein as the "Amendment Effective
Date").
6.5 Jurisdiction. This Fourth Amendment, and any
instrument or agreement required hereunder, shall be governed by
and construed under the laws of the State of California.
6.6 Effectiveness of Assignment. In furtherance and
not in limitation of Section 5.1 of the Third Amendment to Credit
Agreement dated as of March 22, 1994, the parties hereto agree
and acknowledge that the Remaining Banks shall have no
obligation, and the Withdrawing Bank shall have no right, to
effect the assignment of the Assigned Interest if the Company or
the Borrower is not in compliance with any of the covenants and
agreements on its part respectively to be fulfilled pursuant to
the Agreement as amended, as evidenced by a certificate of
compliance to be delivered by the Company to the Banks on or
before July 29, 1994, in substantially the form prescribed by
Section 6.10(d) (iv) and (v) of the Agreement, for the period
ended June 30, 1994, provided, that such certificate shall be
based upon preliminary financial information. Furthermore, the
parties hereto agree that the "Assignment Efffective Date" shall
be July 31, 1994, or the next succeeding Business day thereafter,
if such date is not a Business Day, subject to the further
conditions expressed in Section 5.1 of the Third Amendment to
Credit Agreement dated as of March 22, 1994.
IN WITNESS WHEREOF, the parties hereto have executed
this Agreement by their duly authorized officers as of the day
and year first above written.
INTERNATIONAL TECHNOLOGY
CORPORATION
By
Name:
Title:
IT CORPORATION
By
Name:
Title:<PAGE>
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, as Agent
By
Kay Warren
Vice President
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, as
a Bank
By
Robert W. Troutman
Vice President
THE FIRST NATIONAL BANK OF BOSTON
By
Title
BANK HAPOALIM, B.M.
San Francisco Branch
By
Title
By
Title
CONSENT BY GUARANTORS
The undersigned Guarantors hereby acknowledge that they have
reviewed and consent to the foregoing Fourth Amendment to Credit
Agreement dated as of June 24, 1994, and hereby reaffirm their
respective General Continuing General Guaranties, which continue
in full force and effect on and as of the date hereof.
Date: June , 1994
INTERNATIONAL TECHNOLOGY CORPORATION
IT ENVIRONMENTAL PROGRAMS, INC.
IT ENVIRONMENTAL SERVICES, INC.
IT-TULSA HOLDINGS INC., formerly known as
IT MCGILL POLLUTION CONTROL SYSTEMS, INC.
MCKITTRICK MUD COMPANY, INC.
PRINCETON AQUA SCIENCE
UNDERGROUND RESOURCE MANAGEMENT, INC.
UNIVERSAL PROFESSIONAL INSURANCE
COMPANY, INC.
By:
Title:
By:
Title:
EXHIBIT 10(ii).13
ASSET TRANSFER AGREEMENT
Agreement dated as of May 2, 1994 among MetPath Inc., a Delaware
corporation formerly known as Corning Lab Services Inc.
("MetPath"), International Technology Corporation, a Delaware
corporation ("ITX"), and IT Corporation, a California corporation
("IT") ("ITX and IT being collectively referred to as "ITC").
WHEREAS MetPath, through its Enseco Division, and IT, through its
Analytical Services Division (the "IT Division") are each engaged
in the United States in the business of providing environmental
testing services involving quantitative and qualitative analysis
of chemicals and other pollutants and directly related services
(the foregoing business, as hereinafter further defined, being
referred to in this Agreement as the "Analytical Services
Business");
WHEREAS in connection with the formation of a Delaware
corporation to be organized ("Newco"), MetPath desires to
transfer to Newco the Enseco Assets (as hereinafter defined), and
IT desires to transfer to Newco the ITC Assets (as hereinafter
defined), and Newco desires to assume certain liabilities of the
Enseco Division and the IT Division pursuant to the transactions
contemplated by this Agreement and the related agreements;
WHEREAS as consideration of the transfer by MetPath to Newco of
the Enseco Assets, MetPath will own 1500 shares of Class A Common
Stock, par value $.01 per share, of Newco ("Newco Class A Common
Stock "), constituting 50% of the capital stock of Newco
outstanding immediately following the Closing (as hereinafter
defined);.
WHEREAS as consideration for the transfer by IT to Newco of IT
Assets, IT will own 1500 shares of Class B Common Stock, par
value $.01 per share of Newco ("Newco Class B Common Stock),
constituting 50% of the capital stock of Newco outstanding
immediately following the Closing;
WHEREAS, the parties intend that the transactions contemplated by
this Agreement will be treated as a transaction governed by
Section 351 of the Code (as hereinafter defined).
NOW, THEREFORE, in consideration of the premises and the
mutual promises contained herein, the parties hereto, intending
to be legally bound, hereby agree as follows:
1. Definitions. The following terms when used in
this Agreement (including the recitals and Exhibits) shall have
the meanings set forth below:
"Account Receivable" shall have the meaning set
forth in Section 2(a)(viii) and Section 3(a)(viii).
"Affiliate", with respect to any entity, shall
mean a corporation or other business entity or a trust,
in whatever country organized, which directly or
indirectly controls, is controlled by or is under
common control with such entity, where such control is
exercised through majority ownership of outstanding
stock, including without limitation the ultimate parent
of such entity, it being understood that for purposes
of this Agreement Newco and its Affiliates shall not be
deemed to be an Affiliate of, or to have as an
Affiliate, MetPath, IT or ITX or any of their
respective Affiliates.
"Analytical Services Business" shall have the
meaning set forth in the first recital except that,
with respect to IT, shall exclude the businesses of
IT's Technology Development Laboratory, IT's
Treatability lab and IT's bioassay groups.
"Appropriate Inquiry" shall have the meaning set
forth in Section 9(r).
"Assets" shall collectively mean all of the Enseco
Assets and the ITC Assets.
"Assigned Agreements" shall have the meaning set
forth in Section 2(a)(v) and Section 3(a)(v).
"Assumed Obligations" shall have the meaning set
forth in Section 5(a).
"Business Know-how" shall mean all technical
information, trade secrets, proprietary software, know-
how (including, without limitation, proprietary know-
how and use and application know-how), customer lists
and other similar materials.
"Claims" shall have the meaning set forth in
Section 12.
"Closing" shall have the meaning set forth in
Section 4.
"Closing Date" shall have the meaning set forth in
Section 4.
"Code" shall mean the Internal Revenue Code of
1986, as amended.
"Contracts" shall have the meaning set forth in
Section 7(m).
"Current Assets" shall mean the Accounts
Receivable and other current assets (excluding for
purposes of Section 5 deferred income taxes) assigned
by MetPath or ITC, as the case may be, to Newco
pursuant to Section 5. ITC's Current Assets shall
include the Excluded Receivables and MetPath's Current
Assets shall exclude the Excluded Receivables.
"Depository Accounts" shall have the meaning set
forth in Section 9(h).
"Disclosure Statement" shall mean the respective
Disclosure Statements delivered by MetPath and ITC in
connection with the execution and delivery of this
Agreement.
"Employee Plan" shall have the meaning set forth
in Section 7(u)(iii).
"Enseco Assets" shall mean all of the assets of
MetPath or its Subsidiaries transferred or required to
be transferred to Newco pursuant to Section 2 of this
Agreement.
"Encumbrance" shall mean any pledge, lien, charge,
encumbrance, security interest, equity, assessment or
claim of any kind whatsoever, excluding such
imperfections of title and encumbrances as are not in
the aggregate substantial in character, amount or
extent as applied to any single property or asset and
do not in the aggregate materially detract from the
value or interfere with the present use of any property
or asset subject thereto or affected thereby, or
otherwise materially impair business operations as
presently conducted.
"Environmental Law" shall have the meaning set
forth in Section 7(r).
"ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended.
"Excluded Assets" shall have the meaning set forth
in Section 2(b) hereof.
"Excluded Receivables" shall have the meaning set
forth in Section 2(a)(viii).
"Governmental Authority" shall mean any Federal,
state, local or other governmental or administrative
authority or agency.
"HSR Act" shall mean the Hart-Scott-Rodino Anti-
trust Improvements Act of 1976.
"ITC Assets" shall mean all of the assets of ITC
transferred or required to be transferred to Newco
pursuant to Section 2 of this Agreement.
"ITC Services Agreement" shall mean the Services
Agreement between ITC and Newco in the form to be
mutually agreed upon prior to the Closing.
"Industrial Property Rights" shall mean patents,
copyrights, trademarks, trade names, logos and emblems
(including all applications and disclosures docketed
therefor, and all reissues, renewals, continuations,
extensions and divisions thereof). "Industrial
Property Rights" shall not include the name "IT", the
name "International Technology," IT's federal service
mark No. 1,230,356 (for "IT" and related design), or
any names or marks confusingly similar to any of the
foregoing.
"Laws and Regulations" shall have the meaning set
forth in Section 7(q).
"MetPath/ITC Employees" shall have the meaning set
forth in Section 9(d).
"MetPath Services Agreement" shall mean the
Services Agreement between MetPath and Newco in the
form to be mutually agreed upon prior to the Closing.
"New Sacramento Facility" shall have the meaning
set forth in Section 2(a)(viii).
" Newco Common Stock" shall collectively mean the
Newco Class A Common Stock and the Newco Class B Common
Stock.
"Non-Assigned Agreements" shall have the meaning
set forth in Section 2(a)(v) and Section 3(a)(v).
"Non-Novated Agreement" shall have the meaning set
forth in Section 9(l).
"Note" shall have the meaning set forth in Section
5(a).
"Payables" shall have the meaning set forth in
Section 5(a).
"Permits" shall mean all franchises, permits,
licenses, consents, approvals and other rights and
privileges from any Governmental Authority.
"Pre-Closing Period" shall have the meaning set
forth in Section 9(a).
"Prime Rate" shall have the meaning set forth in
Section 5(f).
"Schedule" shall mean a schedule which forms a
part of the Disclosure Statement.
"Shareholders' Agreement" shall mean the
Shareholders' Agreement among MetPath, ITX, IT and the
Company in the form of Exhibit A hereto.
"Subsidiary", with respect to any entity, shall
mean a corporation of which such entity owns, directly
or indirectly, securities having more than 50% of the
voting power of such corporation.
"Transfer Documents" shall have the meaning set
forth in Section 4(a).
Whenever a representation, warranty or other
statement is made by a party "to the best knowledge" of
such party, or "to the best" of such party's
"knowledge," the representation, warranty or other
statement is made to the best knowledge of Marty
Gibson, James Chambers, Sharon Gordon, James Kaiser,
Bill McCowan, Leo C. Farrenkopf and Raymond Marier (in
the case of MetPath) and Robert Sheh, Anthony DeLuca,
James Redwine, Eric Schwartz, Brad Figley and John
Meehan (in the case of ITC) after having undertaken an
investigation that is reasonable under the
circumstances. This definition applies to
representations, warranties and other statements made
in this Agreement or in an instrument, certificate,
agreement or other document referenced in or delivered
pursuant to this Agreement. "Best efforts" means
commercially reasonable best efforts excluding the
payment of money.
2. Transfer of Assets.
(a) Enseco Assets. Subject to and upon the terms
and conditions of this Agreement, at the Closing MetPath will
convey, transfer, sell, assign, contribute and deliver to Newco,
and Newco will accept from MetPath, all of MetPath's right and
title to and interest in its Analytical Services Business, and
all of its properties and assets of every kind, nature and
description, used in MetPath's Analytical Services Business as of
immediately prior to the Closing, excluding only cash,
certificates of deposit, bonds and securities, but including,
without limitation, the following:
(i) its customer list to be delivered at the
Closing which shall include all customers of its
Analytical Services Business;
(ii) its real estate listed in Schedule 7(i) as
owned by MetPath and all of its tangible assets used in
its Analytical Services Business, whether owned or
leased, including without limitation all equipment,
instruments, tools, furniture and office equipment and
all fixtures and leasehold improvements located in the
facilities listed in Schedule 7(i);
(iii) all of its inventory used in the operation
of its Analytical Services Business existing as of the
Closing Date;
(iv) all of its right, title and interest under
manufacturers' and vendors' warranties in connection
with the assets being transferred hereunder;
(v) all of its right, title and interest in (A)
existing agreements to provide environmental testing
services, and (B) existing real estate leases,
equipment leases, maintenance and service agreements,
non-competition and proprietary information agreements
and asset purchase and stock purchase agreements which
agreements (in the case of agreements described in
clause (B)) are directly related solely to the
Analytical Services Business and other agreements
listed in the Schedules hereto (excluding the employee
benefit plans listed in Schedule 7(u)-3) but excluding
in any such case the agreements indicated in Schedule
7(m)-1 as not being assumed by Newco (the assigned
agreements being referred to as the "Assigned
Agreements" and the agreements indicated on Schedule
7(m)-1 as not being assumed by Newco, being referred to
as "Non-Assigned Agreements");
(vi) all of its right, title and interest in and
to all Industrial Property Rights and Business Know-How
used in connection with its Analytical Services
Business, including without limitation the trade names
Enseco, Wadsworth/Alert Laboratories, California
Analytical Laboratory (CAL), CAL Lab, Chemical Research
Laboratories (CRL), Rocky Mountain Analytical
Laboratory (RMAL) and ERCO;
(vii) all prepaid expenses and deposits existing
as of the Closing Date;
(viii) all of MetPath's accounts receivables for
environmental testing services, including but not
limited to accounts receivable that have been fully
written off and MetPath's interest in accounts
receivable with Governmental Authorities to the maximum
extent permitted by law, but excluding in any event any
accounts receivable transferred to ITX on the Closing
Date (the "Excluded Receivables") and the right to
receive cash from Citicorp Leasing Inc. with respect to
funds advanced for the construction of Enseco's new
administrative facility at 880 Riverside Parkway, West
Sacramento, California 95605 ("New Sacramento
Facility") (the accounts receivable transferred to
Newco at the Closing being referred to as the "Accounts
Receivable");
(ix) all of MetPath's books and records relating
to its Analytical Services Business, including its
laboratory records and billing records, but excluding
its charter, minute books, stock record books, tax
records and books;
(x) all of its right, title and interest in
licenses, certifications and approvals to do business
granted by government and other accrediting agencies in
connection with its Analytical Services Business; and
(xi) its goodwill.
(b) ITC Assets. Subject to and upon the terms
and conditions of this Agreement, at the Closing ITX will convey,
transfer, sell, assign, contribute and deliver to Newco and Newco
will accept from Newco all of ITX's right and title to and
interest in the Excluded Receivables and IT will convey,
transfer, sell, assign, contribute and deliver to Newco, and
Newco will accept from IT, all of IT's right and title to and
interest in its Analytical Services Business, and all of its
properties and assets of every kind, nature and description, used
in IT's Analytical Services Business as of immediately prior to
the Closing, excluding only cash, certificates of deposit, bonds
and securities and the ITC Assets listed in Schedule 2 to this
Agreement ("Excluded Assets") but including, without limitation,
the following:
(i) its customer list to be delivered at the
Closing which shall include all customers of its
Analytical Services Business;
(ii) its real estate listed in Schedule 8(i) as
owned by IT and all of its tangible assets used in its
Analytical Services Business, whether owned or leased,
including without limitation all equipment,
instruments, tools, furniture and office equipment and
all fixtures and leasehold improvements located in the
facilities listed in Schedule 8(i);
(iii) all of its inventory used in the operation
of its Analytical Services Business existing as of the
Closing Date;
(iv) all of its right, title and interest under
manufacturers' and vendors' warranties in connection
with the assets being transferred hereunder;
(v) all of its right, title and interest in (A)
existing agreements to provide environmental testing
services, and (B) existing real estate leases,
equipment lease, maintenance and service agreements,
non-competition and proprietary information agreements
and asset purchase and stock purchase agreements which
agreements (in the case of agreements described in
clause (B))are directly related solely to the
Analytical Services Business and other agreements
listed in the Schedules hereto (excluding the employee
benefit plans listed in Schedule 8(u)-3) but excluding
in any such case the agreements indicated in Schedule
8(m)-1 as not being assumed by Newco (the assigned
agreements being referred to as the "Assigned
Agreements" and the agreements indicated on Schedule
8(m)-1 as not being assumed by Newco, being referred to
as "Non-Assigned Agreements"); provided, however, with
respect to the space in IT facilities listed in
Schedule 4(d)-2 that are presently used in other
divisions of IT, leases for such space shall not be a
part of the ITC Assets, but Newco will, within 30 days
after the Closing, enter into a sublease with IT so as
to enable Newco to continue to occupy such space as
Newco determines prior to the Closing Date upon the
same terms and conditions (on a pro rata basis and
based on square footage used) as IT presently leases
such space;
(vi) all of its right, title and interest in and
to all Industrial Property Rights and Business Know-How
used in connection with its Analytical Services
Business;
(vii) all prepaid expenses and deposits existing
as of the Closing Date;
(viii) all of IT's accounts receivables for
environmental testing services, including but not
limited to accounts receivable that have been fully
written off and IT's interest in accounts receivable
with Governmental Authorities to the maximum extent
permitted by law (the accounts receivable transferred
to Newco at the Closing being referred to as the
"Accounts Receivable");
(ix) all of IT's books and records relating to
its Analytical Services Business, including its
laboratory records and billing records, but excluding
its charter, minute books, stock record books, tax
records and books;
(x) all of its right, title and interest in
licenses, certifications and approvals to do business
granted by government and other accrediting agencies in
connection with its Analytical Services Business; and
(xi) its goodwill.
(c) Simultaneously with the Closing, each of
MetPath and ITC shall deliver to Newco physical possession of all
of the Assets at the locations at which they have been used in
the Business. All of the owned Assets are to be conveyed free
and clear of all liens, charges and encumbrances, except as
otherwise permitted under this Agreement.
3. Consideration.
As consideration for the transfer of the Enseco Assets by
MetPath to Newco, Newco shall issue to MetPath 1500 shares of
Newco Class A Common Stock, which upon issuance shall represent
all of the Newco Class A Common Stock and 50% of the shares of
Newco Common Stock authorized for issue under the Certificate of
Incorporation of Newco and shall assume certain liabilities of
MetPath as contemplated by Section 5. As consideration for the
transfer of the ITC Assets by IT to Newco, Newco shall issue to
IT 1500 shares of Newco Class B Common Stock, which upon issuance
shall represent all of the Newco Class B Common Stock and 50% of
the shares of Newco Common Stock authorized for issue under the
Certificate of Incorporation of Newco.
4. Closing. The closing of the transactions
contemplated by this Agreement (the "Closing") shall take place
at the offices of Enseco at 5251 DTC Parkway, Suite 415,
Englewood, Colorado 80111, at nine o'clock in the forenoon
(local time) on June 15, 1994, or such other date as may be
mutually agreed upon (the "Closing Date").
(a) Instruments of Transfer. (i) MetPath and ITC
shall execute and deliver to Newco such deeds, bills of sale,
endorsements, assignments and other instruments required, in the
reasonable opinion of each party, to vest in Newco good and
marketable title to the properties and assets to be transferred
to Newco as contemplated hereunder; and (ii) Newco shall execute
and deliver to MetPath and IT such instrument or instruments of
assumption with respect to the Assumed Obligations as are
required by Section 5(a) or as MetPath and ITC may otherwise
reasonably require. The instruments and other documents to be
delivered by Newco, MetPath and IT pursuant to this Section 4(a),
Section 4(c) and Section 5(a) shall be referred to as "Transfer
Documents".
(b) Transfer Consideration. Newco shall deliver
to MetPath and IT certificates, in denominations requested by
MetPath and IT representing in the aggregate all the shares of
Newco Common Stock to be issued to MetPath and IT pursuant to
Section 3.
(c) Consents. MetPath and ITC shall use their
best efforts to obtain, prior to the Closing Date, all consents
and approvals of third parties (including all Governmental
Authorities) required for the consummation of the transactions
contemplated by this Agreement as listed in Schedule 4.
(d) Subleases. Newco will enter a sublease with
MetPath for (i) the New Sacramento Facility on the same economic
terms as the lease agreement between TBC Realty Corporation and
Corning Lab Services Inc. and ITC will enter into an agreement
under which ITC will indemnify MetPath with respect to half (in
value) of any Claims (net of amounts received from Newco) that
MetPath may incur under such lease agreement and (ii) the
equipment listed in Schedule 4(d)-1 on the same economic terms as
the underlying lease agreements and ITC will enter into an
agreement under which ITC will indemnify MetPath with respect to
half (in value) of any Claims (net of any amounts received from
Newco) that MetPath may incur under such lease agreement. Newco
will enter into a sublease with IT as contemplated by Section
2(b)(v).
(e) Execution of Agreement. Newco shall deliver
to each of MetPath and ITC a copy of this Agreement executed by
Newco so that Newco shall be a party to and be bound by this
Agreement.
(f) License. Newco and ITX will enter into an
agreement permitting Newco to use on a non-exclusive royalty-free
basis certain portions of ITX's trade names as shall be required
for the operation of Newco's business.
5. Assumption of Liabilities.
(a) Subject to and upon the terms and conditions
of this Agreement (and Section 7 and 9(l) in particular), at the
Closing Newco shall assume (i) pursuant to one or more
Instruments of Assignment and Assumption to be agreed upon prior
to the Closing, all duties, obligations and liabilities of
MetPath or IT, as the case may be, arising under all Assigned
Agreements to the extent that such duty, liability or obligation
relates to events occurring or scheduled to occur, or is
performed or scheduled to be performed, on or after the Closing
Date; (ii) pursuant to a Liabilities Undertaking to be agreed
upon prior to the Closing (a) all trade account payables of
MetPath or IT, as the case may be, related solely to its
Analytical Services Business, incurred in the ordinary course of
business and existing at the Closing Date, and (b) accrued
current liabilities of MetPath or IT, as the case may be existing
at the Closing Date, related solely to its Analytical Services
Business, and incurred in the ordinary course of business,
including wages (including accrued vacation and retirement plan
accruals), payroll taxes and use taxes but excluding income
taxes, (such payables and accrued current liabilities, excluding
the indebtedness evidenced by the Note (as hereinafter defined),
being collectively referred to as "Payables"); and (iii) up to
$32.9 million of indebtedness of MetPath to one or more third
parties evidenced by a promissory note or notes delivered at the
Closing and prepayable by Newco at any time without penalty (the
"Note"). The duties, obligations and liabilities assumed by
Newco pursuant to the Instruments of Assignment and Assumption
and the Liabilities Undertaking and the Note referred to in this
Section 5 are referred to as the "Assumed Obligations". Except
for the Assumed Obligations, Newco is not assuming or agreeing to
be liable for any obligations or liabilities of any party to this
Agreement . Without limiting the generality of the foregoing,
Newco shall not be responsible for any taxes, penalties or
assessments of any party to this Agreement except for payroll
taxes, use taxes and real estate taxes that constitute Assumed
Obligations. MetPath or IT, as the case may be, shall be
responsible for payment of any sales or use taxes payable with
respect to the transfer to Newco of any Enseco Assets or ITC
Assets, as the case may be. Notwithstanding the foregoing, it is
contemplated that at the Closing Newco will establish appropriate
deferred tax liabilities in its financial statements as required
by generally accepted accounting principles.
(b) As soon as practicable after the Closing
Date, Newco will prepare, utilizing the financial records of
Newco, a list, separately for MetPath and IT, of the Current
Assets of MetPath and IT transferred to Newco as of the Closing
Date and the current liabilities as of the Closing Date
(including the Payables) of MetPath and IT related to the
Analytical Services Business. Newco shall provide MetPath and IT
with access to the accounts receivable and trade accounts payable
systems and MetPath and IT shall provide such assistance as Newco
may reasonably require in preparing the list. Newco shall
deliver to MetPath and IT the list as soon as practicable (but in
no event later than 30 days) after the Closing Date.
6. Representations and Warranties by Newco. At the
Closing Newco will represent and warrant to each of MetPath and
ITC that (a) the date and state of Newco's incorporation, its
certificate of incorporation and by-laws the states in which it
is, or is, as of the Closing Date, to be, qualified to do
business, the total number, class and par value of all its
authorized shares of capital stock, the registered ownership
thereof and the legal interests therein, are fully and accurately
stated in Schedule 6; (b) except as contemplated by this
Agreement, no shares of Newco Common Stock have been issued and
there are no outstanding options, contracts, calls, commitments
or demands of any character relating to any shares of Newco
Common Stock; (c) the shares of Newco Common Stock issued to
MetPath and ITC pursuant to Section 3 are validly issued, fully
paid and nonassessable; and (d) Newco has not conducted any
business prior to the Closing Date and has not incurred any
liabilities or obligations other than as expressly contemplated
by this Agreement.
7. Representations and Warranties by MetPath.
MetPath represents and warrants to ITC as follows:
(a) Corporate Organization and Authority.
MetPath (i) is a corporation duly organized, validly existing and
in good standing under the laws of the state of its
incorporation, (ii) has the full corporate power and authority to
carry on its business as now being conducted and to own and lease
its properties, (iii) is qualified and in good standing as a
foreign corporation in all jurisdictions where the failure so to
qualify would have a material adverse effect on its Analytical
Services Business and (iv) has full corporate power and authority
to execute and deliver this Agreement and the other agreements
and instruments executed or to be executed and delivered by it in
connection herewith and to consummate the transactions
contemplated hereby and thereby.
(b) Corporate Proceedings; Validity;
Enforceability. All corporate acts and other proceedings
required to be taken by or on the part of MetPath to authorize it
to execute, deliver and carry out this Agreement and the other
agreements and instruments executed or to be executed and
delivered by any of them in connection herewith and the
transactions contemplated hereby and thereby have been duly and
properly taken. This Agreement and the other agreements and
instruments executed in connection herewith have been duly
executed and delivered by MetPath, and each of the foregoing
agreements constitutes, and each other agreement or instrument to
be executed in connection herewith, when duly executed and
delivered by MetPath, the legal, valid and binding obligation of
MetPath, enforceable in accordance with the terms of such
agreement, except as enforceability may be limited by bankruptcy,
insolvency or other similar laws of general application affecting
the enforcement of creditors' rights or by general principles of
equity limiting the availability of equitable remedies.
(c) No Violation. Subject to the provisions of
Section 17 and Schedule 4, the execution and delivery by MetPath
of this Agreement and the other agreements and instruments
executed or to be executed and delivered by any of them in
connection herewith and the consummation of the transactions
contemplated hereby and thereby shall not (i) violate any
provision of law, (ii) violate the provisions of any order,
judgment or decree of any court or other governmental authority
applicable to MetPath or the property or business of MetPath or
violate the Certificate of Incorporation or By-laws of MetPath or
(iii) result in a breach of or constitute a default (or an event
that with the giving of notice or lapse of time or both would
become a default) under, or result in the creation of an
Encumbrance on any of the Enseco Assets, pursuant to, any
material indenture, mortgage, lease, agreement or other
instrument to which MetPath is a party or by which MetPath is
bound.
(d) Approvals. Subject to the provisions of
Section 17 and Schedule 4, no approval, consent, waiver or other
order or actions of or filing or registration with any court or
other Governmental Authority is required for the execution and
delivery by MetPath of this Agreement, and the other agreements
and instruments executed or to be executed and delivered by any
of them in connection herewith and the consummation by MetPath of
the transactions contemplated hereby and thereby, except as
required under the HSR Act.
(e) Stock Acquired for Investment Purposes.
MetPath is acquiring the shares of Newco Common Stock to be
issued to it pursuant to this Agreement for investment purposes
only and not with a present view towards the sale or distribution
of such shares.
