<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
<TABLE>
<S> <C>
/ / Preliminary Proxy Statement / / Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
</TABLE>
International Technology Corporation
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), or 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
[LOGO]
INTERNATIONAL TECHNOLOGY CORPORATION
23456 HAWTHORNE BOULEVARD
TORRANCE, CALIFORNIA 90505
July 18, 1995
Dear Stockholder:
You are cordially invited to attend the 1995 Annual Meeting of Stockholders
of International Technology Corporation, which will be held on Thursday,
September 7, 1995, at 9:00 a.m. Pacific Daylight time, at the Holiday Inn Crowne
Plaza, located at 300 North Harbor Drive, Redondo Beach, California 90277-2552.
At the Annual Meeting, stockholders will be asked to (i) elect two
directors as described in the accompanying Proxy Statement, and (ii) conduct
such other business as may properly come before the Annual Meeting. In addition,
we will present a current report on the operations and activities of the
Company. At the Annual Meeting, management will also be pleased to answer your
questions about International Technology Corporation and its subsidiaries.
We hope you will be able to participate in person. However, whether or not
you expect to attend, we urge you to sign, date and return your enclosed proxy
card so that your shares will be represented. We look forward to seeing you on
Thursday, September 7, 1995.
E. MARTIN GIBSON ROBERT B. SHEH
- ---------------------------------- ------------------------------------
E. MARTIN GIBSON ROBERT B. SHEH
Chairman of the Board of Directors President and Chief Executive Officer
(LOGO) Printed on Recycled Paper
<PAGE> 3
INTERNATIONAL TECHNOLOGY CORPORATION
23456 HAWTHORNE BOULEVARD
TORRANCE, CALIFORNIA 90505
NOTICE OF 1995 ANNUAL MEETING OF STOCKHOLDERS
The 1995 Annual Meeting of Stockholders of International Technology
Corporation (the "Company") will be held at the Holiday Inn Crowne Plaza,
located at 300 North Harbor Drive, Redondo Beach, California 90277-2552, on
Thursday, September 7, 1995, at 9:00 a.m. Pacific Daylight time, for the
following purposes:
1. To elect two directors to hold office until the 1998 Annual Meeting of
Stockholders and until their successors are elected and qualified; and
2. To transact such other business as may properly come before the Annual
Meeting.
Holders of record of the Company's Common Stock at the close of business on
July 12, 1995 are entitled to notice of and to vote at the Annual Meeting and at
any adjournment or postponement thereof. A list of stockholders entitled to vote
at the Annual Meeting will be open to examination by any stockholder for any
purpose germane to the Annual Meeting, during ordinary business hours, from
August 28, 1995 until September 7, 1995 at the Company's executive offices
located at 23456 Hawthorne Boulevard, Torrance, California.
Each stockholder is requested to sign and date the enclosed proxy card and
to return it without delay in the enclosed postage-paid envelope. Any
stockholder present at the Annual Meeting may withdraw the proxy and vote
personally on each matter brought before the Annual Meeting.
By Order of the Board of Directors,
ERIC SCHWARTZ
Secretary
July 18, 1995
Torrance, California
<PAGE> 4
INTERNATIONAL TECHNOLOGY CORPORATION
23456 HAWTHORNE BOULEVARD
TORRANCE, CALIFORNIA 90505
------------------------
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
SEPTEMBER 7, 1995
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of International Technology Corporation, a
Delaware corporation (the "Company"), for use at the 1995 Annual Meeting of
Stockholders of the Company to be held at 9:00 a.m. Pacific Daylight time, on
Thursday, September 7, 1995, at the Holiday Inn Crowne Plaza, located at 300
North Harbor Drive, Redondo Beach, California 90277-2552, and at any
adjournment(s) or postponement(s) thereof (the "Annual Meeting"). It is
anticipated that this Proxy Statement, together with the proxy and the 1995
Annual Report to Stockholders, will first be mailed to the Company's
stockholders on or about July 18, 1995.
VOTING AT THE MEETING
The close of business on July 12, 1995 has been fixed as the record date
for determination of holders of the Company's Common Stock, $1.00 par value (the
"Common Stock"), entitled to notice of and to vote at the Annual Meeting. On
that date, there were outstanding and entitled to vote 35,771,260 shares of
Common Stock. The presence, either in person or by proxy, of persons entitled to
cast a majority of such votes constitutes a quorum for the transaction of
business at the Annual Meeting.
Stockholders are entitled to one vote per share on all matters submitted
for consideration at the Annual Meeting, subject to cumulative voting rights in
the election of directors (see "Election of Directors"). With regard to the
election of directors, votes may be cast in favor of or withheld from nominees.
Votes that are withheld will be excluded entirely from the vote and will have no
effect. Abstentions may be specified on all proposals other than the election of
directors. Abstentions and broker non-votes on returned proxies are counted as
shares present in the determination of whether the shares of stock represented
at the Annual Meeting constitute a quorum. Each proposal is tabulated
separately. Abstentions are counted in tabulations of the votes cast on
proposals presented to the stockholders, whereas broker non-votes are not
counted for purposes of determining whether a proposal has been approved.
A person giving the enclosed proxy has the power to revoke it at any time
before it is exercised by (i) attending the Annual Meeting and voting in person,
(ii) duly executing and delivering a proxy for the Annual Meeting bearing a
later date, or (iii) delivering written notice of revocation to the Secretary of
the Company prior to use of the enclosed proxy at the Annual Meeting.
<PAGE> 5
BENEFICIAL OWNERSHIP OF SHARES
The following table sets forth information as of July 5, 1995 with respect
to beneficial ownership of (i) the Company's Common Stock and (ii) the Company's
Depositary Shares (the "Depositary Shares"), each representing 1/100 of a share
of 7% Cumulative Convertible Exchangeable Preferred Stock, par value $100.00 per
share (the "Preferred Stock"), by (a) each person known by the Company to be the
beneficial owner of 5% or more of the outstanding Common Stock or Depositary
Shares and as of July 5, 1995, (b) each director and nominee, (c) the named
officers listed in the Summary Compensation Table (the "Named Officers"), and
(d) all directors and persons serving as executive officers as a group. Except
as specifically noted, the information in the following table with respect to
the beneficial owners of 5% or more of the Common Stock or Depositary Shares is
derived solely from Schedules 13D and 13G filed with the Securities Exchange
Commission (the "Commission" or "SEC").
<TABLE>
<CAPTION>
PERCENT OF COMMON AMOUNT AND NATURE PERCENT OF
AMOUNT AND NATURE OF STOCK OF BENEFICIAL DEPOSITARY SHARES
BENEFICIAL OWNERSHIP OF BENEFICIALLY OWNERSHIP OF BENEFICIALLY
NAME AND ADDRESS COMMON STOCK(1)(2) OWNED(2) DEPOSITARY SHARES OWNED
- ------------------------- ----------------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Corning, Inc.(3)......... 2,333,000 6.18% -- --
Lynch & Mayer, Inc.(4)... 764,551(5) 2.14 178,600 7.4%
Mathers and Company,
Inc.(6)................ 4,240,300 11.85 -- --
Wisconsin Investment
Board(7)............... 3,302,200 9.23 -- --
Donald S. Burns.......... 27,500 * -- --
Ralph S. Cunningham...... 23,000 * -- --
E. Martin Gibson......... 21,404(5) * 5,000 --
John H. Hutchison........ 1,272,135 3.56 -- --
Murray H. Hutchison...... 856,690(8) 2.39 -- --
W. Scott Martin.......... 40,000(9) * -- --
James C. McGill.......... 100,452(10) * -- --
Robert B. Sheh........... 294,098 * -- --
Jack O. Vance............ 19,050 * -- --
Anthony J. DeLuca........ 166,052 * -- --
Larry M. Hart............ 86,331 * -- --
James R. Mahoney......... 162,342 * -- --
Eric Schwartz............ 119,249 * -- --
All directors and
executive officers as a
group (15 persons)..... 3,399,688 9.50% 5,000 *
</TABLE>
- ---------------
* Less than 1%
(1) The number of shares of the Common Stock beneficially owned includes shares
of the Common Stock in which the persons set forth in the table have either
investment or voting power. The number of shares beneficially owned also
includes shares that the following individuals have the right to acquire
within sixty days of July 5, 1995 upon exercise of stock options in the
following amounts: (i) 27,500 shares as to Mr. Burns, (ii) 20,000 shares as
to Dr. Cunningham, (iii) 20,000 shares as to Mr. J. Hutchison, (iv) 194,810
shares as to Mr. M. Hutchison, (v) 5,000 shares as to Mr. Martin, (vi)
37,500 shares as to Mr. McGill, (vii) 17,500 shares as to Mr. Vance, (viii)
250,000 shares as to Mr. Sheh, (ix) 104,250 shares as to Mr. DeLuca, (x)
70,000 shares as to Mr. Hart, (xi) 85,250 shares as to Mr. Mahoney, and
(xii) 55,250 shares as to Mr. Schwartz.
(2) For the purposes of determining the number of shares of Common Stock
beneficially owned as well as the percentage of outstanding Common Stock
held by each person or group set forth in the table, the number of shares
is divided by the sum of the number of outstanding shares of the Common
Stock on
2
<PAGE> 6
July 5, 1995 plus (i) the number of shares of Common Stock subject to
options exercisable currently or within 60 days of July 5, 1995 by such
person or group, and/or (ii) shares of Common Stock into which persons who
hold Depositary Shares or other securities may convert the Preferred Stock
represented by such Depositary Shares (or otherwise obtain Common Stock) in
accordance with Rule 13d-3(d)(1) under the Securities Exchange Act of 1934,
as amended ("Rule 13d-3(d)(1)"). Pursuant to Rule 13d-3(d)(1), the Common
Stock purchasable upon exercise of the warrant issued to Corning (as
defined below) is deemed to be outstanding for the purpose of calculating
the percentage of Common Stock owned by Corning (even though such warrant
has not yet been exercised as of the date hereof) but is not deemed
outstanding for the purpose of computing the percentage of ownership of
Common Stock owned by any other person.