(f) Financial Statements. The unaudited
financial statements included in Schedule 7(f) fairly present the
financial condition and results of operations of MetPath's
Analytical Services Business for the periods covered thereby and
have been prepared in accordance with generally accepted
accounting principles except that no footnotes, statements of
cash flow or statements of changes in Stockholders equity have
been prepared.
(g) Liabilities. To the best knowledge of
MetPath, except for the Assumed Obligations and except as set
forth in Schedule 7(g) or in any of the other Schedules, MetPath
does not have any liability, debt or obligation, whether accrued,
absolute, contingent or otherwise, and whether due or to become
due, which might in any manner materially adversely affect the
Enseco Assets or the Analytical Services Business subsequent to
the Closing.
(h) Ownership of Assets. MetPath has title to
or holds under lease all the Enseco Assets, free and clear (in
the case of the Enseco Assets that are owned) of all Encumbrances
except (i) Encumbrances applicable thereto described in such
Schedule 7(h), (ii) vendors' security liens arising between the
time of receipt of such property and payment therefor, and (iii)
liens of current taxes not yet due and payable. MetPath has the
full right and power to sell, convey, assign, transfer and
deliver to Newco, and immediately following the Closing, Newco
will have title to or the right to hold under lease the Enseco
Assets free and clear (in the case of the Enseco Assets that are
owned) of all Encumbrances except those referred to in the
preceding sentence and Encumbrances incurred in connection with
the financing contemplated by Sections 10(m) and 11(k).
(i) Real Property. Schedule 7(i) contains a
complete and accurate list and brief description of all real
property owned or held under lease by MetPath (together with a
brief description of any applicable lease), which real property
is necessary for the operation of its Analytical Services
Business and used or held for use in Metpath's Analytical
Services Business, and all such real property is in all material
respects in good and usable condition (subject to ordinary wear
and tear) for purposes of the conduct of the Analytical Services
Business as presently conducted.
(j) Machinery and Equipment. Schedule 7(j)
contains a complete and accurate list including all machinery,
equipment and other tangible assets (other than real property and
inventory) owned or held under lease by MetPath as of March 27,
1994 which machinery, equipment and other tangible assets have a
value in excess of $1,000 per item on the books of MetPath and
are used or held for use in MetPath's Analytical Services
Business and the locations thereof as of the date hereof. Except
as described in Schedule 7(j), such machinery, equipment and
other tangible assets are in all material respects in good
operating condition and repair subject to ordinary wear and tear.
(k) Receivables. All accounts receivable
included in the Enseco Assets or transferred to ITX on the
Closing Date (i) will represent bona fide indebtedness incurred
by the applicable account debtors, (ii) will have arisen in the
ordinary course of MetPath's Analytical Services Business, and
(iii) will be collectible (net of the applicable reserve for bad
debts) in the ordinary course of MetPath's Analytical Services
Business as to be operated by Newco.
(l) Industrial Property Rights and Business Know-
how. Schedule 7(l) contains a complete and accurate list of the
Industrial Property Rights owned by, registered in the name of,
or licensed to, MetPath, or in which it has any rights, (which
Industrial Property Rights are used in and material to the
Analytical Services Business), and, except as set forth in such
Schedule, any obligation to pay royalties to anyone with respect
thereto in amounts exceeding $20,000 per annum per agreement
relating thereto or $100,000 per annum in aggregate or has
licensed any such Industrial Property Rights to anyone. Except
as set forth in such Schedule, MetPath does not have any
knowledge of, and has not been given or received any notice of,
any conflict with the asserted rights of others with respect to
any of its Industrial Property Rights or any Business Know-how
and MetPath does not have any such knowledge or notice that any
of the services, or any of the processes used, in its Analytical
Services Business infringes any Industrial Property Rights of
others.
(m) Contracts. Schedule 7(m) contains a complete
and accurate list of (i) all contracts and agreements which
relate to the sale of environmental testing services by MetPath
and involve a commitment for more than $1,000,000 (or
expectation in the case of any open-ended agreement as reflected
in the budget for 1994 prepared in September 1993 for more than
$1,000,000 in 1994), and (ii) all other contracts and agreements
not otherwise listed in any Schedule to this Agreement to which
MetPath is a party or may be bound or by which any of the Enseco
Assets may be bound, which in any case relate solely to the
Analytical Services Business (excluding any commercially
reasonable agreement which is terminable on 90 days (or less)
notice without penalty and excluding any agreement which relates
to the purchase of supplies or services or a lease that in any
individual case involves a commitment for less than $200,000) and
all amendments, consents, waivers, side letters and other
commitments relating thereto ("Contracts"). Except as set forth
in such Schedule, all such Contracts are valid, binding and in
full force and effect and have not been amended or modified.
MetPath is not and, to its best knowledge, no other party to any
such Contract, is in default or alleged to be in material default
thereunder, and there exists no condition or event which, after
notice or lapse of time or both, would constitute a default by
any such party. MetPath does not know or have reason to know of
any cancellation, or written threat to cancel or not to renew or
extend, any Contract by any other party thereto. MetPath has
furnished or made available to ITC complete and accurate copies
of such Contracts. Other than this Agreement, MetPath is not a
party to or directly or indirectly bound by a non-competition
agreement or any other agreement of any kind, (i) prohibiting it
from engaging in the Analytical Services Business or restricting
it in any way from servicing any particular customer or customers
in the Analytical Services Business, other than arising under
conflict of interest rules and rules generally affecting the
analytical testing business or (ii) that would after the Closing
Date be binding on Newco and that would prohibit Newco or its
Affiliates from engaging in the Analytical Services Business in
any locale.
(n) Customers. Schedule 7(n) contains complete
and accurate lists of the name and addresses of all customers of
MetPath whose aggregate purchases of services rendered by the
Enseco Division exceeded $1,000,000 for the year ended November
30, 1993. Except as set forth in Schedule 7(n), to the best
knowledge of MetPath, none of the customers listed in such
Schedule has given written notice to MetPath of the
discontinuation or material reduction or material adverse change
in the dollar volume, terms or conditions of present or future
purchases of services.
(o) Capital Projects. Schedule 7(o) hereto sets
forth a complete listing of each pending capital investment
presently approved or budgeted by MetPath's Analytical Services
Business, excluding each such capital investment involving less
than $250,000 for any single investment together with a listing
of the present status of each such investment and the approximate
amount expended as of March 27, 1994.
(p) Litigation. Except as set forth in Schedule
7(p), there is not pending or, to the knowledge of MetPath,
threatened, any judicial, administrative or arbitral action, suit
or proceeding against MetPath which, if adversely determined,
would materially adversely affect the Enseco Assets or MetPath's
Analytical Services Business or result in any material adverse
change in the liabilities assumed by Newco pursuant to any of the
transactions contemplated by this Agreement, or which seeks to
prevent the consummation of the transactions contemplated by this
Agreement or any connection herewith or any actions taken or to
be taken in connection herewith. None of the actions, suits or
proceedings set forth in Schedule 7(p), individually or together
with any other, will have a material adverse effect on the use of
any of the Enseco Assets following consummation of the
transactions contemplated hereby for the purposes for which they
are to be used by Newco in the Analytical Services Business. The
matters listed in Schedule 7(p) also include all outstanding
written (i) professional liability claims, (ii) workers'
compensation claims in excess of $5,000 and (iii) actions, suits
or proceedings relating to environmental, health or safety
matters (except in each case for routine regulatory inspections
none of which has resulted in a fine or penalty in excess of
$5,000).
(q) Compliance with Law. Schedule 7(q) lists all
Permits held by MetPath with respect to the Analytical Services
Business and issued by any governmental entity or any private
accreditation organization other than those whose absence would
not have a material adverse effect on the Analytical Services
Business. Except as set forth in Schedule 7(q), MetPath has all
material Permits necessary for the conduct of its Analytical
Services Business, and no Governmental Authority has threatened
in writing to terminate or not to renew any such Permit or to
refuse to extend any such Permit to Newco or any of its
Subsidiaries or has stated terms substantially more onerous than
the present terms of such Permit. Except as otherwise described
in Schedule 7(q), MetPath is in all material respects duly
authorized and licensed, under all laws, regulations, rules and
orders ("Laws and Regulations") by all Governmental Authorities
to carry on its Analytical Services Business in the places and in
the manner in which it is presently conducted. To the best of
its knowledge, MetPath is in compliance in all material respects
with all Laws and Regulations and all Governmental Authorities
and the terms of all material Permits which are applicable to the
conduct of the Analytical Services Business or any of the Enseco
Assets, including, without limitation, any Laws and Regulations
pertaining to workers' compensation, health or safety matters.
Except as set forth in Schedule 7(q), no order, judgment or
decree of any Governmental Authority is binding upon MetPath or
its successors and no agreement with any Governmental Authority
will have a continuing effect upon Newco or the Analytical
Services Business following the Closing Date.
(r) Environmental Matters. Except as set forth
in Schedule 7(r), to the best knowledge of MetPath, MetPath is in
all material respects in compliance with applicable federal,
state, local or foreign laws, orders, regulations and
requirements applicable to its Analytical Services Business that
relates to or creates liability in respect of environmental
matters ("Environmental Law"), and MetPath has not taken or
failed to take any action that could create liability in the
Enseco Division pursuant to such laws, orders, regulations or
requirements such as, by way of example and not limitation,
transporting, contracting to transport or disposing of hazardous
substances or waste as defined in the Comprehensive Environmental
Response, Control and Liability Act or listed on the Code of
Federal Regulations at 40 CFR 261. MetPath has received no
written notice alleging that it is in violation of any
Environmental Law. To the best knowledge of MetPath, no real
property listed in Schedule 7(i) is and/or was used by MetPath or
any third party with MetPath's knowledge to dispose of hazardous
substances or waste as defined in the Comprehensive Environmental
Response, Control and Liability Act or listed in the Code of
Federal Regulations at 40 CFR 261 in any amount requiring
remediation of such property.
(s) Archived Information. MetPath has maintained
and archived all samples and data collected in connection with
testing performed by it in connection with its Analytical
Services Business in compliance in all material respects with all
federal and state laws and rules, and in compliance in all
material respects with any agreement obligating MetPath so to
maintain such samples and data.
(t) Tax Matters. MetPath has filed all Federal,
state, county, local and foreign tax returns, reports and forms
for income, excise, social security, property, payroll and other
taxes that it shall have been required to file prior to the
Closing Date (except where a failure so to file would not have a
material adverse effect on the Enseco Assets or the Analytical
Services Business). MetPath has paid, or adequate provision has
been made for the payment of, all Federal, state, county, local
and foreign taxes (and related interest and penalties, if any)
required to be paid by it (except where a failure to pay or
provide for such taxes would not have a material adverse effect
on the Enseco Assets or MetPath's Analytical Services Business).
(u) Employees. (i) Employee Relations. There is
not, nor to the best knowledge of MetPath is there now
threatened, any strike, slowdown, picketing, work stoppage or
labor trouble or other occurrence, event or condition of a
similar character in which any employees of MetPath who are
employed in connection with its Analytical Services Business are
participating or have threatened to participate and which has had
or might have a material adverse effect on its Analytical
Services Business. To the best knowledge of MetPath (without
conducting a special investigation), no union activities, work
stoppages or other labor trouble with respect to the employees of
any suppliers to or customers of the Analytical Services Business
are pending or threatened which might have a material adverse
effect on its Analytical Services Business. Except as set forth
in Schedule 7(u)-1, MetPath has not made any commitment or
agreement to increase the wages or benefits, or to modify the
conditions or terms of employment, of any employee engaged in its
Analytical Services Business, except any such commitment or
agreement made on an individual basis in connection with salary
administration in the ordinary course of business.
(ii) Salaried Employees. Schedule 7(u)-2 sets
forth a complete and accurate list of the names and
total compensation of all salaried employees who are
engaged in the Analytical Services Business and whose
aggregate annual salary and cash bonus (based on annual
salary rates as of March 31, 1994 and the bonuses for
1993) exceed $75,000. To the knowledge of MetPath none
of such salaried employees engaged in the Analytical
Services Business has made any written threat to cancel
or otherwise terminate his relationship with MetPath,
and except as set forth in Schedule 7(u)-3, as of the
Closing Date all such employees will be free of all
employment obligations to MetPath and its Affiliates
and (other than confidentiality and like obligations)
will be free to become employees of Newco.
(iii) Employee Benefit Plans. (A) Except as set
forth in Schedule 7(u)-3, MetPath is not a party to,
does not maintain or made any contribution to, or has
incurred any expense with respect to, any employment
agreement, pension, retirement, deferred compensation,
profit sharing, bonus or incentive plan, medical,
dental or other health insurance plan, life insurance
plan, or other employee benefit plan, program,
arrangement or undertaking (whether or not legally
binding), including, without limitation, any "employee
benefit plan" (as defined in Section 3(3) of ERISA),
under which employees engaged in MetPath's Analytical
Services Business are eligible to participate or derive
a benefit (collectively, "Employee Plans" and
individually, "Employee Plan"). MetPath has furnished
or made available to ITC complete and accurate copies
of all such Employee Plans (and, in the case of any
unwritten Employee Plans, descriptions thereof), all
trust or other funding agreements, all amendments
thereto, with respect to the Qualified Plans and
amendments thereto.
(B) Each Employee Plan listed in Schedule 7(u)-3
complies in all material respects with all applicable
laws (including, without limitation, ERISA and the
Code) and any applicable collective bargaining
agreement. The Qualified Plans are qualified under
Section 401(a) of the Code, and the trust under each
Section 501(a) of the Code.
(C) As of the Closing Date, Newco, except as set
forth in Schedule 7(u)-3 shall not be required to
assume any liability to any employee, beneficiary or
other person or entity, including, without limitation,
the Pension Benefit Guaranty Corporation, in connection
with any Employee Plan required to be described in
Schedule 7(u)-3 or by reason of any action or inaction
of MetPath or any administrator or fiduciary or other
person or entity with respect to any Employee Plan,
whether before, on or after the Closing Date, except to
the extent provided in this Section 7(u).
(D) No liability to the Pension Benefit Guaranty
Corporation has been or is expected to be incurred with
respect to any Employee Plan.
(E) The estimated out of pocket expenses (or
formula) as of March 27, 1994 for providing benefits
under each Employee Plan (excluding administrative
expenses) is set forth in Schedule 7(u)-3.
(v) Absence of Specified Changes. Except as
described in Schedule 7(v), since March 27, 1994, in or with
respect to MetPath's Analytical Services Business, MetPath has
conducted its business only in the ordinary course of business
and there has not been any: (i) material transaction except as
conducted in the ordinary course of business; (ii) capital
expenditures not reflected in Schedule 7(o) in excess of $250,000
in the aggregate; (iii) destruction of or damage to any assets
(whether or not covered by insurance) that materially and
adversely affects the financial condition, business or prospects
of the Analytical Services Business; (iv) sale leaseback
transaction other than the New Sacramento Facility; (v) sale or
transfer of any asset of MetPath used in its Analytical Services
Business having a book value at March 27, 1994 in excess of
$250,000 for any single item and $500,000 in the aggregate other
than any disposition of obsolete, redundant or damaged Assets in
the ordinary course of business; (vi) material change in
accounting methods or practices (including, without limitation,
any change in depreciation or amortization policies or rates) by
MetPath; (vii) amendment or termination of any Contract in
connection with the Analytical Services Business to which MetPath
is or was a party, except in the ordinary course of business or
as provided for in this Agreement; (viii) mortgage or any
pledge of any properties or assets of MetPath other than in
connection with the Note; (ix) any indebtedness incurred,
assumed or guaranteed by MetPath (other than pursuant to lease
agreements involving less than $500,000 in the aggregate and the
Note) which obligates MetPath to more than $500,000 in the
aggregate or (x) other event or condition of any character known
to MetPath that has or might reasonably have a material and
adverse effect on the Enseco Assets or MetPath's Analytical
Services Business; and since such date there has not been any
material adverse change in the business, financial condition or
results of operations of MetPath's Analytical Services Business.
(w) Brokers. Except for Lazard Freres, whose fees
and expenses will be paid by MetPath, negotiations relative to
this Agreement and the transactions contemplated hereby have been
carried on by MetPath without the assistance of any finder or
broker and no amount is payable by MetPath by way of brokerage or
finders' commission or fee, or otherwise, on account of this
Agreement or the transactions contemplated hereby.
(y) Disclosure. Except as such representation or
warranty may be qualified herein to the best knowledge of
MetPath, no representation or warranty by MetPath herein or in
any of the Schedules hereto contains any untrue statement of a
material fact or omits to state a material fact necessary to make
the statements contained herein and therein not misleading.
8. Representations and Warranties. ITX and IT
jointly and severally represent and warrant to MetPath as
follows:
(a) Corporate Organization and Authority. Each
of ITX and IT (i) is a corporation duly organized, validly
existing and in good standing under the laws of the state of its
incorporation, (ii) has the full corporate power and authority to
carry on its business as now being conducted and to own and lease
its properties, (iii) is qualified and in good standing as a
foreign corporation in all jurisdictions where the failure so to
qualify would have a material adverse effect on its Analytical
Services Business and (iv) has full corporate power and authority
to execute and deliver this Agreement and the other agreements
and instruments executed or to be executed and delivered by it in
connection herewith and to consummate the transactions
contemplated hereby and thereby.
(b) Corporate Proceedings; Validity;
Enforceability. All corporate acts and other proceedings
required to be taken by or on the part of each of ITX and IT to
authorize it to execute, deliver and carry out this agreement and
the other agreements and instruments executed or to be executed
and delivered by any of them in connection herewith, and the
transactions contemplated hereby and thereby have been duly and
properly taken. This Agreement and the other agreements and
instruments executed in connection herewith have been duly
executed and delivered by each of ITX and IT, and each of the
foregoing agreements constitutes, and each other agreement or
instrument to be executed in connection herewith, when duly
executed and delivered by each of ITX and IT, the legal, valid
and binding obligation of each of ITX and IT, enforceable in
accordance with the terms of such agreement, except as
enforceability may be limited by bankruptcy, insolvency or other
similar laws of general application affecting the enforcement of
creditors' rights or by general principles of equity limiting the
availability of equitable remedies.
(c) No Violation. Subject to the provisions of
Section 17 and Schedule 4, the execution and delivery by ITX and
IT of this Agreement and the other agreements and instruments
executed or to be executed and delivered by any of them in
connection herewith and the consummation of the transactions
contemplated hereby and thereby shall not (i) violate any
provision of law, (ii) violate the provisions of any order,
judgment or decree of any court or other governmental authority
applicable to ITX or IT or the property or business of ITX or IT
or violate the Certificate of Incorporation or By-laws of ITX or
IT or (iii) result in a breach of or constitute a default (or an
event that with the giving of notice or lapse of time or both
would become a default) under, or result in the creation of an
Encumbrance on any of the ITC assets, pursuant to, any material
indenture, mortgage, lease, agreement or other instrument to
which either ITX or IT is a party or by which ITX or IT is bound.
(d) Approvals. Subject to the provisions of
Section 17 and Schedule 4, no approval, consent, waiver or other
order or actions of or filing or registration with any court or
other Governmental Authority is required for the execution and
delivery by ITX or IT, of this Agreement, the other agreements
and instruments executed or to be executed and delivered by any
of them in connection herewith and the consummation by ITX or IT
of the transactions contemplated hereby and thereby, except as
required under the HSR Act.
(e) Stock Acquired for Investment Purposes. IT
is acquiring the shares of Newco Common Stock to be issued to it
pursuant to this Agreement for investment purposes only and not
with a present view towards the sale or distribution of such
shares.
(f) Financial Statements. The unaudited
financial statements included in Schedule 8(f) fairly present the
financial condition and results of operations of IT's Analytical
Services Business for the periods covered thereby and have been
prepared in accordance with generally accepted accounting
principles except that no footnotes, statements of cash flow or
statements of changes in Stockholders equity have been prepared.
(g) Liabilities. To the best knowledge of ITX
and IT, except for the Assumed Obligations and except as set
forth in Schedule 8(g) or in any other Schedule, IT does not
have any liability, debt or obligation, whether accrued,
absolute, contingent or otherwise and whether due or to become
due which might in any manner materially adversely affect the ITC
assets or the Analytical Services Business subsequent to the
Closing.
(h) Ownership of Assets. IT (or in the case of
the Excluded Receivables, ITX) has title to or holds under lease
all the ITC Assets, free and clear (in the case of the ITC Assets
that are owned) of all Encumbrances except (i) the Encumbrances
applicable thereto described in Schedule 8(h), (ii) vendors'
security liens arising between the time of receipt of such
property and payment therefor, and (iii) liens of current taxes
not yet due and payable. IT (or in the case of the Excluded
Receivables, ITX) has the full right and power to sell, convey,
assign, transfer and deliver to Newco, and immediately following
the Closing, Newco will have title to or the right to hold under
lease the ITC Assets free and clear (in the case of the ITC
Assets that are owned) of all Encumbrances except those referred
to in the preceding sentence and Encumbrances incurred in
connection with the financing contemplated by Sections 10(m) and
11(k).
(i) Real Property. Schedule 8(i) contains a
complete and accurate list and brief description of all real
property owned or held under lease by IT (together with a brief
description of any applicable lease), which real property is
necessary for the operation of its Analytical Services Business
and used or held for use in IT's Analytical Services Business,
and all such real property is in all material respects in good
and usable condition (subject to ordinary wear and tear) for
purposes of the conduct of the Analytical Services Business as
presently conducted.
(j) Machinery and Equipment. Schedule 8(j)
contains a complete and accurate list including all machinery,
equipment and other tangible assets (other than real property and
inventory) owned or held under lease by IT as of March 31, 1994
which machinery, equipment and other tangible assets have a value
in excess of $1,000 per item on the books of IT and are used or
held for use in IT's Analytical Services Business and the
locations thereof as of the date hereof. Except as described in
Schedule 8(j), such machinery, equipment and other tangible
assets are in all material respects in good operating condition
and repair subject to ordinary wear and tear.
(k) Receivables. All of IT's accounts receivable
included in the ITC Assets on the Closing Date (i) will represent
bona fide indebtedness incurred by the applicable account
debtors, (ii) will have arisen in the ordinary course of IT's
Analytical Services Business, and (iii) will be collectible (net
of the applicable reserve for bad debts) in the ordinary course
of IT's Analytical Services Business as to be operated by Newco.
(l) Industrial Property Rights and Business Know-
how. Schedule 8(l) contains a complete and accurate list of the
Industrial Property Rights owned by, registered in the name of,
or licensed to, IT, or in which it has any rights, (which
Industrial Property Rights are used in and material to the
Analytical Services Business), and, except as set forth in such
Schedule, any obligation to pay royalties to anyone with respect
thereto in amounts exceeding $20,000 per annum per agreement
relating thereto or $100,000 per annum in aggregate or has
licensed any such Industrial Property Rights to anyone. Except
as set forth in such Schedule, ITC does not have any knowledge
of, and has not been given or received any notice of, any
conflict with the asserted rights of others with respect to any
of its Industrial Property Rights or any Business Know-how and
ITC does not have any such knowledge or notice that any of the
services, or any of the processes used, in its Analytical
Services Business infringes any Industrial Property Rights of
others.
(m) Contracts. Schedule 8(m) contains a complete
and accurate list of (i) all contracts and agreements which
relate to the sale of environmental testing services by IT and
involve a commitment for more than $1,000,000 (or expectation in
the case of any open-ended agreement as reflected in the budget
for fiscal 1995 prepared in February 1994 for more than
$1,000,000 in fiscal 1994), and (ii) all other contracts and
agreements not otherwise listed in any Schedule to this Agreement
to which IT is a party or may be bound, or by which any of the
ITC Assets may be bound, which in any case relate solely to the
Analytical Services Business (excluding any commercially
reasonable agreement which is terminable on 90 days (or less)
notice without penalty and excluding any agreement which relates
to the purchase of supplies or services or a lease that in any
individual case involves a commitment for less than $200,000) and
all amendments, consents, waivers, side letters and other
commitments relating thereto ("Contracts"). Except as set forth
in such Schedule, all such Contracts are valid, binding and in
full force and effect and have not been amended or modified. IT
is not and, to the best knowledge of ITC, no other party to any
such Contract, is in default or alleged to be in material default
thereunder, and there exists no condition or event which, after
notice or lapse of time or both, would constitute a default by
any such party. ITC does not know or have reason to know of any
cancellation, or written threat to cancel or not to renew or
extend, any Contract by any other party thereto. ITC has
furnished or made available to MetPath complete and accurate
copies of such Contracts. Other than this Agreement, IT is not a
party to or directly or indirectly bound by a non-competition
agreement or any other agreement of any kind, (i) prohibiting it
from engaging in the Analytical Services Business or restricting
it in any way from servicing any particular customer or customers
in the Analytical Services Business, other than arising under
conflict of interest rules and rules generally affecting the
analytical testing business or (ii) that would after the Closing
Date be binding on Newco and that would prohibit Newco or its
Affiliates from engaging in the Analytical Services Business in
any locale.
(n) Customers. Schedule 8(n) contains complete
and accurate lists of the name and addresses of all customers of
IT whose aggregate purchases of services rendered by the ITC
Division exceeded $1,000,000 for the year ended March 31, 1994.
Except as set forth in Schedule 8(n), to the best knowledge of
ITC, none of the customers listed in such Schedule has given
written notice to IT or ITX of the discontinuation or material
reduction or material adverse change in the dollar volume, terms
or conditions of present or future purchases of services.
(o) Capital Projects. Schedule 8(o) hereto sets
forth a complete listing of each pending capital investment
presently approved or budgeted by IT's Analytical Services
Business, excluding each such capital investment involving less
than $250,000 for any single investment together with
a listing of the present status of each such investment and the
approximate amount expended as of March 31, 1994.
(p) Litigation. Except as set forth in Schedule
8(p), there is not pending or, to the knowledge of ITC,
threatened, any judicial, administrative or arbitral action, suit
or proceeding against IT which, if adversely determined, would
materially adversely affect the ITC Assets or IT's Analytical
Services Business or result in any material adverse change in the
liabilities assumed by Newco pursuant to any of the transactions
contemplated hereby for the purposes for which they are to be
used by Newco in the Analytical Services Business. The matters
listed in Schedule 8(p) also include all outstanding written (i)
professional liability claims, (ii) worker's compensation claims
in excess of $5,000 and (iii) actions, suits or proceedings
relating to environmental, health or safety matters (except in
each case for routine regulatory inspections none of which has
resulted in a fine or penalty in excess of $5,000.
(q) Compliance with Law. Schedule 8(q) lists all
Permits held by IT with respect to the Analytical Services
Business and issued by any governmental entity or any private
accreditation organization other than those whose absence would
not have a material adverse effect on the Analytical Services
Business. Except as set forth in Schedule 8(q), IT has all
material Permits necessary for the conduct of its Analytical
Services Business, and no Governmental Authority has threatened
in writing to terminate or not to renew any such Permit or to
refuse to extend any such Permit to Newco or any of its
Subsidiaries or has stated terms substantially more onerous than
the present terms of such Permit. Except as otherwise described
in Schedule 8(q), ITC is in all material respects duly authorized
and licensed, under all laws, regulations, rules and orders
("Laws and Regulations") by all Governmental Authorities to carry
on its Analytical Services Business in the places and in the
manner in which it is presently conducted. To the best knowledge
of ITC, IT is in compliance in all material respects with all
Laws and Regulations and all Governmental Authorities and the
terms of all material Permits which are applicable to the conduct
of the Analytical Services Business or any of the ITC Assets,
including, without limitation, any Laws and Regulations
pertaining to workers' compensation, health or safety matters.
Except as set forth in Schedule 8(q), no order, judgment or
decree of any Governmental Authority is binding upon IT or its
successors and no agreement with any Governmental Authority will
have a continuing effect upon Newco or the Analytical Services
Business following the Closing Date.
(r) Environmental Matters. Except as set forth
in Schedule 8(r), to the best knowledge of ITC, IT is in all
material respects in compliance with applicable federal, state,
local or foreign laws, orders, regulations and requirements
applicable to its Analytical Services Business that relates to or
creates liability in respect of environmental matters
("Environmental Law"), and IT has not taken or failed to take any
action that could create liability in the IT Division pursuant to
such laws, orders, regulations or requirements such as, by way of
example and not limitation, transporting, contracting to
transport or disposing of hazardous substances or waste as
defined in the Comprehensive Environmental Response, Control and
Liability Act or listed on the Code of Federal Regulations at 40
CAR 261. ITC has received no written notice alleging that it is
in violation of any Environmental Law. To the best knowledge of
ITC, no real property listed in Schedule 7(i) is and/or was used
by ITC or any third party with ITC's knowledge to dispose of
hazardous substances or waste as defined in the Comprehensive
Environmental Response, Control and Liability Act or listed in
the Code of Federal Regulations at 40 CAR 261 in any amount
requiring remediation of such property.
(s) Archived Information. IT has maintained and
archived all samples and data collected in connection with
testing performed by it in connection with its Analytical
Services Business in compliance in all material respects with all
federal and state laws and rules, and in compliance in all
material respects with any agreement obligating IT so to maintain
such samples and data.
(t) Tax Matters. IT has filed all Federal,
state, county, local and foreign tax returns, reports and forms
for income, excise, social security, property, payroll and other
taxes that it shall have been required to file prior to the
Closing Date (except where a failure so to file would not have a
material adverse effect on the ITC Assets or the Analytical
Services Business). IT has paid, or adequate provision has been
made for the payment of, all Federal, state, county, local and
foreign taxes (and related interest and penalties, if any)
required to be paid by it (except where a failure to pay or
provide for such taxes would not have a material adverse effect
on the ITC Assets or IT's Analytical Services Business).
(u) Employees. (i) Employee Relations. There is
not, nor to the best knowledge of ITC is there now threatened,
any strike, slowdown, picketing, work stoppage or labor trouble
or other occurrence, event or condition of a similar character in
which any employees of IT who are employed in connection with its
Analytical Services Business are participating or have threatened
to participate and which has had or might have a material adverse
effect on its Analytical Services Business. To the best
knowledge of ITC (without conducting a special investigation), no
union activities, work stoppages or other labor trouble with
respect to the employees of any suppliers to or customers of the
Analytical Services Business are pending or threatened which
might have a material adverse effect on its Analytical Services
Business. Except as set forth in Schedule 8(u)-1, IT has not
made any commitment or agreement to increase the wages or
benefits, or to modify the conditions or terms of employment, of
any employee engaged in its Analytical Services Business, except
any such commitment or agreement made on an individual basis in
connection with salary administration in the ordinary course of
business.
(ii) Salaried Employees. Schedule 8(u)-2 sets
forth a complete and accurate list of the names and
total compensation of all salaried employees who are
engaged in the Analytical Services Business and whose
aggregate annual salary and cash bonus (based on annual
salary rates as of March 31, 1994 and the bonuses for
1993) exceed $75,000. To the knowledge of ITC none of
such salaried employees engaged in the Analytical
Services Business has made any written threat to cancel
or otherwise terminate his relationship with ITC, and
except as set forth in Schedule 8(u)-3, as of the
Closing Date all such employees will be free of all
employment obligations to IT and its Affiliates and
(other than confidentiality and like obligations) will
be free to become employees of Newco.
(iii) Employee Benefit Plans. (A) Except as set
forth in Schedule 8(u)-3, IT is not a party to, does
not maintain or made any contribution to, or has
incurred any expense with respect to, any employment
agreement, pension, retirement, deferred compensation,
profit sharing, bonus or incentive plan, medical,
dental or other health insurance plan, life insurance
plan, or other employee benefit plan, program,
arrangement or undertaking (whether or not legally
binding), including, without limitation, any "employee
benefit plan" (as defined in Section 3(3) of ERISA),
under which employees engaged in IT's Analytical
Services Business are eligible to participate or derive
a benefit (collectively, "Employee Plans" and
individually, "Employee Plan"). ITC has furnished or
made available to ITC complete and accurate copies of
all such Employee Plans (and, in the case of any
unwritten Employee Plans, descriptions thereof), all
trust or other funding agreements, all amendments
thereto, with respect to the Qualified Plans and
amendments thereto.
(B) Each Employee Plan listed in Schedule 8(u)-3
complies in all material respects with all applicable
laws (including, without limitation, ERISA and the
Code) and any applicable collective bargaining
agreement. The Qualified Plans are qualified under
Section 401(a) of the Code, and the trust under each
Section 501(a) of the Code.
(C) As of the Closing Date, Newco, except as set
forth in Schedule 8(u)-3 shall not be required to
assume any liability to any employee, beneficiary or
other person or entity, including, without limitation,
the Pension Benefit Guaranty Corporation, in connection
with any Employee Plan required to be described in
Schedule 7(u)-3 or by reason of any action or inaction
of IT or any administrator or fiduciary or other person
or entity with respect to any Employee Plan, whether
before, on or after the Closing Date, except to the
extent provided in this Section 7(u).
(D) No liability to the Pension Benefit Guaranty
Corporation has been or is expected to be incurred with
respect to any Employee Plan.
(E) The estimated out of pocket expenses (or
formula) as of February 28, 1994 for providing benefits
under each Employee Plan (excluding administrative
expenses) is set forth in Schedule 8(u)-3.
(v) Absence of Specified Changes. Except as
described in Schedule 8(v), since March 31, 1994, in or with
respect to IT's Analytical Services Business, IT has conducted
its business only in the ordinary course of business and there
has not been any: (i) material transaction except as conducted
in the ordinary course of business; (ii) capital expenditures
not reflected in Schedule 8(o) in excess of $250,000 in the
aggregate; (iii) destruction of or damage to any assets (whether
or not covered by insurance) that materially and adversely
affects the financial condition, business or prospects of the
Analytical Services Business; (iv) sale leaseback transaction;
(v) sale or transfer of any asset of IT used in its Analytical
Services Business having a book value at March 31, 1994 in excess
of $250,000 for any single item and $500,000 in the aggregate
other than any disposition of obsolete, redundant or damaged
Assets in the ordinary course of business; (vi) material change
in accounting methods or practices (including, without
limitation, any change in depreciation or amortization policies
or rates) by IT; (vii) amendment or termination of any Contract
in connection with the Analytical Services Business to which IT
is or was a party, except in the ordinary course of business or
as provided for in this Agreement; (viii) mortgage or any
pledge of any properties or assets of IT; (ix) any indebtedness
incurred, assumed or guaranteed by IT (other than pursuant to
lease agreements involving less than $500,000 in the aggregate)
which obligates IT to more than $500,000 in the aggregate or (x)
other event or condition of any character known to ITC that has
or might reasonably have a material and adverse effect on the ITC
Assets or IT's Analytical Services Business; and since such date
there has not been any material adverse change in the business,
financial condition or results of operations of IT's Analytical
Services Business.
(w) Brokers. Except for Smith Barney Shearson,
Inc., whose fees and expenses will be paid by IT, negotiations
relative to this Agreement and the transactions contemplated
hereby have been carried on by ITC without the assistance of any
finder or broker and no amount is payable by ITC by way of
brokerage or finders' commission or fee, or otherwise, on account
of this Agreement or the transactions contemplated hereby.
(y) Disclosure. Except as such representation or
warranty may be qualified herein to the best knowledge of ITC, no
representation or warranty by ITC herein or in any of the
Schedules hereto contains any untrue statement of a material fact
or omits to state a material fact necessary to make the
statements contained herein and therein not misleading.
9. Transition of Analytical Services Businesses to
Newco. The transition of the Businesses from MetPath and ITC to
Newco shall be governed by the following provisions:
(a) Conduct of Businesses Prior to Closing.
Between the date hereof and the Closing (the "Pre-Closing
Period"), each of MetPath and ITC shall continue to manage
and support its Analytical Services Business diligently and
operate it only in the ordinary course. Without limiting
the generality of the foregoing, each of MetPath and ITC
shall use its best efforts to maintain the quality and
reputation of the services of its Analytical Services
Business and the good will of its customers, collect its
accounts receivable and pay its payables in the ordinary
course of business consistent with present practice,
maintain all material tangible assets utilized in its
Analytical Services Business in good repair and covered by
adequate insurance, maintain the books and records relating
to its Analytical Services Business in the usual manner and
maintain, in all material respects, the existing
organization of its Analytical Services Business. Each of
MetPath and ITC shall comply in all material respects with
all Laws and Regulations applicable to its Analytical
Services Business and shall not take any action which will
cause any change in its Analytical Services Business other
than changes in the ordinary course of business.
(b) Access to Information and Documents.
Immediately after the execution of this Agreement, MetPath
and ITC will give to each other and their respective
representatives access, for reasonable periods of time
during normal business hours, to all of the properties and
assets to be transferred to Newco pursuant to the
transactions contemplated by this Agreement and the other
agreements executed or to be executed and delivered in
connection herewith, to the key personnel of their
respective Analytical Services Businesses and to all of
their books, Contracts, commitments and records of their
respective Analytical Services Businesses and will give each
other all such information with respect to their respective
Analytical Services Businesses as the other party and its
representatives may reasonably request. ITC will hold, and
will cause its officers, employees, accountants, counsel,
financial advisers and other representatives and Affiliates
to hold, any confidential information it receives regarding
MetPath in accordance with the Confidentiality Agreement
dated January 19, 1994, between IT and Corning Lab Services
Inc. MetPath will hold, and will cause its officers,
employees, accountants, counsel, financial advisors and
other representatives and Affiliates to hold, any
confidential information it receives regarding ITC in
accordance with the Confidentiality Agreement dated January
19, 1994 between Corning Lab Services Inc. and IT.
(c) Employees. At or prior to the Closing
Date, Newco will offer to employ all persons who as of the
Closing Date are employees of MetPath and ITC directly
involved in the Analytical Services Business (and not with
MetPath's or ITC's other businesses) at a salary or hourly
base rate equal to their current salary or hourly base rate
and, except as specifically provided by Section 9(d), on
other terms and conditions determined by Newco.
(d) Employee Benefits. For a period of six
months following the Closing Date, each of MetPath and IT
shall use its best efforts to permit its employees who are
hired by Newco as contemplated by Section 9(c) of the
Agreement ("MetPath/ITC Employees") to continue to be
covered under any employee benefit plans in which they
participated immediately prior to the Closing Date except to
the extent that Newco is providing comparable benefits to
such employees. During such interim period new employees of
Newco who were not MetPath/ITC employees will be eligible to
be covered by the employee benefit plans under which the
majority of the MetPath/ITC employees employed at their work
location are covered. Newco shall promptly pay MetPath or
IT, as the case may be, all of its reasonable out-of-pocket
expenses (including administration expenses) incurred in
connection with providing such benefits. Newco shall adopt
and maintain through June 1, 1995, a severance program
providing the benefits set forth in Schedule 9(d) for all
MetPath/ITC Employees and shall count service with MetPath
and ITC (and their predecessors) under such severance
program and for all other Benefit Plans and fringe benefits
maintained by Newco.
(e) Assistance with Licensing; License Fees.
During the Pre-Closing Period and following the Closing
Date, each party shall use reasonable best efforts
(excluding the payment of money) to cooperate with and
assist Newco in obtaining assignment of or substitution for
all Permits listed in Schedule 7(q) and 8(q).
(f) Third Party Consents. During the Pre-
Closing Period, each party shall use its best efforts to
obtain such consents as are required under Schedule 4 and
consents to the assignment of such additional Assigned
Agreements as any other party may reasonably request. After
the Closing Date each party shall provide such assistance
(excluding the payment of money) as the other party shall
reasonably request to obtain consents to the assignments of
the Assigned Agreements. Newco shall be responsible for
making reasonable payments necessary to obtain such consents
other than any such payments as are specifically required by
the terms of the underlying agreements, which shall be the
responsibility of MetPath or ITC as the case may be. Except
as provided in this Section 9(f), Newco shall pay all other
fees and costs associated with the assignment of the
Assigned Agreements hereunder.
(g) Sole Negotiations. During the Pre-
Closing Period, no party nor any of its Affiliates shall
participate in any negotiations for the direct or indirect
sale of any of its Assets, except with the other parties
hereto and except in the ordinary course of business.
(h) Access to Personnel. After the Closing
Newco will make available to each of MetPath and ITC Newco's
employees for the purpose of assisting such party in
connection with any audit of the tax returns of such party.
Newco shall also make available to each of MetPath and ITC
Newco's employees in connection with any audit,
investigation, lawsuit or other proceeding involving MetPath
or ITC, as the case may be.
(i) Records. Newco shall retain books and
records delivered under Section 2 for a period of five years
from the Closing Date, and at reasonable times and on
reasonable notice, during such period each of MetPath and
ITC and their representatives shall have access to and the
right to copy the books and records delivered by such party
to Newco pursuant to this Agreement. Newco shall give
MetPath and ITC not less than thirty (30) days prior written
notice of its intent to dispose of any such books and
records and, notwithstanding any provision to the contrary,
after giving such notice, Newco shall have the right to
dispose of such books and records in the event that MetPath
or ITC has not accepted delivery of such books and records.
(j) Public Announcements. MetPath, ITC and
Newco shall consult with each other before any party to this
Agreement issues any press release or otherwise makes any
public statement with respect to this Agreement and the
transactions contemplated hereby. Nothing in this Section
9(j) shall prevent such public disclosure by MetPath or ITC
with respect to this Agreement and the transactions
contemplated hereby as, in the opinion of its counsel, it or
they may be required to make by applicable law or the
regulations of any such stock exchange or the National
Association of Securities Dealers.
(k) Assignment of Bank Accounts. At the
Closing MetPath shall to the extent practicable transfer to
Newco irrevocable control over its payroll accounts and
their depository bank accounts and post office boxes
("Depository Accounts") which are utilized for the deposit
of funds from the collection of accounts receivable (or into
which accounts customers are directed to transmit payments
under lock box or similar arrangements) related to its
Analytical Services Business. On and after the Closing
MetPath and ITC shall forward immediately to Newco any funds
that they may receive that are in payment of the Accounts
Receivable and MetPath and ITC shall appoint Newco as their
attorney-in-fact to endorse checks in payment of the
Accounts Receivable and to deposit such checks into Newco's
account.
(l) Government Contracts. To the extent
that as of the Closing Date Newco has not received novation
agreements with respect to non-novated Assigned Agreements
that are with any Governmental Authority (such non-novated
agreements being "Non-Novated Agreements"), then
notwithstanding the provisions of Section 5, such agreement
shall not be assigned to or assumed by Newco until a
novation agreement is executed with respect thereto and in
the interim Newco shall, if permitted by such agreement or
by law, act as a subcontractor and/or agent for the original
contracting party (MetPath or ITC) and shall be responsible
for all obligations of the original contracting party to the
same extent as if such agreement had been assigned or at
the Closing Date and shall be entitled to receive from the
contracting party (and if not so permitted shall be entitled
to receive from MetPath or ITC immediately upon receipt from
the contracting party, all amounts received from the
Governmental Authority in respect of such agreement
immediately upon receipt by such contracting party).
(m) Payment of Accounts Receivable. ITC
shall pay any Accounts Receivable assigned to Newco by ITC
as to which ITC is the debtor, and all accounts payable of
ITC arising in the future as to which Newco is the creditor,
in the normal course of business according to commercially
acceptable terms.
(n) Assistance After Closing. After the
Closing (i) each of MetPath and ITC shall render to Newco
all reasonable assistance in the smooth and orderly transfer
of the accounts receivable, customers and other assets of
its Analytical Services Business to Newco; (ii) MetPath will
comply with the terms of the MetPath Services Agreement and
(iii) ITC will comply with the terms of the ITC Services
Agreement.
(o) Hart-Scott-Rodino. As promptly as
practicable after the date hereof, ITX shall, and MetPath
shall cause Corning to, file such report as is required
under the HSR Act in order to consummate the transactions
contemplated by this Agreement and shall use its best
efforts to supply any additional documents as may be
requested by the Department of Justice or the Federal Trade
Commission with respect to the HSR Act.
(p) Amendment of Schedules.From time to
time prior to the close of business on the tenth business
day before the Closing, either party may deliver or cause to
be delivered to the other party supplemental information or
updated exhibits ("Supplement") concerning events subsequent
to the date hereof or information with respect to past
events that come to the attention of the party which would
render any statement, representation or warranty made in
this Agreement by such party or any information contained in
any Schedule required by this Agreement of such party
inaccurate or incomplete in any material respect; provided
however, that no such Supplement shall be treated as
delivered until received by the other party. The receiving
party may reject the Supplement, within five (5) business
days after receipt by written notice to the other party;
failure to object within such five business day period shall
be deemed acceptance. A party may reject a Supplement only
if it determines that the changes or additions to the
Schedule could subject Newco to a reasonable likelihood of
incurring liabilities or expenses not previously disclosed
in the Schedules exceeding $500,000 in the aggregate. If a
party rejects a Supplement, the other party (i.e., the party
that delivered the Supplement that was rejected) shall have
the right to withdraw from the transactions contemplated by
this Agreement and terminate this Agreement without any
liability whatsoever to any party provided that notice of
such election is given to the rejecting party no later than
seventy-two (72) hours after the receipt of the notice of
rejection.
(q) Conditions. Each of the parties shall
use its best efforts to cause each of the conditions
specified in Sections 10 and 11 as are within its control to
be satisfied.
(r) Environmental Matters. On or before the
date hereof, MetPath and IT shall exchange information that
each has gathered (but not including any attorney-client
privileged or attorney work-product information) by means of
questionnaires to their respective laboratories. Prior to
the Closing Date, each of MetPath and IT shall permit the
other to conduct such environmental investigations through
and including phase I studies, or other appropriate
inquiries (collectively, "Appropriate Inquiries") with
respect to each other's facilities as such party deems
necessary, and may employ its own or third-party personnel
therefor. The party conducting such Appropriate Inquiry
shall defend, indemnify, and hold harmless the other party
against all damages to tangible property and all injuries to
persons (regardless of the limits in Section 12(e) of this
Agreement) to the extent arising out of or related to the
performance of such Appropriate Inquiry, including all
claims and liens for compensation, and shall, upon demand,
post such bonds and take such further actions as are
necessary to accomplish the intent and purposes hereof.
10. Conditions of the Obligations of Newco and
ITC. The obligations of Newco and ITC under this Agreement
are subject to the fulfillment, to the reasonable
satisfaction of ITC, prior to or at the Closing, of each of
the following conditions:
(a) Services Agreement. MetPath and Newco
shall have entered into the MetPath Services Agreement.
(b) Shareholders' Agreement. The parties
thereto shall have entered into the Shareholders' Agreement
and the Shareholders' Agreement shall be in full force and
effect.
(c) Representations and Warranties True at
Closing. The representations and warranties made by MetPath
in this Agreement and in any certificate or document
delivered pursuant to the provisions hereof shall be true in
all material respects at and as of the Closing Date as
though such representations and warranties were made at and
as of such time, except to the extent that such
representations and warranties were made with specific
reference to some other date.
(d) Performance. MetPath shall have
performed and complied in all material respects with all
agreements and conditions required by this Agreement or any
of the other agreements executed and delivered in connection
herewith to be performed or complied with by it prior to or
at the Closing Date.
(e) Compliance Certificates. MetPath shall
have delivered to ITC a certificate, dated the Closing Date
and signed by the President or any Vice President of
MetPath, certifying that the conditions specified in clauses
(c) and (d) of this Section 10 have been satisfied.
(f) Proceedings and Documents. All
proceedings in connection with the transactions contemplated
hereby and all documents and instruments (including, without
limitation, all Transfer Documents) incident to such
transactions shall be satisfactory in legal substance and
form to ITC's counsel, and ITC and its counsel shall have
received all such executed counterpart originals or
certified or other copies of such documents as ITC or its
counsel may reasonably request.
(g) Consents. All consents and approvals of
third parties (including, without limitation, all
Governmental Authorities) required by Schedule 4 to be to be
received by or on the part of any party hereto for the
consummation of the transactions contemplated by this
Agreement shall have been obtained and any waiting period
under the HSR Act shall have expired.
(h) Opinion of Counsel. ITC shall have
received the favorable opinion of counsel for MetPath, dated
the Closing Date and addressed to Newco and ITC, in such
form as the parties shall agree to before the Closing.
(i) [Intentionally omitted.]
(j) Action or Proceeding. No suit, action
or proceeding, or governmental investigation or inquiry
against or concerning, directly or indirectly, MetPath, ITC,
Newco, any Affiliate or any of them, or any of the
properties of any of them, shall have been instituted or
threatened, nor shall any basis therefor have arisen that
might result in any order or judgment of any court or other
Governmental Authority which in the opinion of ITC is of
such significance or materiality and of such a nature as to
render it inadvisable for Newco to consummate the
transactions contemplated by this Agreement.
(k) Fairness Opinion. ITX and IT shall have
received a "fairness opinion," in form and substance
satisfactory to them and dated as of this Agreement, from
Smith Barney Shearson, Inc., with respect to the
transactions contemplated by this Agreement.
(l) Appropriate Inquiries. IT shall have
concluded its Appropriate Inquiries to its reasonable
satisfaction.
(m) Financing. Newco shall have entered
into a definitive credit agreement with a bank or banks
reasonably satisfactory to ITC providing for a facility of
not less than $45 million.
11. Conditions of the Obligations of MetPath and
Newco. The obligations of MetPath and Newco under this
Agreement are subject to the fulfillment, to the reasonable
satisfaction of MetPath, prior to or at the Closing, of each
of the following conditions:
(a) Services Agreement. ITC and Newco
shall have entered into the ITC Services Agreement.
(b) Shareholders' Agreement. The parties
thereto shall have entered into the Shareholders' Agreement
and the Shareholders' Agreement shall be in full force and
effect.
(c) Representations and Warranties True at
Closing. The representations and warranties made by ITC in
this Agreement and in any certificate or document delivered
pursuant to the provisions hereof shall be true in all
material respects at and as of the Closing Date as though
such representations and warranties were made at and as of
such time, except to the extent that such representations
and warranties were made with specific reference to some
other date.
(d) Performance. ITC shall have performed
and complied in all material respects with all agreements
and conditions required by this Agreement or any of the
other agreements executed and delivered in connection
herewith to be performed or complied with by it prior to or
at the Closing Date.
(e) Compliance Certificate. ITC shall have
delivered to MetPath a certificate, dated the Closing Date
and signed by the President or any Vice President of ITC,
certifying that the conditions specified in clauses (c) and
(d) of this Section 11 have been satisfied.
(f) Proceedings and Documents. All
proceedings in connection with the transactions contemplated
hereby and all documents and instruments (including, without
limitation, all Transfer Documents) incident to such
transactions shall be satisfactory in legal substance and
form to MetPath's counsel, and MetPath and its counsel shall
have received all such executed counterpart originals and
certified or other copies of such documents as MetPath or
its counsel may reasonably request.
(g) Consents. All consents and approvals of
third parties (including, without limitation, all
Governmental Authorities) required by Schedule 4 to be
received by or on the part of any party hereto for the
consummation of the transactions contemplated by this
Agreement shall have been obtained and any waiting period
under the HSR Act shall have expired.
(h) Opinion of Counsel. MetPath shall have
received the favorable opinion of counsel for ITC, dated the
Closing Date and addressed to Newco and MetPath, in such
form as the parties shall agree to before the Closing Date.
(i) [Intentionally omitted.]
(j) Action or Proceeding. No suit, action
or proceeding, or governmental investigation or inquiry
against or concerning, directly or indirectly, MetPath, ITC,
Newco, any Affiliate of any of such corporations, or any of
the properties of any of the foregoing, shall have been
instituted or threatened, nor shall any basis therefor have
arisen, that might result in any order or judgment of any
court or other Governmental Authority which in the opinion
of MetPath is of such significance or materiality and of
such a nature as to render it inadvisable for MetPath to
consummate the transactions contemplated by this Agreement.
(k) Financing. Newco shall have entered
into a definitive credit agreement with a bank or banks
reasonably satisfactory to MetPath providing for a facility
of not less than $45 million.
(l) Appropriate Inquiries. MetPath shall
have concluded its Appropriate Inquiries to its reasonable
satisfaction.
12. Survival and Indemnification. (a) Survival.
Notwithstanding any investigation made by or on behalf of
any party at any time, all the terms, conditions,
warranties, representations and indemnities set forth in
this Agreement, including the Schedules, or in any
certificate, document or other instrument delivered in
connection herewith, shall survive the delivery of the
Assets and the Closing hereunder; provided, however, that
any right of recovery in respect of any inaccuracy of a
representation or breach of a warranty for which a claim has
not been asserted in writing on or before midnight on the
third anniversary of the Closing Date shall expire at such
time.
(b) Indemnification by MetPath. MetPath
agrees to indemnify and hold harmless ITC and Newco from and
against all claims, liabilities, obligations, losses,
deficiencies, damages, costs and expenses (including,
without limitation, fees and disbursements of counsel) of
every kind, nature and description (collectively "Claims")
which may be payable by virtue of, or be based upon, or
arise out of, or result from (i) the inaccuracy of any
representation or the breach of any warranty, covenant or
agreement made by MetPath in this Agreement, including the
Schedules, or in any certificate, document or other
instrument delivered in connection with the transactions
contemplated by this Agreement; (ii) the failure of MetPath
to comply with any bulk transfer or similar law of any
jurisdiction in connection with the transactions
contemplated by this Agreement; (iii) any claim made, or
action or proceeding brought for, a finder's fee or
brokerage or other commission arising by reason of any
services rendered or alleged to have been rendered to or at
the instance of MetPath or any of its Affiliates with
respect to the transactions contemplated by this Agreement;
(iv) any obligation or liability of MetPath not included in
the Assumed Obligations or any material Encumbrance on any
owned Enseco Assets or any claim made, or action or
proceeding brought, for actions taken or omitted to be taken
by MetPath in connection with or arising out of the conduct
of the Analytical Services Business or the ownership of the
Enseco Assets by MetPath on or prior to the Closing Date,
including without limitation (a) all losses suffered or
incurred by Newco arising out of services rendered or that
should have been rendered in connection with the Analytical
Services Business to the extent that the claim out of which
the loss arises shall have occurred on or before the Closing
Date (regardless of the date on which such claim is
asserted); (b) any Claim arising as a result of any
violation or alleged violation of or liability incurred
under any Environmental Law in connection with the
Analytical Services Business based on (i) a condition,
including without limitation the items discussed in Schedule
7(r), existing prior to the Closing Date, (ii) the acts or
omissions of MetPath or its agents or contractors or
Affiliates prior to the Closing Date or (iii) the leasing,
occupancy or ownership by MetPath of its properties prior to
the Closing Date, including the properties listed in
Schedule 7(i); (c) any violation or alleged violation of law
by MetPath prior to the Closing Date in connection with the
Analytical Services Business or the premises listed in
Schedule 7(i); (d) any Claim by any former employee of
MetPath hired by Newco as contemplated by Section 9(c) of
this Agreement or any other employee of MetPath for accrued
compensation, vacation pay, severance benefits or other
benefits owing or maintained by MetPath arising out of
services rendered prior to the Closing Date other than
vacation pay accrued as of the Closing Date in the Final
Working Capital Certificate which shall remain the
obligation of Newco; and (e) any Claim under the Code or
ERISA resulting from MetPath having been a member of a
controlled group or a group of business as under common
control within the meaning of Section 414 of the Code; and
(v) any allegation by a third party which if true would
constitute a claim covered by Subsections 12(b)(i) through
(iv).