(3) Such information is derived from a Schedule 13D dated February 22, 1995
filed with the SEC and from the documents referenced in "Certain
Transactions -- Change of Contract Provisions in Corning Joint Venture
Agreements" below. Pursuant to the Securities Acquisition Agreement dated
May 2, 1994 (the "Corning Agreement") by and between MetPath Inc. (now
known as Corning Clinical Laboratories, Inc. ("Corning"), an affiliate of
Corning Incorporated) and the Company, the Company issued to Corning
333,000 shares of the Company's Common Stock and a warrant to purchase
2,000,000 additional shares of Common Stock. Pursuant to the Corning
Agreement, Corning has agreed that, through May 2, 1999, it will vote all
shares of Common Stock (and securities convertible into Common Stock
(collectively, the "Voting Securities")) owned by it and its affiliates in
accordance with the recommendation of the Company's Board of Directors or,
in the absence of a recommendation, in the same proportion as the votes
cast by all other holders of securities entitled to vote on the matter.
Without regard to the foregoing, however, Corning retains the right to vote
in its discretion the Voting Securities with respect to matters for which a
class vote is provided pursuant to law or pursuant to the Company's charter
or bylaws, and Corning is not prohibited from voting consistently with its
own social, economic and corporate ethics policies generally. The address
of Corning, Inc. is One Riverfront Plaza, Corning, New York 14831.
(4) Such information is derived solely from a Schedule 13G dated January 30,
1995 filed by such beneficial owner with the SEC. The address of Lynch &
Mayer, Inc. is 520 Madison Avenue, New York, New York 10022.
(5) The number of shares of Common Stock beneficially owned includes shares of
Common Stock into which the following persons who hold Depositary Shares
may convert the Preferred Stock represented by such Depositary Shares: (i)
21,404 as to Mr. Gibson, and (ii) 764,551 as to Lynch & Mayer, Inc. The
shares of Preferred Stock represented by the Depositary Shares currently
are convertible into Common Stock at a ratio of 428.08 shares of Common
Stock for each share of Preferred Stock (or 4.2808 shares of Common Stock
for each Depositary Share). Such ratio is subject to adjustment under
certain circumstances.
(6) Such information is derived solely from a Schedule 13G dated February 9,
1995 filed by such beneficial owner with the SEC on behalf of Mathers &
Company, Inc., Mathers Fund, Inc. and Mr. Henry G. Van der Eb, Jr. The
address of Mathers and Company, Inc. and the other filers as set forth in
their Form 13G is 100 Corporate North, Suite 201, Bannockburn, Illinois
60015. The Form 13G filed by such persons also reports that of the
securities reported by such persons, 3,630,000 are held by Mathers and
Company clients, including 3,357,000 owned by Mathers Fund (of which it is
also reported that there are more than 19,000 shareholders), and 883,300
over which Mr. Van der Eb reports sole voting power.
(7) Such information is derived solely from a Schedule 13G filed by such
beneficial owner with the SEC dated February 13, 1995. The address of the
Wisconsin Investment Board set forth in its Form 13G is P. O. Box 7842,
Madison, Wisconsin 53707.
(8) Includes 618 shares held by Mr. M. Hutchison as custodian for his children.
Mr. Hutchison disclaims beneficial ownership of such shares.
3
<PAGE> 7
(9) Includes 5,000 shares owned by Martcon, Inc., a company owned by Mr.
Martin. Mr. Martin disclaims beneficial ownership of such shares.
(10) Includes 4,000 shares owned by Mr. McGill's wife as to which Mr. McGill has
no voting or dispositive power and 5,000 shares owned by McGill Resources,
Inc., a company owned by Mr. McGill. Mr. McGill disclaims beneficial
ownership of all such shares.
ELECTION OF DIRECTORS
The directors of the Company serve for three-year terms which are staggered
to provide for the election of approximately one-third of the Board members each
year. Although the terms of three directors expire at the Annual Meeting, only
two of those directors have been nominated for election at the Annual Meeting
and the Board has reduced, effective immediately prior to the commencement of
the Annual Meeting, the number of authorized directors from nine to eight.
Therefore, two directors will be elected at the Annual Meeting to serve until
the 1998 Annual Meeting and until their successors are elected and qualified.
Stockholders are entitled to cumulate voting rights in the election of
directors. Under cumulative voting, each stockholder is entitled to a number of
votes equal to the number of directors to be elected multiplied by the number of
shares of Common Stock the stockholder is entitled to vote. Such votes may be
cast for one nominee or distributed among two or more candidates. The candidates
for election receiving the highest number of affirmative votes of the shares
entitled to vote for them up to the number of directors to be elected by those
shares will be elected.
No stockholder shall be entitled to cumulate votes for a candidate unless
such candidate's name has been placed in nomination prior to the voting. In
voting by proxy, a stockholder is conferring upon the proxyholders the
discretionary authority to cumulate votes in electing directors. If any person
other than the nominees set forth in the following table is nominated for
election as a director, the persons named in the accompanying proxy may vote at
their discretion cumulatively for less than all the nominees set forth on the
following page.
Under the Company's Bylaws, in order to be effective, nominations for
election as a director must be submitted to the Secretary of the Company not
later than sixty days in advance of the Annual Meeting or, if later, the
fifteenth day following the first public disclosure of the date of the Annual
Meeting. Any such notice of nomination must 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 Common Stock of the Company entitled to vote at the Annual Meeting
and intends to appear in person or by proxy at the Annual 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 SEC had the nominee been nominated, or intended to be
nominated, by the Board of Directors; and (v) the consent of each nominee to
serve as director of the Company if so elected. In addition, a stockholder
making such a nomination must promptly provide any other information reasonably
requested by the Company.
4
<PAGE> 8
The names of the nominees for election as directors who have been
recommended to the Board of Directors by the Nominating Committee of the Board,
the present directors whose terms of office do not expire in 1995, and the
present director whose term expires in 1995 and who is not currently a nominee
for re-election are set forth in the following table. The Company has no reason
to believe that any nominee for election will not be able to serve his
prescribed term. Should any nominee become unavailable to serve, the proxies
solicited hereby may be voted for election of such other person as shall be
nominated by the Board of Directors.
<TABLE>
<CAPTION>
DIRECTOR OF
TERM TO THE COMPANY
NAME AGE POSITION EXPIRE SINCE
- ------------------------------ --- ------------------------------ ------- -----------
<S> <C> <C> <C> <C>
NOMINEES FOR TERMS EXPIRING IN 1998:
Jack O. Vance(2) 70 Director 1998 1987
E. Martin Gibson(1)(2) 57 Director and Chairman of 1998 1994
the Board (non-officer
position)
DIRECTORS WHOSE TERMS EXPIRE IN OR AFTER 1995 AND
WHO ARE NOT CURRENTLY NOMINEES FOR RE-ELECTION:
Murray H. Hutchison(3)(4)(5) 56 Director 1995 1972
John H. Hutchison(3)(4) 61 Director 1996 1972
James C. McGill(1)(3) 51 Director 1996 1990
W. Scott Martin(2) 45 Director 1996 1994
Ralph S. Cunningham(1)(2) 54 Director 1997 1981
Donald S. Burns(1)(3) 69 Director 1997 1989
Robert B. Sheh 55 Director, President and 1997 1992
Chief Executive Officer
</TABLE>
- ---------------
(1) Member of Nominating Committee.
(2) Member of Compensation Committee.
(3) Member of Audit Committee.
(4) Murray H. Hutchison and John H. Hutchison are brothers.
(5) Mr. Murray Hutchison's term expires at the Annual Meeting.
BACKGROUND OF THE NOMINEES AND DIRECTORS
Mr. Burns has been Chairman, President and Chief Executive Officer of
Prestige Holdings, Ltd., a property management and business consulting firm,
since 1978. Mr. Burns serves on the Board of Directors of ESI Corporation,
International Rectifier Corporation and The Hillhaven Corporation.
Dr. Cunningham served as the Company's Chairman of the Board of Directors
from May 5, 1994 to January 5, 1995. Such position was a non-officer,
non-employee position. He currently serves as President and Chief Executive
Officer of CITGO Petroleum Corporation. From May 1994 to May 1995, he served as
the Vice Chairman of the Board of Huntsman Corporation and Huntsman Specialty
Chemicals Corporation. Prior to joining Huntsman in 1994 he served as the
President of Texaco Chemical Company from 1990 to 1994 which was acquired by
Huntsman Corporation in 1994. From 1989 to 1990, he was Chairman and Chief
Executive Officer of Clark Oil Refining Corporation. In 1980, he joined Tenneco
Oil Processing and Marketing as Executive Vice President and served as President
of that company from 1982 to 1989. Dr. Cunningham serves as a director of
Sherritt, Inc., Enterprise Products Company, Huntsman Corporation and CITGO
Petroleum Corporation.
Mr. Gibson became a director of the Company on October 11, 1994 and was
elected Chairman of the Board of Directors, a non-officer, non-employee
position, on April 6, 1995. From 1990 until December 1994, Mr. Gibson served as
Chairman of Corning Life Sciences, Inc., a subsidiary of Corning Incorporated.
Mr. Gibson served in various other senior management capacities with Corning
Incorporated during his 32 year career there, including as a Senior Vice
President and General Manager of Corning Medical and Scientific Division from
1980 until 1983, and as Group President of Corning Consumer Products and
Laboratory Sciences from 1983 until 1990. From 1983 to 1994, Mr. Gibson served
on the Board of Directors
5
<PAGE> 9
of Corning Incorporated. Mr. Gibson also serves on the Board of Directors of
Hardinge, Inc. and NovaCare, Inc.
Mr. John H. Hutchison retired as an employee of the Company on February 19,
1988, after having served as Vice President, Facilities and Equipment of the
Company since 1976.
Mr. Murray H. Hutchison retired as Chairman of the Board of Directors
effective March 31, 1994 and as an employee of the Company effective May 31,
1994. He had been an officer and director of the Company or its predecessor
since 1972. He served as Chairman and Chief Executive Officer from May 1975
until July 1992, when Mr. Sheh was elected President and Chief Executive
Officer. Mr. Hutchison continued as Chairman of the Board until his retirement.
Mr. Hutchison serves on the Board of Directors of The Olson Company, Sunrise
Medical, Inc., and the Winston Tire Company.
Mr. Martin has been President of the Tulsa Loan Production Office of the
First Bank & Trust Company, Wagoner, Oklahoma, since September 1994. He was the
President, Chief Executive Officer and a member of the Board of Directors of
WestStar Bank in Tulsa, Oklahoma, from 1984 until September 1994. He has also
served as a member of the Boards of Directors of First Bank and Trust Company,
Wagoner, Oklahoma, since 1974; of First Bank of Chandler, Chandler, Oklahoma,
since 1977; and of First National Bank, Burkburnett, Texas, since 1983.