(c) Indemnification by ITC. ITX and IT,
jointly and severally, agree to indemnify and hold harmless
MetPath and Newco from and against all claims, liabilities,
obligations, losses, deficiencies, damages, costs and
expenses (including, without limitation, fees and
disbursements of counsel) of every kind, nature and
description (collectively "Claims") which may be payable by
virtue of, or be based upon, or arise out of, or result from
(i) the inaccuracy of any representation or the breach of
any warranty, covenant or agreement made by ITX or IT in
this Agreement, including the Schedules, or in any
certificate, document or other instrument delivered in
connection with the transactions contemplated by this
Agreement; (ii) the failure of IT to comply with any bulk
transfer or similar law of any jurisdiction in connection
with the transactions contemplated by this Agreement; (iii)
any claim made, or action or proceeding brought for, a
finder's fee or brokerage or other commission arising by
reason of any services rendered or alleged to have been
rendered to or at the instance of IT or any of its
Affiliates with respect to the transactions contemplated by
this Agreement; (iv) any obligation or liability of IT or
ITX not included in the Assumed Obligations or any material
Encumbrance on any owned ITC Assets or any claim made, or
action or proceeding brought, for actions taken or omitted
to be taken by ITC in connection with or arising out of the
conduct of the Analytical Services Business or the ownership
of the ITC Assets by ITC on or prior to the Closing Date,
including without limitation (a) all losses suffered or
incurred by Newco arising out of services rendered or that
should have been rendered in connection with the Analytical
Services Business to the extent that the claim out of which
the loss arises shall have occurred on or before the Closing
Date (regardless of the date on which such claim is
asserted); (b) any Claim arising as a result of any
violation or alleged violation of or liability incurred
under any Environmental Law in connection with the
Analytical Services Business based on (i) a condition,
including without limitation the items discussed in Schedule
8(r), existing prior to the Closing Date, (ii) the acts or
omissions of IT or its agents or contractors or Affiliates
prior to the Closing Date or (iii) the leasing, occupancy or
ownership by IT of its properties prior to the Closing Date,
including the properties listed in Schedule 8(i); (c) any
violation or alleged violation of law by ITC prior to the
Closing Date in connection with the Analytical Services
Business or the premises listed in Schedule 8(i); (d) any
Claim by any former employee of IT hired by Newco as
contemplated by Section 9(c) of this Agreement or any other
employee of IT for accrued compensation, vacation pay,
severance benefits or other benefits owing or maintained by
IT arising out of services rendered prior to the Closing
Date other than vacation pay accrued as of the Closing Date
in the Final Working Capital Certificate which shall remain
the obligation of Newco; and (e) any Claim under the Code or
ERISA resulting from IT having been a member of a controlled
group or a group of business as under common control within
the meaning of Section 414 of the Code; and (v) any
allegation by a third party which if true would constitute a
claim covered by Subsections 12(c)(i) through (iv).
(d) Indemnification by Newco. Newco agrees
to indemnify and hold harmless MetPath and ITC from and
against any and all Claims which may be payable by virtue
of, or be based upon, or arise out of, or result from (i)
any obligation or liability specifically assumed by Newco or
(ii) any claim made, or action or proceeding brought,
against MetPath or ITC, for actions taken or omitted to be
taken by Newco in connection with the Analytical Services
Business following the Closing Date.
(e) Limitation. Notwithstanding the
foregoing, the indemnification by MetPath and ITC in respect
of the inaccuracy of representations and the breach of
warranties referred to in clause (i) of paragraph (b) and
(c) of this Section 12 shall apply only if the amount of
such indemnification exceeds $1,500,000 in the aggregate, in
which event MetPath or ITC , as the case may be, shall be
obligated with respect to the full amount of such claims
(including the first $1,500,000 thereof); provided, however,
any party otherwise required to pay a sum under this Section
12(e) to the other party shall be required to pay only the
difference between the amount which it would be required to
pay, and any amount it would be entitled to receive as
indemnity from the other party, but for such $1,500,000
limitation (by way of example only, if an indemnifying party
is required to pay $1,600,000 under this Section 12(e), and
the other party has accrued against it claims of $1,400,000
(which it would not be required to pay because of the
$1,500,000 limitation), the party otherwise required to pay
the $1,600,000 shall only be required to pay to the other
party $200,000 ($1,600,000 - $1,400,000); and provided,
further, however, that no indemnification shall be made with
respect to the inaccuracy of a misrepresentation or a breach
of a warranty (regardless of whether the $1,500,000 minimum
is exceeded) unless the Claim or Claims related to such
inaccuracy or misrepresentation exceeds $25,000). The
aggregate amount of the indemnification paid under this
Section 12 by MetPath or ITC, as the case may be, in excess
of any insurance proceeds applicable to any Claims, shall
not exceed $25 million (the "Indemnification Cap");
provided, further, however, that all the preceding
limitations on indemnification set forth in this paragraph
(c) shall not apply to any obligation to indemnify or any
liability for a Claim which arises out of any breach of any
representation or warranty which was made with actual intent
to defraud any other party or out of any breach of any
agreement perpetrated with actual intent to harm another
party.
(f) Notices, etc. Each party hereto agrees
to give the applicable other party prompt written notice of
any third-party claims, actions or proceedings of which it
has knowledge as to which it may request indemnification
hereunder. The indemnifying party shall have the right to
defend, with counsel reasonably satisfactory to the
indemnified party, any such third-party claims, actions or
proceedings, provided it agrees in writing to indemnify and
hold harmless the indemnified party from the full amount of
any and all Claims which the indemnified party may incur or
suffer as a result of such claim, action or proceeding. No
settlement of any claim, action or proceeding as to which
indemnification may be requested hereunder shall be made
without the consent of the indemnifying party unless the
indemnifying party shall have been given prior written
notice of such claim, action or proceeding and shall have
failed to assume the defense of the same within 30 days
after receipt of such notice.
(g) Reduction for Insurance Proceeds and Tax
Benefits notwithstanding anything to the contrary contained
herein, the amount of indemnification due to a party under
this Agreement will be reduced by (i) any insurance
proceeds received by such party in respect of such
claim provided that the indemnification due IT under this
Agreement will not be reduced by any amounts received by IT
from ITX's insurance subsidiary; and (ii) the net tax
benefit (based on an assumed combined federal and state tax
rate of 40%), if any, actually available to such party for
the claims for which indemnification is otherwise due
hereunder.
13. Expenses. Except as otherwise provided
herein, each party shall pay all costs and expenses incurred
by such party in connection with the negotiation and
preparation of this Agreement, the Exhibits and Schedules
thereto or any ancillary documentation or with the closing
of the transactions contemplated by this Agreement or
attributable to the performance of, and compliance with, all
agreements and conditions contained herein to be performed
or complied with by such party.
14. Further Assistance. From time to time, at
Newco's request (whether at or after the Closing) and
without further consideration , MetPath and ITC, at its own
expense, will execute, acknowledge, deliver and file such
instruments (including, without limitation, assignments of
patents and trademarks) and will take such other action as
Newco may reasonably request in order more effectively to
convey and transfer to Newco the assets and properties
transferred to Newco hereunder, and will reasonably assist
Newco in the collection or reduction to possession of any
such assets and properties.
15. Notices. All notices and communications
hereunder given by any party to any other party shall be in
writing (including by telecopy, confirmed in writing) and
shall be deemed to have been duly given when received if
delivered in person or by mail, first-class, postage and
certified mail prepaid, and when sent, if sent by telecopy,
addressed to the respective parties as follows:
If to MetPath: MetPath Inc.
One Malcolm Avenue
Teterboro, New Jersey 07608
Attention: General Counsel
Telecopy: 201-393-5289
If to ITC: International Technology
Corporation
23456 Hawthorne Boulevard
Torrance, CA 90505
Attention: General Counsel
Telecopy: 310-791-4770
If to Newco: 5251 DTC Parkway
Suite 415
Englewood, Colorado 80111
Attention: President
Telecopy: 303-796-2002
or to such other address as a party may have specified by
written notice to the other parties.
16. Termination. (a) Grounds for Termination.
This Agreement may be terminated at any time prior to the
Closing;
(i) by mutual consent of the MetPath and IT;
and
(ii) if the Closing shall not have occurred
on or before August 1, 1994, or such later date as may be
agreed upon in writing by the parties, by either (A)
MetPath, unless the Closing shall not have occurred through
failure of MetPath to comply in all material respects with
its obligations hereunder, or (B) IT, unless the Closing
shall not have occurred through failure of ITC to comply in
all material respects with its obligations hereunder.
(b) Effect of Termination. In the event of
termination of this Agreement and abandonment of the
transactions contemplated hereby pursuant to clause (a) of
Section 16, written notice thereof shall forthwith be given
to all parties and this Agreement, other than the provisions
of Section 9(b), shall terminate and the transactions
contemplated hereby shall be abandoned, without further
action by any of the parties hereto provided, however, that,
except as provided in Section 9(p), if this Agreement is so
terminated by one party because one or more of the
conditions to such party's obligations hereunder is not
satisfied as a result of the other party's failure to comply
with any provision of this Agreement, it is expressly agreed
and understood that the terminating party's right to pursue
all legal remedies, if any, for breach of contract and
damages shall also survive such termination unimpaired.
17. Assignability of Agreements and Permits.
Each of MetPath, IT and ITX acknowledge and agree that
(a) Novation or other transfer of the
Contracts between IT and MetPath and their respective
governmental and private clients is generally prohibited by
law or as a matter of agreement absent the consent of such
client, and except as provided in Schedule 4, such novations
or other transfers will not be requested before the Closing
and are not conditions precedent to the Closing.
(b) Transfer of the Permits that both
MetPath and IT use in their respective analytical services
businesses is generally prohibited absent consent of the
Governmental Authority issuing such Permit and such
transfers will not be requested before the Closing and are
not conditions precedent to the Closing.
(c) Except as contemplated by Schedule 4, no
representation or warranty made in Sections 7 and 8 shall be
deemed violated by the failure to obtain consent to
assignment of any Contract or Permit or the effect such
failure could have on such Contract or Permit.
18. Miscellaneous. (a) Entire Document. This
Agreement including the Disclosure Statement embodies the
entire agreement and understanding between the parties
hereto with respect to the subject matter hereof and
supersedes all prior and contemporaneous agreements and
understandings of the parties. The parties hereby
acknowledge that certain other agreements, including without
limitation the Securities Acquisition Agreement and the
Shareholders' Agreement, are being executed and delivered in
connection with this Agreement.
(b) Benefits; Enforcement. Except for the
Confidentiality Agreements referred to in Section 9, this
Agreement shall be binding upon and shall inure to the
benefit of and be enforceable by the successors and assigns
of the parties. This Agreement shall also inure to the
benefit of, and be enforceable against MetPath by Newco and
ITC and against ITC by Newco and MetPath and the successors
and assigns of either of them provided that any enforcement
by both Newco and any of the foregoing shall not result in a
multiple recovery in respect of the same claim. Nothing in
this Agreement, whether express or implied, is intended to
confer any rights or remedies under or by reason of this
Agreement on any person other than the parties to it and
their respective successors and assigns, nor is anything in
this Agreement intended to relieve or discharge the
obligation or liability of any third person to any party to
this Agreement.
(c) Amendments This Agreement may be
amended or waived only by an instrument in writing signed by
the party against whom enforcement of such amendment or
waiver is sought.
(d) Headings. The Table of Contents and the
headings of this Agreement are for reference only, and shall
not limit or otherwise affect any of the terms or provisions
hereof.
(e) Counterparts. This Agreement may be
executed in several counterparts and may be executed by the
respective parties hereto on separate counterparts, each of
which shall constitute an original, but all of which, when
taken together, shall constitute but one and the same
instrument.
(f) Governing Law. This Agreement shall be
construed in accordance with and governed by the internal
laws of the State of New York without regard to principles
of conflicts of laws. Jurisdiction and venue for litigation
of any dispute, controversy or claim arising out of or in
connection with this Agreement shall be only in a United
States federal court or a New York state court having
subject matter jurisdiction located in New York, New York.
The parties hereby expressly submit to the personal
jurisdiction of the foregoing courts located in New York,
New York, and waive any objection or defense based on
personal jurisdiction or venue that might otherwise be
asserted to proceedings in such courts.
(g) Arbitration. All disputes or
differences arising out of or related in any way to this
Agreement shall be submitted to the decision of three (3)
arbitrators, one to be chosen by each party, and the third
to be chosen by the two previously selected arbitrators. If
either of the parties fails to appoint an arbitrator within
one (1) month after receipt of a demand to arbitrate, such
arbitrator shall at the request of either party be appointed
by application to the courts of New York having competent
jurisdiction therefor. The arbitrator proceedings shall
take place in New York. The applicant shall submit its case
within one (1) month after the appointment of the
arbitration panel, and the respondent shall submit his reply
within one (1) month after receipt of a claim. The
arbitrators shall apply the rules of evidence and law
applicable in courts sitting in New York. The arbitration
panel shall be empowered to award provisional (i.e.,
injunctive) relief upon proper application, but a party
shall be entitled, pending the appointment of all such
arbitrators and the convening of such arbitration, to seek
such relief from any court otherwise having competent
jurisdiction of such matter. The arbitration panel shall
render a written, reasoned decision on each issue before it,
in which decision it shall also state how each arbitrator
voted. Any decision by the arbitration panel shall be
binding upon the parties and may be entered as a final
judgment in any court having jurisdiction. The cost of any
arbitration proceeding shall be borne by the parties as the
arbitrator shall determine if the parties have not otherwise
agreed.
(h) Attorney's Fees. If any action or other
proceeding is brought for the enforcement of this Agreement
or because of any alleged dispute, default or
misrepresentation in connection with any of its provisions,
the successful or prevailing party shall be entitled to
recover reasonable attorneys' fees and other costs incurred
in the actions or proceeding, in addition to any other
relief to which it may be entitled. In addition, any award
of damages as a result of breach of this Agreement or any of
its provisions shall include an award of prejudgment
interest from the date of the breach at the Prime Rate. If
any action or other proceeding is brought to enforce a
judgment rendered in connection with this Agreement, the
judgment creditor shall be entitled to recover reasonable
attorney's fees and other costs incurred, and such costs
shall be recoverable as a separate item. This provision
shall be severable from all other provisions of this
Agreement, shall survive any judgment, and shall not be
deemed merged into the judgment.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this
Agreement to be duly executed as of the date first above
written.
METPATH INC.
By: ___________________________
E. Martin Gibson
Director and Chairman of
Corning Lab Services, Inc.
By: ___________________________
James D. Chambers
Vice President and Treasurer
INTERNATIONAL TECHNOLOGY
CORPORATION
By: ___________________________
Robert B. Sheh
President and Chief Executive
Officer
IT CORPORATION
By: ___________________________
Robert B. Sheh
NEWCO
By: ___________________________
Title:
<PAGE>
LIST OF EXHIBITS
A. Shareholders' Agreement
<PAGE>
LIST OF SCHEDULES IN THE DISCLOSURE STATEMENT
Schedule Description Section
Reference
2 Excluded Assets
4 Approvals and Consents
4(d) Sublease
6 Newco Representations
MetPath Schedules:
7(f) Financial Statements
7(g) Liabilities
7(h) Encumbrances
7(i) Real Property
7(j) Machinery and Equipment
7(l) Industrial Property Rights
7(m)-1 Contracts
7(n) Customers and Suppliers
7(o) Capital Projects
7(p) Litigation
7(q) Permits
7(r) Environmental Matters
7(u)-1 Commitments on Wages or Benefits
7(u)-2 Salaried Employees
7(u)-3 Employee Benefit Plans
7(v) Changes in Business
ITC Schedules:
8(f) Financial Statements
8(g) Liabilities
8(h) Encumbrances
8(i) Real Property
8(j) Machinery and Equipment
8(l) Industrial Property Rights
8(m)-1 Contracts
8(n) Customers and Suppliers
8(o) Capital Projects
8(p) Litigation
8(q) Permits
8(r) Environmental Matters
8(u)-1 Commitments on Wages or Benefits
8(u)-2 Salaried Employees
8(u)-3 Employee Benefit Plans
8(v) Changes in Business
9(d) Severance Program
EXHIBIT 10(ii).14
SECURITIES ACQUISITION AGREEMENT
among
INTERNATIONAL TECHNOLOGY CORPORATION
and
METPATH, INC.
Dated as of May 2, 1994
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C> <C> <C> <C> <C> <C> <C> <S>
Recitals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
Section 1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
Section 2. Securities Acquisition and Closing. . . . . . . . . . . . . . . . . . . .4
(a) Issuance of Shares and Warrants . . . . . . . . . . . . . . . . . . . . .4
(b) Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
(c) Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
(d) Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
Section 3. Representation and Warranties by ITX. . . . . . . . . . . . . . . . . . .4
(a) Corporate Organization and Authority. . . . . . . . . . . . . . . . . . .5
(b) Corporate Proceedings; Validity; Enforceability . . . . . . . . . . . . .5
(c) No Violation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
(d) Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
(e) Capitalization of ITX . . . . . . . . . . . . . . . . . . . . . . . . . .5
(f) Finders; Brokers. . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
Section 4. Representations by METPATH. . . . . . . . . . . . . . . . . . . . . . . .6
(a) Corporate Existence and Power . . . . . . . . . . . . . . . . . . . . . .6
(b) Corporate Proceedings; Validity; Enforceability . . . . . . . . . . . . .6
(c) Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
(d) Finders; Brokers. . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
(e) Stock Acquired for Investment Purposes. . . . . . . . . . . . . . . . . .7
(f) No Violation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
(g) METPATH Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . .7
Section 5. Conditions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8
(a) Obligations of ITX. . . . . . . . . . . . . . . . . . . . . . . . . . . .8
(1) Consideration. . . . . . . . . . . . . . . . . . . . . . . . . . .8
(2) Representations and Warranties True at
Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8
(3) Performance. . . . . . . . . . . . . . . . . . . . . . . . . . . .8
(4) Compliance Certificates. . . . . . . . . . . . . . . . . . . . . .8
(5) Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8
(6) Legal Matters. . . . . . . . . . . . . . . . . . . . . . . . . . .8
(7) Shareholders' Agreement. . . . . . . . . . . . . . . . . . . . . .8
(8) Opinion of Counsel . . . . . . . . . . . . . . . . . . . . . . . .8
(9) Actions Simultaneous with Closing. . . . . . . . . . . . . . . . .9
(10) Action or Proceeding . . . . . . . . . . . . . . . . . . . . . . .9
(b) Obligations of METPATH. . . . . . . . . . . . . . . . . . . . . . . . . .9
(1) Issuance and Listing of Stock. . . . . . . . . . . . . . . . . . .9
(2) Representations and Warranties True at
Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
(3) Performance. . . . . . . . . . . . . . . . . . . . . . . . . . . 10
(4) Compliance Certificates. . . . . . . . . . . . . . . . . . . . . 10
(5) Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
(6) Legal Matters. . . . . . . . . . . . . . . . . . . . . . . . . . 10
(7) Actions Simultaneous With Closing. . . . . . . . . . . . . . . . 10
(8) Shareholders' Agreement. . . . . . . . . . . . . . . . . . . . . 10
(9) Opinion of Counsel . . . . . . . . . . . . . . . . . . . . . . . 10
(10) Action or Proceeding . . . . . . . . . . . . . . . . . . . . . . 11
Section 6. Securities Law Compliance on Transfer.. . . . . . . . . . . . . . . . . 11
(a) Required Legends. . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
(b) Binding Effect. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 7. Restrictions on Transfer and Exercise . . . . . . . . . . . . . . . . . 12
(a) Restrictions on Certain Actions by METPATH. . . . . . . . . . . . . . . 12
(b) Voting. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
(c) Certain Permitted Actions . . . . . . . . . . . . . . . . . . . . . . . 14
(d) Exempted Transactions . . . . . . . . . . . . . . . . . . . . . . . . . 14
(e) Right of First Refusal. . . . . . . . . . . . . . . . . . . . . . . . . 16
(f) Effects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 8. Registration Rights . . . . . . . . . . . . . . . . . . . . . . . . . . 17
(a) Requests for Registration . . . . . . . . . . . . . . . . . . . . . . . 17
(b) ITX Registration. . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
(c) Obligation of METPATH . . . . . . . . . . . . . . . . . . . . . . . . . 18
(d) Obligations of ITX. . . . . . . . . . . . . . . . . . . . . . . . . . . 18
(e) Conditions to the Obligations of ITX. . . . . . . . . . . . . . . . . . 21
(f) Expenses of Registration. . . . . . . . . . . . . . . . . . . . . . . . 21
(g) Underwriting Requirements . . . . . . . . . . . . . . . . . . . . . . . 22
Section 9. Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . 22
(a) Indemnification by ITX. . . . . . . . . . . . . . . . . . . . . . . . . 22
(b) Indemnification by Holders of Registrable
Securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
(c) Conduct of Indemnification Proceedings. . . . . . . . . . . . . . . . . 23
(d) Contribution. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
(e) Survival of Indemnification Obligation. . . . . . . . . . . . . . . . . 24
Section 10. Rule 144. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 11. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 12. Indemnification and Limitation of Liability;
Remedies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 13. Representations, Warranties and Covenants to
Survive Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 14. Further Assurances. . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 15. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 16. Non-assignability . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 17. Captions; Exhibits. . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 18. Entire Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Exhibit A . . . . . . . . . . . . . . . . . . . . . .Following Page 27<PAGE>
SECURITIES ACQUISITION AGREEMENT
</TABLE>
AGREEMENT dated as of May 2, 1994, among International
Technology Corporation, a Delaware corporation ("ITX") and
MetPath, Inc., a Delaware corporation ("MetPath").
Recitals
WHEREAS, MetPath, through its Enseco division, is engaged
in the United States in the business of providing environmental
testing services involving quantitative and qualitative analysis of
chemicals and other pollutants and directly related services (all
the foregoing, being referred to in this Agreement as the
"Analytical Services Business");
WHEREAS, ITX, through the IT Analytical Services division
of its subsidiary IT Corporation, a California corporation ("IT"),
is engaged in the United States in the Analytical Services
Business;
WHEREAS, in connection with the formation of a joint
venture, MetPath and ITX each desire to transfer their respective
entire Analytical Services Businesses to a newly-formed Delaware
corporation, "NEWCO") pursuant to the transactions contemplated by
the Asset Transfer Agreement dated as of May 2, 1994, among NEWCO,
MetPath, ITX and IT Corporation (the "Asset Transfer Agreements")
and certain related agreements;
WHEREAS, in connection with the transactions contemplated
in this Agreement and the Asset Transfer Agreements, ITX proposes
to issue to MetPath, and MetPath proposes to acquire from ITX,
333,000 shares of the common stock, $1.00 par value of ITX (as
further hereinafter defined, the "Common Stock") and Warrants
entitling MetPath to purchase 2,000,000 shares of the Common Stock;
NOW, THEREFORE, in consideration of the premises and the
mutual promises contained herein, the parties hereby agree as
follows:
1. Definitions. The following terms, when used in this
Agreement (including the Recitals) shall have the meanings set
forth below (and the singular shall include the plural and vice-
versa unless the context otherwise requires):
"Affiliate", with respect to any entity, shall mean
a corporation or other business entity or a trust, in whatever
country organized, which, directly or indirectly, controls, is
controlled by or is under common control with such entity, where
such control is exercised through majority ownership of outstanding
stock including, without limitation, the ultimate parent of such
entity.
"Asset Transfer Agreement" shall have the meaning
set forth in the third recital to this Agreement.
"Closing" shall have the meaning set forth in Sec-
tion 2(e).
"Closing Date" shall have the meaning set forth in
Section 2(e).
"Common Stock" shall mean the common stock of ITX,
$1.00 par value, together with the rights associated with
each share thereof pursuant to the Rights Agreement and
any securities issued as a dividend or distribution or as
part of a stock split with respect to the Common Stock.
Common Stock also includes any other securities, property
or cash issuable upon exercise of the Warrant upon the
happening of certain events, as provided for therein.
"Control" or "controls" shall mean "control" as
defined in Rule 405 of the Securities Act, Section 15 of
the Securities Act or Section 20 of the Exchange Act.
"Demand Request" shall have the meaning set forth in
Section 8(a).
"Exchange Act" shall mean the Securities Exchange
Act of 1934, 15 USC sec. 78a et seq., as amended, or any
federal statute or code that is a successor to it.
"Encumbrance" shall mean any pledge, lien, charge,
encumbrance, security interest, equity, assessment or
adverse claim of any kind whatsoever.
"Governmental Authority" shall mean any Federal,
state, local or other governmental or administrative
authority or agency.
"Group" shall mean "group" as such term is used in
Section 13(d)(3) of the Exchange Act.
"Holder" shall mean permitted and registered
transferees of the MetPath Shares.
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust
Improvements Act of 1976.
"IT Assets" shall mean the Assets of IT's Analytical
Services Business as defined in the Asset Transfer
Agreement.
"MetPath Accounts Receivable" shall mean accounts
receivable in the approximate amount of Three Million
Three Hundred Twenty Thousand dollars ($3,320,000)
identified by MetPath to ITX in writing at the Closing.
"MetPath Assets" shall mean the Assets of MetPath's
Analytical Services Business as defined in the Asset
Transfer Agreement.
"MetPath Shares" shall mean the 333,000 shares of
Common Stock issuable to MetPath hereunder and the
2,000,000 shares of Common Stock purchasable by MetPath
upon exercise of the Warrant.
"Person" shall mean a "person" as such term is used
in Section 13(d)(3) of the Exchange Act and Section 2(2)
of the Securities Act.
"Piggy-Back Request" shall have the meaning
established in Section 8(b) hereof.
"Proxies", "solicitation", "participant", and
"election contest" shall have the meanings established in
Regulation 14A under the Exchange Act.
"Qualifying Offer" shall mean (i) any tender offer
or exchange offer commenced by ITX for any ITX Voting
Securities; and (ii) any acquisition transaction
involving any ITX Voting Securities proposed by a person
or entity other than ITX which is approved by, or not
opposed by, the Board of Directors of ITX.
"Register," "registered," and "registration" shall
mean a registration effected by preparing and filing a
registration statement, and any pre-effective and post-
effective amendments filed or required to be filed, in
compliance with the Securities Act, and the declaration
or ordering of effectiveness of such registration
statement.
"Registrable Securities" shall mean the Common Stock
issued pursuant to this Agreement and any Common Stock
issuable or previously issued on the exercise of the
Warrant and any Common Stock issued as a dividend or
other distribution with respect to, or in exchange for or
in replacement of, the Common Stock; provided, however,
Registrable Securities does not include the Warrant,
which is not registrable.
"Registration Period" shall mean with respect to all
or any portion of the MetPath Shares the period of time
after the issuance of such securities after which the
Holder is entitled to sell the securities pursuant to
Rule 144(k) under the Securities Act, provided, that the
Registration Period for any remaining portion of the
MetPath Shares shall expire not later than June 15, 2002.
"Rights Agreement" or "Rights Plan" shall mean the
Rights Agreement dated December 14, 1989 among ITX and
Bank of America, NT & SA, as Rights Agent, and the Rights
Plan embodied in the Certificate of Designations of
Series A Junior Participating Cumulative Preferred Stock
of ITX, dated December 19, 1989, and all documents
incident thereto, as at any time any of them may be
amended.
"SEC" shall mean the Securities Exchange Commission.
"Securities Act" shall mean the Securities Act of
1933, 15 USC sec. 77a et seq., as amended, or any federal
statute or code that is a successor to it.
"Sell" (or "Sale"), for purpose of Section 7 hereof,
shall have the meaning established in Section 7(c)
hereof.
"Shareholders' Agreement" shall mean the
Shareholders' Agreement among MetPath, ITX, and IT to be
entered into as of the Closing Date..
"Stockholders" shall mean each and every person who
holds or owns, directly or indirectly, any shares any
shares of the capital stock of ITX.
"Subsidiary", with respect to any entity, shall mean
a corporation of which such entity owns, directly or
indirectly, securities having more than 50% of the voting
power of such corporation.
"Voting Securities" shall include Common Stock or
any ITX securities convertible into, exchangeable for or
exercisable for Common Stock.
"Warrant" shall mean the warrant to purchase
2,000,000 shares of Common Stock as provided for in the
Warrant of even date issued by ITX in favor of MetPath
substantially in the form of Exhibit A annexed hereto and
incorporated hereinand includes any Warrants into which
the Warrant may be divided or for which it may be
exchanged pursuant to the terms of the Warrant, or
otherwise.
2. Securities Acquisition and Closing. Subject to the
terms and conditions of this Agreement:
(a) Issuance of Shares and Warrant. In connection
with the Closing of the Asset Transfer Agreement, ITX
agrees to issue to MetPath (i) Three Hundred Thirty Three
Thousand (333,000) shares of the Common Stock and (ii)
one (1) Warrant entitling MetPath to purchase Two Million
(2,000,000) shares of the Common Stock.
(b) Consideration. Upon the terms and subject to
the conditions set forth in this Agreement, at the
Closing, as consideration for the Common Stock to be
issued to it, MetPath shall assign or otherwise transfer
to ITX the MetPath Accounts Receivable
(c) Expenses. MetPath, ITX and IT shall each pay
their respective expenses incurred in connection with the
negotiation, execution and performance of this Agreement,
except that any stamp and other taxes incident to the
issuance hereunder of the shares of Common Stock shall be
paid by ITX.
(d) Closing. The closing of the transactions
contemplated by this Agreement (the "Closing") shall take
place at the offices of ENSECO, One DTC, 5251 DTC
Parkway, Suite 415, Englewood, Colorado, or such other
place as may be mutually agreed upon, at nine A.M. on
June 15, 1994.
3. Representations and Warranties by ITX. ITX
represents and warrants to MetPath that:
(a) Corporate Organization and Authority. ITX (i)
is a corporation duly organized, validly existing and in
good standing under the laws of Delaware; (ii) has the
full corporate power and authority to conduct its
business as presently constituted and either directly or
through its Subsidiaries to own and lease its properties
and the properties necessary to so conduct its business,
(iii) is qualified and in good standing as a foreign
corporation under the laws of all jurisdictions where the
failure so to qualify would have a material adverse
effect on its business; and (iv) has full corporate power
and authority to execute and deliver this Agreement and
the other agreements and instruments executed or to be
executed and delivered by it in connection herewith and
to consummate the transactions contemplated hereby and
thereby.
(b) Corporate Proceedings; Validity;
Enforceability. All corporate acts and other proceedings
required to be taken by or on the part of ITX to
authorize it to carry out this Agreement and the other
agreements and instruments-executed or to be executed and
delivered by it in connection herewith and the
transactions contemplated hereby and thereby have been
duly and properly taken or shall be duly and properly
taken prior to the Closing Date. This Agreement has been
duly executed and delivered by ITX and constitutes, and
each such other agreement and instrument constitutes, or
when duly executed and delivered, shall constitute, the
legal, valid and binding obligation of ITX, enforceable
in accordance with its terms, subject as to enforcement
of remedies, to bankruptcy, insolvency, reorganization
and other laws of general applicability relating to or
affecting enforcement of creditors' rights and to general
principles of equity.
(c) No Violation. Subject to the provisions of
Section 5(c) hereof, the execution and delivery by ITX of
this Agreement and the other agreements and instruments
executed or to be executed and delivered by it in
connection herewith and its consummation of the trans-
actions contemplated hereby and thereby shall not (i)
violate any provision of law, (ii) violate the provisions
of any order, judgment or decree of any court or other
Governmental Authority applicable to ITX or its property
or business or violate the Certificate of Incorporation
or By-laws of ITX or (iii) result in a breach of or
constitute a default (or an event that with the giving of
notice or lapse of time or both would become a default)
under, or result in the creation of an Encumbrance on any
of its Assets pursuant to, any indenture, mortgage,
lease, agreement or other instrument to which ITX is a
party or by which it is bound.
(d) Approvals. Subject to the provisions of
Section 5(c) hereof, no approval, consent, waiver or
other order or action of or filing or registration with
any court or other Governmental Authority is required for
the execution and delivery by ITX of this Agreement and
the other agreements and instruments executed or to be
executed and delivered by ITX in connection herewith and
the consummation by ITX of the transactions contemplated
hereby and thereby, except as required under the HSR Act,
and except as otherwise described in Schedule 4 to the
Disclosure Statement referred to in the Asset Transfer
Agreement.
(e) Capitalization of ITX. The capital stock of
ITX consists of:
(i) 35,201,052 (as of March 31, 1994) shares of Common
Stock, par value $1.00 per share, together with the
rights associated with those shares pursuant to the
Rights Plan;
(ii) the 9 3/8% Senior Notes Due 1996, $50,000,000 of
which are presently outstanding ($25,000,000 of said
Notes having been redeemed in September 1993, out of an
initial issue of $75,000,000); and
(iii) 2,400,000 Depositary Shares, each representing
1/100th of a share of 7% Cumulative Convertible
Exchangeable Preferred Stock; and
ITX has no other authorized or outstanding voting or
equity securities or interests. All the issued and
outstanding shares of capital stock of ITX have been, and
all shares of capital stock of ITX to be issued pursuant
to the transactions contemplated by this Agreement, when
so issued, shall be, legally and validly issued and fully
paid and nonassessable. Except pursuant to the
transactions contemplated by or related to this Agreement
or as related to the agreements concerning its capital
stock referenced above, ITX has no outstanding
obligations, understandings or commitments regarding the
issuance of any additional shares of capital stock,
voting or equity securities or interests or other
securities, or any options, rights, warrants or
securities exercisable for or convertible into such
shares, securities or interests (except for shares of
Common Stock issuable pursuant to employee stock
incentive plans entered into in the ordinary course of
business). There are no preemptive rights in respect of
the capital stock of ITX. There are no outstanding
obligations, understandings or commitments of ITX to
repurchase, redeem or otherwise acquire any outstanding
shares of its capital stock or restricting its ability to
issue the shares of capital stock to be issued hereunder.
(f) Finders; Brokers. ITX is not a party to any
understanding with, or in any way obligated to, any
finder or broker for any commissions, fees or expenses in
connection with the origination, negotiation, execution
or performance of this Agreement. ITX has, however,
retained the services of Smith Barney Shearson, Inc., for
whose fees and expenses in connection with these
transactions, ITX will be solely responsible.
4. Representations by MetPath. MetPath represents and
warrants to ITX that:
(a) Corporate Existence and Power. MetPath (i) is
a corporation duly organized, validly existing and in
good standing under the laws of Delaware; and (ii) has
full corporate power and authority to execute and deliver
this Agreement and the other agreements and instruments
executed or to be executed and delivered by it in
connection herewith and to consummate the transactions
contemplated hereby and thereby.
(b) Corporate Proceedings; Validity;
Enforceability. All corporate acts and other proceedings
required to be taken by or on the part of MetPath to
authorize it to carry out this Agreement and the other
agreements and instruments-executed or to be executed and
delivered by it in connection herewith and the
transactions contemplated hereby and thereby have been
duly and properly taken or shall be duly and properly
taken prior to the Closing Date. This Agreement has been
duly executed and delivered by MetPath and constitutes,
and each such other agreement and instrument constitutes,
or when duly executed and delivered, shall constitute,
the legal, valid and binding obligation of MetPath,
enforceable in accordance with its terms, subject as to
enforcement of remedies, to bankruptcy, insolvency,
reorganization and other laws of general applicability
relating to or affecting enforcement of creditors' rights
and to general principles of equity.
(c) Approvals. Subject to the provisions of
Section 5(c) hereof, no approval, consent, waiver or
other order or action of or filing or registration with
any court or other Governmental Authority is required for
the execution and delivery by MetPath of this Agreement
and the other agreements and instruments to be executed
and delivered by MetPath pursuant hereto and the
consummation by MetPath of the transactions contemplated
hereby and thereby, except as required under the HSR Act,
and except as otherwise described in Schedule 4 to the
Asset Transfer Agreement.
(d) Finders; Brokers. MetPath is not a party to
any understanding with any finder or broker which would
subject ITX to liability for any commissions, fees or
expenses in connection with the origination, negotiation,
execution or performance of this Agreement. MetPath has,
however, retained the services of Lazard Freres, for
whose fees and expenses in connection with these
transactions MetPath will be solely responsible.
(e) Securities Acquired for Investment Purposes.
MetPath is acquiring the MetPath Shares and the Warrant
to be issued to it pursuant to this Agreement for
investment purposes only and not with a present view
towards the sale or distribution of such shares.
(f) No Violation. Subject to the provisions of
Section 5(c) hereof, the execution and delivery by
MetPath of this Agreement and the other agreements and
instruments executed or to be executed and delivered by
it in connection herewith and its consummation of the
transactions contemplated hereby and thereby shall not
(i) violate any provision of law, (ii) violate the
provisions of any order, judgment or decree of any court
or other Governmental Authority applicable to MetPath or
its property or business or violate the Articles of
Association of MetPath or (iii) result in a breach of or
constitute a default (or an event that with the giving of
notice or lapse of time or both would become a default)
under any indenture, mortgage, lease, agreement or other
instrument to which MetPath is a party or by which it is
bound.
(g) MetPath Accounts Receivable. All accounts
receivable included in the MetPath Accounts Receivable
(i) will represent bona fide indebtedness incurred by the
applicable account debtors, (ii) will have arisen in the
ordinary course of MetPath's Analytical Services Business
and (iii) will be collectible in the ordinary course of
MetPath's Analytical Services Business.
5. Conditions.
(a) Obligations of ITX. The obligations of ITX to
close and to issue the 333,000 shares of Common Stock and
the Warrant to be issued hereunder shall be subject to
the following:
(1) Consideration. ITX shall have received
from MetPath the consideration required to be
delivered in accordance with Section 2(b).
(2) Representations and Warranties True at
Closing. The representations and warranties made
by MetPath in this Agreement and in any certificate
or document delivered pursuant to the provisions
hereof shall be true in all material respects at
and as of the Closing Date as though such
representations and warranties were made at and as
of such time.
(3) Performance. MetPath shall have
performed and complied in all material respects
with all agreements and conditions required by this
Agreement to be performed or complied with by it
prior to or at the Closing Date.
(4) Compliance Certificates. MetPath shall
have delivered to ITX a certificate, dated the
Closing Date and signed by an appropriate officer,
certifying that the conditions specified in clauses
(2) and (3) of this Section 5(a) have been
satisfied.
(5) Consents. All consents and approvals of
third parties required to be received by or on the
part of ITX, MetPath for the consummation of the
transactions contemplated by this Agreement (other
than any such consent or approval which is
designated in Section 5(c) hereof, an Exhibit to
this Agreement or to the Disclosure Statement
referred to in the Asset Transfer Agreements as not
being required to be received on or prior to the
Closing Date) shall have been obtained and any
waiting period under the HSR Act shall have
expired.
(6) Legal Matters. All legal matters
incident to the consummation of the transactions
contemplated hereby shall be satisfactory to
counsel for ITX.
(7) Shareholders' Agreement. The parties
thereto shall have entered into the Shareholders'
Agreement and the Shareholders' Agreement shall be
in full force and effect.
(8) Opinion of Counsel. ITX shall have
received a written opinion of counsel for MetPath
dated the Closing Date and addressed to ITX, to the
effect that MetPath is a corporation duly organized
and validly existing, in good standing, under the
laws of Delaware, and has the corporate power and
authority to execute, deliver and carry out the
terms and provisions of this Agreement; and that
this Agreement has been duly executed and delivered
by MetPath and is the legal, valid and binding
obligation of MetPath enforceable in accordance
with its terms, subject, as to the enforcement of
remedies, to bankruptcy, insolvency, reorganization
and other laws of general applicability relating to
or affecting enforcement of creditors' rights and
to general principles of equity.
(9) Actions Simultaneous with Closing. The
transfers contemplated by the Asset Transfer
Agreements shall have been made simultaneously
herewith and the other agreements and instruments
executed or to be executed and delivered by it in
connection herewith and to consummate the
transactions contemplated hereby and thereby have
been executed and delivered by MetPath and no
default exists under any of them.
(10) Action or Proceeding. No suit, action
or proceeding, or governmental investigation or
inquiry against or concerning, directly or
indirectly, MetPath, ITC, Newco, any Affiliate of
any of them, or any of the properties of any of
them, shall have been instituted or threatened, nor
shall any basis therefor have arisen that might
result in any order or judgment of any court or
other Governmental Authority which in the opinion
of ITX is of such significance or materiality and
of such a nature as to render it inadvisable for
ITX to consummate the transactions contemplated by
this Agreement.
(11) Fairness Opinion. ITX and IT shall
have received a "fairness opinion," in form and
substance satisfactory to them, dated as of the
date of this Agreement, from Smith Barney Shearson,
Inc. with respect to the transactions contemplated
by this Agreement.
(b) Obligations of MetPath. The obligations of
MetPath to close and to acquire the shares of Common
Stock and the Warrant to be issued hereunder shall be
subject to the following:
(1) Issuance and Listing of Stock. ITX shall
have issued (i) certificates evidencing an aggre-
gate of Three Hundred Thirty Three Thousand
(333,000) shares of the Common Stock and (ii) one
(1) Warrant entitling MetPath to purchase Two
Million (2,000,000) shares of the Common Stock, and
the MetPath Shares shall be listed (subject to
notice of issuance) upon the New York Stock
Exchange and the Pacific Stock Exchange. Such
certificates may bear appropriate legends
evidencing the restrictions on transfer resulting
from the private transactions contemplated by this
Agreement, all as provided in Section 7 of this
Agreement.
(2) Representations and Warranties True at
Closing. The representations and warranties made
by ITX in this Agreement and in any certificate or
document delivered pursuant to the provisions
hereof shall be true in all material respects at
and as of the Closing Date as though such
representations and warranties were made at and as
of such time.
(3) Performance. ITX shall have performed
and complied in all material respects with all
agreements and conditions required by this
Agreement to be performed or complied with by it
prior to or at the Closing Date.
(4) Compliance Certificates. ITX shall have
delivered to MetPath a certificate, dated the
Closing Date and signed by the President or any
Vice President of ITX, certifying that the
conditions specified in clauses (2) and (3) of this
Section 5(b) have been satisfied.
(5) Consents. All consents and approvals of
third parties required to be received by or on the
part of ITX, MetPath for the consummation of the
transactions contemplated by this Agreement (other
than any such consent or approval which is
designated in Section 5(c) hereof, an Exhibit to
this Agreement or to the Disclosure Statement
referred to in the Asset Transfer Agreements as not
being required to be received on or prior to the
Closing Date) shall have been obtained and any
waiting period under the HSR Act shall have
expired.
(6) Legal Matters. All legal matters
incident to the consummation of the transactions
contemplated hereby shall be satisfactory to
counsel for MetPath.
(7) Actions Simultaneous With Closing. ITX,
IT and MetPath shall each have performed all of
their obligations under the Asset Transfer
Agreement, all the other conditions to the
obligations of ITX set forth in the Asset Transfer
Agreement shall have been satisfied, and the
transfers contemplated by the Asset Transfer Agree-
ment shall have been made simultaneously herewith,
each of the foregoing to the satisfaction of
MetPath.
(8) Shareholders' Agreement. The parties
thereto shall have entered into the Shareholders'
Agreement, and the Shareholders' Agreement shall be
in full force and effect.
(9) Opinion of Counsel. MetPath shall have
received a written opinion of counsel for ITX,
dated the Closing Date and addressed to MetPath, to
the effect that (a) ITX has been duly organized and
is validly existing and in good standing under the
laws of the State of Delaware and has the corporate
power to execute, deliver and carry out the terms
and provisions of this Agreement; (b) this
Agreement has been executed and delivered by ITX
and is the legal, valid and binding obligation of
ITX enforceable in accordance with its terms,
subject as to enforcement of remedies, to
bankruptcy, insolvency, reorganization and other
laws of general applicability relating to or
affecting enforcement of creditors' rights and to
general principles of equity; (c) the authorized
capital stock of ITX is as represented in Section
3(e) of this Agreement, (d) the 333,000 shares of
Common Stock to be issued to MetPath hereunder, and
the Warrant have been duly authorized for issue;
(e) upon the issuance of the 333,000 shares of
Common Stock to be issued hereunder and the
exercise of the Warrant the shares of Common Stock
issuable upon the exercise thereof, such shares (i)
will be validly issued, fully paid and
nonassessable, (ii) title thereto will have been
duly transferred to MetPath; and (f) there are no
restrictions which would constitute an Encumbrance
upon such shares.
(10) Action or Proceeding. No suit, action
or proceeding, or governmental investigation or
inquiry against or concerning, directly or
indirectly, MetPath, ITC, Newco, any Affiliate of
any of them, or any of the properties of any of
them, shall have been instituted or threatened, nor
shall any basis therefor have arisen that might
result in any order or judgment of any court or
other Governmental Authority which in the opinion
of MetPath is of such significance or materiality
and of such a nature as to render it inadvisable
for MetPath to consummate the transactions
contemplated by this Agreement.
(c) MetPath and ITX acknowledge that:
(1) Neither MetPath nor IT believe that the
regulations under the Exon-Florio Amendments, 31
CFR Part 800 ("Exon-Florio"), are applicable to any
of the transactions contemplated by the parties and
have consequently have not filed and do not intend
to file a notice pursuant to Exon-Florio;
(2) IT has been and is required to file
certifications pursuant to the Foreign Ownership,
Control and Influence ("FOCI") regulations of the
US Departments of Defense and Energy, 48 CFR 904.70
and 48 CFR 952.204-73; to-date, IT has been
determined not to be subject to foreign ownership,
control, or influence; because of the nature of the
FOCI process, it is unlikely that either the DOD or
DOE will determine the FOCI compliance status of
MetPath or NEWCO or of ITX (after giving effect to
the transactions contemplated by this Agreement)
before the Closing and, therefore, such consents
have not been obtained and are not conditions
precedent to closing;
6. Securities Law Compliance on Transfer.
(a) Required Legends. The Warrant may not be
exercised and neither the Warrant nor any of the MetPath
Shares may be sold, assigned, pledged or in any other
manner transferred or disposed of, in whole or in part,
except in compliance with applicable United States
federal and state securities or Blue Sky laws, the terms
and conditions hereof and the terms and conditions of the
Warrant. The Warrant and each certificate for the MetPath
Shares shall bear a legend in substantially the same form
as the legend set forth below and on the first page of
the Warrant, unless the Holder shall deliver to ITX an
opinion of counsel reasonably satisfactory to ITX that
the Warrant represented thereby need no longer be subject
to the restriction contained herein. Each certificate
for the MetPath Shares (or subsequently issued in
substitution or exchange for such shares), unless either
(i) at the time of sale or exercise, as the case may be,
such shares are registered under the Securities Act of
1933, as amended (the "Securities Act"), or (ii) the
Holder shall deliver to ITX an opinion of counsel
reasonably satisfactory to ITX that the Shares
represented thereby need no longer be subject to the
restriction contained herein, shall bear a legend
substantially in the following form (modified as
appropriate):
[THESE SECURITIES] [THIS WARRANT AND THE SECURITIES
ISSUABLE UPON EXERCISE HEREOF] HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1993, AS AMENDED (THE
"SECURITIES ACT") NOR HAVE ANY OF THEM BEEN REGISTERED OR
QUALIFIED UNDER THE SECURITIES OR BLUE SKY LAWS OF ANY
STATE. [NEITHER THIS WARRANT NOR THE SECURITIES ISSUABLE
UPON EXERCISE HEREOF] [THESE SECURITIES] MAY [NOT] BE
SOLD, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE
TRANSFERRED, OR OFFERED FOR SALE, ASSIGNMENT, PLEDGE,
HYPOTHECATION, OR TRANSFER EXCEPT IN COMPLIANCE WITH THE
PROVISIONS OF THE SECURITIES ACT AND THE APPLICABLE RULES
AND REGULATIONS THEREUNDER AND APPLICABLE STATE
SECURITIES OR BLUE SKY LAWS.
TRANSFER OF [THIS WARRANT AND THE SECURITIES
ISSUABLE UPON EXERCISE HEREOF] [THESE SECURITIES] MAY BE
SUBJECT TO THE SECURITIES ACQUISITION AGREEMENT DATED AS
OF MAY 1, 1994, COPIES OF WHICH ARE AVAILABLE FROM ITX AT
23456 HAWTHORNE BOULEVARD, TORRANCE, CALIFORNIA 90505.
(b) Binding Effect. The provisions of this Section
6 shall be binding upon all subsequent holders of
certificates for the MetPath Shares bearing the above
legend and all subsequent holders of the Warrant, if any.
7. Restrictions on Transfer and Exercise.
(a) Restrictions on Certain Actions by MetPath.
MetPath agrees that from the Closing Date through the
earlier of May 2, 1999 and the date MetPath or its
assignee disposes of all the Common Stock purchased under
this Agreement and acquired under the Warrant (the
"Expiration Date"), MetPath will not, nor will it permit
any of its Affiliates, from and after the date that such
person becomes an Affiliate unless in any such case it
receives the prior written permission of ITX, to:
(1) acquire, announce an intention to acquire,
offer or propose to acquire, solicit an offer to
sell or agree to acquire by purchase, by gift, by
joining a partnership, limited partnership,
syndicate or other group or otherwise, any (i)
assets, businesses or properties of ITX, or any
entity known to MetPath to be a Subsidiary or
Affiliate of ITX, other than in the ordinary course
of business or (ii) shares of Common Stock or any
Voting Securities;
(2) participate in the formation or encourage
the formation of, or join or in any way act in
concert with, any Person which owns or seeks to
acquire beneficial ownership of ITX Voting
Securities;
(3) solicit, or participate in any
"solicitation" of "proxies" or become a
"participant" in any "election contest" with
respect to ITX;
(4) initiate, propose or otherwise solicit
stockholders for the approval of one or more
stockholder proposals with respect to ITX or induce
any other person to initiate any stockholder
proposal;
(5) seek to place more than one representative
on the Board of Directors of ITX, seek the removal
of any member of the Board of Directors of ITX or
seek to have called any meeting of the stockholders
of ITX;
(6) deposit any ITX Voting Securities in a
voting trust or, subject them to a voting agreement
or other agreement or arrangement with respect to
the voting of such ITX Voting Securities; or
(7) otherwise act, alone or in concert with
others, to seek to control the management, Board of
Directors, policies or affairs of ITX or solicit,
propose, seek to effect or negotiate with any other
person (including, without limitation, ITX) with
respect to any form of business combination or
other extraordinary transaction with ITX or any
entity known to MetPath to be a Subsidiary or
Affiliate of ITX, or any restructuring,
recapitalization, similar transaction or other
transaction not in the ordinary course of business
with respect to ITX or any entity known to MetPath
to be a Subsidiary or Affiliate of ITX, solicit,
make or propose or negotiate with any other person
with respect to, or announce an intent to make, any
tender offer or exchange offer for any securities
of ITX or any entity known to MetPath to be a
Subsidiary or Affiliate of ITX, or publicly
disclose an intent, purpose, plan or proposal with
respect to ITX, any entity known to MetPath to be a
Subsidiary or Affiliate of ITX or any securities or
assets of ITX or any entity known to MetPath to be
a Subsidiary or Affiliate of ITX, that would
violate the provisions of this Section 7(a), or
assist, participate in, facilitate or solicit any
effort or attempt by any person to do or seek to do
any of the foregoing;
(b) Voting. In connection with all matters subject
to the vote of security holders of ITX during the period
from and after the date hereof through May 2, 1999,
inclusive, MetPath shall, and shall direct its Affiliates
to, vote all ITX Voting Securities owned by them (a) in
accordance with the recommendation of ITX's Board of
Directors with respect to such matter, or (b) in the
absence of a recommendation, in the same proportion as
the votes cast by all other holders of ITX Voting
Securities with respect to such matter; provided that
MetPath shall retain the right to vote, in its
discretion, all ITX Voting Securities owned by MetPath,
with respect to matters respecting which a class vote, if
any, is provided pursuant to law or pursuant to ITX's
charter or by-laws. By voting as directed by ITX,
MetPath shall not be deemed to have waived any rights
that it may have to enforce its rights under the
Securities Acquisition Agreement or the Delaware General
Corporation Law to challenge the actions taken. Nothing
in this Section 7(b) shall prohibit MetPath from voting
consistently with its own social, economic and corporate
ethics policies generally.
(c) Certain Permitted Actions. Notwithstanding the
limitations and restrictions set forth elsewhere in this
Agreement:
(1) MetPath and its Affiliates (provided it
is not in default under this Agreement) shall have
the right to exercise the Warrant and acquire
Common Stock issuable upon exercise thereof and
shall have the right to acquire any ITX securities
distributed as a dividend, because of an adjustment
resulting from the operation of anti-dilution
provisions, or otherwise in respect of the Warrant
and to exercise any rights, options or other
securities (including the acquisition of any
additional ITX securities) distributable with
respect to any securities received from ITX.
(2) In addition to any ITX securities
acquired pursuant to its exercise of the Warrant,
MetPath shall have the right to acquire Voting
Securities which, when added to the securities
acquired on exercise of the Warrant and considering
for this purpose all convertible, exchangeable or
exercisable Voting Securities as if they had been
converted into, exchanged for or exercised for
Common Stock, would constitute not more than six
percent (6%) of the number of shares of Common
Stock reported by ITX to be outstanding in ITX's
most recently available filing with the Securities
and Exchange Commission (the "SEC") or other public
announcement.
(3) As a holder of Common Stock and the
Warrant, MetPath and its Affiliates may exercise
Rights under the Rights Agreement and may acquire
the securities issuable upon exercise of those
Rights.