Mr. McGill is currently, and has been for five years, a private investor.
He served as Chairman of McGill Environmental Systems, Inc. from 1970 to 1987.
Mr. McGill serves on the Board of Trustees of the University of Tulsa and on the
Boards of Directors of three private corporations that are engaged in tax
consulting, health care and pipeline construction.
Mr. Sheh has been President and Chief Executive Officer of the Company
since July 29, 1992. Prior to joining the Company, Mr. Sheh was President of The
Ralph M. Parsons Company, an engineering construction firm, from 1989, and prior
thereto had a broad range of management responsibilities since first joining
Parsons in 1971. Mr. Sheh is also a director of Davidson & Associates, Inc.
Mr. Vance was a director of McKinsey & Company from 1960 until he retired
on December 31, 1989. He currently serves as Managing Director of Management
Research, Inc., a management consulting firm. Mr. Vance also serves as a member
of the Board of Directors of International Rectifier Corporation, The Olson
Company, The Hillhaven Corporation, ESCORP, University Restaurant Group, FCG
Enterprises, Inc. and Semtech Corporation.
MEETINGS OF THE BOARD OF DIRECTORS AND COMMITTEES
During the period April 1, 1994 through March 31, 1995, the end of the
Company's last fiscal year, the Company's Board of Directors held 14 meetings.
During such fiscal year, each director attended 75% or more of the aggregate of
(i) the total number of meetings of the Board of Directors (held during the
period for which he has been a director) and (ii) the total number of meetings
held by all committees of the Board on which he served (during the periods that
he served).
The Company's Audit Committee held five meetings from April 1, 1994 through
March 31, 1995. The Audit Committee makes recommendations to the Board of
Directors concerning the selection of the Company's independent auditors and
reviews with the independent auditors the scope and results of the annual audit.
The members of the Audit Committee are set forth under "Election of Directors"
above.
The Company's Compensation Committee held six meetings from April 1, 1994
through March 31, 1995. The Compensation Committee reviews salaries, bonuses and
other aspects of executive compensation and administers the Company's 1991 Stock
Incentive Plan, which provides for the granting of stock incentive awards to
employees and directors of the Company. The members of the Compensation
Committee are set forth under "Election of Directors" above.
The Company's Nominating Committee held three meetings from April 1, 1994
through March 31, 1995. The Nominating Committee presents to the Board of
Directors nominees for election as directors of the Company. The nominees for
election to the Board of Directors at the Annual Meeting named in this Proxy
Statement were recommended to the Board of Directors by the Nominating Committee
and selected by the
6
<PAGE> 10
Board of Directors subsequent to March 31, 1995. The members of the Nominating
Committee are set forth under "Election of Directors" above.
The Company has a number of other standing and ad hoc committees of the
Board of Directors, to which members are appointed by the Board of Directors.
Such committees met at various times throughout the year.
COMPENSATION OF DIRECTORS
Retainer Fees. Non-employee directors receive a retainer fee of $3,500 per
quarter, $1,000 for each Board or committee meeting attended, $500 per day for
travel on business days and reimbursement of air travel and other expenses
incurred in connection with attending Board or committee meetings. Committee
chairmen receive $1,500 for each committee meeting attended. In January 1995,
the Board of Directors agreed to reduce meeting fee expenses by limiting the
fees paid for meeting attendance to no more than one committee meeting for all
committee meetings held in tandem with a Board meeting, regardless of the actual
number of committee meetings attended. Additionally, in order to more closely
align the compensation of the Board members with the interests of Company's
stockholders, upon the recommendation of the Compensation Committee, the Board
has determined that, effective with the third quarter of fiscal year 1996, the
quarterly retainer fee payable to each director for the third quarter of each
fiscal year will be received in the form of shares of Common Stock, rather than
in cash. Such shares are expected to be purchased by the Company in the open
market and reissued to directors in order to avoid dilution to the Company's
stockholders.
Chairman of the Board. Mr. E. Martin Gibson was elected on April 6, 1995 as
Chairman of the Board, which is a non-officer, non-employee position. In lieu of
the non-employee director fees described above, Mr. Gibson receives compensation
at the rate of $120,000 per year. Mr. Gibson serves as a member or ex-officio
member of all committees of the Board and spends significant time on Company
matters. Dr. Ralph Cunningham served as the non-officer, non-employee Chairman
of the Board from May 5, 1994 to January 5, 1995 and received compensation for
such service at the rate of $150,000 per year.
Stock Options. Each non-employee director also receives automatic grants of
nonqualified stock options under the 1991 Stock Incentive Plan (the "1991
Plan"), and previously under the 1983 Stock Incentive Plan (the "1983 Plan"), to
purchase 20,000 shares of Common Stock upon his initial election as a director
plus options to purchase an additional 10,000 shares of Common Stock at each
subsequent annual meeting after having served at least six months. The options
have an exercise price equal to the fair market value of Common Stock at the
date of grant; become exercisable in installments of 25% on each of the first
four anniversaries of the date of grant; have a five-year term; and terminate
when the holder ceases to be a director unless due to death, disability or
retirement. Former officers who become non-employee directors receive automatic
grants of options to purchase 20,000 shares of Common Stock at the annual
meeting following the time they become non-employee directors if the meeting
occurs at least six months thereafter. If the meeting occurs less than six
months thereafter, such options are received at the end of the next fiscal year.
Thereafter such directors receive options to purchase an additional 10,000
shares of Common Stock at each subsequent annual meeting. Accordingly, Mr.
Murray Hutchison received options to purchase 20,000 shares on March 31, 1995.
All such grants are subject to the limitation that a non-employee director may
not hold, at any time, nonqualified stock options to purchase a number of shares
that, when added to all shares previously purchased by such director under the
1983 Plan or 1991 Plan, exceeds 50,000 shares. No options shall be granted under
the 1991 Plan after March 31, 1996, the date upon which the 1991 Plan shall
expire.
Retirement Plan. Additionally, such non-employee directors qualify for five
years of retirement payments if on retirement (i) they have five years of Board
service (in which case payments would begin at age 70, or upon retirement if the
director is between 70 and 73 when he retires) or (ii) they have ten years of
Board service (in which case payments would begin at age 65, or upon retirement
if the director is between 65 and 73 when he retires). Directors who have served
continuously since December 4, 1984 are not subject to such requirements and
have qualified for the retirement plan. To participate in the retirement plan,
however, those directors who have served continuously since December 4, 1984
must retire at the conclusion of the annual meeting following the date they
reach age 75 unless the Board otherwise provides. In the event of an eligible
director's death, the director's beneficiary will be entitled to receive a lump
sum payment of the
7
<PAGE> 11
amount that would otherwise have been payable to the director, less any amounts
previously paid under the plan. In the event of a director's disability or a
change of control (as defined in the plan) pursuant to which a director elects
not to remain on the Board, the service and age requirements are waived. Payment
will be made in the normal manner upon disability or in a lump sum if a director
elects not to remain on the Board in the event of a change of control. The
annual retirement amount is equal to the retainer fee and the meeting and
committee fees paid for a normal schedule of meetings during a fiscal year (or
the actual schedule of meetings during the 12-month period prior to such
director's retirement, if such schedule would result in higher retirement
benefits), as determined in accordance with the Board's retirement plan.
Additionally, former employees of the Company become eligible to participate in
the Plan once they have completed five years of service as a non-employee
director.
Directors' Compensation Table. The following table sets forth details as to
the fees paid in fiscal year 1995 to each of the Company's non-employee
directors who served during any portion of fiscal year 1995.
<TABLE>
<CAPTION>
CHAIRMAN OF THE ATTENDANCE
NAME BOARD FEES RETAINER FEES FEES(1)
------------------------------------- --------------- ------------- ----------
<S> <C> <C> <C>
Donald S. Burns...................... $14,000 $ 23,500
Ralph S. Cunningham.................. $ 100,000 7,000 7,500
E. Martin Gibson(2).................. 7,000 7,500
Michael N. Hammes(3)................. 7,000 16,000
John H. Hutchison.................... 14,000 14,000
Murray H. Hutchison.................. 11,667 8,000
W. Scott Martin(4)................... 7,000 10,500
James C. McGill...................... 14,000 35,000
Jack O. Vance........................ 14,000 32,000
</TABLE>
- ---------------
(1) Includes fees paid for attendance at Board and committee meetings and the
$500 per day fee per business day required for travel to Board or committee
meetings.
(2) Mr. Gibson became a director on October 11, 1994.
(3) Mr. Hammes resigned from the Board of Directors on September 12, 1994.
(4) Mr. Martin became a director on September 1, 1994.
Retired Directors' Compensation Table. The following table sets forth
details as to the fees and/or retirement payments paid in fiscal year 1995 to
each of the Company's retired directors entitled to receive payments.
<TABLE>
<CAPTION>
ATTENDANCE RETIREMENT
NAME RETAINER FEES FEES(1) PAYMENTS
----------------------------------------- ------------- ---------- ----------
<S> <C> <C> <C>
Robert W. Davis.......................... $ 3,500(2) $ 17,000(2) $ 35,875
Robert R. Dockson........................ 3,500(2) 21,000(2) 36,750
Frederick Llewellyn...................... -- -- 39,000
Ernest J. Loebbecke...................... -- -- 39,000
John V. Vaughn........................... -- -- 39,000
</TABLE>
- ---------------
(1) Includes fees paid for attendance at Board and committee meetings and the
$500 per day fee per business day required for travel to Board or committee
meetings.
(2) Reflects fees paid and expenses reimbursed prior to retirement as a
director.
Messrs. Loebbecke and Vaughn (who first became directors in 1977 and 1976,
respectively) retired on August 22, 1991 and will receive annual retirement
payments of $39,000 through August 22, 1996. Mr. Llewellyn (who first became a
director in 1977) retired on September 10, 1992 and will receive annual
retirement payments of $39,000 through September 10, 1997. Messrs. Davis and
Dockson (who first became directors in 1989 and 1979, respectively) retired on
September 1, 1994, and are entitled to receive annual retirement payments in the
amounts of $55,500 and $57,000, respectively, through September 1, 1999.