(d) Exempted Transactions. During the term of this
Agreement, neither MetPath nor any of its Affiliates will
sell, assign, transfer, grant an option with respect to
or otherwise dispose of any interest in (or enter into an
agreement, arrangement or understanding with respect to
the foregoing) (individually and collectively, "Sell")
the Warrant or any Voting Securities, except for the
following dispositions:
(1) MetPath and its Affiliates, may Sell, to
any single person or Group, Voting Securities in
privately negotiated transactions, which in the
aggregate (assuming the exercise, conversion or
exchange of all such Voting Securities other than
Common Stock) would represent a number of shares of
Common Stock constituting not more than 1% (or 5%
in the event that the purchaser is an institutional
investor such as a mutual fund, bank, insurance
company or pension fund whose identity ITX has
approved in advance, an "Institutional Investor")
of the then outstanding shares of Common Stock;
provided, however, that neither MetPath nor its
Affiliates shall Sell any Voting Securities to a
person in a transaction described in this Section
7(d)(1) which is otherwise so permitted (except in
the case of sales to Institutional Investors) if
MetPath knows that such acquiror would hold Voting
Securities representing, in the aggregate (assuming
exercise, conversion or exchange of such Voting
Securities other than Common Stock), 5% of the then
outstanding shares of Common Stock following such
sale or other transfer and MetPath shall make all
reasonable inquiries of such acquiror with respect
to its ownership of Voting Securities before each
Sale of any ITX Voting Securities; and
(2) MetPath and its Affiliates may Sell Voting
Securities (i) pursuant to a transaction approved
in writing by ITX; (ii) pursuant to a Qualifying
Offer; (iii) in a transfer made by MetPath to any
Affiliate of MetPath which agrees in writing to be
bound by the provisions of this Agreement (provided
that the transferor of such Voting Securities shall
continue to remain bound by the terms of this
Agreement); (iv) pursuant to a bona fide pledge of
Voting Securities by MetPath or its Affiliates as
security for bona fide indebtedness to a brokerage
firm or financial institution not affiliated with
MetPath or any of its Affiliates for money borrowed
or pursuant to such pledge by such pledgee and such
pledgee and each purchaser from such pledgee agree
in writing to be bound by the provisions of this
Agreement; (v) in a registered public offering
pursuant to Section 8 hereof; (vi) in "brokers'
transactions" (as such term is defined in Rule
144(g) of the Securities Act, which definition
shall apply for all purposes of this Agreement) or
transactions directly with a "market maker" (as
such term is defined in Section 3(a)(38) of the
Exchange Act), subject in all cases to the volume
limitations provided in Rule 144(e)(1) of the
Securities Act; (vii) as a result of a merger,
consolidation, share exchange or liquidation of
MetPath in which MetPath is not the survivor,
provided that the surviving or successor entity and
each entity that controls the surviving or
successor entity agrees in writing with ITX to be
bound by the provisions of this Agreement.
(3) Provided, however, that the Warrant shall
not be transferrable except by operation of law or
in a transfer made by MetPath to any Affiliate of
MetPath which agrees in writing to be bound by the
provisions of this Agreement or to an Institutional
Investor pursuant to Section 7(d)(1) above
(provided that the transferor of such Warrant shall
continue to remain bound by the terms of this
Agreement), anything in this Agreement to the
contrary not withstanding.
(e) Right of First Refusal. In the event that
after the Closing Date and on or before May 2, 1999,
MetPath desires to sell all or part of its holding of ITX
Voting Securities in a permitted public offering or in
any other transaction other than one permitted under
clauses (i), (ii), (iii), or (vii) of section 7(d)(2),
ITX shall first be given the opportunity to purchase (or
cause a nominee designated by ITX to purchase) all or any
portion of such Voting Securities in the following
manner:
(1) MetPath shall deliver a written notice to
ITX of such intention, identifying (if known) the
proposed purchaser and the proposed price of the
Voting Securities, and setting forth the other
terms and conditions of such offer or proposed
sale.
(2) ITX shall have the right for 15 days from
the receipt of such written notice, exercisable by
written notice, to elect to purchase (or to
designate a nominee to purchase) all or any portion
of such Voting Securities for cash at a price equal
to the greater of (x) the closing sales price of
securities on the date in which MetPath delivered
such notice to ITX (in the case of a registered
public offering) or the proposed purchase price (in
the case of any other proposed sale) or (y) the
closing sales price of such securities on the date
when ITX elects (or designates a nominee) to
purchase such shares (the closing sales price being
the closing sales price on the New York Stock
Exchange Composite Transaction List or if the
securities are not listed on the New York Stock
Exchange, the closing sale price on the principal
securities exchange in which they are traded or, in
the event that the securities are not traded on a
national securities exchange, on the closing sales
price on the NASDAQ National Market System or, if
the securities are not so listed, at the mean bid
the closing bid and asked price).
(3) If ITX does not exercise its right to
elect to purchase within 15 days from the receipt
of MetPath's notice, MetPath shall be free to sell
or agree to sell the Voting Securities specified in
its notice to the Persons at a price not to be less
than the lesser of the proposed purchase price and
the closing sales price on the date that MetPath
enters into a definitive sale agreement (such
closing sales price to be determined as provided in
clause (2) above); provided, that all such sales
shall comply with the terms of Section 7(d) hereof.
If MetPath shall not so sell all of such Voting
Securities within 120 days of the expiration of the
time period during which ITX had the right to elect
to purchase such Voting Securities, the provisions
of this Agreement, including this Section 7(e)
shall thereafter apply to the Voting Securities not
so sold.
(4) In the event of a sale of securities to
MetPath in accordance with this Agreement to a
person other than an Affiliate of MetPath, except
for sales permitted by this Agreement only if the
purchaser agrees to be bound by the provisions of
this Agreement, the securities sold shall be free
from any restrictions in this Agreement as of the
date of such sale, and ITX shall cause any legend
relating to the restrictions in this Agreement on
the certificates representing the securities to be
removed.
(5) If ITX exercises its right to purchase
under this Section 7(e), the closing therefor shall
occur within 15 days after receipt by MetPath of
the notice of exercise, at a time, place and date
specified by ITX. At the closing, ITX shall
deliver to MetPath cash or immediately available
funds in an amount equal to the purchase price
determined under clause (3), and MetPath shall
deliver to ITX certificates representing the Voting
Securities, duly endorsed for transfer, together
with all necessary stock transfer stamps.
(f) Effects.
(1) If MetPath or any Affiliate of MetPath
acquires any ITX Voting Securities in violation of
this Agreement, it will immediately dispose of such
ITX Voting Securities to persons which are not
Affiliates of MetPath in a manner permitted by
Section 7(d).
(2) Notwithstanding anything in this
Agreement to the contrary, in the event any of the
Warrant, the Voting Securities or the MetPath
Shares shall be transferred in violation of the
provisions of this Section 7, ITX and its transfer
agent shall not be obligated to register on the
books and records of ITX or recognize any
transferee or subsequent holder receiving said
securities in a transaction in violation of this
Section 7 as entitled to any of the rights or
privileges of holders of the securities of ITX
(including without limitation the rights to vote
such securities, if any, and receive dividends).
(3) The inadvertent violation of this Section
7 by an Affiliate of MetPath involving no more than
1% of the ITX Voting Shares then outstanding shall
not constitute a violation of this Section 7.
8. Registration Rights
(a) Requests for Registration. ITX agrees that,
commencing on the date hereof, upon receipt of a written
request therefor from MetPath (the "Demand Request"), ITX
shall, with reasonable promptness, file a registration
statement on a form to be selected by ITX to register
under the Securities Act for sale to the public all
Registerable Securities specified in the Demand Request
and thereafter shall file such amendment or amendments to
such registration statement as shall be necessary to
cause the same to become effective (a "Demand
Registration"), ITX shall be obligated to effect one (1)
registration pursuant to this Section 8(a), except that
all of ITX's obligations under this Section shall expire
on the expiration of the Registration Period with respect
to the Registrable Securities proposed to be sold, and
ITX shall not be required to register an offering of less
than two hundred fifty thousand (250,000) (subject to
adjustment in the event of any reverse stock split or
similar transaction) shares of ITX Common Stock; provided
however, that, MetPath shall have the right to withdraw
not more than one Demand Request (and such request shall
be deemed not to have been made) if, on or prior to the
date the registration statement shall become effective,
MetPath so requests and the market price of the
Registrable Securities shall have declined by at least
10% from the date of the Demand Request to the date that
the Demand Request is withdrawn.
(b) ITX Registration. If any time ITX determines
or is requested or receives a demand from any person
other than MetPath to register any of its securities in
respect of an underwritten public offering under the
Securities Act, on a form that would also permit the
registration of any of the Registrable Securities held by
MetPath, ITX shall, each such time, promptly give MetPath
written notice of its intent to effect a registration
and, subject to Section 8(e) below, will include in such
registration all Voting Securities owned by MetPath with
respect to which ITX has received a written request from
MetPath specifying the amount of such Voting Securities
(a "Piggyback Request") to be included therein within 15
days after the receipt by MetPath of the notice from ITX.
(c) Obligation of MetPath. Any Demand Request or
Piggyback Request (collectively, a "Request") shall
express MetPath's present intent to offer the amount of
Registrable Securities to be included in the registration
statement (the "Securities") for distribution and contain
an undertaking to provide all such information and
materials and to take all such actions as may be required
in order to permit ITX to comply with all applicable
requirements of the SEC and to obtain acceleration of the
effective date of the registration statement.
(d) Obligations of ITX. As to any registration
statement referred to in Sections 8(a) and 8(b) ITX
shall:
(1) furnish to MetPath and the underwriters,
if any, copies of all documents referred to in
Section d(9) below at least five business days
prior to the day they are proposed to be filed,
which documents will be subject to the reasonable
review of the MetPath and its underwriters, and in
the case of any Demand Request ITX will not file
any registration statement or any amendment or
supplement thereto or any prospectus (including in
each case such documents as are incorporated by
reference) to which MetPath and its underwriters,
if any, shall reasonably object;
(2) use its best reasonable efforts to have
such registration statement declared effective as
promptly as reasonably practicable, and shall
promptly notify MetPath, and such other persons as
MetPath designates, if any, and confirm such advice
in writing (i) when such registration statement
becomes effective, (ii) when any post-effective
amendment to such registration statement becomes
effective, (iii) of any request by the SEC for any
amendment or supplement to such registration
statement or any prospectus relating thereto or for
additional information and (iv ) of the happening
of any event which makes any statement made in the
registration statement, the prospectus, any
amendment or supplement thereto, or any document
incorporated therein by reference untrue or which
requires the making of any changes in the
registration statement, the prospectus or any
document incorporated therein by reference in order
to make the statements therein not misleading;
(3) upon the occurrence of any event
contemplated by paragraph d(2)(iv) below, prepare a
supplement or post-effective amendment to the
registration statement or the related prospectus or
any document incorporated therein by reference or
file any other required document so that, as
thereafter delivered to the purchasers of the
Registrable Securities, the prospectus will not
contain any untrue statement of a material fact or
omit to state any material fact necessary to make
the statements therein not misleading;
(4) use its best efforts to obtain the
withdrawal at the earliest possible time of any
order suspending or preventing the use of any
prospectus or suspending the effectiveness of the
registration statement or any amendment or
supplement thereto or suspending the qualification
of any Common Stock included in such registration
statement for sale in any jurisdiction;
(5) enter into such agreements (including any
underwriting agreements) and take all such other
actions as MetPath may reasonably require in order
to expedite or facilitate the disposition of such
Registrable Securities and in such connection,
whether or not an underwriting agreement is entered
into and whether or not the registration is an
underwritten registration (i) make such
representations and warranties to holders of such
Registrable Securities and the underwriters, if
any, in form, substance and scope as are
customarily made by issuers comparable to ITX to
underwriters in primary underwritten offerings;
(ii) obtain opinions of counsel to ITX and updates
thereof (which counsel and opinions (in form, scope
and substance) shall be reasonably satisfactory to
the managing underwriters, if any, and addressed to
each selling holder and the underwriters, if any,
covering the matters customarily covered in
opinions requested in underwritten offerings and
such other matters as may be reasonably requested
by such holders and underwriters); (iii) obtain
"cold comfort" letters and updates thereof from
ITX's independent certified public accountants
addressed to the selling holders of Registrable
Securities and the underwriters, if any, such
letters to be in customary form and covering such
matters of the type customarily covered in "cold
comfort" letters and as MetPath and underwriters,
if any, shall reasonably require; and (iv) deliver
such documents and certificates as may be requested
by MetPath and the managing underwriters, if any,
to evidence compliance with clause (i) above and
with any customary conditions contained in the
underwriting agreement or other agreement entered
into by MetPath, provided that if an underwriting
agreement is entered into, the same shall set forth
in full the indemnification provisions and
procedures of Section 9 hereof with respect to all
parties to be indemnified pursuant to said Section.
(6) otherwise use its best efforts to comply
with all applicable rules and regulations of the
SEC, and make generally available to its security
holders earnings statements satisfying the
provisions of Section 11(a) of the Securities Act
and Rule 158 thereunder, as soon as practicable but
in any event no later than 45 days after the end of
any 12-month period (or 90 days, if such period is
a fiscal year) (1) commencing at the end of any
fiscal quarter in which Registrable Securities are
sold to underwriters in a firm or best efforts
Underwritten Offering, or (2) if not sold to
underwriters in such an offering, beginning with
the first month of ITX's first fiscal quarter
commencing after the effective date of the
Registration Statement, which statements shall
cover said 12-month periods;
(7) make available for inspection by any
underwriters participating in any planned
disposition of Securities and any attorney,
accountant or other agent retained by MetPath or
underwriters, all financial and other records
reasonably necessary to permit such persons to
demonstrate that they have conducted a "reasonable
investigation," as that term is used in Section 11
of the Securities Act, of matters described in the
registration statement, and cause the appropriate
ITX officers to supply all such information
reasonably requested by MetPath, the underwriters
or their agents in connection therewith;
(8) use its best efforts to qualify, not
later than the effective date of such registration
statement, the Securities under such "blue sky" or
other state securities laws as MetPath may
reasonably request; provided, however, that neither
ITX nor IT shall be obligated to qualify as a
foreign corporation or as a dealer in securities or
to execute or file any general consent to service
of process under the laws of any such jurisdiction
where such company is not so subject.
(9) furnish to MetPath such number of copies
of the registration statement, each amendment
thereto, the prospectus included in each such
registration statement and each amendment thereto,
each amendment or supplement to any prospectus and
such other documents as MetPath may reasonably
request in order to facilitate the disposition of
the Securities;
(10) for a period of at least 120 days in the
case of an underwritten offering or 270 days in the
case of a shelf registration from the effective
date of such registration statement, use all
reasonable efforts to keep such registration
statement in effect and current and from time to
time to amend or supplement such registration
statement or the prospectus relating thereto to the
extent necessary to permit the completion within
said period, in compliance with the Securities Act,
of the sale or distribution of the Securities. If
at any time the SEC should institute or threaten to
institute any proceedings for the purpose of
issuing a stop order suspending the effectiveness
of any such registration statement, ITX will
promptly notify MetPath and will use all reasonable
efforts to prevent the issuance of any such stop
order or to obtain the withdrawal thereof as soon
as possible. ITX promptly will advise MetPath of
any order or communication of any public board or
body addressed to ITX suspending or threatening to
suspend the qualification of any of the Securities
for sale in any jurisdiction; and
(11) as to each registration statement
referred to in Sections 8(a) and 8(b), insofar as
the methods of distribution proposed to be used are
not reflected in the last prospectus filed by ITX
as part of the registration statement or pursuant
to Rule 424 under the Securities Act, MetPath will
provide ITX with a description of the method or
methods of distribution of Securities from time to
time contemplated by MetPath and ITX shall file any
and all amendments and supplements necessary to
include such description in the registration
statement.
(e) Conditions to the Obligations of ITX. ITX
shall be entitled to postpone, for up to 60 days, the
filing of any registration statement otherwise required
to be prepared and filed by it pursuant hereto if, at the
time it receives a Request, ITX would be required to
prepare any financial statements other than those it
customarily prepares or ITX determines in its reasonable
business judgment that such registration and offering
would interfere with any material financing, acquisition,
corporate reorganization or other material corporate
transaction or development involving ITX and promptly
gives MetPath written notice of such determination;
provided that in any such event, ITX shall use all
reasonable efforts to minimize the length of the
postponement. If ITX shall so postpone the filing of a
registration statement, MetPath shall have the right to
withdraw the Request by giving written notice to ITX
within 30 days after the receipt of the notice of
postponement and, in the event of such withdrawal, the
Request which was withdrawn shall not be deemed to have
been made. All Securities to be included in a
registration shall, at the request of ITX, at or prior to
the closing, convert or arrange for the conversion or
exercise of any such Securities into Common Stock of the
same class as is being registered by ITX or other
Holders. Anything in this Agreement to the contrary
notwithstanding, ITX shall have no obligation to arrange
for any registration of Registrable Securities for any
Person other than MetPath and/or one assignee of MetPath,
who shall have acquired such rights in a transaction
permitted pursuant to Section 7 of this Agreement and
agreed in writing to be bound by this Agreement, all
registration rights provided in this Agreement being
personal to and not assignable by MetPath, except as
stated immediately above; provided, however, an
Institutional Investor shall not be required to agree in
writing to be bound by the terms of Section 7 of this
Agreement to obtain registration of Registrable
Securities.
(f) Expenses of Registration. All expenses (other
than fees and disbursements of counsel for MetPath and
underwriting or brokerage commissions) incurred in
connection with all registrations pursuant to Sections
8(a) and 8(b) hereof and the "blue sky" qualifications
related thereto pursuant to Section 8(d)(3), including
without limitation all registration and qualification
fees, printers' and accounting fees, and fees and
disbursements of counsel for ITX, shall be borne by ITX;
provided, that if MetPath withdraws a Demand Request
pursuant to Section 8(a) hereof, MetPath and ITX shall
share equally all expenses otherwise payable by ITX under
this Section 8(f).
(g) Underwriting Requirements. ITX shall have the
right to select the underwriter or underwriters for all
offerings under Section 8 of this Agreement provided that
such underwriter is reasonably satisfactory to MetPath.
In connection with any offering pursuant to a Piggyback
Request, ITX shall not be required to register any Voting
Securities held by MetPath unless MetPath accepts the
terms of the underwriting required and then only in such
quantity as will not, in the written opinion of the
underwriters, exceed the maximum amount of Securities
that can be marketed at a price reasonably related to the
then current market price for such Securities, or to the
proposed offering price if no market price then exists
for the Securities, or otherwise materially and adversely
affect such offering.
9. Indemnification. In connection with any claim,
demand, action or proceeding arising out of any registration
pursuant to Section 8 of this Agreement only:
(a) Indemnification by ITX . ITX agrees to
indemnify and hold harmless, to the full extent permitted
by law, each holder of Registrable Securities, against
all losses, claims, damages, liabilities and expenses
(including reasonable attorney's fees and disbursements)
caused by (i) any violation of law by ITX in connection
with or any breach by ITX of its undertakings under
Section 8 or 9 of this Agreement or (ii) any untrue or
alleged untrue statement of a material fact contained in
any registration statement or any amendment or supplement
thereto, prospectus, preliminary prospectus or amendment
or supplement thereto, or any omission or alleged
omission of a material fact required to be stated therein
or necessary to make the statements therein not
misleading, except insofar as the same are caused by or
contained in any information furnished in writing to ITX
by such holder expressly for use therein or by such
holder's failure to deliver a copy of the registration
statement or prospectus or any amendment or supplement
thereto after ITX has furnished such holder with a
sufficient number of copies of the same. ITX will also
indemnify underwriters, selling brokers, dealer-managers
and similar securities industry professionals
participating in the distribution, their officers and
directors and each Person who controls such persons to
the same extent as provided above with respect to the
indemnification of the holders of Registrable Securities,
if requested.
(b) Indemnification by Holders of Registrable
Securities. In connection with the registration, each
holder of Registrable Securities will furnish to ITX in
writing such information and affidavits as ITX reasonably
requests in connection with any registration statement or
prospectus and agrees to indemnify and hold harmless, to
the full extent permitted by law, ITX, its directors and
officers and each Person who controls ITX against any
losses, claims, damages, liabilities and expenses
(including reasonable attorney's fees and disbursements)
resulting from any untrue statement of a material fact
contained in the registration statement, prospectus,
preliminary prospectus, amendment or supplement thereto,
or any omission of a material fact required to be stated
in the registration statement or prospectus or
preliminary prospectus necessary to make the statements
therein not misleading, to the extent, but only the
extent, that such untrue statement or omission is
contained in any information or affidavit so furnished in
writing by such holder to ITX specifically for inclusion
in such registration statement, prospectus, preliminary
prospectus, amendment or supplement thereto. ITX shall
be entitled to receive indemnities from underwriters,
selling brokers, dealer-managers and similar securities
industry professionals participating in the distribution,
to the same extent as provided above with respect to
information so furnished in writing by such Person
specifically for the inclusion in any prospectus or
registration statement.
(c) Conduct of Indemnification Proceedings. Any
Person entitled to indemnification hereunder will (i)
give prompt notice to the indemnifying party of any claim
with respect to which it seeks indemnification and (ii)
permit such indemnifying party to assume the defense of
such claims with counsel reasonably satisfactory to the
indemnified party, provided, however, that any Person
entitled to indemnification hereunder shall have the
right to employ separate counsel and to participate in
the defense of such claims, but the fees and expense of
such counsel shall be at the expense of such person
unless (a) the indemnifying party has agreed to pay such
fees or expenses, or (b) the indemnifying party shall
have failed to assume the defense of such claim and
employ counsel reasonably satisfactory to such Person, or
(c) in the reasonable judgment of any such person, based
upon advice of its counsel, a conflict of interest may
exist between such person and the indemnifying party with
respect to such claims (in which case, if the person
notifies the indemnifying party in writing that such
person elects to employ separate counsel at the expense
of the indemnifying party, the indemnifying party shall
not have the right to assume the defense of such claim on
behalf of such person). If such defense is not assumed
by the indemnifying party, the indemnifying party will
not be subject to any liability for any settlement made
by the indemnified party without its consent (but such
consent will not be unreasonably withheld). No
indemnifying party will be required to consent to entry
of any judgment or enter into any settlement which does
not include as an unconditional term thereof the giving
by the claimant or plaintiff to the indemnified party of
a release from all liability in respect to such claim or
litigation. An indemnifying party who is not entitled
to, or elects not to, assume the defense of a claim will
not be obligated to pay the fees and expenses of more
than one counsel for all parties indemnified by such
indemnifying party with respect to such claim, unless in
the reasonable judgment of any indemnified party a
conflict of interest may exist between such indemnified
party and any other of such indemnified parties with
respect to such claim, in which event the indemnifying
party shall be obligated to pay the fees and expenses of
one such additional counsel . In all events the
indemnifying party shall be obligated to pay only the
reasonable fees and charges of counsel for the
indemnified party for each party as to which a conflict
exists.
(d) Contribution. If for any reason the
indemnification provided for in Sections 9(a) and (b) is
unavailable to an indemnified party or insufficient to
hold it harmless as contemplated by Sections 9(a) and
(b), then the indemnifying party shall contribute to the
amount paid or payable by the indemnified party as a
result of such loss, claim, damage or liability in such
proportion as is appropriate to reflect the relative
fault of the indemnified party and the indemnifying
party, as well as any other relevant equitable
considerations.
(e) Survival of Indemnification Obligation. The
indemnifications provided for under this Agreement will
remain in full force and effect regardless of any
investigation made by or on behalf of the indemnified
party or the controlling Person of each indemnified party
and will survive the transfer of the Registrable
Securities.
10. Rule 144. In addition to its other obligations
hereunder, ITX shall file the reports required to be filed by it
under the Securities Act and the Exchange Act and the rules and
regulations adopted by the SEC thereunder (or, if ITX is not
required to file such reports, it will, upon the request of any
holder of Registrable Securities made after the Closing Date, make
publicly available other information so long as necessary to permit
sales pursuant to Rule 144 under the Securities Act), and it will
take such further action as any holder of the Registrable
Securities may reasonably request, all to the extent required from
time to time to enable such holder to sell ITX Common Stock without
registration under the Securities Act within the limitation of the
exemptions provided by (a) Rule 144 under the Securities Act, as
such Rule may be amended from time to time, or (b) any similar rule
or regulation hereafter adopted by the SEC. Upon the request of
any holder of Registrable Securities, ITX will deliver to such
holder a written statement as to whether it has complied with such
information and requirements.
11. Notices. All notices and communications hereunder
given by any party to any other party shall be in writing
(including by telex, confirmed in writing) and shall be deemed to
have been duly given when received if delivered in person or by
mail, first-class, postage and certified mail prepaid, and when
sent, if sent by telex, answerback received, addressed to the
respective parties hereto as follows:
If to ITX: International Technology Corporation
23456 Hawthorne Blvd.
Torrance, CA 90505
Attention: General Counsel
If to MetPath: MetPath, Inc.
One Malcolm Avenue
Teterboro, New Jersey 07608-1070
Attention: General Counsel
or to such other address as to either party as such party shall
designate by written notice to the other party hereto.
12. Indemnification and Limitation of Liability;
Remedies.
(a) Except with respect to those matters falling
with the scope of Section 9 or 12(b) hereof, or
constituting a violation of Sections 7 or 8 thereof, each
party shall be entitled to indemnification from the other
for violations of this Agreement to the extent and
according to the provisions of the Asset Transfer
Agreement and the amount of any deductibles with respect
to such indemnity obligations and any limitations of
liability provided therein shall be cumulated and
aggregated with all claims under this Agreement.
(b) MetPath agrees that money damages would not be
a sufficient remedy for a breach of Section 7 or 8 of
this Agreement and that ITX shall be entitled to
equitable relief, including injunction and specific
performance, in the event of any breach of said
provisions of this Agreement, in addition to all other
remedies available to ITX at law or in equity. MetPath
also agrees to defend, indemnify and hold harmless ITX,
its directors, officers, employees and agents from and
against all claims, demands, damages, judgments, fines,
penalties and causes of action whatsoever arising out of
or related to the breach or other failure to comply with
terms of Section 7 or 8 of this Agreement by itself
and/or Affiliates and assignees.
13. Representations, Warranties and Covenants to Survive
Closing. The representations, warranties and covenants made by
each of the parties hereto shall survive the Closing of this
Agreement.
14. Further Assurances. Upon request from time to time,
ITX and MetPath shall each execute and deliver all documents, take
all rightful oaths, and do all other acts that may be reasonably
necessary or desirable, to accomplish the intent and purposes of
this Agreement.
15. Governing Law. This Agreement shall be governed by
and construed in accordance with the laws of the State of Delaware.
16. Non-assignability. Except as expressly provided
herein, this Agreement shall not be assigned by either party hereto
except by operation of law without the express prior written
consents of the other parties hereto, and any attempted assignment
shall, without such consents, be null and void. Provided, however,
either party may assign its rights to any Affiliate which agrees in
writing to be bound by the provisions of this Agreement.
17. Captions; Exhibits. The captions appearing herein
are for the convenience of the parties only, and shall not be con-
strued to affect the meaning of the provisions of this Agreement.
All Exhibits referred to herein are annexed hereto and hereby made
a part of this Agreement, and any document or matter referenced in
any Exhibit shall be deemed referred to in every Exhibit.
18. Entire Agreement. This Agreement sets forth the
entire understanding of the parties hereto and supersedes any prior
agreements or understandings with respect to the subject matter of
this Agreement and no modifications or amendments to this Agreement
shall be binding on the parties unless in a writing by the party or
parties to be bound by such modifications or amendment. The
representations and warranties contained in this Agreement are in
lieu of all other representations and warranties, express or
implied, in fact or by law. The parties hereby acknowledge that
certain other agreements, including without limitation the Asset
Transfer Agreement, the Warrant, and the Shareholders' Agreement
are being executed and delivered in connection with this
Agreement.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this
Agreement to be duly executed as of the date first above written.
INTERNATIONAL TECHNOLOGY CORPORATION
By:
Title:
METPATH, INC.
By:
Title:
EXHIBIT 10(iii).2
DESCRIPTION OF SPECIAL TURN-A-ROUND PLAN
(FISCAL YEAR 1995 MANAGEMENT INCENTIVE PLAN)
The Management Incentive Plan for fiscal year 1995 ("Plan"),
a special one-year plan approved by the Board of Directors,
provides for two tiers of awards, a base Plan and an enhanced Plan.
Both tiers provide for a bonus payment based on the Company
achieving certain pre-determined levels of operating income
established in connection with the approval of the fiscal year 1995
budget. Payments may be made quarterly as well as annually.
In addition to minimum salary grade and length of service
requirements, participants must be nominated by their respective
divisional management and approved by the executive management of
the Company. Based on management's recommendation, the Committee
included approximately 85 employees in the base Plan and 75
employees in the enhanced Plan. The Plan is administered by the
Compensation Committee ("Committee") of the Board of Directors
which is authorized to interpret and amend the Plan and make awards
thereunder.
Base Plan
Under the base Plan, eligible participants can receive a
percentage of base salary at target levels of operating income
achieved by the Company ranging from 10% to 20% of base salary
("target level"). At higher levels of operating income,
participants can receive up to a maximum 15% to 30% of base salary
("maximum level").
In connection with the 1995 budget, operating income targets
have been established for each fiscal quarter. If operating income
for any quarter is between 95% and 100% of the pre-determined
target, a bonus for the quarter is paid at the close of the quarter
on a sliding scale between 50% and 100% of the applicable target
level bonus. If the operating income for the quarter exceeds the
target, a credit for the excess over the target is deferred into an
annual account out of which additional year-end bonus payments are
made in cash, or as otherwise determined by the Committee (up to
the maximum level), if, but only if, the Company meets 95% of its
annual operating income target.
Enhanced Plan
The enhanced Plan operates in a similar manner to the base
Plan with two exceptions. First, the bonus range is from 20% to
50% of base salary at the target level and from 40% to 100% of base
salary at the maximum level. Second, in the event the quarterly
operating income targets are exceeded, the credit for the excess
which is deferred into an annual account and paid out in the event
95% of the annual operating income target level is met, is paid in
the form of restricted stock of the Company (or in such other form
as the Committee may determine). The restricted stock will be
valued in relation to the current fair market value at the time of
issuance and will become vested only after three years of
additional employment with the Company.
EXHIBIT 10(iii).8
October 29, 1993
Mr. Larry M. Hart
1401 Lincoln Lane
Newport Beach, CA 92660
Dear Larry:
I am pleased to confirm our offer of employment with
International Technology Corporation as Senior Vice President and
Chief Operating Officer at our headquarters in Torrance,
California. Your annual salary will be $300,000 which is paid at
the rate of $12,500 semi-monthly.
You will be eligible to participate in the IT Bonus Plan for
FY 1994 with a target bonus of 50% salary. For FY 1994, and FY
1995, you will be guaranteed a minimum bonus award of $100,000 each
year, payable after the close of each fiscal year.
You will be eligible to participate in the Company's Long-
Term Incentive Compensation Plan at a current target level of 50%
of salary. This Plan is currently being restructured.
In addition to the above compensation elements, the Company
will also:
. Grant to you an option to purchase 180,000 shares of IT
common stock to vest in 25% increments over four years
with full vesting occurring on the fourth hire date
anniversary. The exercise price will be equal to the
fair market value of the stock on date of hire. The
Company will guarantee that you will be granted at least
30,000 additional stock options annually, commensurate
with your first, second, and third anniversaries with IT.
The Compensation Committee has the discretion to
accelerate the vesting of the options if an unfriendly
change of control were to occur.
. Enter into a rolling two year change of control Severance
Agreement with you similar to those entered into with the
other senior executives of the Company.
. Allow you to participate in the automobile allowance
program and receive an allowance of $4,350 per year. You
should note that the top four executives are currently
not taking this benefit.<PAGE>
Mr. Larry M. Hart
October 29, 1993
Page 2
. Pay dues and reimburse all business related expenses for
membership in a Country Club, such as Virginia Country
Club.
. Reimburse you for up to $4,000 per year for actual
expenses related to tax and financial counseling and tax
preparation.
As an employee of IT Corporation, you will be eligible to
receive a variety of standard benefits, including health and life
insurance, effective in accordance with plan provisions. Details
of these plans will be presented during your orientation. As an
officer of the Company, you will also be entitled to participate in
the Executive Medical Program providing 100% medical coverage with
up to $10,000.
Following one year of service, you will become a participant
in the IT Corporation Retirement Plan. The Plan provides for a
minimum guaranteed annual company contribution, subject to
statutory limits, of 4% of salary, and additional profit sharing
contributions at the discretion of the Board of Directors. The
Plan also contains a voluntary 401(k) feature. All Company
contributions vest at the rate of 20% per year after becoming
eligible for the Plan. Therefore, all benefits are fully vested
after six (6) years of service.
If you decide to relocate closer to the Torrance headquarters,
you will be reimbursed for the following:
. Closing costs on the sale of the Newport Beach house,
including but not limited to real estate commission.
. All moving expenses and other costs of relocation.
. Reimbursement of estimated federal taxes caused by the
above relocation reimbursements.
In addition, if you relocate to the South Bay area, and sell
your Newport Beach home, the Company will request the Compensation
Committee of the Board of Directors to authorize an interest free
relocation loan of up to $200,000, but not to exceed 25% of the
purchase price of the new home. Such a loan would be amortized
over ten (10) years with the Company forgiving five (5) percent of
the principal amount on December 31 of each year for ten (10) years
and five (5) percent of the loan would be repaid from annual bonus
awards. If no bonus award is made in a year, then the five (5)
percent principal payment will not be due until the end of the ten
(10) year loan period and shall not accrue interest until the end
of the ten (10) year period.<PAGE>
Mr. Larry M. Hart
October 29, 1993
Page 3
In the event you are terminated within your first two (2)
years of employment for other than "cause" you will receive
severance of no less than one year's base salary, and an amount
equal to your actual bonus for the most recently completed fiscal
year, or at least $100,000 if such termination occurs before
March 31, 1994. In addition, the stock options discussed earlier
in this letter, will become fully vested.
This offer is contingent upon successful completion of a
physical examination and drug screen, and providing adequate
documentation that you are legally entitled to work in the United
States.
We are looking forward to having you join International
Technology Corporation, and are confident that you will find this
a rewarding and exciting opportunity. I personally look forward to
working closely with you in the years ahead. Please call me if I
can be of any assistance.
Sincerely,
ROBERT B. SHEH
Robert B. Sheh
Accepted: LARRY M. HART
-----------------
Date: November 4, 1993
EXHIBIT 10(iii).9
PERSONAL INJURY SETTLEMENT AGREEMENT
====================================
This Personal Injury Settlement Agreement (hereafter the
"Agreement") is entered into by E. Brian Smith (hereafter
"Smith"), an individual, and International Technology
Corporation, a Delaware corporation, and its subsidiaries and
affiliates (collectively referred to as the "Company").
RECITALS:
==========
A. WHEREAS, although job performance is not an issue in
this controversy, a controversy has arisen between Smith on
the one hand and the Company on the other hand arising out of
the termination of Smith in his capacity as President and
Chief Operating Officer of the Company.
B. WHEREAS, Smith contends that the actions of the
Company in causing his termination as President of the Company
have caused him to suffer personal injury damages including
emotional distress.
C. WHEREAS, the Company denies Smith's claims and
asserts that it and all of its officers, directors,
representatives and employees have acted lawfully and in good
faith at all times as regards Smith, and
D. WHEREAS, the Company and Smith desire to bring all
controversies between them to a conclusion, settle their
differences, and avoid the cost of prosecution and defense of
all tort and workers' compensation claims for personal
injuries arising from or following notification by Smith of
his termination from the position of President and Chief
Operating Officer and of the Company's desire to terminate his
employment. For all these reasons, the parties make the
following Personal Injury Settlement Agreement ("Agreement").
NOW, THEREFORE, in consideration of the aforementioned
recitals and mutual covenants and conditions set forth below,
Smith and Company agree as follows:
AGREEMENT
=========
1. Personal Injury Claims. In full settlement of any
and all tort, and workers' compensation claims for personal
injuries of any kind which may have been brought by Smith,
based upon actions of the Company up to and including the
effective date of this Agreement, and that might have been
asserted in litigation against the Company or any other
individual or any other entity and further including all
claims for attorneys' fees and costs allocable or attributable
to being made whole for personal injuries to Smith, the
parties agree as follows:
a. The Company shall pay to Smith without
deduction or offset the gross amount of $150,000 forthwith
after this Agreement becomes effective in accordance with
paragraph 2.a. below. Of this amount, $50,000 is specifically
allocated to the workers' compensation claims of Smith.
b. On July 21, 1988, the Compensation Committee of
the Board of Directors approved an extension of an interest-
free loan to enable Smith to relocate his personal residence.
The loan is secured by a deed of trust on his personal
residence. The Company and Smith agreed that, commencing on
December 31, 1989 and on each December 31 thereafter, ten
percent of the original principal amount will be forgiven by
the Company, provided Smith is then employed by the Company.
As a part of this Agreement the prior Agreement is amended and
any amount remaining unpaid or unforgiven with regard to this
loan on the date of execution of this Agreement will be
forgiven by the Company and the deed of trust will be released
and reconveyed to Smith.
c. At such time as the Company shall no longer be
obligated to pay Smith's membership dues in the Big Canyon
Country Club, but in any event no earlier than January 1,
1994, Smith shall have the option either to direct the Company
to transfer to him the ownership of the Big Canyon Country
Club membership or, if Smith does not so direct, the Company
shall pay to Smith the sum of $102,000. If Smith elects to
direct the Company to transfer to him the ownership of the Big
Canyon Country Club membership, and if the average cost of
such memberships during the preceding quarter in which
memberships were sold exceeds $120,000, then as a condition of
the Company's obligation to transfer the ownership of the Big
Canyon Country Club membership to Smith, Smith shall pay to
the Company 85 percent of the difference between the average
cost referred to above and $120,000.
The Company and Smith agree that the
consideration set forth above and elsewhere in this Agreement
represents a fair and reasonable compromise of disputed
personal injury and workers' compensation claims. The
foregoing excludes payment for allegedly lost compensation on
any theory of pleading or litigation and said payment shall
not be construed in any way to represent exemplary and/or
punitive damages.
2. Payment Schedule.
Payments shall be made as follows:
a. With respect to paragraph 1.a. above, on the
eighth day following the date of signing this Agreement (the
"Effective Date"), unless this Agreement has been revoked by
Smith pursuant to Smith's Execution and Acknowledgment of this
Agreement, the Company shall make two payments to Smith: One
in the gross amount of $100,000 and one in the amount of
$50,000 pursuant to the Compromise and Release, if then
approved. If the Compromise and Release has not by then been
approved such payment shall be made as an advance under the
Compromise and Release. To effectuate this settlement, Smith
agrees to execute a separate Compromise and Release pursuant
to the procedures of the Workers' compensation Appeals Board
(the "Board"). The Compensation and Release shall be
essentially in the form set forth in Attachment A and
incorporated herein by this reference. In the event that the
Board does not approve the amounts agreed to be allocated as
set forth above, the amount approved by the Board shall be
allocated to Smith's workers' compensation claims, and the
remaining portion of the total sum shall be allocated to be
remaining personal injury and emotional distress claims
released hereunder. The Company and Smith agree to use their
best efforts to cause the Compromise and Release to be
approved by the Board.
b. The balance due on the loan described at
paragraph 1.b. above will be forgiven by the Company and the
deed of trust will be released and reconveyed to Smith as soon
as possible following the Effective Date.
c. Smith may exercise his option described in 1.c.
above during the time period described in 1.c. above provided,
however, that in the event Smith does not elect to have the
Big Canyon Country Club membership transferred to him within
thirty (30) days following the date the Company ceases to be
obligated to pay Smith's membership dues in such club, the
$102,000 payment to Smith in lieu of such transfer shall be
paid to Smith upon the expiration of such thirty (30) day
period, or earlier if Smith notifies the Company of his
selection of the payment option, but in any event not earlier
than January 31, 1994, and Smith shall at the time of payment
reconvey such club membership to Company or, at Company's
option, list such membership for sale and irrevocably assign
to the Company the proceeds of the sale.
There shall be no withholding or deduction from
any amount or transfer described in this paragraph 2, as such
payments are deemed by Smith to be excludable from federal
income tax under the provisions of Section 104(a)(1) of the
Internal Revenue Code.
3. Taxes. Responsibility for any and all tax payments
with respect to payments made pursuant to this Agreement shall
be borne by Smith and not by Company. In the event that any
taxing or governmental authority asserts, imposes, or inquires
into any tax liability, interest or penalties in connection
with this payment, the Company agrees to immediately notify
Smith, and agrees further to give Smith the first option to
defend, compromise, or otherwise deal with the issue.
Smith agrees to indemnify and hold the Company
harmless against any tax liability, interest, or penalties
hereon and any legal fees necessarily incurred by the Company
which may be attributable to the characterization of this
payment by the IRS, the taxing authorities of the State of
California or the courts for tax purposes. This indemnity,
however, shall not extend to any fines or penalties imposed
upon the Company due solely to its decision, if any, that no
Form 1099 need be filed in connection with this settlement or
the compensation paid hereunder.
4. Assignments. Smith represents, as a material
inducement of this Agreement, that he is authorized to enter
into this Agreement as to all claims and that he has not
assigned his right, title or interest in any such claims of
payments thereof to any person or entity.
5. Mutual Release. The parties hereby and forever
release and discharge each other and present parents,
subsidiaries, and related corporations, as well as the
successors, shareholders, officers and directors of corporate
shareholders, officers, directors, heirs, predecessors,
assigns, agents, employees, spouses, attorneys, and
representatives of each of them, past or present, from any and
all cause or causes of action, actions, judgments, liens,
indebtedness, damages, losses, claims, liabilities, and
demands of whatsoever kind or character, known or unknown,
suspected to exist or not suspected to exist, anticipated or
not anticipated, whether or not heretofore brought before any
state or federal court or before any state or federal agency
or other governmental entity, including, but not limited to,
(i) all tort claims for personal injuries relating to or
arising out of his removal as President of the Company, and
any conduct of the Company since his removal, and (ii) any
claims for attorneys' fees allegedly attributable to claims
for relief of personal injuries whether or not any of the tort
claims for personal injuries hereby released was heretofore
brought before any State of Federal agency or Court or any
other governmental entity. The mutual releases granted herein
are with respect to matters existing as of the effective date
of this Agreement.
6. Dismissal with Prejudice. Smith hereby instructs
his attorneys to take all necessary action to obtain a
dismissal with prejudice of any and all litigation between him
and Company or any other individual or entity released by him
in Paragraph 5 of this Personal Injury Settlement Agreement
that he may have commenced, whether referred to herein or not,
and Smith agrees to cooperate in making court filings and
taking other action to that end.
7. Confidentiality. The parties agree to hold the
provisions of this Personal Injury Settlement Agreement and
subject matter of the controversy resolved by this Personal
Injury Settlement Agreement confidential except as may be
required to satisfy the Company's public disclosure or
financial or accounting requirements on the following terms:
(a) Smith and Company agree not to make the terms of
this Personal Injury Settlement Agreement public except (i) as
absolutely required and only to the extent necessary to
prosecute or defend any future dispute between them; (ii) as
absolutely required an only to the extent necessary to secure
compliance with or enforcement of the terms of this Agreement;
(iii) upon lawful inquiry by governmental agencies, (iv) in
response to lawful discovery in litigation or lawful subpoena
or court order, or (v) as absolutely required by Smith in
connection with obtaining financing for development of any
business or with respect to obtaining employment. The party
receiving inquiry under subparagraph (iii) or discovery under
subparagraph (iv) or contemplating disclosure pursuant to
subparagraphs (i), (ii) or (v) shall notify the other party
reasonably in advance of any contemplated disclosure so that
such other party shall have an opportunity to appear and/or
assert his or its legitimate interest in the matter.
(b) Nothing in this Personal Injury Settlement Agreement
shall be construed to affect the obligations of the parties to
testify truthfully upon lawful inquiry by governmental
agencies; or in response to a lawful discovery request in
litigation, lawful subpoena, or court order.
8. Known and Unknown Claims. Smith and Company
understand and expressly agree that this Agreement extends to
all personal injury claims of every nature and kind, known or
unknown, suspected or unsuspected, direct or derivative,
vested or contingent, past, present or future, arising from or
attributable to any allegedly unlawful act or omission or
employment practice of Company or any of its past or present
affiliated entities of Smith or any of their respective past
or present officers, directors, agents, employees, attorneys
or representatives occurring prior to the date of this
Agreement, whether or not set forth in any claim, charge,
complaint, or pleading referred to herein, and that any and
all rights granted to Smith and Company under Section 1542 of
the California Code or Civil Code or any analogous federal or
state or local law or regulation are hereby expressly waived.
Said Section 1542 of the California Civil Code reads as
follows:
"A general release does not extend to claims which
the creditor does not know or suspect to exist in
his favor at the time of executing the release,
which if known by him must have materially affected
his settlement with the debtor."
9. Binding Effects. Smith and Company understand and
expressly agree that this Agreement shall bind and benefit the
officers, directors, representatives, agents, attorneys,
employees, successors and assigns of Company and its past or
present affiliated entities and the representatives,
attorneys, spouse, heirs and assigns of Smith.
10. Entire Agreement. Smith and Company each represent,
understand, and expressly agree that this Personal Injury
Settlement Agreement sets forth all of the agreements,
covenants and understandings of the parties with respect to
the personal injury and workers' compensation claims of Smith.
The parties are entering into a separate agreement with
respect to Smith's severance compensation, benefits, age
discrimination and other claims. No other agreements or
covenants will be binding upon the parties unless set forth in
writing signed by the parties or their authorized
representatives, and each of the parties is authorized to make
the representations and agreements herein set forth by or on
behalf of each such party.
11. Invalid Provisions. If any provision of this
Personal Injury Settlement Agreement or the application
thereof is held invalid, the invalidity shall not affect other
provisions or applications of this Personal Injury Settlement
Agreement which can be given effect without the invalid
provisions or applications and to this end the provisions of
this Personal Injury Settlement Agreement are declared to be
severable.
12. Recitals and Paragraph Headings. Each term of this
Agreement is contractual and not merely a recital. All
recitals are incorporated by reference into this Agreement.
Captions and paragraph headings are used herein for
convenience only, are no part of this Agreement and shall not
be used in interpreting or construing it.
13. Additional Documents. The parties will execute all
such further and additional documents and undertake all such
actions as shall be reasonable, convenient, necessary or
desirable to carry out the provisions of this Agreement.
14. Costs and Attorneys' Fees. Each party is to bear
its own costs and attorneys' fees incurred in connection with
the matters resolved by this Agreement and in connection with
the negotiation and preparation of this Agreement. However,
in the event of litigation or arbitration relating to or for
the enforcement of this Agreement, the prevailing party shall
be entitled to reasonable attorneys' fees and costs actually
incurred.
15. California Law. This Personal Injury Settlement
Agreement shall be governed by the laws of the State of
California, and shall be construed according to its fair
meaning and not for or against any party.
16. Counterparts. This Personal Injury Settlement
Agreement may be executed in any number of counterparts, each
of which shall be an original but all of which shall
constitute one and the same instrument.
17. Legal Advice. Each party has received independent
legal advice from his or its attorneys with respect to the
advisability of making the settlement provided for herein,
with respect to the advisability of executing this Agreement
and with respect to the meaning of California Civil Code
Section 1542.
18. Obligations of the Parties which Survive Smith's
Death. The following obligations of the either party, and no
others, shall survive Smith's death: paragraph 1, paragraph
2, paragraph 3, paragraph 5, paragraph 7, paragraph 8,
paragraph 9, paragraph 10, paragraph 11, paragraph 12,
paragraph 13, paragraph 14, paragraph 15, paragraph 18,
paragraph 19, paragraph 20, paragraph 21, paragraph 22, and
paragraph 23. 19. Arbitration. Except in connection
with an action by the Company or Smith for temporary or
preliminary injunctive or other such equitable relief pending
arbitration, any controversy, dispute, or claim between the
parties to this Agreement or any party released pursuant to
it, including any claim arising out of, in connection with, or
in relation to the interpretation, performance or breach of
this Agreement shall be settled, at the request of either
party, by arbitration conducted in Los Angeles, California, in
accordance with the then existing rules for commercial
arbitration of the American Arbitration Association, and
judgment upon any award rendered by the arbitrator(s) may be
entered by any state or federal court having jurisdiction
thereof. Unless the parties agree otherwise, the arbitrators
shall be members of the National Academy of Arbitrators or
retired judges of the Superior Court of the Court of Appeal.
The parties intend that this agreement to arbitrate be valid,
enforceable and irrevocable and that it provide the exclusive
remedy with respect to all disputes within its scopes.
20. Factual Investigation. Each party to this Agreement
has made such investigation of the facts pertaining to this
matters resolved by this Agreement and of all the matters
pertaining thereto as he or it deems necessary.
21. Later Discovered Facts. Each party hereto is aware
that he or it may hereafter discover claims or facts in
addition to or different from those he or it now knows or
believes to be true with respect to the matters resolved
herein. Nevertheless, it is the intention of each party to
fully, finally and forever settle and release all such matters
and all claims relative thereto which may exist or may
heretofore have existed between them.
22. Construction of Agreement. Each party has
cooperated in the drafting and preparation of this Agreement,
and, accordingly, in any construction or interpretation of
this Agreement, the same shall not be construed against any
party by reason of the source of drafting.
23. No Admissions. This Agreement effects the
settlement of claims which are denied, disputed and/or
contested and nothing contained herein shall be construed as
an admission by any party hereto of any liability of any kind
to any other party. Each of the parties hereto denies any
liability in connection with any claim and intends merely to
avoid the uncertainties and costs of litigation and buy his or
its peace.
24. Smith and Company's Understanding.
THE PARTIES TO THIS AGREEMENT FURTHER STATE THAT THEY
HAVE CAREFULLY READ THIS AGREEMENT AND THAT IT HAS BEEN FULLY
EXPLAINED TO THEM BY THEIR ATTORNEYS AND THAT THEY FULLY
UNDERSTAND ITS FINAL AND BINDING EFFECT; THAT THE ONLY
PROMISES MADE TO THEM TO SIGN THE AGREEMENT ARE THOSE STATED
ABOVE, AND THAT THEY ARE SIGNING THIS AGREEMENT VOLUNTARILY.
25. Board Approvals. The Company represents that this
Agreement has been approved by its Board of Directors by
resolution adopted by a majority of its directors.
26. Effective Date of Agreement. This Agreement shall
not become effective, and the Company's obligations shall not
arise, until Smith's period to revoke has expired without
Smith's having revoked this Agreement. A revocation of
Smith's Separation Agreement shall operate as a revocation of
this Agreement and vice versa.
<PAGE>
EXECUTION AND ACKNOWLEDGMENT BY E. BRIAN SMITH
==============================================
I received this Personal Injury Settlement Agreement on
October , 1993. I understand that I have had twenty-one
(21) days thereafter within which to consider this Agreement
with my legal counsel. I freely choose to sign this Personal
Injury Settlement Agreement on October , 1993. I
understand that I will have seven (7) days thereafter within
which to revoke my acceptance of this Personal Injury
Settlement Agreement and that the Personal Injury Settlement
Agreement shall not be effective under the expiration of that
seven (7) day period. Executed at ,
California, this ___ day of October, 1993.
E. BRIAN SMITH
EXECUTION AND ACKNOWLEDGMENT BY INTERNATIONAL TECHNOLOGY
CORPORATION
==============================================================
Dated: October , 1993
At: Torrance, California
INTERNATIONAL TECHNOLOGY CORPORATION
By:
Murray Hutchison
Its: Chairman of the Board
APPROVED AS TO FORM AND SUBSTANCE:
Date: October , 1993
Robert Ridley, Attorney for
E. Brian Smith
Date: October , 1993 ____________________
James N. Adler, Attorney
for International
Technology Corporation
<PAGE>
ADDITIONAL CONSIDERATION
========================
In order to induce International Technology Corporation
(the "Company") to enter into the foregoing Personal Injury
Settlement Agreement, I agree to forever release and discharge
the Company and the past and present parent, subsidiary, and
related corporations of the Company as well as the successors,
shareholders, officers and directors of corporate
shareholders, officers, directors, heirs, predecessors,
assigns, agents, employees, attorneys and representatives of
each of them, past or present, from any and all cause or
causes of action, actions, judgments, liens, indebtedness,
damages, losses, claims, liabilities and demands of whatsoever
kind or character, known or unknown, suspected to exist or not
suspected to exist or not suspected to exist, anticipated or
not anticipated, whether or not heretofore brought before any
state or federal court or before any state or federal agency
or other governmental entity, including without limitation on
the generality of the foregoing, any and all claims, demands
or causes of action attributable to, connected with, or
incidental to the employment of my husband by the Company, the
separation of that employment, and any dealings between the
parties concerning my husband's employment or any other matter
existing prior to the date of execution of this Agreement,
excepting only those obligations to be performed hereunder.
This release is intended to apply to any and all claims (other
than claims based on common law contract theories or state or
federal statutory or constitutional law theories) based on
tort theories involving personal injury.
Executed this ____ day of October ___, 1993.
LaVonne Smith
<PAGE>
SEPARATION AGREEMENT
====================
This Separation Agreement (hereafter the "Agreement"), is
entered into by E. Brian Smith (hereinafter "Smith"), an
individual, and International Technology Corporation, a
Delaware corporation, and its subsidiaries and affiliates
(collectively referred to as the "Company").
RECITALS
========
E. WHEREAS, Smith has been employed by the Company, has
held the position of President and Chief Operating Officer of
the Company principally supervising the Company's daily
operations, and has served as an officer and director of
numerous of its subsidiaries;
F. WHEREAS, effective July 28, 1992, Smith has decided
to resign his position as President of the Company and all of
his other officer and director positions with the Company and
all of its subsidiaries;
G. WHEREAS, Smith and the Company wish to finally and
forever resolve all matters between them relative to Smith's
employment (Smith's job performance is not an issue in dispute
between Smith and Company) and his entitlement to severance
pay and other additional forms of compensation and benefits,
and to provide, for the termination of the employment
relationships;
NOW, THEREFORE, in consideration of the aforementioned
recitals and the mutual covenants and conditions set forth
below and in full settlement of any and all claims for
allegedly lost compensation including, without limitation, all
claims for back pay, severance pay, incentive compensation,
accrued vacation pay, continuation of health or other benefits
or any other payment in the nature of compensation including
payments for violation of any law precluding discrimination on
the basis of age allegedly attributable to Smith's employment
by the Company, and any and all other claims (other than tort
claims involving personal injuries or claims under workers
compensation which are the subject of a separate agreement)
which were or could have been raised by either party prior to
the date of this Agreement, Smith and the Company hereby agree
as follows:
AGREEMENT
=========
1. Resignation and Termination of Employment. Smith
has resigned as an officer and director of the Company and
further has resigned all positions with any subsidiary or
related company of the Company (including membership of the
Board of any subsidiary or related companies or any committees
thereof) effective July 28, 1992 and the Company has accepted
Smith's resignations. Smith agrees to execute such documents
as the Company may reasonably request in order to document
such resignations. Smith's employment by the Company will
terminate no later than October 15, 1994. Smith, however, may
resign at any time prior thereto.