8
<PAGE> 12
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth the annual, long-term compensation and other
compensation for services in all capacities to the Company for the fiscal years
1995, 1994 and 1993 of those persons who were, as of March 31, 1995, the Chief
Executive Officer and the other four most highly compensated executive officers
of the Company (the "Named Officers").
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
-------------------------
ANNUAL COMPENSATION AWARDS
----------------------------------------- -------------------------
OTHER SECURITIES
ANNUAL RESTRICTED UNDERLYING ALL OTHER
NAME AND COMPEN- STOCK OPTIONS COMPEN-
PRINCIPAL POSITION YEAR SALARY($)(1) BONUS($)(2) SATION($)(3) AWARDS($)(4) (#) SATION($)(5)
- ------------------------------ ---- ------------ ----------- ------------ ------------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Robert B. Sheh(6) 1995 $450,000 $ 225,000 $ 51,487 $ 74,993 150,000 $ 16,572
President and 1994 450,000 0 175,449 0 50,000 93,679
Chief Executive Officer 1993 291,130 0 0 0 250,000 0
Larry M. Hart(6) 1995 300,000 150,000 77,000 49,995 100,000 91,873
Senior Vice President 1994 113,655 100,000 0 0 180,000 0
and Chief Operating 1993 0 0 0 0 0 0
Officer
Anthony J. DeLuca 1995 270,400 108,160 0 173,550 77,000 11,808
Senior Vice President 1994 268,667 0 0 0 22,000 32,834
and Chief Financial 1993 253,500 0 0 0 10,000 9,154
Officer
James R. Mahoney(7) 1995 256,925 104,000 0 172,163 77,000 16,599
Senior Vice President, 1994 232,834 0 5,630 0 22,000 32,210
Regional and 1993 214,959 0 0 0 8,000 14,319
Technical Operations and
Corporate Development
Eric Schwartz(6) 1995 250,000 100,000 0 33,330 77,000 6,572
Senior Vice President, 1994 245,834 0 0 0 22,000 0
Law and Administration, 1993 125,625 25,000 0 0 50,000 0
General Counsel and
Secretary
</TABLE>
- ---------------
(1) Amounts reported for 1993 reflect a temporary management salary reduction
for the period from November 1, 1992 through January 15, 1993. The salary
reduction for Mr. Sheh was 15%; for Messrs. DeLuca and Schwartz, 12%; and
for Mr. Mahoney, 11%. Salaries were reduced for other management ranging
from 6% to 11%. The salary reported for Mr. Sheh in fiscal year 1993 covers
only the period from July 29, 1992 to March 31, 1993. The salary reported
for Mr. Schwartz in fiscal year 1993 covers only the period of October 2,
1992 to March 31, 1993. The salary reported for Mr. Hart in fiscal year 1994
covers only the period of November 15, 1993 to March, 31, 1994.
(2) The bonus amounts reported in fiscal years 1993 and 1994 were paid in
connection with the provisions of the offers of employment made at the time
Mr. Schwartz (1993) and Mr. Hart (1994) were hired. The bonus amounts
reported in fiscal years 1993 and 1994 are reported in the fiscal year in
which they were earned or accrued, even though the actual cash payment may
have been made in the following fiscal year. All bonus amounts reported for
fiscal year 1995 include all cash bonus amounts paid, earned or accrued for
the fiscal year even though the actual cash payments for the fourth quarter
were actually paid in fiscal year 1996. In addition to the bonus amounts
paid in cash, each Named Officer also received an award of restricted stock
in fiscal year 1996 attributable to a fiscal year 1995 incentive
compensation plan. The value of such restricted stock awards is reported in
this table under Restricted Stock Awards. The total value of bonuses earned
in fiscal year 1995, including the value of restricted stock attributable to
fiscal year 1995, by each of the Named Officers are as follows: Mr. Sheh,
$299,993; Mr. Hart, $199,995; Mr. DeLuca, $144,210; Mr. Mahoney, $138,663;
and Mr. Schwartz, $133,330.
(3) The dollar value of perquisites and other personal benefits, if any, for
each of the Named Officers, except Mr. Sheh and Mr. Hart, was less than the
reporting thresholds established by the SEC. The amount shown for Mr. Sheh
in fiscal year 1994 includes (i) $58,171 for a tax gross up on the
relocation expenses reported under All Other Compensation, and (ii) $95,794
for club memberships; all in accordance with the terms of agreements between
the Company and Mr. Sheh. Of the $95,794 reported for club
9
<PAGE> 13
membership, $25,000 was a one-time nonrefundable admission fee and $59,400
is a membership fee. In the event Mr. Sheh's employment with the Company
should terminate, the value of the membership shall revert to the Company.
The amount shown for Mr. Mahoney for fiscal year 1994 is a tax gross up on
relocation expenses reported under All Other Compensation, in accordance
with the terms of agreements between the Company and Mr. Mahoney. The amount
shown for Mr. Sheh for fiscal year 1995 includes (i) $18,903 of imputed
interest on an interest-free loan to purchase a residence (described
elsewhere under "Certain Transactions,") and (ii) $17,947 of life insurance
premiums for life insurance in excess of $50,000 (although required to be
reported as income, Mr. Sheh pays the cost for all premiums on insurance in
excess of one and one-half times his salary, as do all salaried employees).
The amount shown for Mr. Hart for fiscal year 1995 includes $54,233 for a
tax gross up on the relocation expenses reported under All Other
Compensation, in accordance with the terms of agreements between the Company
and Mr. Hart.
(4) 50,000 shares of restricted stock were awarded to each of Mr. DeLuca and Mr.
Mahoney on March 2, 1995, with a fair market value of $2.75 per share on the
date of grant. The restrictions on the shares lapse in 20% increments over
five years provided that Messrs. DeLuca and Mahoney remain employed by the
Company on the vesting dates. In addition, each Named Officer received
awards of restricted stock in connection with a fiscal year 1995 incentive
compensation plan. A total of 73,290 shares of restricted stock were awarded
on July 5, 1995 with a fair market value of $3.125 per share. The shares
awarded were as follows: Mr. Sheh, 23,998 shares; Mr. Hart, 15,998 shares;
Mr. DeLuca, 11,536 shares; Mr. Mahoney, 11,092 shares; and Mr. Schwartz,
10,666 shares. The restrictions on the shares will lapse three years from
the date of award provided that each Named Officer remains employed by the
Company at that date.
(5) For 1993, the amount shown for Mr. DeLuca represents the Company's
contribution to the Company's Retirement Plan, a defined contribution plan
in which participants are fully vested in the plan following six years of
service. The amount shown for Mr. Mahoney includes $4,319 for the Company's
contribution to the Company's Retirement Plan and $10,000 for partial
principal forgiveness of a relocation loan to purchase a residence. For
1994, the amount shown for Mr. Sheh includes $83,679 in moving expenses in
accordance with the terms of an agreement between the Company and Mr. Sheh
and $10,000 for partial principal forgiveness on a relocation loan to
purchase a residence. The amount shown for Mr. DeLuca includes $23,400 paid
for accrued but unused vacation and $9,434 for the Company's contribution to
the Company's Retirement Plan. The amount shown for Mr. Mahoney includes
$13,091 in previously unreimbursed moving expenses in connection with his
relocation to Southern California, $10,000 for partial principal forgiveness
on a relocation loan to purchase a residence, and $9,119 for the Company's
contribution to the Company's Retirement Plan. For 1995, the amount shown
for Mr. Sheh includes $6,572 for the Company's contribution to the Company's
Retirement Plan and $10,000 for partial principal forgiveness on a
relocation loan to purchase a residence. The amount shown for Mr. Hart
includes $81,873 in moving expenses in accordance with the terms of an
agreement between the Company and Mr. Hart, and $10,000 for partial
principal forgiveness on a relocation loan to purchase a residence. The
amount shown for Mr. DeLuca includes $6,608 for the Company's contribution
to the Company's Retirement Plan and $5,200 paid for accrued but unused
vacation. The amount shown for Mr. Schwartz represents the Company's
contribution to the Company's Retirement Plan. The amount shown for Mr.
Mahoney includes $6,599 for the Company's contribution to the Company's
Retirement Plan, and $10,000 for partial principal forgiveness on a
relocation loan to purchase a residence.
(6) Mr. Sheh joined the Company in the position of President and Chief Executive
Officer on July 29, 1992. Mr. Schwartz joined the Company in the position of
Senior Vice President, General Counsel and Secretary of the Company on
October 2, 1992. Mr. Hart joined the Company in the position of Senior Vice
President and Chief Operating Officer on November 15, 1993.
(7) 15,000 shares of restricted stock were awarded to Mr. Mahoney on January 14,
1991, with a fair market value of $7.75 per share, at a purchase price of
$1.00 per share. These shares vest in 25% increments over four years. At the
end of fiscal year 1995, all 15,000 restricted shares had vested. Dividends
are payable on the restricted stock on the same basis as the Company's
Common Stock; however, no dividends were paid in fiscal years 1995, 1994, or
1993.
10
<PAGE> 14
STOCK OPTION GRANTS IN LAST FISCAL YEAR
The following table provides information related to grants of stock options
pursuant to the Company's Stock Incentive Plan during the fiscal year ended
March 31, 1995. No stock appreciation rights ("SARs") were granted during the
last fiscal year.
<TABLE>
<CAPTION>
NUMBER OF PERCENT OF
SECURITIES TOTAL OPTIONS
UNDERLYING GRANTED TO GRANT
OPTIONS EMPLOYEES IN EXERCISE PRICE EXPIRATION DATE PRESENT
NAME GRANTED(#)(1) FISCAL YEAR (PER SHARE)(2) DATE VALUE(3)
- ---------------------------------- ------------- --------------- -------------- ---------- ------------
<S> <C> <C> <C> <C> <C>
Robert B. Sheh.................... 150,000 10.5% $2.875 4/29/04 $249,000
Larry M. Hart..................... 100,000 7.0% 2.875 4/29/04 166,000
Anthony J. DeLuca................. 77,000 5.4% 2.875 4/29/04 127,820
James R. Mahoney.................. 77,000 5.4% 2.875 4/29/04 127,820
Eric Schwartz..................... 77,000 5.4% 2.875 4/29/04 127,820
</TABLE>
- ---------------
(1) All nonqualified options granted in fiscal year 1995 vest in 25% increments
over four years beginning one year from the date of grant. Full vesting
occurs on the fourth anniversary date and the option expires ten years after
grant. Options become 100% vested and are exercisable until the expiration
date upon retirement from the Company.
(2) The exercise price on options granted is the fair market value of the Common
Stock on the date of grant.
(3) When calculating the present value of options granted in 1995, the Company
used the Black-Scholes option pricing model to obtain a calculated present
value of $1.66 per share. The Company assumed a volatility of .349, a risk
free interest rate of 7.43%, no dividend yield and assumed that the options
would be exercised evenly throughout the four-year vesting schedule. In
addition, the Company took a 3% discount for each year in the vesting period
to account for the risk of forfeiture in the event that the executive
terminates employment with the Company. The valuation is not intended to
forecast possible future appreciation, if any, of the Common Stock. The real
value of the option depends on the actual performance of the Common Stock
during the applicable period.
AGGREGATED OPTION EXERCISES DURING LAST FISCAL YEAR AND OPTION VALUES AT END OF
LAST FISCAL YEAR
The following table provides information with respect to the exercise of
stock options during the fiscal year ended March 31, 1995 by the Named Officers,
and with respect to unexercised "in-the-money" stock options outstanding as of
March 31, 1995. In-the-money stock options are options for which the exercise
price is less than the market price of the underlying stock at the end of the
fiscal year. No executive officer or any other employee of the Company held or
exercised any SARs at any time during fiscal 1995.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
SHARE OPTIONS AT FISCAL YEAR END IN-THE-MONEY OPTIONS AT
ACQUIRED (IN SHARES) FISCAL YEAR-END($)(1)
ON VALUE --------------------------- ---------------------------
NAME EXERCISE REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------------- -------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Robert B. Sheh................. 0 $ 0 137,500 312,500 $ 0 $ 0
Larry M. Hart.................. 0 0 45,000 235,000 0 0
Anthony J. DeLuca.............. 0 0 84,500 101,500 0 0
James R. Mahoney............... 0 0 64,500 97,500 0 0
Eric Schwartz.................. 0 0 30,500 118,500 0 0
</TABLE>
- ---------------
(1) Represents the difference between the $2.375 closing market price of the
Company's Common Stock at March 31, 1995, minus the exercise price of the
options.
11
<PAGE> 15
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors is composed of four
non-employee directors. No member of the Compensation Committee is a former or
current officer or associate of the Company or its subsidiaries and there are no
Compensation Committee interlocks. The Compensation Committee reviews management
compensation levels and evaluates management performance and related matters.
The Compensation Committee also administers the Company's various management
incentive plans, including the 1991 Stock Incentive Plan (1991 Plan). This
report relates to the fiscal year ended March 31, 1995.
To assist the Compensation Committee in performing these functions, the
Compensation Committee retains the services of nationally known independent
consulting firms specializing in executive compensation issues. Since 1987,
these services have been provided primarily by Towers Perrin, which advises the
Committee as to executive compensation and its relationship to achieving the
Company's goals. In doing so, Towers Perrin prepares and reviews for the
Compensation Committee surveys and other materials describing the compensation
practices of other companies, including those in the environmental services
industry, and considers other factors which Towers Perrin and the Committee deem
relevant.
COMPENSATION PROGRAM OBJECTIVES
The Compensation Committee has developed and implemented compensation
strategies, plans and programs which are designed to attract, retain, and
motivate key management and to align the financial interests of the Company's
executive officers with those of stockholders. The Company's management
compensation programs are designed to provide:
(i) Base salary levels that are competitive with those of engineering,
environmental services, and general industry companies;
(ii) Competitive total annual cash compensation delivered through
annual incentive compensation that varies in a consistent and predictable
manner with the financial performance of the Company; and
(iii) Long-term incentive compensation that focuses management efforts
on building stockholder value through attainment of longer-term financial
and strategic goals, and encourages management stock ownership.
A substantial portion of an executive officer's compensation is "at risk"
with annual and long-term incentives, at target levels, intended generally to
provide between 40% to 60% of total compensation. In designing and administering
its management compensation program, the Company attempts to achieve an
appropriate balance among the various elements of compensation, each of which is
discussed in greater detail below.
In fiscal year 1995, the Compensation Committee initiated several actions
to further align management and stockholder interests. These actions included
the implementation of an employee stock purchase plan, the adoption of executive
stock ownership guidelines, and the linking of a larger portion of management's
incentive bonus to the value of the Common Stock.
The Company's management compensation program and the Committee's actions
are discussed in greater detail below.
BASE SALARY
As a guideline, base salary for the Company is targeted at the sixtieth
percentile level of comparable engineering and environmental services and other
companies with similar revenues or numbers of employees in order to attract and
retain key talent in this highly competitive industry. To meet this objective,
the Company, with the assistance of compensation consulting firms, reviews
compensation survey data from (i) large engineering companies from which it
recruits and with which it competes for human resources; (ii) environmental
services companies with which it competes, including some that are and some that
are not in the peer group index in the Five-Year Stock Price Performance Graph
included in this Proxy Statement; and (iii) other companies in general industry
with similar revenues or numbers of employees. The Company's
12
<PAGE> 16
salary plan for executive officers is approved, on an annual basis, by the
Compensation Committee and considers individual performance, the Company's
overall financial performance and competitive practice. Annual performance
reviews and formal merit increase guidelines determine individual salary
increases.
The Compensation Committee completed an annual review of officer base pay
levels in fiscal year 1995. Only one of the Named Officers, Mr. Mahoney,
received a salary increase for fiscal year 1995, as the salaries of the other
officers were determined to be within the competitive norms. The salary increase
for Mr. Mahoney was 10.5% to reflect his increased responsibilities and
performance in fiscal year 1995. Base pay for all officers increased by an
average of 2.6% (versus a 3.7% increase in fiscal year 1994); however, only five
of the 13 officers received base pay increases.
THE INCENTIVE COMPENSATION PLAN
The Incentive Compensation "Bonus" Plan is designed to reward executive
officers and other key employees, on an annual basis, for their contributions to
corporate and business unit/division objectives, and for individual performance.
Each eligible employee's award is expressed as a percentage of the individual's
base salary for such fiscal year. Incentive bonus targets varied, in fiscal year
1995, from 10% of base salary for certain key employees to 50% of base salary
for the chief executive officer at target levels. The incentive bonus targets
equate to the Company's annual budget objectives as approved by the Board of
Directors. If the Company's performance exceeds budget, the maximum bonus
payable to participants would be 150% of the target. This compensation structure
is based on the Compensation Committee's policy that increasing amounts of
compensation should be "at risk" for those employees with greater influence on
stockholder value. Company objectives are measured by performance criteria that
relate to both individual and Company performance. The Compensation Committee
believes that these performance criteria have a high degree of correlation to
the price of the Company's Common Stock over time. Company objectives are
expressed in specific financial targets that are established as part of the
annual budgeting process, which includes a review of performance of a comparable
group of environmental service companies.
Because the Company had not achieved its financial performance objectives
or paid any bonus awards under its formal short-term management incentive
programs since fiscal year 1990, a special key management incentive compensation
plan (the "Turnaround" Plan) was adopted specifically for fiscal year 1995 to
jump start and focus management on achieving specific financial objectives to
build stockholder value. The Committee selected operating income as the key
financial measure for fiscal year 1995 and the financial targets were
established both on an annual and quarterly basis. The Company met its operating
income targets in fiscal year 1995 and the Committee believes that this
"Turnaround" Plan was successful in achieving its intended purpose. Under the
"Turnaround" Plan, incentive bonus target awards under the basic incentive plan,
which range from 10% of salary for certain key employees to 50% of salary for
the chief executive officer, were enhanced by one-third, for selected
participants with the greatest direct influence on the specified financial
objectives, to create a significantly higher "at risk" incentive. Incentive
bonus awards began to be earned when the Company achieved 95% of the quarterly
objectives, and amounts of up to 100% of the target bonus incentives were paid
if the quarterly objectives were achieved. Incentive awards earned in excess of
100% of the quarterly incentives were deferred until the end of the fiscal year.
If annual financial results reached 95% of target objectives, all annual
incentive awards earned in excess of target awards and all deferred incentive
awards were paid in cash for basic participants. In the case of officers and
other key executives eligible for enhanced incentive awards, deferred awards
were paid in shares of restricted stock. The restrictions on the restricted
shares lapse at the end of three years contingent on the participant's continued
employment. The Company purchased shares issued in the plan on the open market
to avoid any dilution to stockholders. The distribution of all incentive awards
was determined, at the Committee's discretion, according to an assessment of
Company and individual performance in relation to pre-established objectives.
Cash incentive awards were paid to 162 participants. Of the total participants,
64 key executives received enhanced awards in the form of an aggregate of
229,152 shares of restricted Common Stock. The total incentive awards earned by
the Named Officers under the plan were as follows: Mr. Sheh, $299,993; Mr. Hart,
$199,995; Mr. DeLuca, $144,210; Mr. Mahoney, $138,663; and Mr. Schwartz,
$133,330. Of such awards, an aggregate of $229,031 was awarded to such Named
Officers in the form of restricted stock. The number of shares of restricted
stock issued to each
13
<PAGE> 17
Named Officer, on July 5, 1995, were as follows: Mr. Sheh, 23,998 shares; Mr.
Hart, 15,998 shares; Mr. DeLuca 11,536 shares; Mr. Mahoney, 11,092 shares; and
Mr. Schwartz, 10,666 shares.
Also, to further strengthen the link between the annual incentive plan and
the enhancement of stockholder value, the Compensation Committee modified the
plan for fiscal year 1996. The 1996 Incentive Compensation "Bonus" Plan provides
that the financial targets for the year be increased from those for fiscal year
1995; the financial measures be expanded to include earnings per share,
operating income and Common Stock price appreciation; the cash awards for
targeted performance be reduced; the enhancement feature be eliminated; and the
amounts paid quarterly be reduced, with a larger portion paid at the end of the
fiscal year. A portion of the incentives earned under the plan will again be
paid in restricted stock.
TOTAL ANNUAL CASH COMPENSATION (BASE SALARY PLUS BONUS)
As a guideline, total annual cash compensation is set at the sixtieth
percentile of comparable engineering and environmental service and other
companies when annual objectives and targets are achieved. Upper quartile cash
compensation can be earned only if business results significantly exceed Company
objectives.
LONG TERM INCENTIVE COMPENSATION PROGRAM
The Company's long term incentive program consists of the 1991 Plan that
expires on March 31, 1996.
The 1991 Plan authorizes the granting of various stock-based incentive
awards to officers and key employees of the Company and its subsidiaries. During
each year, the Compensation Committee considers the desirability of granting
stock-based awards to officers and other key employees under the 1991 Plan. In
determining the grant of awards to officers and other key employees, the
Compensation Committee considers, among other things, the ability of the
individual to influence stockholder value, personal performance and prior option
grants. The 1991 Plan gives the Compensation Committee the flexibility to
provide longer-term incentive awards in a variety of forms to align further the
long-term interests of the Company's management with those of its stockholders.
The Compensation Committee granted options under the 1991 Plan in fiscal
year 1995 to each of the Named Officers, and to other officers. The Company's
target for long-term compensation for officers, including the Named Officers,
for fiscal year 1995 ranged from 50% to 100% of base salary. The option grants
for all the officers, including the Named Officers, were below the fiscal year
1995 target levels for long-term incentive compensation and were as follows: Mr.
Sheh, 150,000 shares; Mr. Hart, 100,000 shares; and 77,000 shares for each of
Messrs. DeLuca, Mahoney, and Schwartz. The average exercise price for the Named
Officers is approximately $4.45 per share.
In connection with the Company's restructuring and organizational
effectiveness efforts during fiscal year 1995, the Compensation Committee
approved the grant of restricted stock to four officers, including two Named
Officers, Messrs. DeLuca and Mahoney. The grant was designed to recognize the
key roles and responsibilities of the officers in the new organization and to
provide a significant inducement to these executives to remain with the Company.
The shares vest in five equal annual installments. Mr. DeLuca and Mr. Mahoney
each received 50,000 restricted shares. On the date of grant, the shares had a
fair market value of $2.75 share, or an aggregate of $137,500 for each of
Messrs. DeLuca and Mahoney.
During fiscal year 1995, the Compensation Committee, following a review of
competitive practices regarding executive stock ownership and to create greater
alignment of management and stockholder interests, adopted an executive stock
ownership program. The program provides that members of senior management, over
a five year period, acquire and hold shares of Common Stock equal in value to at
least one year's annual base salary. Additionally, the Compensation Committee
adopted an employee stock purchase plan under which employees may purchase
Common Stock on the open market through a third party administrator, through
payroll deductions or direct payments. Executive officers are entitled to
participate in this plan. The Company pays the brokerage fees associated with
the stock purchases and the expenses of administration of the plan.
14
<PAGE> 18
TOTAL DIRECT COMPENSATION (TOTAL ANNUAL CASH COMPENSATION PLUS THE ANNUALIZED
VALUE OF LONG-TERM INCENTIVES)
As a guideline, total direct compensation ("TDC"), through incentive awards
to executive officers under the 1991 Plan, is set between the fiftieth
percentile and the upper quartile of comparable engineering and environmental
service and other companies, when the Company's long-term goals to increase
stockholder value are achieved or exceeded.
SECTION 162(M) OF THE INTERNAL REVENUE CODE
As of January 1, 1994, the Internal Revenue Code of 1986 was amended to
eliminate the deductibility of certain compensation in excess of $1,000,000.
Compensation awarded under a "performance-based" compensation program which has
been approved by stockholders is exempted from the deduction limitation. As at
many other companies, the Compensation Committee is studying the IRS final
guidelines and intends to develop a formal policy regarding Section 162(m).
COMPENSATION OF DIRECTORS
In order to more closely align the compensation of the Board members with
the interests of Company's stockholders, upon the recommendation of the
Compensation Committee, the Board has determined that, effective with the third
quarter of fiscal year 1996, the quarterly retainer fee payable to each director
for the third quarter of each fiscal year will be received in the form of shares
of Common Stock, rather than in cash. Such shares are expected to be purchased
by the Company in the open market and reissued to directors in order to avoid
dilution to the Company's stockholders.
CHANGES IN NAMED EXECUTIVE OFFICERS
Upon Mr. Murray Hutchison's retirement as an officer of the Company, it was
considered appropriate by the Board of Directors that an agreement be negotiated
with Mr. Hutchison to provide him retirement benefits similar to those provided
under retirement plans maintained by other corporations for senior executive
officers. In authorizing such an agreement, the directors were cognizant of the
fact that, unlike many other organizations, the Company has not offered
significant retirement benefits to such employees; and that failure to provide
reasonable retirement benefits for an executive whose role in the Company was as
prominent as Mr. Hutchison's could be divisive and have a negative effect on
morale of key employees. The Board of Directors was also cognizant of Mr.
Hutchison's substantial role in the development of the Company into a major
environmental services organization and that his knowledge of the Company's
affairs and history could be of importance to the Company in the future.
Following the receipt of a report from an outside compensation consulting
firm, a representative of the Compensation Committee had discussions with Mr.
Hutchison, and discussions occurred between the compensation consultant and
another consulting firm which had been retained by Mr. Hutchison. As the result
of these discussions, an agreement was reached as described under "Certain
Transactions -- Hutchison Retirement Agreement."
COMPENSATION OF CHIEF EXECUTIVE OFFICER
Mr. Sheh's annual salary for fiscal year 1995 was $450,000 and has remained
at that rate, except for a temporary salary reduction in fiscal year 1993, since
he was hired. The Committee was assisted in assessing the competitiveness of Mr.
Sheh's salary for fiscal year 1995 by executive-level competitive compensation
information provided by Towers Perrin. Mr. Sheh's salary approximates the
sixtieth percentile, (pay policy position) of salaries paid by engineering and
environmental services companies. In consideration of the competitive data and
the increased incentive opportunities under the "Turnaround" Plan, Mr. Sheh's
salary was not increased for fiscal year 1995.
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<PAGE> 19
Mr. Sheh was granted 150,000 stock options in April 1994 under the 1991
Plan. This grant is less than the targeted level for Mr. Sheh for fiscal year
1995. These options, which vest in 25% increments over a four-year period, have
an exercise price of $2.875 per share, which was the closing price of the stock
on the date of grant. The stock options were granted to provide Mr. Sheh with a
significant incentive to remain with the Company and to link his total
compensation opportunity to increases in stockholder value.
The "Turnaround" Plan for fiscal year 1995 provided Mr. Sheh with the
opportunity for an annual "bonus" award ranging from 0% to 100% of his salary,
conditioned on Company performance against previously established quarterly and
annual operating income objectives. Because the Company achieved the targeted
operating income for the year, the first time it had done so in five years, Mr.
Sheh earned a total award of $299,993, consisting of $161,550 in cash paid in
fiscal year 1995, $63,450 in cash paid in fiscal year 1996 and $74,993 in
restricted stock issued in fiscal year 1996. Mr. Sheh must remain continuously
employed for three years in order for the restrictions on the stock to lapse.
Mr. Sheh did not receive a bonus in fiscal years 1993 or 1994.
THE COMPENSATION COMMITTEE
Jack O. Vance, Chairman
Ralph S. Cunningham
W. Scott Martin
E. Martin Gibson
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<PAGE> 20
STOCK PRICE PERFORMANCE GRAPH
The following graph sets forth the Company's cumulative total stockholder
return on its Common Stock as compared to the S&P 500 Index and the Smith Barney
("SB") Hazardous Waste Index on March 31 of each listed year. The graph covers
the period from March 31, 1990 through March 31, 1995. Mr. Sheh and several
other senior executives joined the Company in fiscal year 1993 or thereafter.
COMPARISON OF 5-YEAR CUMULATIVE TOTAL RETURN
INTERNATIONAL TECHNOLOGY CORPORATION, S&P 500 INDEX,
SB HAZARDOUS WASTE INDEX(1)
Year Ended March 31
<TABLE>
<CAPTION>
MEASUREMENT PERIOD INT'L TECHNOLOGY SB HAZARDOUS
(FISCAL YEAR COVERED) CORP. S&P 500 INDEX WASTE
<S> <C> <C> <C>
1990 100 100 100
1991 155 114 134
1992 89 127 109
1993 84 146 89
1994 43 148 73
1995 34 171 65
</TABLE>
(1) Assumes $100 invested on March 31, 1990 in the Company's Common Stock, the
S&P 500 Index, and the SB Hazardous Waste Index, and assumes the
reinvestment of all dividends.
THIS GRAPH REPRESENTS HISTORICAL STOCK PRICE PERFORMANCE AND IS NOT
NECESSARILY INDICATIVE OF ANY FUTURE STOCK PRICE PERFORMANCE.
THE FOREGOING REPORT OF THE COMPENSATION COMMITTEE AND THE PERFORMANCE
GRAPH THAT APPEARS IMMEDIATELY AFTER SUCH REPORT SHALL NOT BE DEEMED TO BE
SOLICITING MATERIAL OR TO BE FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES EXCHANGE ACT OF 1934 OR
INCORPORATED BY REFERENCE IN ANY DOCUMENT SO FILED.
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<PAGE> 21
CERTAIN TRANSACTIONS
Executive Agreements. In connection with his employment as Chief Executive
Officer, Mr. Sheh and the Company entered into an agreement dated July 15, 1992.
The agreement is intended to specify annual stock option grants and a minimum
level of base pay for Mr. Sheh, as well as to address certain other matters.
Pursuant to the agreement, Mr. Sheh's annual base salary is $450,000 subject to
merit increases and the agreement provides the opportunity to participate in the
Company's Incentive Bonus Plan with a bonus of up to 50% of base salary at
target levels. Pursuant to the agreement, Mr. Sheh received stock options
covering 250,000 shares of Common Stock upon joining the Company. The agreement
also provides that Mr. Sheh is entitled to receive stock options covering 30,000
shares of Common Stock on each of the first, second and third anniversaries of
his employment. The agreement provides for certain insurance and other benefits.
The agreement also provides that if Mr. Sheh were terminated within his first
three years of employment for other than "cause," he would be entitled to
receive no less than the equivalent of two years of base salary and short-and
long-term bonuses and all stock options will become immediately vested.
Thereafter, he would be entitled to one year of base salary and bonuses upon
termination for other than "cause."
In connection with his employment as Senior Vice President and Chief
Operating Officer, Mr. Hart and the Company entered into an agreement dated
November 4, 1993. The agreement is intended to specify annual stock option
grants and a minimum level of base pay for Mr. Hart, as well as to address
certain other matters. Pursuant to the agreement, Mr. Hart's annual base salary
is $300,000 subject to merit increases and the opportunity to participate in the
Company's Incentive Bonus Plan with a bonus of up to 50% of base salary at
target levels, with a guarantee of a minimum cash bonus of $100,000 for each of
fiscal years 1994 and 1995. Pursuant to the agreement, Mr. Hart received stock
options covering 180,000 shares of Common Stock upon joining the Company. The
agreement also provides that Mr. Hart is entitled to receive stock options
covering 30,000 shares of Common Stock on each of the first, second and third
anniversaries of his employment. The agreement provides for certain insurance
and other benefits. Additionally, the agreement provides for the reimbursement
of certain household moving expenses and a relocation loan (described below). In
the event Mr. Hart were terminated within his first two years of employment for
other than "cause," under the agreement he would be entitled to receive no less
than the equivalent of one year of base salary and short- and long-term bonuses
and all stock options will become immediately vested.
Hutchison Retirement Agreement. Mr. Murray Hutchison, who spent over 30
years with the Company in various employment capacities, including Chairman of
the Board of Directors and Chief Executive Officer, retired from his officer
positions with the Company and its subsidiaries as of March 31, 1994 and retired
as an employee as of May 31, 1994. He continues to serve on the Board of
Directors, but his term expires at the Annual Meeting. Pursuant to a retirement
agreement between Mr. Hutchison and the Company approved and entered into March
3, 1994, and effective May 31, 1994, the Company agreed to pay Mr. Hutchison
$25,000 per month for the remainder of his life or ten years, whichever is
longer. In addition, the Company agreed to provide Mr. Hutchison and his wife
medical benefits no less favorable than those provided as of April 1, 1994, with
reduction for Medicare at age 65. The Company also agreed to provide Mr.
Hutchison life insurance in the amount of $1,000,000; a monthly car allowance;
an office together with secretarial support services until age 65 and tax and
financial planning services. These benefits were in addition to Mr. Hutchison's
pre-existing rights under the Company's stock incentive plans and a qualified
defined contribution Retirement Plan previously maintained by the Company. Mr.
Hutchison is not eligible to participate in the retirement plan for directors
because he will not have attained five years of service as a non-employee
director at the time his term expires. The Hutchison agreement was approved by
the Board of Directors, following approval by the Compensation Committee and
advice of an independent compensation consulting firm. Under generally accepted
accounting principles the Company recorded a pre-tax charge to earnings of
$4,500,000 (approximately $3,000,000, net of tax benefit) in the fourth quarter
of fiscal year 1994, representing the net present value of the benefits provided
in the agreement.
As the result of concerns expressed by stockholders, in June 1994 the Board
of Directors formed a special committee comprised of four non-employee directors
to review the Hutchison agreement. The special committee engaged independent
legal counsel and a new independent compensation consulting firm to assist it in
the review process. Following its review of the Hutchison agreement, the special
committee recommended
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<PAGE> 22
that the Hutchison agreement be modified in various respects in order to reduce
the cost to the Company. Following negotiations, in January 1995, an amendment
was approved by the special committee and entered into between the Company and
Mr. Hutchison, eliminating the monthly car allowance, office and secretarial
support and tax and financial planning services. In the amendment, Mr. Hutchison
also agreed to perform certain consulting services for the Company, if
requested, without additional compensation. The other elements of Mr.
Hutchison's severance agreement were retained without change. The effect of the
amendment was to reduce the cost of Mr. Hutchison's retirement agreement, on a
present value basis, by approximately $500,000.
Severance Benefit Agreements. In addition to the executive agreements with
Messrs. Sheh and Hart, the Company currently maintains change in control
severance benefit agreements (the "Severance Agreements") with certain executive
officers. The Severance Agreements generally have a two-year term. The persons
with whom the Company has entered into Severance Agreements are Robert B. Sheh,
Anthony J. DeLuca, James R. Mahoney, Eric Schwartz and Larry M. Hart expiring on
July 29, 1996, April 12, 1996, September 15, 1997, September 15, 1997, and
November 14, 1995, respectively.
The Severance Agreements provide, upon the occurrence of certain events,
for the payment of lump sum cash compensation equal to 2.99 times the executive
officer's annual base salary and the highest aggregate cash bonus paid to the
executive officer in the preceding three fiscal years (subject to reduction in
certain circumstances, including the limitation that the Company's aggregate
severance liability shall not exceed 5% of the Company's market capitalization
based on the fair market value of the Common Stock at the date of the occurrence
of the event). The Company is obligated to pay such compensation to the
executive officer if a change in control of the Company as defined in the
Severance Agreements occurs and the officer's employment subsequently is
terminated by the Company or by the officer for specified reasons. The Severance
Agreements also provide that the Company will arrange in such event to provide
the officer for two years with disability, life, accident and health insurance
substantially similar to those insurance benefits being received by the officer
at the time of the termination of employment. The Severance Agreements generally
have a two-year term if no change in control of the Company occurs. If there is
a change in control of the Company, the Severance Agreements remain in effect
for three years from the date of the change in control if it has not been
approved by the Board of Directors and for one year if the change in control has
been approved by the Board of Directors. If the Severance Agreements had been
triggered as of June 30, 1995, the lump sum cash compensation payable to Messrs.
Sheh, Hart, DeLuca, Mahoney and Schwartz would have been $1,645,486, $1,096,990,
$909,655, $874,667 and $841,029, respectively, giving effect to the reduction in
the Company's aggregate severance liability such that it would not exceed 5% of
the Company's market capitalization on June 30, 1995.
The purpose of the Severance Agreements is to continue to attract and
retain well-qualified executives and key personnel who are an integral part of
the management of the Company and whose performance is considered critical to
the future success of the Company. To this end, the Severance Agreements are
intended to protect the continued employment of such executives and key
personnel which would be at risk in the event of a change in control and to
provide an incentive to such executives and key personnel to remain in the
employ of the Company, notwithstanding the uncertainty in job security caused by
an actual or threatened change in control.
Relocation Loans. In certain circumstances, the Company may grant
interest-free loans to executive officers, officers and certain other employees
principally for real estate purchases in connection with company-initiated
transfers to a new location. Although the terms and conditions of such loans
vary in individual circumstances, all loans are approved by the Compensation
Committee, typically have ten-year terms, are secured by the principal residence
of the individual, and provide for repayment of principal either through
forgiveness based upon continuing service or application of bonuses under the
Company's Incentive Bonus Plan. Generally, such loans become due and payable
upon the sale of the underlying principal residence or after the termination of
the individual's employment from the Company.
On March 27, 1991, Mr. James R. Mahoney, Senior Vice President, entered
into a relocation loan arrangement with the Company which had an original
principal amount of $200,000, is secured by a deed of
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<PAGE> 23
trust on his principal residence and will remain interest-free so long as Mr.
Mahoney remains an employee. Beginning December 31, 1991 and on each December
31st thereafter until December 31, 2000 (the date when the loan is due and
payable), 5% of the original principal amount (to a maximum of 50% of the
original principal amount) was scheduled to be forgiven by the Company, provided
Mr. Mahoney remains employed by the Company. Additionally, Mr. Mahoney agreed to
repay the remaining 50% of the original principal amount in installments related
to the issuance of awards under the Company's Incentive Bonus Plan. Since no
bonuses were awarded or paid under the Company's Incentive Bonus Plan during
fiscal years 1993 and 1994, Mr. Mahoney was not required to make any installment
payments to the Company. During the fiscal year ended March 31, 1995, (i) Mr.
Mahoney repaid $10,000 of his loan, and (ii) the maximum amount owed by Mr.
Mahoney to the Company under this loan was $170,000. As of May 31, 1995, the
amount outstanding was $150,000.
On May 21, 1993, Mr. Robert B. Sheh, President and Chief Executive Officer
and a director of the Company, entered into a relocation loan arrangement with
the Company which had an original principal amount of $200,000, is secured by a
deed of trust on his principal residence and will remain interest-free so long
as Mr. Sheh remains an employee. Beginning December 31, 1993 and on each
December 31st thereafter until December 31, 2002 (the date when the loan is due
and payable), 5% of the original principal amount (to a maximum of 50% of the
original principal amount) was scheduled to be forgiven by the Company, provided
Mr. Sheh remains employed by the Company. Additionally, Mr. Sheh agreed to repay
the remaining 50% of the original principal amount in installments related to
the issuance of awards under the Company's Incentive Bonus Plan. During the
fiscal year ended March 31, 1995, (i) Mr. Sheh repaid $10,000 of his loan, and
(ii) the maximum amount owed by Mr. Sheh to the Company under this loan was
$190,000. As of May 31, 1995, the amount outstanding was $170,000.
On June 14, 1994, Mr. Larry M. Hart, Senior Vice President and Chief
Operating Officer of the Company, entered into a relocation loan arrangement
with the Company which had an original principal amount of $200,000, is secured
by a deed of trust on his principal residence and will remain interest free so
long as Mr. Hart remains an employee. Beginning December 31, 1994 and on each
December 31st thereafter until December 31, 2003 (the date when the loan is due
and payable), 5% of the original principal amount (to a maximum of 50% of the
original principal amount) was scheduled to be forgiven by the Company, provided
Mr. Hart remains employed by the Company. Additionally, Mr. Hart agreed to repay
the remaining 50% of the original principal amount in installments related to
the issuance of awards under the Company's Incentive Bonus Plan. During the
fiscal year ended March 31, 1995 (i) Mr. Hart repaid $10,000 of his loan and
(ii) the maximum amount owed by Mr. Hart was $200,000. As of May 31, 1995, the
amount outstanding was $180,000.
McGill Consulting Contract. The Company entered into a Consulting Agreement
with Gene McGill & Associates ("Consultant") as of September 17, 1992 pursuant
to which the Company retained the consulting services of the Consultant, a
corporation wholly owned by Mr. Eugene C. McGill, a brother of Mr. James C.
McGill, a member of the Board of Directors. The consulting agreement expired
during fiscal year 1995. The Consulting Agreement provided for an advance of
$26,000 per calendar quarter against which the hourly compensation due the
Consultant for time charged was offset. Subsequent to the expiration of the
Consulting Agreement, the Consultant has continued to provide technical services
to one of the Company's business units on a time and materials basis. The amount
of compensation paid to the Consultant amounted to approximately $89,577 in
fiscal year 1995.
Change of Control Provisions in Corning Joint Venture Agreements. In
connection with the formation of a joint venture corporation with an affiliate
of Corning Incorporated ("Corning"), the Company has issued to Corning 333,000
shares of the Company's Common Stock and a warrant to purchase 2,000,000
additional shares of the Company's Common Stock at a price of $5.00 per share,
pursuant to a Securities Acquisition Agreement dated May 2, 1994 (the
"Agreement"). The Agreement provides, among other things, that for a period of
five years or until Corning disposes of the Common Stock of the Company it
acquires through this transaction, Corning and its affiliates will not seek to
acquire more than six percent (6%) of the Company's Common Stock, participate in
a group seeking to acquire the Company, engage in a proxy contest with respect
to the Company, or otherwise seek to control the management, directors, or
affairs of the Company. The
20
<PAGE> 24
Agreement also provides generally that Corning and its affiliates may not sell
the Common Stock to persons holding more than 1% of the Company's Common Stock,
or 5% in the case of an institutional investor whose identity the Company has
approved in advance and, under certain circumstances, for a right of first
refusal in favor of the Company in the event Corning desires to sell shares of
Common Stock within five years. The Agreement also provides Corning with certain
rights to cause the Company to register the Common Stock it acquires in this
transaction, pursuant to customary terms and conditions, including
indemnification of Corning under certain circumstances.
Indemnification. The General Corporation Law of the State of Delaware, the
state of incorporation of the Company, and the Bylaws of the Company provide for
indemnification of directors and officers. Section 145 of the Delaware General
Corporation Law provides generally that a person sued as a director, officer,
employee or agent of a corporation may be indemnified by the corporation for
reasonable expenses, including attorneys' fees, if, in cases other than actions
brought by or in the right of the corporation, he or she has acted in good faith
and in a manner he or she reasonably believed to be in, or not opposed to, the
best interests of the corporation (and in the case of a criminal proceeding, had
no reasonable cause to believe that his or her conduct was unlawful). Section
145 provides that no indemnification for any claim or matter may be made, in the
case of an action brought by or in the right of the corporation, if the person
has been adjudged to be liable, unless the Court of Chancery or other court
determines that indemnity is fair and reasonable despite the adjudication of
liability. Indemnification is mandatory in the case of a director, officer,
employee or agent who has been successful on the merits, or otherwise, in
defense of a suit against him or her. The determination of whether a director,
officer, employee or agent should be indemnified must be made by a majority of
disinterested directors, independent legal counsel or the stockholders.
Directors and officers of the Company are covered under policies of
directors' and officers' liability insurance. The directors and all officers
serving the Company as Senior Vice President or in a higher position are parties
to Indemnity Agreements (the "Indemnity Agreements"). The Indemnity Agreements
provide indemnification for the directors and covered officers in the event the
directors' and officers' liability insurance does not cover a particular claim
for indemnification or if such a claim or claims exceed the limits of such
coverage. The Indemnity Agreements are generally intended to provide
indemnification for any amounts a director or covered officer is legally
obligated to pay because of claims arising out of the director's or officer's
service to the Company.
Additionally, in 1987 the Company's Certificate of Incorporation was
amended with the approval of stockholders to provide that its directors are not
to be liable to the Company or its stockholders for monetary damages for breach
of fiduciary duty to the fullest extent permitted by law. This provision is
intended to allow the Company's directors the benefit of the Delaware General
Corporation Law which provides that directors of Delaware corporations may be
relieved of monetary liabilities for breach of their fiduciary duty of care,
except under certain circumstances, including breach of the director's duty of
loyalty, acts or omissions not in good faith or involving intentional misconduct
or a knowing violation of law or any transaction from which the director derived
an improper personal benefit.
Compliance with Securities Reporting Requirements. Section 16(a) of the
Securities Exchange Act of 1934 (the "Act") requires directors, certain officers
of the Company and persons holding more than 10% of the Company's Common Stock
to file reports concerning their ownership of Common Stock by dates established
under the Act and also requires that the Company disclose in this Proxy
Statement any non-compliance with those requirements during fiscal year 1995.
Based solely upon a review of reports delivered to the Company, all Section
16(a) filing requirements were satisfied, except that Mr. Davis, who retired as
a director effective as of the end of the Company's 1994 Annual Meeting, filed
one late report with respect to a purchase of 1,000 Depositary Shares.
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<PAGE> 25
INDEPENDENT AUDITOR
Ernst & Young LLP was the Company's independent auditor for the year ended
March 31, 1995 and has been selected as the auditor for the current fiscal year,
as recommended by the Audit Committee. A representative of that firm is expected
to be at the Annual Meeting and will have an opportunity to make a statement, if
desired. The representative will also be available to respond to appropriate
questions from stockholders.
STOCKHOLDER PROPOSALS
Any eligible stockholder (as defined below) of the Company wishing to have
a proposal considered for inclusion in the Company's 1996 proxy solicitation
materials must set forth such proposal in writing and file it with the Secretary
of the Company on or before March 20, 1996. The Board of Directors of the
Company will review any proposals from eligible stockholders which it receives
by that date and, with advice of counsel, will determine whether any such
proposal will be included in its 1996 proxy solicitation materials under
applicable SEC proxy rules. An eligible stockholder is one who is the record or
beneficial owner of at least 1% or $1,000 in market value of securities entitled
to be voted at that annual meeting and has held such securities for at least one
year and who shall continue to own such securities through the date on which the
annual meeting is held.
ANNUAL REPORT
The Company's 1995 Annual Report to Stockholders is being mailed to
stockholders together with this Proxy Statement. Stockholders are referred to
the report for financial and other information about the Company, but such
report is not incorporated in this Proxy Statement and is not part of the proxy
soliciting material.
FORM 10-K ANNUAL REPORT
The Company will provide to any stockholder, without charge, a copy of its
Annual Report on Form 10-K for the fiscal year ended March 31, 1995, including
financial statements, filed with the SEC, upon the request of any such
stockholder. Requests should be directed to International Technology
Corporation, Attention: Investor Relations Department, 23456 Hawthorne
Boulevard, Torrance, California 90505.
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<PAGE> 26
GENERAL AND OTHER MATTERS
The Company will bear the cost of this solicitation of proxies, including
expenses in connection with preparing, assembling and mailing the proxy
solicitation materials and the charges and expenses of brokerage firms and
others for forwarding solicitation materials to beneficial owners. The Company
has engaged Corporate Investor Communications, Inc. ("CIC") to assist in the
solicitation of proxies, for which CIC will be paid a fee not to exceed $5,000
plus out-of-pocket expenses. In addition to solicitation by mail, proxies may be
solicited personally or by telephone or telegraph by CIC, as well as by
directors, officers or employees of the Company, who will receive no additional
compensation for such services.
As of the date of this Proxy Statement, there are no other matters to be
brought before the Annual Meeting. Pursuant to the Company's Bylaws, in order to
present business at the Annual Meeting other than that proposed by the Board, a
stockholder must give written notice to the Secretary of the Company not later
than sixty days in advance of the Annual Meeting or, if later, the fifteenth day
following the first public disclosure of the date of the Annual Meeting. Any
such notice must set forth as to each matter the stockholder proposes to bring
before the meeting: (i) a brief description of the business desired to be
brought before the meeting and the reasons for conducting such business at the
meeting; (ii) the name and address, as they appear on the Company's books, of
the stockholder proposing such business; (iii) the class, series and number of
shares of the Company that are beneficially owned by the stockholder; and (iv)
any material interest of the stockholder in such business. In addition, a
stockholder making any such proposal must promptly provide any information
reasonably requested by the Company. Should any other matters come before the
Annual Meeting, action may be taken thereon pursuant to the proxies in the form
enclosed, which confer discretionary authority on the persons named therein or
their substitutes with respect to such matters.
By Order of the Board of Directors,
ERIC SCHWARTZ
Secretary
July 18, 1995
Torrance, California
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<PAGE> 27
PROXY INTERNATIONAL TECHNOLOGY CORPORATION
ANNUAL MEETING OF STOCKHOLDERS
SEPTEMBER 7, 1995
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned constitutes and appoints ANTHONY J. DELUCA, E. MARTIN
GIBSON and ROBER B. SHEH and each of them, attorneys-in-fact and proxies of the
undersigned, to represent the undersigned and to vote all shares of Common
Stock, $1.00 par value, of International Technology Corporation (the "Company")
which the undersigned would be entitled to vote if personally present at the
Annual Meeting of Stockholders of the Company (the "1995 Annual Meeting") to be
held at 9:00 a.m. Pacific Daylight Time, on Thursday, September 7, 1995, at the
Holiday Inn Crowne Plaza, located at 300 North Harbor Drive, Redondo Beach,
California 90277-2552, and at any adjournment or postponement thereof. All
proxies shall be voted as directed, or, if no direction is given, for the
nominees named on the reverse side.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
[SEE REVERSE SIDE]
/X/ PLEASE MARK VOTES AS IN THIS EXAMPLE.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF INTERNATIONAL
TECHNOLOGY CORPORATION.
1. ELECTION OF DIRECTORS 2. In the discretion of the
poicyholders with respect
NOMINEES: E. Martin Gibson and Jack O. Vance to any other matter that
may properly come before
FOR WITHHELD the 1995 Annual Meeting and
at any adjournment or post-
[ ] [ ] ponement thereof. The Board
of Directors is not aware of
/ / _______________________________________ any other matters that will
For both nominees except as noted above be presented at the meeting.
MARK HERE
FOR ADDRESS
CHANGE AND
NOTE AT LEFT [ ]
Please date and sign exactly as
your name or names appear
hereon. If more than one owner,
all should sign. Executors,
administrators, trustees, guar-
dians, attorneys and corporate
officers should indicate their
fiduciary capacity or full
title when signing.
PLEASE COMPLETE, SIGN, DATE AND RETURN THIS Signature:____________________
PROXY PROMPTLY USING THE ENCLOSED ENVELOPE.
Date:_________________
Signature:____________________
Date:_________________