2. Salary, Vacation and Other Payments.
a. Whether or not Smith resigns from employment
prior thereto, the Company will continue to pay to Smith the
gross amount of $14,583.33, semimonthly, less applicable
deductions, through and including a final payment on October
15, 1994 of $14,583.33.
b. Smith acknowledges that he has received payment
for all accrued vacation and that since July 31, 1992, he has
not, and will not, accrue further vacation.
3. Benefits. Smith shall continue to be eligible to
participate on the same basis as other senior executive
employees in the following group benefits.
a. Group Medical Insurance. The Company's group
medical insurance plan and the corporate executive medical
plan.
b. Group Life Insurance. Ownership of the policy
shall be transferred to Smith upon the earlier of the dates
specified in paragraph 3.e.
c. Accidental Death and Dismemberment.
d. Long Term Disability Insurance.
e. In each case, the Company's obligation to
continue to pay the Company's share of the cost of these
benefits (subparagraphs a. b. c. and d.) shall cease upon
Smith's obtaining employment with another employer or October
15, 1994, whichever shall be sooner.
f. IT Corporation Retirement Plan. So long as he
remains an employee of the Company, Smith may continue to
participate in the 401(k) portion of the Company's retirement
plan. Commencing with the plan year beginning in 1994 with
respect to the Company's retirement plan, no contribution by
the Company shall be allocated to Smith's account. To
facilitate Smith's continued participation in the 401(k)
portion of the retirement plan, Smith, by executing this
Agreement, is waiving any right which he may have to have the
Company make a contribution on his behalf to any portion of
the retirement plan with regard to any plan year beginning in
1994 and thereafter. Smith understands, however, that his
entitlement to participate in the Company's contribution with
regard to the plan year beginning in 1993 will be otherwise
controlled by the plan.
g. At the time Smith becomes 65 years of age, if
there is a program of Company sponsored or provided medical,
death or similar benefits then generally available to retirees
and their spouses the Company will then make such program
available to Smith and his spouse on the same basis, and
subject to the same underwriting and other qualifications
applicable to such plans, as are generally available to other
retirees. Additionally, qualification requirements regarding
length of service will be waived. In order to take advantage
of this provision Smith must advise the Company in writing
during the 30 day period which commences 60 days prior to his
65th birthday of his desire to participate in any such benefit
plan unless the benefit plan itself specifies a longer notice
period.
4. Stock Options. The parties acknowledge that Smith
has unexercised options covering 52,930 shares of common stock
of the Company granted on May 18, 1989, 36,000 shares of
common stock of the Company granted on November 14, 1991, and
15,000 shares of common stock of the Company granted on May 7,
1992 under the Company's 1983 Stock Incentive Plan (the
"Plan"). Upon the termination of Smith's employment, all said
options shall be fully vested in Smith notwithstanding any
terms to the contrary in the stock option agreements
evidencing said options; provided, however, the performance
criteria of May 7, 1992, options must be met as a condition of
their exercise. Smith shall have the right to exercise the
options in accordance with the terms of the applicable Stock
Option Agreements, as an employee until his resignation or
January 31, 1995, whichever is later, and thereafter as if
Smith had retired from the Company. In the event that the
performance requirements of the May 7, 1992 stock option
agreements are generally amended or deleted by the Company,
the performance requirements of Smith's May 7, 1992 stock
option agreement will be similarly amended or deleted so that
the performance requirements in Smith's May 7, 1992 stock
option agreement will be no less favorable than those
generally applicable to other officers of the Company with
regard to their May 7, 1992 stock option agreements as
amended. The options may be exercised by Smith delivering to
the Company shares of Common Stock of the Company owned by
him, in accordance with the terms of the Plan and the policies
of the Stock Option Committee administering the Plan. Smith
agrees to pay any requisite withholding by check at the time
of exercise.
5. Club Memberships. The Company will reimburse Smith,
so long as he remains a member in good standing, for the
normal monthly dues of Big Canyon Country Club, The California
Club and the Bankers Club, provided such payments shall not
extend past October 15, 1994, or the date when Smith becomes
employed by another employer, whichever is earlier, and Smith
must pay all other charges, assessments, and expenses
associated with such clubs. The Company shall continue to own
the membership in Big Canyon Country Club, and Smith shall
reconvey such membership to the Company on or before October
15, 1994 in accordance with a separate agreement between the
parties unless Smith earlier exercises his option to receive
such membership under any separate agreement.
6. Office and Secretarial Support. The Company will
continue, as it has since July 29, 1992, to provide Smith with
the office he occupies on the effective date, together with
secretarial support services as necessary until such time as
he obtains employment by another employer or until October 15,
1994, whichever is earlier. Here, and elsewhere in this
Agreement, Smith shall be deemed to have secured other
employment if he becomes substantially employed or is
substantially engaged by any other corporation or business
entity including any such corporation or business entity as to
which Smith is a principal, substantial investor, substantial
stockholder or partner. Smith shall be deemed to be
substantially employed or substantially engaged by any other
corporation or business entity as soon as he is associated
with any business and deriving income therefrom (other than
occasional payments based upon hourly rated consulting
services) which business has significant financing in place or
which has significant financial resources and which is
actively seeking customers or clients for its products or
services or potential products or potential services. In the
event the office being occupied by Smith becomes unavailable
either because the Company closed its Irvine Office or because
it legitimately needs such office for its other business
needs, it shall provide Smith with a similar office and
secretarial support service at the Company's executive office
or at a different geographical comparable location in southern
California. The Company shall continue to provide Smith with
such office supplies as he shall reasonably require and as are
consistent with support provided from July 28, 1992 to the
date of this Agreement.
7. Expenses. During the period July 26, 1993 through
the conclusion of Smith's employment with the Company or
October 15, 1994, whichever is earlier, the Company shall
reimburse Smith, up to a maximum of $25,000 for his reasonable
expenses. Any claim for fees or unreimbursed expenses for the
period prior to July 26, 1993, are released as part of the
settlement reflected by this Agreement, provided, however, the
Company shall reimburse Smith, without regard to the
limitations contained in this paragraph, for the monthly club
membership dues referenced in paragraph 5 both with regard to
the period prior to July 26, 1993 and thereafter in accordance
with the provisions of paragraph 5. Any expenses incurred in
connection with Smith's rendition of consulting services
pursuant to the provisions of paragraph 8 hereof shall be in
addition to such $25,000 maximum. All reimbursements to Smith
pursuant to this paragraph 7 or paragraph 8 shall be made
promptly upon properly documented request in accordance with
the Company's normal practice.
8. Consulting Services.
a. Smith agrees that so long as Smith is receiving
payments under paragraph 2.a. of this Agreement he will, upon
reasonable notice from the Company, provide consulting
services to the Company at no charge other than reimbursement
of reasonable expenses; provided such services do not exceed
an aggregate of 200 hours.
b. Upon the expiration of Smith's consulting
obligations pursuant to subparagraph a. above, Smith agrees to
consult with the Company at such times as the Company shall
reasonably request and the Company shall pay Smith a mutually
agreeable consulting fee.
c. Smith shall be reimbursed for all reasonable
out of pocket expenses incurred in connection with any
consulting services rendered pursuant to this paragraph 8.
Reasonable expenses shall be of the same type, class, and
nature as previously provided in accordance with the Company's
policy for Smith's previous position as President and Chief
Operating Officer.
d. During the period of any consulting as provided
in this paragraph 8, Smith shall be:
i. Covered by business and accident travel
insurance which is either the same or reasonably
equivalent to that provided by the Company for the
benefit of its senior executives, and
ii. To the extent that Smith is not otherwise
covered by any insurance policy maintained by the
Company, the Company shall be responsible for providing a
defense to, and indemnifying, Smith, to the same extent
and under the same conditions as if he were an officer of
the Company, with respect to any litigation including any
third party litigation or other proceeding arising from
his lawful activities on behalf of the Company as
President or in any other previous capacity and the
discharge of his duties as an employee or a consultant to
the Company as may be requested by the Company.
9. Sole Entitlement. Smith agrees that except for
payments to settle his claims for personal injuries, his sole
entitlement to compensation, payments of any kind, monetary
and/or non-monetary benefits and/or perquisites with respect
to his employment with, his services rendered to and all other
matters between Smith and the Company and the subsidiary or
affiliated corporations of the Company, is as expressly set
forth in the Agreement. It is expressly agreed that the
Severance Benefit Agreement dated February 22, 1988 by and
between Smith and Company is hereby terminated effective as of
the effective date and is of no force and effect whatsoever.
10. Releases by Smith. Except for his claims against
the company for damages suffered by reason of personal
injuries, which claims are the subject of a separate agreement
and release, Smith does hereby and forever release and
discharge the Company and the past and present parent,
subsidiary and affiliated corporations of the Company as well
as the successors, shareholders, officers and directors of
corporate shareholders, officers, directors, heirs,
predecessors, assigns, agents, employees, attorneys and
representatives of each of them, past or present, from any and
all cause or causes of action, actions, judgments, liens,
indebtedness, damages, losses, claims, liabilities, and demand
of whatsoever kind or character, known or unknown, suspected
to exist or not suspected to exist, anticipated or not
anticipated, whether or not heretofore brought before any
state or federal court or before any state or federal agency
or other governmental entity, whether statutory or common law,
including without limitation on the generality of the
foregoing, any and all claims, demands or causes of action
attributable to, connected with, or incidental to the
employment of Smith by the Company, the separation of that
employment and any dealings between the parties concerning
Smith's employment or any other matter existing prior to the
date of execution of this Agreement, excepting only those
personal injury claims as noted above and obligations to be
performed hereunder. This release is intended to apply to any
claims arising from federal, state or local laws including
those which prohibit discrimination on the basis of race,
national origin, sex, religion, age, marital status,
pregnancy, handicap, perceived handicap, ancestry, sexual
orientation, family or personal leave or any other form of
discrimination, any common law claims of any kind whatever,
any claims for severance pay, sick leave, family leave,
vacation, life insurance, bonuses, incentive compensation,
health insurance, disability or medical insurance or any other
fringe benefit or compensation, and all rights and claims
arising under the Employee Retirement Income Security Act of
1974 ("ERISA"), or pertaining to ERISA regulated benefits.
You understand that by agreeing to this settlement
agreement you are specifically waiving the benefits of the
provisions of Section 1542 of the Civil Code of the State of
California and any other analogous state or federal law or
regulation. Said Section 1542 of the California Civil Code
reads as follows:
"A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH
THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN
HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE,
WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED
HIS SETTLEMENT WITH THE DEBTOR."
You also agree as part of this settlement to cooperate
with WPH in connection with any issues which may arise as to
which you are particularly knowledgeable as a result of your
employment by WPH by making yourself reasonably available to
consult with WPH. This agreement to cooperate shall also
extend to our attorneys in the event of any litigation
involving WPH. With respect to any such litigations, in the
event you are named as a defendant by any party thereto, you
shall be entitled to be indemnified against any third party
claims and will be provided with the costs of defending any
such litigation to the same extent as if you were still
employed by WPH.
In entering into this settlement agreement each of us is
representing that we have made such investigation of the facts
pertaining to the matters resolved by this Agreement and of
all the matters pertaining thereto as he or it deems necessary
and that each of us hereto is aware that he or it may
hereafter discover claims or facts in addition to or different
from those he or it now knows or believes to be true with
respect to the matters resolved herein. Nevertheless, it is
the intention of each party to fully, finally and forever
settle and release all such matters and all claims relative
thereto which may exist or may heretofore have existed between
them.
The waiver of the federal Age Discrimination in the
Employment Act is included in this agreement is given only in
exchange for consideration in addition to anything of value to
which you are already entitled. The waiver set forth below
does not waive rights or claims which may arise after the date
of execution of this Agreement. You acknowledge that (i) this
entire agreement is written in a manner calculated to be
understood by you, (ii) that by reviewing this Agreement or
drafts thereof you have been advised in writing to consult
with an attorney before executing this agreement, and (iii)
you were given a period of 21 days within which to consider
the Agreement, and (iv) to the extent you execute this
agreement before the expiration of the 21 day period, you do
so knowingly and voluntarily. You shall have the right to
cancel and revoke this agreement during a period of 7 days
following your execution of the agreement and this agreement
shall not become effective, and no money shall be paid
hereunder until the expiration of such 7-day period. The 7-
day period of revocation shall commence upon the date of your
execution of this Agreement. In order to revoke this
agreement, you shall deliver to WPH, prior to the expiration
of said 7-day period, a written notice of cancellation. This
Agreement shall become effective on the eighth day after your
execution, provided there has been no revocation pursuant to
this paragraph.
In addition to the release set forth in paragraph 10
hereof, Smith hereby voluntarily and knowingly waives all
rights or claims arising under the Federal Age Discrimination
in Employment Act.
11. Obligations Which Survive Smith's Death. The
following obligations of either Party, and no others, shall
survive Smith's death: Paragraph 2.a., paragraph 3,
paragraph 4, paragraphs 7, 8, 9, 10, 11, 12, 13, 15, 16, 20,
23, 24, 25, 26, 27, 29, 30, 32, 34, 36 and 38. Any payments
pursuant to these obligations shall be made to Smith's wife,
LaVonne Smith, or to his estate in the event she shall no
longer be living.
12. Smith Sole Owner. It is understood and agreed by
the parties that Smith may acquire or otherwise initiate his
own company while he is still employed by the Company. Any
and all activity of Smith to this purpose shall be exclusively
for Smith's benefit and the Company shall have no right, title
and interest in and to any such company acquired or initiated
by Smith or any of its assets, claims or other property, real
or personal. Smith shall be the sole owner of any such
company or companies so acquired or initiated by him. The
provisions of this paragraph, however, shall not be
interpreted to relieve Smith of his obligations pursuant to
paragraph 14 of the Agreement or of any other obligations
arising hereunder or under any separate written agreement.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement on the day and year first written above.
EXECUTION AND ACKNOWLEDGMENT BY E. BRIAN SMITH
I received this Separation Agreement on October ___,
1993. I understand that I have twenty-one (21) days
thereafter within which to consider this Agreement with my
legal counsel. I freely choose to sign this separation on
October ____, 1993. I understand that I will have seven (7)
days thereafter within which to revoke my acceptance of this
Separation Agreement and that the Separation Agreement shall
not be effective under the expiration of that seven (7) day
period. Executed at ______________________________,
California, this _____ day of October, 1993.
E. BRIAN SMITH
EXECUTION AND ACKNOWLEDGMENT BY INTERNATIONAL TECHNOLOGY
CORPORATION
=========================================================
Dated: October ___, 1993
At: Torrance, California
INTERNATIONAL TECHNOLOGY CORPORATION
By:
Murray Hutchison
Its: Chairman of the Board
APPROVED AS TO FORM AND SUBSTANCE:
Date: October ___, 1993 ____________________________
Robert Ridley, Attorney for
E. Brian Smith
Date: October ___, 1993 ____________________________
James N. Adler, Attorney
for International Technology
Corporation<PAGE>
ADDITIONAL CONSIDERATION
========================
In order to induce International Technology Corporation
(the "Company") to enter into the foregoing Separation
Agreement, I agree to forever release and discharge the
Company and the past and present parent, subsidiary, and
related corporations of the Company as well as the successors,
shareholders, officers and directors of corporate
shareholders, officers, directors, heirs, predecessors,
assigns, agents, employees, attorneys and representatives of
each of them, past or present, from any and all cause or
causes of action, actions, judgments, liens, indebtedness,
damages, losses, claims, liabilities and demands of whatsoever
kind or character, known or unknown, suspected to exist or not
suspected to exist or not suspected to exist, anticipated or
not anticipated, whether or not heretofore brought before any
state or federal court or before any state or federal agency
or other governmental entity, including without limitation on
the generality of the foregoing, any and all claims, demands
or causes of action attributable to, connected with, or
incidental to the employment of my husband by the Company, the
separation of that employment, and any dealings between the
parties concerning my husband's employment or any other matter
existing prior to the date of execution of this Agreement,
excepting only those obligations to be performed hereunder.
This release is intended to apply to any and all claims (other
than personal injury claims based on tort theories) based on
common law contract theories or state or federal statutory or
constitutional law theories.
Executed this ____ day of October ___, 1993.
LaVonne Smith
RETIREMENT AGREEMENT
====================
This Retirement Agreement (hereafter the "Agreement"), is
entered into by Murray Hutchison (hereinafter "Hutchison"), an
individual, and International Technology Corporation, a
Delaware corporation, and its subsidiaries and affiliates
(collectively referred to as the "Company").
RECITALS
========
A. WHEREAS, Hutchison was the founder of the present
environmental managerial company, has held the position of
Chairman of the Board and Chief Executive Officer of the
Company, and has served as an officer and director of numerous
of its subsidiaries;
B. WHEREAS, effective April 1, 1994 Hutchison desires
to retire as an employee of the Company and to relinquish all
of his officer positions with the Company and its
subsidiaries; and
C. WHEREAS, Hutchison and the Company wish to finally
and forever resolve all matters between them relative to
Hutchison's employment and his entitlement to retirement pay
and other additional forms of compensation and benefits, and
to provide for the termination of the employment relationship;
NOW, THEREFORE, in consideration of the aforementioned
recitals and the mutual covenants and conditions set forth
below, Hutchison and the Company hereby agree as follows:
AGREEMENT
=========
1. Retirement and Termination of Employment. Hutchison
will retire as an employee and officer of the Company and
will, effective April 1, 1994, resign all of his officer
positions with the Company and any subsidiary or related
company of the Company. Hutchison agrees to execute such
documents as the Company may reasonably request in order to
document such retirement and resignations. Hutchison's
employment by the Company will terminate effective April 1,
1994.
2. Retirement Pay
a. The Company shall pay to Hutchison the sum of
$25,000 per month for the remainder of his life or ten years
certain. In the event of Hutchison's death prior to the ten
year certain, the balance remaining shall be payable to
Hutchison's estate under the same terms and conditions
applicable. Such payments shall be made semi-monthly or
monthly at the option of the Company. Such payments shall be
made on or before the first of each month with the first
payment due April 1 and on or before the fifteenth of each
month if semi-monthly payments are made.
b. No deductions shall be made from this amount
except as required by law. This amount shall be paid without
regard to any sums or payments due or available to Hutchison
as a result of his existing IT Pension and Profit Sharing
account with the Company, which both parties agree is fully
vested in Hutchison. No adjustment in this amount shall be
made for normal changes in the cost of living index.
3. Executive Medical Reimbursement Plan. For the life
of Hutchison and his wife Victoria Hutchison, the Company
shall provide to Hutchison and his wife medical benefits no
less favorable to Hutchison and/or his wife than those enjoyed
by Hutchison on April 1, 1994. At age 65 when Medicare is
applicable the Company's contribution shall become secondary
and the Company shall make up the difference between Medicare
and the Company's medical benefits provided under the
Executive Medical Reimbursement Plan. If current legislation
or other circumstances shall preclude the Company from being
able to continue to provide this benefit, the parties agree
that an equitable adjustment will be made in an attempt to put
Hutchison and his wife in the position intended by this
provision.
4. Group Life Insurance. The Company shall provide
Hutchison with life insurance in the amount of $1,000,000,
payable to the beneficiary of Hutchison's choice. If the
Company elects to provide this insurance through other than
term insurance, any cash values shall be the property of the
Company. Hutchison shall have the right to increase the
amount of life insurance but shall be personally responsible
for the cost in excess of the $1,000,000 policy if it cannot
be granted under the present Company flex plan.
5. Other Fringe Benefits.
a. Automobile Allowance. The Company shall
continue to provide Hutchison through age 65 with a monthly
car allowance which shall be not less than that payable to any
officer of the Company and shall in any event be not less from
that being received to Hutchison immediately prior to his
retirement.
b. Tax and Financial Planning Services. The
Company shall continue to provide Hutchison during his life
with reasonable tax and financial planning services consistent
with such services provided prior to his retirement.
6. Stock Options. The parties acknowledge that
Hutchison has unexercised options covering 90,810 shares of
common stock of the Company granted on May 18, 1989, 54,000
shares of common stock of the Company granted on November 14,
1991, 20,000 shares of common stock of the Company granted on
May 7, 1992 under the Company's 1983 Stock Incentive Plan (the
"Plan"), and 50,000 shares of the common stock of the Company
granted June 3, 1993. Upon Hutchison's retirement, all said
options shall be fully vested in Hutchison notwithstanding any
terms to the contrary in the stock option agreements
evidencing said options; provided, however, the performance
criteria of May 7, 1992, options must be met as a condition of
their exercise. Hutchison shall have the right to exercise
the options in accordance with the terms of the applicable
Stock Option Agreements. In the event that the performance
requirements of the May 7, 1992 stock option agreements are
generally amended or deleted by the Company, the performance
requirements of Hutchison's May 7, 1992 stock option agreement
will be similarly amended or deleted so that the performance
requirements in Hutchison's May 7, 1992 stock option agreement
will be no less favorable than those generally applicable to
other officers of the Company with regard to their May 7, 1992
stock option agreements as amended. The options may be
exercised by Hutchison delivering to the Company shares of
Common Stock of the Company owned by him, in accordance with
the terms of the Plan and the policies of the Stock Option
Committee administering the Plan.
7. Office and Secretarial Support. The Company agrees
to provide Hutchison with an office together with secretarial
support services as reasonably necessary during his life until
he reaches the age of 65. The office and secretarial support
shall be provided to Hutchison at the office of the Company
nearest to his then residence or an equivalent office near his
residence. Hutchison shall be allowed to move his present
furniture to the new office provided.
8. Continuing Obligations. Hutchison acknowledges that
he is obligated by contract and by operation of law to
maintain the confidentiality of the Company's trade secrets
and other confidential information not publicly known, and
covenants and agrees that he shall not use or divulge,
disclose, or communicate to any other person, firm, or
corporation, any of the Company's trade secrets or
confidential information except as disclosure shall be
compelled by judicial process.
9. Legal Advice. Each party has had the opportunity to
receive independent legal advice from his or its attorneys
with respect to the advisability of making the settlement
provided for herein, with respect to the advisability of
executing this Agreement and with respect to the meaning of
California Civil Code Section 1542.
10. Confidentiality. This Agreement and its provisions
are intended to be confidential. Accordingly, except as may
be required to satisfy the Company's public disclosure or
financial or accounting requirements or as may be compelled by
court order, neither the Company nor Hutchison shall disclose
or publicize to any person, firm or corporation the terms of
this Agreement without the consent of the other party. As
reasonably necessary, Hutchison may discuss this Agreement
with his wife, attorney, financial advisor, tax advisor,
benefit advisor or compensation advisor and Company may
discuss this Agreement with its attorneys, officers, directors
and managers provided, however, that each agrees to be bound
by the terms of this paragraph to keep the information
confidential.
11. Recitals and Paragraph Headings. Each term of this
Agreement is contractual and not merely a recital. All
recitals are incorporated by reference into this Agreement.
Captions and paragraph headings are used herein for
convenience only, are no part of this Agreement and shall not
be used in interpreting or construing it.
12. Additional Documents. The parties will execute all
such further and additional documents and undertake all such
other actions as shall be reasonable, convenient, necessary or
desirable to carry out the provisions of this Agreement.
13. California Law. This Agreement was negotiated,
executed and delivered within the State of California, and the
rights and obligations of the parties hereto shall be
construed and enforced in accordance with and governed by the
laws of the State of California. Should any litigation arise
concerning this Agreement, it will be filed only in a court in
the County of Los Angeles, State of California, and then only
if consistent with the parties' obligations under paragraph 21
hereof with regard to arbitration.
14. Entire Agreement. This Agreement constitutes a
single integrated contract expressing the entire agreement of
the parties with respect to the subject matter hereof and
supersedes all prior and contemporaneous oral and written
agreements and discussions with respect to the subject matter
hereof. There are no other agreements, written or oral,
express or implied, between the parties hereto, concerning the
subject matter hereof, except as set forth herein. This
Agreement may be amended only by an agreement in writing.
This paragraph is not intended to preclude Hutchison from
receiving fees as a director of the Company.
15. Binding Effect. This Agreement is binding upon and
shall inure to the benefit of the parties hereto, their heirs,
assignees and successors in interest (including successors in
any reorganization or merger with any other entity).
16. Construction of Agreement. Each party has
cooperated in the drafting and preparation of this Agreement,
and, accordingly, in any construction or interpretation of
this Agreement, the same shall not be construed against any
party by reason of the source of drafting.
17. Costs and Attorneys' Fees. Each party is to bear
its own costs and attorneys' fees incurred in connection with
the matters resolved by this Agreement and in connection with
the negotiation and the preparation of this Agreement.
However, in the event of litigation or arbitration relating to
or for the enforcement of this Agreement, the prevailing party
shall be entitled to reasonable attorneys' fees and costs
actually incurred.
18. Taxes. Hutchison acknowledges his responsibility
for any and all taxes due with respect to the sums paid to him
under this Agreement.
19. Counterparts. This Agreement may be executed in
counterparts. When each party has signed and delivered at
least one such counterpart, each counterpart shall be deemed
an original, and, when taken together with other signed
counterparts, shall constitute one Agreement which shall be
binding upon and effective as to all parties. No counterpart
shall be effective until all parties hereto have executed and
exchanged an executed counterpart hereof.
20. No Waiver. The failure to enforce at any time any
of the provisions of this Agreement, or to require at any time
performance by the other party of any of the provisions
hereof, shall in no way be construed to be a waiver of such
provisions or to affect either the validity of this Agreement
or any part hereof or the right of either party thereafter to
enforce each and every provision in accordance with the terms
of this Agreement.
21. Arbitration. Any controversy, dispute, or claim
between the parties to this Agreement or any party released
pursuant to it, including any claim arising out of, in
connection with, or in relation to the interpretation,
performance or breach of this Agreement shall be settled, at
the request of either party, by arbitration conducted in Los
Angeles, California, in accordance with the then existing
rules for commercial arbitration of the American Arbitration
Association, and judgment upon any award rendered by the
arbitrator(s) may be entered by any state or federal court
having jurisdiction thereof. In the event either party shall
suspend its performance on the basis that its performance has
been excused by a material breach by the other party, either
party seeking performance may request preliminary relief from
the arbitrator and both parties agree to cooperate to have
such issue heard on an expedited basis. The arbitrator may
hear such issue on a preliminary basis and may grant such
preliminary relief, and under such conditions, as the
arbitrator shall deem to be appropriate and equitable. Unless
the parties agree otherwise, the arbitrators shall be members
of the National Academy of Arbitrators or retired judges of
the Superior Court of the Court of Appeal. The parties intend
that this agreement to arbitrate be valid, enforceable and
irrevocable and that it provide the exclusive remedy with
respect to all disputes within its scopes.
22. In the event the Board of Directors of the
Corporation wishes to fulfill the obligation under this
Agreement, it shall have the right to employ an appraiser to
establish the value of the various provisions and to have an
actuary amount established that could be due and payable to
Hutchison that would represent the current present value of
this Agreement. Such monies could then be payable in a lump
sum to Hutchison and this Agreement could then be terminated.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement on the day and year first written above.
EXECUTION AND ACKNOWLEDGMENT BY INTERNATIONAL TECHNOLOGY
CORPORATION
========================================================
Dated: __________ ___, 1994
At: Torrance, California
INTERNATIONAL TECHNOLOGY CORPORATION
By:
