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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE FISCAL YEAR ENDED MARCH 27, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ________________ TO ___________________
COMMISSION FILE NUMBER 1-9037
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INTERNATIONAL TECHNOLOGY CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Delaware 33-0001212
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
2790 Mosside Boulevard, Monroeville, Pennsylvania 15146-2792
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (412) 372-7701
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
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NAME OF EACH EXCHANGE ON WHICH
TITLE OF EACH CLASS REGISTERED
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Common Stock, $.01 Par Value New York Stock Exchange; Pacific Stock Exchange
Preferred Stock Depositary Shares New York Stock Exchange; Pacific Stock Exchange
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SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: None
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS REQUIRED
TO BE FILED BY SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING
THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANT WAS
REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH FILING
REQUIREMENTS FOR THE PAST 90 DAYS. YES ...X.... NO ........
INDICATE BY CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO ITEM 405
OF REGULATION S-K IS NOT CONTAINED HEREIN, AND WILL NOT BE CONTAINED, TO THE
BEST OF REGISTRANT'S KNOWLEDGE, IN DEFINITIVE PROXY OR INFORMATION STATEMENTS
INCORPORATED BY REFERENCE IN PART III OF THIS FORM 10-K OR ANY AMENDMENT TO THIS
FORM 10-K. ___
THE AGGREGATE MARKET VALUE OF THE REGISTRANT'S VOTING COMMON STOCK HELD BY
NON-AFFILIATES OF THE REGISTRANT AT JUNE 11, 1998, WAS APPROXIMATELY
$228,962,000 (BASED UPON THE CLOSING SALE PRICE OF ITS COMMON STOCK ON THE NEW
YORK STOCK EXCHANGE AS REPORTED BY THE WALL STREET JOURNAL ON SUCH DATE.)
AT JUNE 11, 1998 THE REGISTRANT HAD ISSUED AND OUTSTANDING AN AGGREGATE OF
22,637,774 SHARES OF ITS COMMON STOCK, INCLUDING 8,078 SHARES HELD IN TREASURY.
DOCUMENTS INCORPORATED BY REFERENCE
CERTAIN INFORMATION INCLUDED IN THE REGISTRANT'S DEFINITIVE PROXY STATEMENT TO
BE FILED WITH THE SECURITIES AND EXCHANGE COMMISSION FOR THE 1998 ANNUAL MEETING
OF STOCKHOLDERS OF THE REGISTRANT IS INCORPORATED BY REFERENCE INTO PART III
HEREOF.
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INTERNATIONAL TECHNOLOGY CORPORATION
ANNUAL REPORT ON FORM 10-K
FOR THE FISCAL YEAR ENDED MARCH 27, 1998
TABLE OF CONTENTS
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Item Page
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PART I
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1 Business............................................................................. 2
General.......................................................................... 2
Background....................................................................... 3
Operations....................................................................... 4
General..................................................................... 4
Engineering and Construction................................................ 4
Consulting and Ventures..................................................... 4
Outsourcing................................................................. 5
International............................................................... 5
Customers................................................................... 5
Competition................................................................. 6
Technology Development...................................................... 7
Regulations................................................................. 7
Environmental Contractor Risks.............................................. 9
Insurance and Risk Management............................................... 10
Leverage.................................................................... 11
Risk of Achievement of Synergies and Integration of Operations.............. 11
History of Losses........................................................... 12
Control of Board of Directors............................................... 12
Discontinued Operations.......................................................... 12
Employees........................................................................ 13
2 Properties........................................................................... 13
3 Legal Proceedings.................................................................... 13
4 Submission of Matters to a Vote of Shareholders...................................... 13
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4A Executive Officers of the Company.................................................... 14
PART II
5 Market for the Registrant's Common Stock and Related
Shareholder Matters.............................................................. 15
6 Selected Financial Data.............................................................. 16
7 Management's Discussion and Analysis of Results of Operations
and Financial Condition.......................................................... 16
8 Financial Statements and Supplementary Data.......................................... 27
9 Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure......................................................... 58
PART III
10 Directors and Executive Officers of the Registrant................................... 58
11 Executive Compensation............................................................... 58
12 Security Ownership of Certain Beneficial Owners and Management....................... 58
13 Certain Relationships and Related Transactions....................................... 58
PART IV
14 Exhibits, Financial Statement Schedule and Reports on Form 8-K....................... 59
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PART I
ITEM 1. BUSINESS.
GENERAL
International Technology Corporation, a Delaware corporation (the Company
or IT) provides a full range of technology-driven, value-added consulting,
outsourcing, engineering and construction capabilities through a network of 67
offices in the United States and selected international locations. The Company
was incorporated in 1983; the earliest antecedent of the Company commenced
operations in California in 1926. On June 9, 1998, the Board of Directors of IT
approved a change in IT's fiscal year end from the last Friday in March of each
year to the last Friday in December of each year; as a result, the Company's
transition period will cover the nine month period ending December 25, 1998.
The Company's services include construction and remediation, risk
assessment, air quality management, pollution prevention and waste minimization,
information management, land-use planning and restoration of impaired
properties, decontamination and decommissioning, design/build, wastewater
treatment, historical research and investigation, environmental consulting and
advocacy services, engineering services and facility operation and maintenance.
The Company's business strategy is to be a global provider of environmental
solutions to both the government and private industry clients. As part of this
strategy, the Company has diversified through several acquisitions of
specialized companies primarily serving targeted commercial markets.
Additionally, the Company acquired OHM Corporation (OHM) in a two-step
transaction, comprised of a tender offer for 13,933,000 shares of OHM common
stock, or 54% of the outstanding OHM stock, for $160,300,000 in cash, which was
consummated on February 25, 1998, and a merger (the "Merger") of an IT
subsidiary into OHM on June 11, 1998. In the Merger, the former OHM shareholders
received IT common stock representing approximately 57% of the outstanding IT
common stock and 45% of the voting power of IT, as well as cash in the aggregate
amount of $30,800,000.
Following the tender offer, the Company launched an integration plan which
included having IT and OHM management coordinate their operations and implement
cost savings plans. OHM is a leading diversified services firm, providing a
broad range of outsourced services for governmental and private sector clients.
OHM has worked at 300 military bases on projects for the U.S. Army Corp of
Engineers, the U.S. Department of the Navy and Air Forces as well as projects
for the U.S. Environmental Protection Agency (EPA) and the Department of Energy
(DOE). Private sector clients include those in petroleum, chemical,
transportation and general manufacturing. Giving effect to the OHM acquisition,
IT has projected annual revenues of approximately $1.0 billion and backlog at
March 27, 1998 of $3.5 billion (see Management's Discussion and Analysis of
Results of Operations and Financial Condition - Results of Operations).
Demand for the Company's services is heavily influenced by the level of
enforcement of environmental laws and regulations, funding levels for government
projects and spending patterns of commercial clients. The Company believes
commercial client spending has been and will continue to be influenced by the
implementation and enforcement activities of governmental regulatory agencies
and the existing uncertain regulatory climate. The operations of the Company are
performed subject to a comprehensive federal, state, and local environmental
regulatory structure. (See Business - Operations - Regulations.) This regulatory
framework is a primary driver of business opportunities for the Company. The
lapse of the Superfund (see Business - Operations - Regulations - Comprehensive
Environmental Response, Compensation and Liability Act of 1980 (CERCLA) and
uncertainty concerning the form of the future reauthorization of the Superfund
and potential changes in other regulations have dampened demand for the
Company's services.
In recent years, the Company's revenues have been derived primarily from
its business with federal, state and local governmental clients. Revenues
attributable to contracts with governmental agencies accounted for 63%, 67% and
69% of total revenues in fiscal years 1998, 1997 and 1996, respectively. (See
Business - Operations - Customers Federal, State and Local Governmental
Clients.) The Company expects that revenues attributable to federal, state and
local governmental agency contracts, particularly those with the U.S. Department
of Defense (DOD) and DOE, will continue to represent a substantial percentage of
total revenues in the near term. Efforts to constrain the federal budget
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deficit have reduced the level of spending on environmental restoration by the
DOD, the DOE and other federal governmental agencies. During the past two years,
the Company's commercial client revenue has increased modestly despite an
uncertain regulatory climate, primarily due to the acquisitions of specialized
consulting firms (see Business-Operations - Consulting and Ventures and
Management's Discussion and Analysis of Results of Operations and Financial
Condition - Revenues).
BACKGROUND
Hazardous materials management and remediation, as well as air and water
pollution control, are widely acknowledged as significant national priorities.
As of March 1998, the USEPA had designated approximately 1,372 sites as
Superfund locations with significant concentrations of hazardous materials,
although only approximately 37% of these sites have been remediated. In
addition, there are a large number of small commercial and governmental sites
that will require cleanup. The assessment, decontamination and remediation of
hazardous sites are governed by complex environmental and occupational safety
and health regulations administered by numerous federal, state and local
agencies.
Many of the Company's clients, both governmental and commercial, require a
full-service solution, in which a single supplier manages the entire process
from identification and assessment through remediation. Successful remediation
of hazardous sites requires a multidisciplinary approach, since such sites
typically involve a variety of waste which affects air, soil and/or water.
Depending on the circumstances, the required skills may include risk assessment,
computer modeling, ambient air monitoring, land-use planning, process and design
engineering, and construc tion/remediation. The application of these disciplines
to solve client problems requires substantial operational knowledge, and the
Company believes that it is well-positioned to solve client problems in a
practical, cost-effective manner because of the combination of its technical
capabilities and experience. Additionally, the Company's technical expertise and
operational experience are sought by other firms for project-specific teaming
and joint venture relationships, thereby allowing the Company access to an
increased number of large-scale governmental and commercial programs.
Over the past several years, the environmental management and hazardous
waste remediation industry has been characterized by an increasing number of
well-capitalized competitors, reduced government enforcement of environmental
regulations and regulatory uncertainty. This has resulted in reduced commercial
spending on environmental cleanup and intense pricing competition for hazardous
waste cleanup projects. In recent years, lower demand in the private sector has
been offset to some extent by new major project opportunities in the public
sector, primarily comprehensive cleanup projects at DOD and DOE installations,
which require a broad range of project management and field execution skills,
limiting the number of potential bidders. As a result of the changes impacting
the industry, consolidation has occurred through downsizing and mergers. The
Company's strategy is to be a strong competitor for the major project
opportunities offered by the DOD and DOE, to continue to actively serve the
commercial market, to expand and diversify into economically-driven, value-added
services and to achieve economies of scale by continued participation in the
ongoing consolidation in the industry. (See Management's Discussion and Analysis
of Results of Operations and Financial Condition - Liquidity and Capital
Resources.)
Since 1996, the Company has made a number of acquisitions to further grow
and diversify its business, including the acquisition of OHM. In March 1996, the
Company acquired Gradient Corporation, a prominent environmental risk assessment
firm. In November 1996, the Company acquired a 50.1% interest in a Taiwanese
wastewater treatment design/build firm (see Business - Operations -
International). In May 1997, the Company acquired PHR Environmental Consultants,
Inc. (PHR), a company that provides environmental historical research and
investigation, and in September 1997, the Company acquired Pacific Environmental
Group (PEG), a leading provider of a broad range of environmental consulting and
engineering services to major oil companies. In January 1998, the Company
acquired Jellinek, Schwartz & Connolly, Inc., (JSC) a Washington D.C. based firm
providing economically driven, science-based environmental consulting and
advocacy services to clients in the areas of chemical product registration,
environmental regulatory strategy, and risk management through the systematic
integration of science, policy, advocacy and management expertise. (See Business
- - Operations - Consulting and Ventures.) In March 1998, the Company acquired
LandBank Inc., a real estate and restoration company focusing on environmentally
impaired properties. A subsidiary of OHM,
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Beneco Enterprises, Inc., (Beneco), a leading provider of operations,
maintenance and construction outsourcing services, was acquired by OHM in June
1997. These recent acquisitions are illustrative of the Company's strategy of
directing its growth and diversification toward economically-driven, value-added
services which are complementary to IT's existing services and which are
synergistic when combined with IT's market position and infrastructure.
OPERATIONS
GENERAL
The Company's operations have been managed through two divisions,
Engineering and Construction and Consulting and Ventures. Outsourcing, a third
division, is being formed to focus on service areas that are expected to
experience high growth. The Engineering and Construction division manages
projects of all sizes, while the Consulting and Ventures division provides
specialized consulting services and focuses on new value-added business
solutions. The Company provides these capabilities throughout the United States
as well as internationally through appropriate resources located in the
Company's 67 offices and through certain international affiliates (see Business
Operations - International). OHM's business is being integrated primarily into
the Engineering and Construction division, with the exception of Beneco, which
will serve as the platform for the Outsourcing division.
ENGINEERING AND CONSTRUCTION
The major part of IT's business is the management of complex hazardous
waste remediation projects involving the assessment, planning and execution of
the decontamination and restoration of property, plant and equipment that have
been contaminated by hazardous substances. These projects include the cleanup of
land disposal sites where hazardous or toxic substances have been disposed and
pose a threat to the surrounding environment; rivers, streams and ground water
contaminated by chemical substances and buildings, production facilities and
storage sites contaminated with hazardous chemical and/or radioactive materials.
These projects require considerable strategic environmental management,
technical engineering and analytical effort to determine the substances
involved, the extent of the contamination, the appropriate alternatives for
containing or removing the contamination, and the selection of the technologies
for treatment to perform the cleanup of the site as well as strong project
management and construction and remediation skills to execute the ultimate
remediation projects in the field. The Company is involved in the assessment or
cleanup phases of site remedial action projects in all areas of the United
States.
The Company provides full-service capabilities for these projects,
primarily in the areas of DOD and DOE delivery order program management,
engineering and design services, remedial construction, specialized equipment,
and decontamination/decommissioning capabilities. In the area of remedial
construction, IT offers diverse services, such as excavation and isolation,
installation of subsurface recovery systems, bioremediation approaches, chemical
treatment, soil washing, fixation or stabilization, facility or site closures,
solidification, landfill cell construction, and slurry wall and cap
installation. This full-service strategy supports the Company's marketing
efforts toward developing partnering arrangements with clients in which IT is
the primary supplier of all client environmental management services and assists
clients in innovatively reducing total environmental costs.
CONSULTING AND VENTURES
The Company provides a wide range of consulting services including
environmental permitting, facility siting and design, strategic environmental
management, environmental compliance/auditing, risk assessment/management,
pollution prevention, waste minimization, environmental information systems, and
data management.
The Company has expanded its air quality business in response to its
clients' needs. The Company provides services related to pollution prevention
engineering, control technology specification, permit preparation, emergency
release management, emission sampling and monitoring, leak detection in
industrial facilities and overall air quality management.
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Additionally, the Company performs a variety of consulting services for
clients to help them comply with environmental and/or health and safety
regulations. The Company also provides assistance to these clients in developing
corporate policies and procedures in areas such as pollution prevention and
waste minimization that integrate environmental regulations into their business
decisions.
The Company has been strategically broadening its capability through
business initiatives which address the trend toward economically-driven,
value-added environmental solutions. As part of this strategy, the Company has
expanded its Consulting and Ventures division through the acquisitions of
Gradient Corporation, PHR Environmental Consultants, Pacific Environmental
Group, Inc., Jellinek, Schwartz & Connolly and LandBank, Inc.
OUTSOURCING
Through Beneco, a company acquired as part of the OHM acquisition, IT has
full service capabilities for operations, maintenance and construction at
federal facilities. Beneco is a leading provider of project, program and
construction management services to the DOD, and state and local government
agencies. The addition of Beneco is an important step to leveraging the
Company's core competencies into new, high growth service areas, specifically
the outsourcing and privatization trend occurring across federal, state and
local levels of government. Through Beneco, the Company may offer a service
related business of a recurring nature that is not dependent on regulatory
enforcement.
INTERNATIONAL
In November 1996, the Company made a 50.1% investment in Chi Mei
Scientech/Entech, a Taiwan-based wastewater treatment design/build firm, which
now does business as Chi Mei International Technology. The Company has in the
past, and may in the future, enter into joint venture agreements or investments
to pursue and perform international projects; however, no such joint ventures
are currently active. (See Management's Discussion and Analysis of Results of
Operations and Financial Condition - Results of Operations - Continuing
Operations - Revenues.)
CUSTOMERS
The Company's services are provided to a broad range of federal, state and
local governmental and commercial clients in the U.S. market. During fiscal year
1998, the Company experienced a shift in revenues from the governmental sector
to commercial primarily due to the acquisition of specialized firms that
primarily service commercial clients. However, with the acquisition of OHM, the
Company's governmental sector revenue is expected to increase to at least the
levels experienced in fiscal year 1996; approximately 70% of the Company's
revenues.
Federal, State and Local Governmental Clients
Due to its technical expertise, project management experience and
full-service capabilities, the Company has successfully bid on and executed
contracts with federal and other governmental agencies for the performance of
various CERCLA and RCRA activities. (See Business - Operations - Regulations.)
The Company's governmental contracts are often multi-year, indefinite delivery
order programs (IDOs). These programs provide spending budget estimates for
which the client expects to define the scope by working closely with IT's
program management and technical staff. While initially not providing the
Company with any specific kind of work, as projects are defined, the work is
awarded to the Company on a sole source basis. Government contracts are
typically subject to annual funding limitations and public sector budgeting
constraints. Some of these contracts provide a maximum contractual amount of
services that may be performed by the Company with the specific services
authorized from time to time by the government agency through a series of task
orders under the master contract. The Company may be asked to perform services
for the full amount of an IDO or for amounts greater or less than the full
amount. IDOs generated approximately 40% of the Company's revenues in fiscal
year 1998. The programs with federal government agencies typically involve a
competitive bidding process pursuant to federal procurement policies involving
several bidders and result in a period of contract negotiation after a
successful bidder is selected. Although the Company generally serves as the
prime contractor on its contracts or as a part of a joint venture which is the
prime contractor, the Company serves as a subcontractor to other prime
contractors on some federal government programs. As has become typical in the
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environmental industry, the Company has entered and may continue to enter into
joint venture or teaming arrangements with competitors when bidding on certain
of the largest, most complex contracts, to provide the breadth of technical
expertise and, at times, bonding capacity required for the project.
The Company's revenues attributable to federal, state and local
governmental contracts as a percentage of the Company's consolidated revenues
for the last three years is outlined in the table below:
YEAR ENDED
------------------------------
MARCH 27, MARCH 28, MARCH 29,
SOURCE 1998 1997 1996
------ ---- ---- ----
Federal government:
DOD.................................. 47% 42% 51%
DOE.................................. 9 14 11
Other federal agencies............... 2 3 3
--- --- --
58 59 65
State and local governments .............. 5 8 4
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Total..................................... 63% 67% 69%
== == ==
Commercial Clients
The Company serves numerous commercial clients including chemical,
petroleum and other manufacturing firms, utilities, real estate and
transportation service companies, and law firms. A substantial portion of the
Company's commercial work represents new contracts awarded by existing clients.
No single commercial client accounted for 10% or more of the Company's
consolidated revenues in fiscal years 1998, 1997 or 1996. There is a growing
trend in the Company's work for commercial clients toward strategic
environmental management services and economically-driven solutions to
environmental issues (see Business - Operations - Consulting and Ventures).
COMPETITION
The environmental management industry is very competitive and requires
professional personnel with technical and project management skills. The Company
believes that the principal competitive factors in all areas of its business are
operational experience, technical proficiency, breadth of services offered,
local presence and, often most importantly, price. The Company faces competition
from a diverse array of small and large organizations including national or
regional environmental management firms; national, regional and local
architectural, engineering and construction firms; environmental management
divisions or subsidiaries of international engineering, construction and systems
companies; and hazardous waste generators which have developed in-house
capabilities.
Increased competition, combined with changes in client procurement
procedures, has resulted in market trends over the past several years toward
lower contract margins, a client preference for fixed-price or unit-price
contracts and unfavorable changes in contract terms and conditions in areas such
as indemnification of the client by the Company of liabilities for damage or
injury to third parties and property and for environmental fines and penalties.
Additionally, certain of the Company's larger competitors may benefit from
economies of scale and have better access to bonding and insurance markets at a
lower cost. The entry of large systems contractors and international engineering
and construction firms into the environmental management industry has increased
the level of competition for major federal governmental contracts and programs,
which have been the primary source of the Company's revenue in recent years.
Over the past several years, there has been consolidation in the industry as
certain of the larger corporations have acquired smaller firms which, although
reducing the number of industry competitors to some degree, has increased the
number of stronger competitors. The Company has been, and expects to continue to
be, a participant in the industry consolidation.
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TECHNOLOGY DEVELOPMENT
IT's technology development program focuses on innovative applications of
new and existing technologies and methods, principally through client projects.
The IT technology development program is directed in three primary areas: 1)
continued improvements to technologies developed in-house through applications
on client projects, 2) the evaluation and implementation of technologies
developed outside the Company which present commercial opportunities for IT, and
3) improvements to third party technologies for enhanced client value.
Through the Company's technology development program, IT has continued to
advance the development and implementation of its bioremediation programs. Clean
closure of numerous sites have been accomplished using naturally occurring
organisms in the patented BIOFAST(R) system.
Under license from a third party, IT continues the application of the
"barrier wall and reactive gate technology." Contaminated groundwater at the
site collects against the down gradient barrier wall and is funneled to the
reactive gate where the contaminants decompose by reaction with the reactive
media in the gate.
IT has entered into the third option year of the contract for operation of
the USEPA Test & Evaluation Facility in Cincinnati, Ohio. This RCRA Part B
permitted, USEPA facility is also available for private party sponsored
technology evaluations, provides treatability testing and process development
services on contaminated waste waters, sludges, and soils. Major efforts this
year focused on safe drinking water and water treatment processes including
filtration and disinfection technologies.
This year the Company has also improved its position in the development and
commercialization of environmental information management technology. IT has
received extensive patent coverage for the ManageIT system which is used for the
management and tracking of hazardous waste at client sites. Through the use of
its proprietary IT Environment Management System (ITEMS) and related systems,
the Company has become a leading user of advanced data base management
technology to serve its clients' needs. The Company uses various information
management capabilities developed by many vendors, in addition to its
proprietary systems, in implementing environmental information management
systems for its clients.
PATENTS
Through OHM, the Company currently owns two patents covering certain design
features of equipment employed in its on-site remediation business. The first
relates to a filtration system developed and used by the Company to remove
pollutants from flowing creeks and streams and the second, known as a Portable
Method for Decontaminating Earth, relates to a decontamination system used by
the Company to remove contaminants from the soil through a process, commonly
known as soil vapor extraction. The Company utilizes X*TRAX(R) and LT*X(R) per
perform thermal desorption serves. The X*TRAX(R) and LT*X(R) systems are waste
treatment processes that thermally separate organic contaminants from soils or
solids with subsequent treatment of the organic vapor stream.
REGULATIONS
The Company and its clients are subject to extensive and evolving
environmental laws and regulations; the level of enforcement of which affects
the demand for many of the services offered by the Company (see Business -
Operations - Environmental Contractor Risks) and creates certain significant
risks and potential opportunities for the Company in providing its services.
Regulatory changes may also affect the Company's inactive disposal sites in
Northern California. (See Notes to Consolidated Financial Statements -
Discontinued operations.)
Within the past several years, a number of significant changes to existing
environmental legislation have been proposed. Most of the proposed changes have
been stalled in the Congress. The proposals would overhaul the government
regulatory process, require regulatory risk assessments and cost-benefit
analyses, and reduce requirements
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for reporting to the government. Although the impact of these proposed changes
upon the Company's business cannot yet be fully predicted, the proposed changes
in regulations and reduced enforcement of current environmental laws appear to
have decreased the demand for certain of the Company's services, as customers
anticipate and adjust to the potential changes. Proposed changes could result in
increased or decreased demand for certain of the Company's services if
regulatory changes affect the cost of remediation projects or result in more
funds being spent for actual remediation. The ultimate impact of the proposed
changes will depend upon a number of factors, including the overall strength of
the U.S. economy and customers' views on the cost-effectiveness of remedies
available under the changed regulations.
The principal environmental legislation affecting the Company and its
clients is described below:
National Environmental Policy Act of 1969 (NEPA). Under NEPA, all federal
agencies must consider environmental factors in their decision making. Among
other matters, NEPA established guidelines and requirements for environmental
assessments and mitigation measures for a variety of projects involving
government approval or financing, including development and construction of
power plants and transmission lines, pipelines, highways, landfills, mines,
reservoirs and residential and commercial developments.
Resource Conservation and Recovery Act of 1976 (RCRA). RCRA regulates the
treatment, storage and disposal of hazardous and solid wastes. The 1984
Hazardous and Solid Waste Amendments to RCRA (HSWA) expanded RCRA's scope by
providing for the regulation of additional wastes as hazardous and imposing
restrictions on land disposal of certain wastes, prescribing more stringent
management standards for hazardous waste disposal sites, setting standards for
underground storage tank (UST) management and providing for corrective action
procedures. Under RCRA, liability and stringent management standards are imposed
on generators or transporters of hazardous waste or owners or operators of waste
treatment, storage or disposal facilities.
Comprehensive Environmental Response, Compensation and Liability Act of
1980 (CERCLA). CERCLA addresses cleanup of sites at which there have been or may
be releases or threatened releases of hazardous substances into the environment.
CERCLA assigns liability for costs of cleanup and damage to natural resources to
any person who, currently or at the time of disposal of a hazardous substance,
owned or operated any facility at which hazardous substances were released; to
any person who arranged for disposal, treatment, or transportation of hazardous
substances by others; and to certain persons who accepted hazardous substances
for transport to facilities or sites from which there is a release or threatened
release of hazardous substances. CERCLA authorizes the federal government either
to clean up these sites itself or to order persons responsible for the situation
to do so. CERCLA created the Hazardous Substance Superfund (Superfund) to be
used by the federal government to pay for certain cleanup efforts. Where the
federal government expends Superfund money for remedial activities, it must seek
reimbursement from the potentially responsible parties (PRPs). CERCLA generally
imposes strict, joint and severe retroactive liability upon such parties. CERCLA
was amended in 1986 by the Superfund Amendments and Reauthorization Act (SARA),
which authorized increased federal expenditures and imposed more stringent
cleanup standards and accelerated timetables. SARA also contained provisions
which expanded the enforcement powers of the USEPA.
Although CERCLA's Superfund taxing authority expired in December 1995 and
CERCLA's authority to expend funds originally expired in September 1994;
Congress has extended the USEPA's authority to tax and use funds on an interim
basis. Congress has to date, related reinstatement of Superfund's taxing and
spending authority to comprehensive reauthorization of the basic CERCLA statute.
The Congressional Budget Office estimates that the Superfund trust fund has
sufficient funds for the CERCLA program through the year 2000.
The Company believes that failure of Congress to reauthorize CERCLA and
proposed substantial changes in and continuing uncertainty concerning the
details of the legislation, cleanup standards, and remedy selection, have
resulted in project delays and/or the failure of clients to initiate or proceed
with projects. A number of changes to CERCLA have been previously proposed as a
part of the reauthorizing legislation. Amendments to repeal CERCLA's retroactive
liability provisions have been introduced. Standards for acceptable cleanups
have also been the subject of proposals for change. Although several bills to
reauthorize CERCLA have been introduced in Congress, controversy over the
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details of the legislation indicate that there is no clarity when CERCLA may be
reauthorized, what changes would be included in any reauthorization, or what
funding levels might be.
In response to Congressional and private sector pressure and, in part, to
avoid more sweeping legislative changes, the USEPA has attempted to relax
regulatory requirements and enforcement. For example, the USEPA has attempted,
through various regulatory initiatives, to make it easier to redevelop
"brownfields," i.e., lightly to moderately contaminated urban sites. Brownfields
sites nationally have been estimated to number in the hundreds of thousands.
Similar legislation has also been introduced, and a number of states have
initiated similar programs. While the Company believes such programs offer
additional opportunities, the ultimate impact of such programs cannot yet be
predicted.
Clean Air Act and 1990 Amendments. The Clean Air Act requires compliance
with National Ambient Air Quality Standards for specific pollutants and empowers
the USEPA to establish and enforce limits on the emission of various pollutants
from specific types of facilities. The Clean Air Act Amendments of 1990 modified
the Clean Air Act in a number of significant areas. Among other changes, they
established emissions allowances for sulfur and nitrogen oxides, established
strict requirements applicable to emissions of air toxics, established a
facility-wide operating permit program for all major sources of pollutants,
established requirements for management of accidental releases of toxic air
pollutants, and created significant new penalties, both civil and criminal, for
violations of the Clean Air Act.
Although the USEPA recently promulgated regulations significantly
tightening standards for ozone and particulate emissions, which might eventually
increase demand for the Company's air quality services, the proposals have met
with substantial opposition (including court challenges) and their ultimate fate
and impact remains uncertain.
Other Federal and State Environmental Laws. The Company's services are also
utilized by its clients in complying with, and the Company's operations are
subject to regulation under, among others, the following federal laws: the Toxic
Substances Control Act, the Clean Water Act, the Safe Drinking Water Act, the
Occupational Safety and Health Act and the Hazardous Materials Transportation
Act. The Food Quality Protection Act (FQPA) of 1996 has created an increased
demand for agricultural chemical registration and defense services in which JSC,
a recent acquisition by the Company, is a leading supplier. Moreover, the
regulatory initiatives incorporated in FQPA, including more comprehensive risk
evaluation and management for hazardous chemicals are likely to influence future
EPA policies and practices. Such regulatory developments may increase demand for
certain of the Company's services. Many states have also passed Superfund-type
legislation and other regulations and policies to cover more detailed aspects of
hazardous materials management. This legislation addresses such topics as air
pollution control, UST and aboveground storage tank (AST) management, water
quality, solid waste, hazardous waste, surface impoundments, site cleanup and
wastewater discharge. Many states are also reviewing and relaxing laws and
regulations because of their alleged adverse impact upon business and
competitiveness.
ENVIRONMENTAL CONTRACTOR RISKS
Although the Company believes that it generally benefits from increased
environmental regulations affecting business, and from enforcement of those
regulations, increased regulation, enforcement and private litigation also
create significant risks for the Company. These risks include potentially large
civil and criminal liabilities from violations of environmental laws and
regulations and liabilities to customers and to third parties for damages
arising from performing services for clients. The Company's failure to observe
such laws and/or the terms and conditions of licenses and permits it holds could
adversely impact the Company's ability to carry on one or more of its businesses
as presently conducted.
Liabilities Arising out of Environmental Laws and Regulations
All facets of the Company's business are conducted in the context of an
extensive and rapidly changing statutory and regulatory framework. The Company's
operations and services are affected by and subject to regulation by a number of
federal and other agencies. There have also been efforts by litigants to expand
the reach of CERCLA and RCRA to make contractor firms responsible for cleanup
costs through claims that environmental contractors are owners or operators of
hazardous waste facilities or that they arranged for treatment, transportation
or disposal of hazardous
9
<PAGE> 11
substances. While a few decided CERCLA cases have shielded cleanup contractors
from strict liability, no clear direction has emerged from the cases decided
to-date.
Potential Liabilities Involving Customers and Third Parties
In performing services for its customers, the Company could potentially be
liable for breach of contract, personal injury, property damage, negligence and
other causes of action. The damages available to a customer, should it prevail
in its claims, are potentially large and could include consequential damages.
Many of those contracting for environmental management services,
particularly those involving large scale remediations, seek to shift to
contractors the risk of completing the project in the event the contamination is
either more extensive or difficult to resolve than originally anticipated. In
the competitive market in which environmental management services are offered,
customer pressure has increased significantly for contractors to accept greater
risk of performance, liability for damage or injury to third parties or
property, and liability for fines and penalties. The Company has from time to
time been involved in claims and litigation involving disputes over such issues.
(See Notes to Consolidated Financial Statements -Commitments and Contingencies -
Contingencies.)
Environmental management contractors, in connection with work performed for
customers, also potentially face liabilities to third parties from various
claims including claims for property damage or personal injury stemming from a
release of toxic substances or otherwise which could arise long after completion
of the project.
Over the past several years, the USEPA and other federal agencies have
constricted significantly the circumstances under which they will indemnify
their contractors against liabilities incurred in connection with CERCLA
projects and continue their attempts to renegotiate previously agreed
indemnities. While future Congressional action to broaden the availability of
indemnification is possible, there is no assurance that Congress will change
federal government indemnification policies.
Government Contracting Risk
As a major provider of services to governmental agencies, the Company also
faces the risks associated with government contracting, which could include
substantial civil and criminal fines and penalties. Government contracting
requirements are complex, highly technical and subject to varying
interpretations. As a result of its government contracting business, the Company
has been, is, and expects in the future to be, the subject of audits and
investigations by governmental agencies. (See Notes to Consolidated Financial
Statements - Commitments and contingencies - Helen Kramer.) In addition to the
potential damage to the Company's business reputation, the failure to comply
with the terms of one or more of its government contracts could also result in
the Company's suspension or debarment from future government contract projects
for a significant period of time, which could result in a material adverse
effect on the consolidated financial condition, liquidity, and results of
operations of the Company.
INSURANCE AND RISK MANAGEMENT
The Company has adopted a range of insurance and risk management programs
designed to control or reduce potential liabilities, including financing risk
through insurance and self-insurance programs, negotiation of contractual
indemnification with suppliers and clients, other contract administration
procedures, and employee health, safety, training, and environmental monitoring
programs. Due to the significant percentage of the Company's revenues derived
from work for governmental agencies, the Company has developed a company-wide
government contracts compliance program. The Company cannot assure the adequacy
of the program and compliance failure could have a material adverse effect on
the Company's business.
The Company maintains liability insurance programs that are structured to
provide coverage for major and catastrophic losses while essentially
self-insuring losses that may occur in the ordinary course of business.
Effective April 1, 1998, the Company contracted with primary and excess
liability carriers for $75,000,000 limits with a $500,000 deductible. The
Company's insurance program also includes pollution liability coverage with
limits of $35,000,000 and a $1,000,000 deductible.
10
<PAGE> 12
In preceding years, the Company's insurance program included a $5,000,000
retention for general liability, automobile liability and contractor's pollution
liability coverages. With respect to the $5,000,000 retention level for each of
such coverages, the Company is obligated to indemnify the Company's insurance
carriers against liabilities and costs of defense, subject to certain
limitations. Letters of credit support the indemnity commitment.
Although the Company believes its insurance program to be appropriate for
the management of its risks, its insurance policies may not fully cover risks
arising from the Company's operations. Policy coverage exclusions, retaining
risks through deductible and self-insured retention programs, or losses in
excess of the coverage may cause all or a portion of one or more losses not to
be covered by such insurance.
LEVERAGE
The Company has in the past and may in the future have a significant amount
of indebtedness. Concurrent with the Merger, IT amended and restated its tender
offer credit facility to consist of a $228,000,000 eight year term loan and a
$150,000,000 six year revolving credit facility. In conjunction with the Merger,
the Company borrowed $228,000,000 under the term loan and approximately
$85,000,000 under the revolving credit facility to refinance the tender offer
credit facilities and OHM's existing revolving line of credit. The facility is
also available for working capital purposes.
The Company's leverage could also limit its ability to obtain necessary
project and other financing and any necessary bonding and to withstand
competitive pressure and adverse economic conditions (including a downturn in
business or increased inflation or interest rates) or to take advantage of
significant business opportunities that may arise, including strategic
acquisitions (see generally Management Discussion and Analysis of Results of
Operations and Financial Condition - Liquidity and Capital Resources).
RISKS OF ACHIEVEMENT OF SYNERGIES AND INTEGRATION OF OPERATIONS
The Company's management believes that it will be able to achieve certain
after-tax cost savings and other synergistic benefits as a result of combining
IT and OHM in the Merger. However, there can be no assurance that such benefits
will be realized. Regardless of the level of savings actually realized, the
level of savings in 1998 will be affected by transaction costs, presently
expected to aggregate approximately $30,500,000 for IT and OHM, consisting of
Tender Offer Credit Facilities and Merger Credit Facilities, debt issuance costs
of approximately $3,700,000 and $5,400,000, respectively, debt breakage costs of
approximately $7.8 million and asset acquisition and stock issuance costs of
approximately $8,600,000 and $5,000,000, respectively. Additionally, the future
success of the Company will depend in part upon its ability to integrate and
operate OHM and other acquired businesses successfully with its business. The
business integration includes management reviewing OHM contract claim
receivables to understand fully the facts and claim recovery assumptions. The
integration process will require the dedication of management resources, which
may temporarily distract attention from the day-to-day business of the Company.
The future success of the Company will also depend in part on its ability to
retain and assimilate qualified employees of OHM and other acquired businesses.
There can be no assurance that the Company will be able to efficiently integrate
acquired businesses with its business or retain or assimilate qualified
employees of acquired businesses. A failure to do so could have material adverse
effect on the Company's financial condition, liquidity and results of
operations. Furthermore, the Company's business strategy calls for continued
growth through acquisitions. Identifying and pursuing future acquisition
opportunities will require a significant amount of management time and skill.
There can be no assurance that the Company will be able to identify suitable
acquisition candidates, consummate any acquisition on acceptable terms or
successfully integrate acquired business operations (including by realization of
anticipated cost savings and synergies). Future acquisitions may entail the
payment of consideration in excess of book value, may result in the issuance of
additional shares of IT Common Stock, IT Preferred Stock, or the incurrence of
additional indebtedness and could have a dilutive effect on the Company's net
income per share.
11
<PAGE> 13
HISTORY OF LOSSES
IT incurred losses applicable to common stock from continuing operations in
each of the five fiscal years 1994 through 1998 in the amounts of $3,200,000,
$7,900,000, $3,700,000, $13,700,000 and $12,500,000, respectively. Excluding
special charges, net income or loss applicable to common stock from continuing
operations is $1,800,000 net income in fiscal year 1998, $5,300,000 net loss in
fiscal year 1997 and a $4,600,000 net income in fiscal year 1996. See
"Management's Discussion and Analysis of Results of Operations and Financial
Condition - "Special Charges", "Quanterra" and "Extraordinary Item". No
assurance can be given that IT will not continue to incur losses from continuing
operations.
CONTROL OF BOARD OF DIRECTORS
In November 1996, certain entities affiliated with the Carlyle Group
(Carlyle), a Washington D.C. based merchant banking firm, or with respect to
which Carlyle affiliates act as investment manager (all such entities are also
referred to herein as the "Parent Stockholders") acquired 45,000 shares of
Convertible Preferred Stock and warrants (the "Carlyle Warrants") to purchase
1,250,000 shares of IT Common Stock. As a result of a paid-in-kind dividend paid
on February 20, 1998, the Parent Stockholders as of that date held 45,271 shares
of Convertible Preferred Stock. The Parent Stockholders hold approximately 38%
of the voting power of IT prior to the consummation of the Merger (approximately
43% assuming exercise of the Carlyle Warrants) and approximately 21%
(approximately 24% assuming exercise of the Carlyle Warrants) of the voting
power thereafter. The terms of the Convertible Preferred Stock provide that
until November 20, 2001, the holders of the Convertible Preferred Stock have the
right to elect a majority of the IT Board of Directors, provided that such
holders continue to hold at least 20% of the voting power of IT. As a result,
the Parent Stockholders are in a position to control the strategic direction of
IT, to elect and dismiss IT's officers and to approve and disapprove significant
transactions. (See "Notes to Consolidated Financial Statements - Preferred Stock
- - Carlyle Investment".)
DISCONTINUED OPERATIONS
In December 1987, the Company's Board of Directors adopted a strategic
restructuring program which included a formal plan to divest the transportation,
treatment and disposal operations through sale of some facilities and closure of
certain other facilities. Subsequent to this date, the Company ceased obtaining
new business for these operations. These operations included the handling and
transportation of clients' wastes and their treatment and/or disposal at Company
or third party-owned facilities. In June 1989, the Company completed the sale of
IT's active treatment and disposal operations in Imperial Valley and at
Bakersfield, California, as well as its transportation business. The Company's
four inactive treatment, storage and disposal facilities located in Northern
California were not included in this transaction. Closure plans for the other
three were previously approved and two of these facilities are closed with the
other in the process of closure. In March 1998, the Company announced approval
by the California Department of Toxic Substances Control (DTSC) of the final
closure and post closure plan for one of the four inactive treatment, storage
and disposal facilities. The approved plans allow the Company to proceed with
the completion of final closure construction and provides for future submittal
of technical studies that will be utilized to determine final aspects and costs
of closure construction and monitoring programs for the former Panoche disposal
site. Primarily as a result of the recent approval of the Panoche final closure
plan, the Company increased its previous cost estimates by $8,000,000 in the
quarter ending March 27, 1998.
There are substantial financial implications related to the discontinued
operations (see Notes to Consolidated Financial Statements - Discontinued
Operations and Management's Discussion and Analysis of Results of Operations and
Financial Condition - Liquidity and Capital Resources).
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<PAGE> 14
EMPLOYEES
At March 27, 1998, the Company employed 4,595 regular employees. At March
27, 1998, none of the Company's employees were represented by labor unions under
collective bargaining agreements. The Company employs union labor from time to
time on a project-specific basis. The Company considers its relations with its
employees to be good.
ITEM 2. PROPERTIES.
IT owns or leases property in 28 states, the District of Columbia and the
United Kingdom. Excluding its discontinued operations, the Company owns
approximately 76 acres and leases approximately 1,115,000 square feet of
property for various uses, including regional and project offices, technology
and process development laboratories, field remediation support service
facilities and corporate offices. Management considers the facilities adequate
for the present and anticipated activities of the Company.
Additionally, the Company owns approximately 2,821 acres related to its
discontinued operations, principally in Northern California, of which
approximately 500 acres have been used for hazardous waste disposal facilities
and approximately 2,200 are adjacent to those facilities, but were never used
for waste disposal.
ITEM 3. LEGAL PROCEEDINGS.
CONTINUING OPERATIONS LEGAL PROCEEDINGS
See Notes to Consolidated Financial Statements - Commitments and
Contingencies - Contingencies for information regarding the legal proceedings
related to the continuing operations of the Company.
DISCONTINUED OPERATIONS LEGAL PROCEEDINGS
See Notes to Consolidated Financial Statements - Discontinued operations
for information regarding the legal proceedings that related to the
transportation, treatment and disposal discontinued operations of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SHAREHOLDERS.
There were no matters submitted to a vote of the Company's common
shareholders during the fourth quarter of fiscal year 1998.
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<PAGE> 15
ITEM 4A. EXECUTIVE OFFICERS OF THE COMPANY.
The following table provides information as of June 12, 1998 regarding
the Company's executive officers and the positions they hold with the Company.
The officers are appointed annually by the Board of Directors to serve at the
discretion of the Board.
<TABLE>
<CAPTION>
First
elected as
officer of
Name Age Position the Company
---- --- -------- -----------
<S> <C> <C> <C>
Anthony J. DeLuca 51 Chief Executive Officer 1990
and President
James G. Kirk 59 Vice President, General Counsel 1996
and Secretary
James R. Mahoney 59 Senior Vice President, 1991
Consulting and Ventures
Raymond J. Pompe 64 Senior Vice President, 1988
Engineering and Construction
Philip O. Strawbridge 43 Senior Vice President, 1998
Chief Administrative Officer
</TABLE>
- -------------
Mr. DeLuca was named Chief Executive Officer and President and a director
of the Company as of July 1, 1996. Prior thereto, Mr. DeLuca had been Senior
Vice President and Chief Financial Officer of the Company since March 1990.
Before joining the Company Mr. DeLuca had been a senior partner at the public
accounting firm Ernst & Young LLP.
Mr. Kirk, who joined the Company as General Counsel, Eastern Operations, in
1991, was named Vice President, General Counsel and Secretary in September 1996.
Prior to joining the Company, Mr. Kirk served as Vice President and General
Counsel for Limbach Constructors from 1978 to 1991. From 1973 to 1978, Mr. Kirk
was Assistant General Counsel for Dravo Corporation.
Mr. Mahoney, who joined the Company in January 1991 as Senior Vice
President and Director of Technology was named Senior Vice President, Corporate
Development and Sales in April 1992; Senior Vice President, Technical Operations
and Corporate Development in March 1995; and Senior Vice President, Consulting
and Ventures in July 1996. Prior to joining the Company, Mr. Mahoney was
Director of the National Acid Precipitation Assessment Program, a U.S.
government research and assessment program, from 1988 to 1991. From 1984 to
1987, Mr. Mahoney served in various environmental managerial capacities with
Bechtel Group, Incorporated, a major engineering and construction firm.
Mr. Pompe joined the Company in 1988 as Vice President, Construction and
Remediation, was named Senior Vice President, Project Operations, in March 1995,
and Senior Vice President, Engineering and Construction in July 1996. Prior to
joining the Company, Mr. Pompe was employed by Dravo Corporation, a major
construction firm, from 1956 to 1988 in various executive capacities, most
recently as Senior Vice President responsible for construction projects.
Mr. Strawbridge joined the Company through the merger with OHM in May, 1998
as Senior Vice President and Chief Administrative Officer. Mr. Strawbridge
joined OHM Corporation in February 1996 as Senior Vice President, Chief
Financial and Administrative Officer and was given the additional responsibility
of President of OHM's wholly owned subsidiary OHM Energy Services in October,
1996. Prior to joining OHM, Mr. Strawbridge was employed by Fluor Corporation
from 1988 to 1996 in various managerial capacities including Senior Director of
Contracts and Finance and acting Vice President of Fluor Daniel Fernald. From
1976 to 1988, Mr. Strawbridge was employed by the U.S. Government in various
management and executive capacities.
14
<PAGE> 16
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SHAREHOLDER
MATTERS.
The Company's common stock is listed on the New York Stock Exchange (NYSE)
and Pacific Stock Exchange under the symbol ITX. The following table sets forth
the high and low sale prices of the common stock, as reported by the NYSE for
the periods indicated, all after adjustment for a one-for-four reverse stock
split effective November 21, 1996.
QUARTER ENDED HIGH LOW
------------- ---- ---
June 28, 1996................................... $ 14 $ 9
September 27, 1996.............................. 12 7 1/2
December 27, 1996............................... 11 1/2 8 3/8
March 28, 1997.................................. 8 7/8 6 3/4
June 27, 1997................................... 8 1/4 6 3/8
September 26, 1997.............................. 9 1/4 6 13/16
December 26, 1997............................... 9 9/16 7
March 27, 1998.................................. 10 5/8 7 3/8
On June 11, 1998, the closing sale price of the common stock on the NYSE as
reported by The Wall Street Journal was $10.1875 per share. On that date there
-----------------------
were 2,118 stockholders of record.
The Company has not paid a cash dividend on its common stock for the three
years ended March 27, 1998. The Company has no present intention to pay cash
dividends on its common stock for the foreseeable future in order to retain all
earnings for investment in the Company's business. IT's credit agreements
prohibit cash dividends on common stock.
15
<PAGE> 17
ITEM 6. SELECTED FINANCIAL DATA.
The following table sets forth income statement information for the
Company's continuing operations and other financial information for each of the
five years in the period ended March 28, 1997. Share and per share data have
been restated to reflect the one-for-four reverse stock split effective November
21, 1996.
<TABLE>
<CAPTION>
Year ended
-----------------------------------------------------------
March 31,
March 27, March 28, March 29, -----------------
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
(In thousands, except per share data)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT INFORMATION
Revenues $ 442,216 $ 362,131 $ 400,042 $ 423,972 $ 392,803
Loss from continuing operations
(net of preferred stock dividends) (12,527) (13,693) (3,654) (7,880) (3,241)
Loss per share
from continuing operations (1.28) (1.48) (.41) (.89) (.37)
Weighted average shares outstanding 9,737 9,227 8,982 8,889 8,691
OTHER FINANCIAL INFORMATION
Working capital $ 74,924 $ 110,705 $ 89,174 $ 73,838 $ 63,522
Total assets 709,217 342,531 315,314 362,152 359,203
Long-term debt 284,697 65,874 65,611 80,189 68,625
Long-term accrued liabilities 27,528 15,184 30,223 45,207 38,993
Stockholders' equity 148,150 168,853 140,865 145,921 160,548
</TABLE>
Above per share amounts are computed based upon the new Financial Accounting
Standards Board Opinion No. 128, which had no effect as a result of the losses
incurred.
No cash dividends were paid on common shares for any period.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION.
RESULTS OF OPERATIONS
CONTINUING OPERATIONS
OVERVIEW
The Company provides a full range of technology-driven, value-added
consulting, engineering and construction capabilities through a network of 67
offices in the United States and selected international locations. The Company's
services include construction and remediation, risk assessment, air quality
management, pollution prevention and waste minimization, information management,
land-use planning and restoration services of impaired properties,
decontamination and decommissioning, design/build, wastewater treatment,
historical research and investigation, environmental consulting and advocacy
services, engineering services and facility outsourcing for operation,
maintenance and construction. The Company's business strategy is to be a global
provider of environmental and infrastructure solutions to both the government
and private industry clients. As part of this strategy, the Company entered into
a definitive agreement to acquire OHM Corporation on January 15, 1998 and the
first step of the Merger Agreement was completed through a tender offer on
February 25, 1998 at which time the Company owned
16
<PAGE> 18
INTERNATIONAL TECHNOLOGY CORPORATION
RESULTS OF OPERATIONS (CONTINUED)
approximately 54% of the outstanding shares of OHM. The second step of the
acquisition was successfully completed on June 11, 1998 and created a company
with projected annual revenues of approximately $1.0 billion and backlog at
March 27, 1998 of approximately $3.5 billion. The Company has also diversified
through several acquisitions of specialized companies primarily serving targeted
commercial markets.
REVENUES
Revenues for fiscal year 1998 were $442,216,000, up 22 percent or
$80,085,000 from the $362,131,000 revenues reported in the prior fiscal year.
Fiscal year 1998 includes the results of OHM Corporation ("OHM") since February
25, 1998, the date on which IT acquired a 54% controlling interest. Revenues
related to OHM in the fourth quarter were $42,106,000. A significant portion of
the increase in revenues (approximately $57,500,000) is due to revenues
generated from acquired businesses including OHM. Revenue from the Company's
federal government contracts increased approximately 19 percent in fiscal year
1998 when compared to fiscal year 1997. Revenues from federal government
contracts excluding OHM, increased 6 percent during these same comparative
periods.
Although revenue growth (excluding acquisitions) in the Company's
construction and remediation business is expected to be modest in the near
future due to difficult industry-wide conditions, the Company has aggressively
targeted revenue growth and diversification through business acquisitions as
evidenced by the businesses acquired during fiscal year 1998. In addition to the
OHM acquisition, the Company purchased four other companies during fiscal year
1998. These acquisitions include; (1) PHR, a consulting firm which assists
business entities to more economically confront potential or existing
environmental liabilities through an interdisciplinary investigation approach of
science, history and information, (2) PEG, a company providing a broad range of
environmental consulting and engineering services to major oil companies, mainly
in the western United States, (3) JSC, a company providing economically driven,
science-based environmental consulting and advocacy services, and (4) LandBank
Inc., a real estate and restoration company focusing on environmentally impaired
properties.
A substantial percentage of the Company's revenues during the three years
ended March 27, 1998 was earned through executing governmental contracts for
various federal, state and local agencies. Revenues from governmental contracts
accounted for 63% of the Company's revenues in fiscal year 1998 compared to 67%
and 69% in fiscal years 1997 and 1996, respectively. See the table in Business -
Operations - Customers - Federal, State and Local Governmental Clients for an
analysis of the Company's revenues attributable to federal, state and local
governmental contracts. Federal governmental revenues are derived principally
from work performed for the DOD and, to a lesser extent, the DOE. In the near
term, the Company expects that the percentage of total revenues from the
execution of federal, state and local governmental contracts will continue to be
substantial and increase due to the acquisition of OHM.
During fiscal year 1998, the DOD revenues of $206,180,000 exceeded fiscal
year 1997 revenues of $153,464,000 by $52,716,000. Of this improvement in DOD
revenues, about one half resulted from the OHM acquisition and the balance from
increased funding of the Company's DOD indefinite delivery order programs and an
increase in the number of DOD contracts being executed. The Company expects to
continue to derive a substantial portion of its revenues from the DOD indefinite
delivery order contracts which are primarily related to remedial action work.
Overall, revenue levels from the Company's federal government contracts
(excluding OHM) have gradually improved during these comparative periods as
strong improvement in DOD activity was partially offset by the completion of
contracts funded by other government agencies including the DOE.
DOE revenues declined by 18% from $49,591,000 in fiscal year 1997 to
$40,496,000 in fiscal year 1998. OHM's DOE revenues were not significant for the
five week period ending March 27, 1998; however, the Company has received recent
DOE awards. Management expects to increase its revenues from the DOE in the
future due to an expected transition by the DOE over the next several years to
emphasize remediation over studies combined with the Company's favorable
experience in winning and executing similar work for the DOD and the Company's
experience
17
<PAGE> 19
INTERNATIONAL TECHNOLOGY CORPORATION
RESULTS OF OPERATIONS (CONTINUED)
with DOE related to its past performance of DOE studies. Evidence of the
Company's efforts to benefit from this transition is the award in October 1997
of a $122 ,000,000 project to perform the excavation, pretreatment and drying of
an estimated one million tons of contaminated materials for the DOE's Fernald
Environmental Management Project and the recent award, to provide architect,
engineering, construction and construction management services at the DOE's
Rocky Flats Environmental Technology Site near Denver, Colorado.
The Company reported an increase in revenue from the commercial sector of
$42,760,000 or 36% for fiscal year 1998, when compared to fiscal year 1997. Of
this $42,760,000 revenue increase, 38% was attributable to targeted commercial
business opportunities and 62% resulted from business acquisitions including
OHM. Revenue growth from the commercial sector (excluding recent acquisitions)
could be restricted in the near term partly due to increased emphasis on
competitively bid lower cost solutions and partly due to delaying certain work
until final Congressional action is taken on the reauthorization of CERCLA. As
for CERCLA, it is uncertain when reauthorization will occur or what the details
of the legislation, including retroactive liability, cleanup standards, and
remedy selection, may include. Uncertainty regarding possible rollbacks of
environmental regulation and/or reduced enforcement have led some commercial
clients to delay projects as well. Contemplated changes in regulations could
further decrease the demand for certain of the Company's services, as customers
anticipate and adjust to the new regulations. However, legislative or regulatory
changes could also result in increased demand for certain of the Company's
services if such changes decrease the cost of remediation projects or result in
more funds being spent for actual remediation. The ultimate impact of any such
changes will depend upon a number of factors, including the overall strength of
the U.S. economy and customers' views on the cost effectiveness of the remedies
available.
Revenues for fiscal year 1997 of $362,131,000 were 9.4% below the
$400,042,000 revenue level of fiscal year 1996. This decline in revenues
generally reflected the weak demand in both governmental and commercial markets
served by the Company, as well as a change in the Company's approach to the
market in de-emphasizing smaller lower-value projects in fiscal year 1997. In
addition, revenues declined in fiscal year 1997 due to delays in the
authorization of the federal budget that reduced funding of governmental
projects.
Revenues derived from large, complex thermal remediation contracts
utilizing the Company's HTTS thermal treatment technology were approximately 3%,
10% and 11% of revenues in fiscal years 1998, 1997 and 1996, respectively.
Incineration as a remedy under CERCLA has come under legislative and regulatory
pressures. Because of this issue, and the relatively higher cost of incineration
and the lack of regulatory approved potential project opportunities in the
United States; the Company has been forced to seek alternative uses for its HTTS
equipment. Until recently, the Company had been actively pursuing foreign and
domestic potential opportunities which utilize the HTTS equipment. The two
foreign thermal HTTS installations IT had been pursuing through joint ventures
have been slowed by circumstances outside of IT's control. At March 27, 1998,
the net book value of IT's HTTS equipment, related spare parts inventory and
related foreign joint ventures ownership interests was approximately
$12,900,000. IT's HTTS equipment is currently idle. On May 27, 1998, IT's Board
of Directors approved plans to exit the HTTS incineration business. As a result
of this action, the Company plans to sell the HTTS equipment and anticipates
incurring a $12,000,000 charge to operations, net of cash proceeds in the
quarter ending June 26, 1998. (See Notes to Consolidated Financial Statements -
Subsequent Events.)
The Company's total funded and unfunded backlog at March 27, 1998 was
approximately $3,451,000,000 ($1,198,000,000 at March 28, 1997) including
approximately $405,000,000 of contracted backlog scheduled to be completed
during the nine month period ended December 1998 and between $180,000,000 and
$210,000,000 of additional project work expected to be defined and performed in
the nine month period ended December 1998 under existing governmental IDO
contracts. Backlog revenues are expected to be earned primarily over the next
one to five years, with a substantial portion of the backlog consisting of
governmental contracts, many of which are subject to annual funding and
definition of project scope. The backlog amounts at March 27, 1998 and March 28,
1997 include $2,688,000,000 and $785,000,000, respectively, of future work the
Company estimates it will receive (based on historical experience) under
existing IDO programs. In accordance with industry practices, substantially all
of the Company's contracts are subject to cancellation, delay or modification by
the customer.
18
<PAGE> 20
INTERNATIONAL TECHNOLOGY CORPORATION
RESULTS OF OPERATIONS (CONTINUED)
The Company's backlog at any given time is subject to changes in scope of
services required by the contracts leading to increases or decreases in backlog
amounts. These contracts subject to such scope changes have led to a number of
contract claims requiring negotiations with clients in the ordinary course of
business. (See Notes to Consolidated Financial Statements - Summary of
significant accounting policies - Contract accounting and accounts receivable.)
GROSS MARGIN
Gross margins were 11.6%, 10.5% and 14.5% of revenues in fiscal years
1998, 1997 and 1996, respectively. Gross margins improved to 11.6% in fiscal
year 1998 as management continues to carefully monitor overhead costs and as a
result of spreading fixed overhead costs over higher revenue levels. In the near
term, the Company expects to maintain the improved gross margin levels achieved
due to the organizational streamlining initiated in the second quarter of fiscal
year 1997 and through expected cost savings resulting from the recent OHM
acquisition. The Company's ability to maintain or improve its gross margins is
heavily dependent on increasing utilization of professional staff, properly
executing projects, and successfully bidding new contracts at adequate margin
levels. In fiscal year 1997, gross margins declined compared to fiscal year 1996
as a result of lower pricing due to competitive industry conditions and by the
continued shift in revenue mix toward larger projects and programs which involve
more subcontracting and carry a lower margin on revenues.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses were 7.2%, 9.2% and 9.5% of
revenues in fiscal years 1998, 1997 and 1996, respectively. Selling, general and
administrative expenses of $31,774,000 in fiscal year 1998 were $1,657,000 or
5.0% lower than the fiscal year 1997 level primarily due to the full year impact
of the corporate restructuring (see Special Charges) initiated at the end of the
second fiscal quarter of 1997 and the relocation of the Company's corporate
headquarters in the first quarter of fiscal year 1998 which resulted in reduced
lease expense and labor cost as the Company integrated and consolidated
management and corporate functions into the Company's largest facility (see
Special Charges). In the near term, the Company expects selling, general and
administrative expenses to decrease as a percentage of revenue primarily due to
the OHM acquisition. Fiscal year 1997 selling, general and administrative
expenses of $33,431,000 represented a decrease of $4,694,000 or 12.3% from the
prior year level, due to the above mentioned corporate restructuring initiated
in the second fiscal quarter of 1997.
SPECIAL CHARGES
Special charges of $14,248,000 were recorded in fiscal year 1998. These
special items include a $5,694,000 charge for integration costs associated with
the acquisition of OHM, a $3,943,000 non-cash charge related to the Helen Kramer
project claim settlement, a $2,811,000 charge associated with the relocation of
the Company's corporate headquarters, and a $1,800,000 loss from the sale of a
small remediation services business.
As a result of the acquisition of OHM, the Company approved an integration
plan to reduce overall facility cost by consolidating various IT and OHM
facilities, subleasing excess space and terminating certain employees. The
$5,694,000 charge recorded in the fourth quarter of fiscal year 1998 for these
integration costs included $2,197,000 of costs for severance pay to IT employees
and $3,497,000 of costs and other related items for closing and consolidating IT
offices with OHM offices. As of March 27, 1998, $4,526,000 of the integration
charge remained to be paid. By December 25, 1998, approximately 50% of this
charge is expected to be paid as the integration process between IT and OHM will
be substantially complete. The remaining costs relate to the facility closures
and office consolidations and will be paid over the future terms of the facility
leases. Most of these facility leases will be paid off within the next four
years, however, one lease requires payments over the next seven years.
Subleasing efforts commenced in February 1998 primarily through a relationship
established with a national real estate firm.
19
<PAGE> 21
INTERNATIONAL TECHNOLOGY CORPORATION
RESULTS OF OPERATIONS (CONTINUED)
In December 1997, the Company settled a contract claim which has been
outstanding in excess of five years with the US Army Corps of Engineers, the
Environmental Protection Agency and the Department of Justice (jointly
"Government") arising out of work performed by the joint venture of IT and Davy
International at the Helen Kramer Superfund project. On December 26, 1997, the
joint venture received a $14,500,000 payment from the Government to resolve all
outstanding project claims related to additional work resulting from differing
site conditions. In early January 1998, the joint venture paid $4,300,000 to the
Government to resolve related civil claims by the Government. IT's share of the
joint venture results is 60%, accordingly, IT received net cash of $6,000,000,
its proportionate share of the settlement. In December 1997, the Company
recorded a non-cash pre-tax charge of $3,943,000 as the cash received was less
than the combined unbilled and billed receivables related to this project which
totaled approximately $9,900,000.
The special charges that occurred in the first quarter of fiscal 1998
resulted from the relocation of the Company's corporate headquarters from
Torrance, California to Monroeville (Pittsburgh), Pennsylvania and the sale of
its California based small project remediation services business. The
headquarters relocation consolidated the corporate overhead functions with the
Company's largest operations office and closer to its lenders and largest
shareholders which are located in the Eastern United States. As a result of this
relocation, the Company incurred a pre-tax charge of $2,811,000. In May 1997,
the Company incurred a non-cash pre-tax charge of $1,800,000 to sell its
California remediation services business pursuant to a change in the Company's
approach to the market.
In conjunction with the corporate restructuring which was initiated in the
second quarter of fiscal year 1997, the Company incurred a pre-tax restructuring
charge of $8,403,000. The restructuring charge included $3,400,000 of costs for
severance, $4,100,000 of costs for closing and reducing the size of a number of
the Company's offices, and $903,000 of costs for other related items. As part of
the plan of termination, the Company laid-off 133 employees and paid
approximately $2,460,000 in termination benefits. In addition, the Company
approved a plan to close five leased facilities and reduce the size of eleven
other leased facilities by either sublease or abandonment. Most of the remaining
costs to be paid relate to the facility closures and office space reductions
which will be paid out over the terms of the lease. One of these facility
closures has a remaining lease obligation of approximately 7 years. At March 27,
1998, $1,187,000 of the charge remained to be paid.
QUANTERRA
Since December 29, 1995, the Company has retained a 19% ownership interest
in Quanterra, Inc., an environmental laboratory business, and accounted for this
investment under the cost method. (See Liquidity and Capital Resources and Notes
to Consolidated Financial Statements - Quanterra.) As a result, the Company has
not recognized income or loss from Quanterra in fiscal years 1998 or 1997. Prior
to December 29, 1995, the Company's investment in Quanterra was 50% and
accounted for under the equity method. In the nine month period ending December
29, 1995, the Company reported equity in net loss of Quanterra of $1,821,000 and
a pre-tax charge of $24,595,000 to reflect the impairment in the value of IT's
investment in Quanterra. The impairment occurred as a result of the
recapitalization transaction in which IT and Corning completed an agreement to
recapitalize Quanterra and change IT's ownership interest in Quanterra from 50%
to 19%. The events that led to the impairment of the Company's investment in
Quanterra occurred in December 1995 when it became evident that Quanterra's net
loss would increase significantly in comparison to the September 1995 quarterly
results and it became apparent that Quanterra would require additional capital
from its owners to meet its liquidity needs for 1996. These two events led to
the recapitalization transaction and the Company's loss recognition. On May 27,
1998, IT's Board of Directors considered and approved the divestiture of certain
non-core assets. The non-core assets include the Company's 19% common stock
ownership interest in Quanterra, which is currently recorded at $16,300,000.
The Company expects to sell its investment in Quanterra for approximately
$6,000,000, and as a result, the Company anticipates recording a non-cash charge
of approximately $10,000,000 in the quarter ending June 26, 1998. (See Notes to
Consolidated Financial Statements - Subsequent Events.)
20
<PAGE> 22
INTERNATIONAL TECHNOLOGY CORPORATION
RESULTS OF OPERATIONS (CONTINUED)
OTHER INCOME
In fiscal year 1998, other income represents minority interest in OHM (see
Notes to the Consolidated Financial Statements - Business Acquisitions - OHM
Acquisition), Chi Mei and miscellaneous asset sales.
In fiscal year 1996, the Company reported in other income a pre-tax gain of
$1,090,000, related to the settlement of certain litigation concerning a HTTS
incineration project.
INTEREST, NET
Net interest expense was 1.8%, 1.5% and 1.6% of revenues in fiscal years
1998, 1997 and 1996, respectively. The following table shows net interest
expense for the three fiscal years ended March 27, 1998.
<TABLE>
<CAPTION>
Year ended
--------------------------------------------
March 27, March 28, March 29,
1998 1997 1996
---- ---- ----
(In thousands)
<S> <C> <C> <C>
Interest incurred.................. $ 10,730 $ 7,168 $ 7,014
Capitalized interest............... (10) - -
Interest income.................... (2,751) (1,908) (569)
------- ------- -------
Interest, net.................... $ 7,969 $ 5,260 $ 6,445
====== ====== ======
</TABLE>
The increase in fiscal year 1998 net interest expense compared to fiscal
year 1997 of $2,709,000 is directly related to the tender credit facilities
arranged by the Company to acquire OHM. Loan origination costs and fees and
interest expense incurred for the period February 25, 1998 to March 27, 1998
related to the acquisition of OHM stock was approximately $3,400,000.
During fiscal year 1997, the level of debt outstanding was relatively
unchanged from the prior year end level as the Company's refinancing completed
in October 1995 provided that initial principal payments were not due until 2001
on the Company's outstanding $65,000,000 senior secured notes. Accordingly,
interest incurred in fiscal year 1997 was $154,000 or 2.2% higher than the
corresponding amount for fiscal year 1996. Interest income of $1,908,000 was
$1,339,000 higher than the $569,000 in fiscal year 1996 due to the full-year
investment in cash equivalents of the excess proceeds of the October 1995
refinancing and an increased level of investment in cash equivalents beginning
in November 1996 from the proceeds of the Carlyle Investment (see Notes to
Consolidated Financial Statements Preferred stock - Carlyle Investment).
INCOME TAXES
For the fiscal year 1998, the Company reported a loss from continuing
operations before income taxes and an extraordinary item of $2,185,000 and
recorded an income tax charge of $4,175,000 after adjusting for the special
charge and a $2,252,000 deferred tax asset valuation adjustment prior to the
acquisition of OHM. The Company also recognized a tax benefit of $3,497,000 on
an extraordinary charge for the early extinguishment of debt and a $3,040,000
benefit for a loss from disposition of a discontinued operation. The total net
tax benefit is $2,362,000. The Company's effective income tax rate from
continuing operations is more than the federal statutory rate primarily due to
the above charge, state income taxes and nondeductible expenses (see Notes to
Consolidated Financial Statements - Income taxes).
For fiscal year 1997, in which the Company reported a loss from continuing
operations before income taxes of $8,956,000, the Company recorded an income tax
benefit of $179,000 which included a $4,602,000 tax charge resulting from the
adjustment of IT's deferred tax asset valuation allowance based on the Company's
assessment of the
21
<PAGE> 23
INTERNATIONAL TECHNOLOGY CORPORATION
RESULTS OF OPERATIONS (CONTINUED)
uncertainty as to when it will generate a sufficient level of future earnings to
realize the deferred tax asset created by the Special Charges (see Special
Charges).
For fiscal year 1996, in which the Company reported a loss from continuing
operations before income taxes of $11,744,000, the Company recorded an income
tax benefit of $12,290,000 which included a $7,781,000 tax benefit resulting
from the adjustment of IT's deferred tax asset valuation allowance based on the
Company's reassessment of its ability to generate a sufficient level of future
earnings to realize a substantial portion of IT's related deferred tax asset.
Based upon a net deferred tax asset of $86,495,000 (net of a valuation
allowance of $31,865,000) at March 27, 1998, and assuming a net 38% federal and
state tax rate, the level of future earnings necessary to fully realize the
deferred tax asset would be approximately $228,000,000. The Company evaluates
the adequacy of the valuation allowance and the realizability of the deferred
tax asset on an ongoing basis. Because of the Company's position in the
industry, recent acquisitions and restructuring and existing backlog, management
expects that its future taxable income will more likely than not allow the
Company to fully realize its deferred tax asset of $86,495,000.
EXTRAORDINARY ITEM
In fiscal year 1998, the Company recorded a $5,706,000 charge, net of
income tax benefit of $3,497,000, related to the early extinguishment of IT's
$65,000,000 senior debt which was refinanced in connection with the merger with
OHM. The Company incurred a $5,563,000 payment for the make whole interest
provision as a result of retiring its $65,000,000 senior debt, in accordance
with the loan agreement. In addition, the Company also expensed approximately
$3,600,000 related to the unamortized loan origination expenses associated with
issuing the $65,000,000 senior debt.
DIVIDENDS
The reported dividends for fiscal years 1998, 1997 and 1996 were
$6,167,000, $4,916,000 and $4,200,000, respectively. The reported dividends
include imputed dividends on the 6% Cumulative Convertible Participating
Preferred Stock of $2,105,000 and $866,000 for fiscal years 1998 and 1997,
respectively, which are not payable in cash or stock. Commencing with November
21, 1997, the 6% Preferred Stock outstanding accrues a 3% inkind stock dividend
for one year during which the statement of operations also includes an imputed
dividend at a rate of approximately 3% per annum. This additional imputed
dividend of $467,000 in fiscal 1998 will never be paid in cash, except for
fractional shares, and represents the amortization of the fair market value
adjustment recorded since the date of issuance. After November 21, 1998, the
outstanding 6% Preferred Stock is entitled to a 6% cumulative cash dividend
payable quarterly. The Company reported cash dividends on its outstanding
depositary shares (each representing 1/100 of a share of the Company's 7%
Cumulative Convertible Exchangeable Preferred Stock) of $3,595,000, $4,050,000
and $4,200,000 in fiscal years 1998, 1997 and 1996, respectively. The decrease
in cash dividends in fiscal 1998 of $455,000 compared to fiscal 1997 is due to
the conversion to common stock by some holders of the Company's 7% Cumulative
Convertible Exchangeable Preferred Stock during the third quarter of fiscal year
1997. The Company's dividends are summarized below:
22
<PAGE> 24
INTERNATIONAL TECHNOLOGY CORPORATION
RESULTS OF OPERATIONS (CONTINUED)
<TABLE>
<CAPTION>
March 27, March 28, March 29,
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Dividend Summary on Preferred Stock
- -----------------------------------
7% Cumulative convertible exchangeable
cash dividend $ 3,595,000 $ 4,050,000 $ 4,200,000
6% Cumulative convertible participating
Imputed non-cash dividend 2,105,000 866,000 -
In kind 3% stock dividend (including
cash paid of $7,000 for fractional shares) 467,000 - -
----------- ----------- -----------
Total $ 6,167,000 $ 4,916,000 $ 4,200,000
=========== =========== ===========
</TABLE>
DISCONTINUED OPERATIONS
In fiscal year 1998, the Company increased its provision for loss on
disposition of its discontinued transportation, treatment and disposal business
by $4,960,000 (net of income tax benefit of $3,040,000). This increased
provision primarily related to an additional accrual for closure costs related
to the former Panoche disposal site. In March 1998, the Company announced
approval by the California Department of Toxic Substances Control (DTSC) of the
final closure and post closure plan for one of the four inactive treatment,
storage and disposal facilities. The approved plans allow the Company to proceed
with the completion of final closure construction and provides for future
submittal of technical studies that will be utilized to determine final aspects
and costs of closure construction and monitoring programs for the former Panoche
disposal site.
For further information regarding the Company's discontinued operations,
see Notes to Consolidated Financial Statements - Discontinued Operations.
23
<PAGE> 25
INTERNATIONAL TECHNOLOGY CORPORATION
LIQUIDITY AND CAPITAL RESOURCES
Working capital decreased by $35,781,000 or 32.3% to $74,924,000 at March
27, 1998 from $110,705,000 at March 28, 1997. The current ratio at March 27,
1998 was 1.38:1 which compares to 2.21:1 at March 28, 1997.
Cash used by operating activities for fiscal year 1998 totaled $19,540,000,
a change of $44,335,000 from the $24,795,000 of cash provided by operating
activities in the prior fiscal year principally due to a reduction in
receivables collected in fiscal year 1998 compared to fiscal year 1997.
Additionally, billing in excess of revenues earned decreased $4,634,000 compared
to an increase of $5,183,000 last year as a large remediation project was
completed in the current fiscal year. Furthermore, during fiscal year 1997, cash
flow from operating activities was positive primarily due to strong accounts
receivable management that improved cash flow by $25,422,000. This improved
receivable management was maintained during the current fiscal year as
receivables decreased slightly, $386,000, despite an increase in revenue. Of the
$19,540,000 net cash used for operating activities during fiscal year 1998,
$14,914,000 is related to the Company's discontinued operations. For further
information on these activities, see Notes to Consolidated Financial Statements
- - Discontinued operations. Capital expenditures were $4,766,000, $3,361,000 and
$4,696,000 for fiscal years 1998, 1997 and 1996, respectively. Capital
expenditures for fiscal year 1998 were $1,405,000 higher than fiscal year 1997
due primarily to computer hardware requirements to integrate acquisitions.
However, capital expenditures for fiscal year 1998 were approximately the same
as fiscal year 1996. The Company expects an increase in capital expenditures for
the period ending December 1998 directly related to the OHM acquisition. Cash
used for the acquisition of businesses, net of cash acquired was $163,189,000
for fiscal year 1998. On February 25, 1998, IT purchased 13,933,000 shares of
OHM Corporation common stock for $160,229,500 which is included in the Statement
of Cash Flows net of the $12,000,000 of cash acquired. The Company also acquired
speciality consulting firms PHR, PEG, JSC and LandBank for cash during fiscal
year 1998. These acquisition agreements, along with the acquisition of Beneco by
OHM, include potential future earnout payments. The total potential future
contingent payments range from a low of zero to a maximum of approximately
$19,900,000 of which $13,700,000 can be payable in the Company's common stock at
the Company's option. The Company does not expect to pay significant cash income
taxes over the next several years due to its net operating loss carryforwards.
(See Notes to Consolidated Financial Statements - Income taxes and Management's
Discussion and Analysis of Results of Operations and Financial Condition
Continuing Operations - Income taxes.)
To finance the acquisition of OHM, IT entered into a $240,000,000 credit
facility ("Tender Offer Credit Facilities"). The Tender Offer Credit Facilities
were used to complete the Tender Offer, to refinance IT's $65,000,000 principal
amount of senior notes and for working capital purposes during the period from
the Tender Offer closing date of February 25, 1998 until the merger closing date
of June 11, 1998. The Tender Offer Credit Facilities provided up to
$240,000,000, consisting of an eighteen-month $80,000,000 tender note and an
$160,000,000 revolving credit facility. The loans made under the Tender Offer
Credit Facilities did not amortize and were repaid in full with proceeds made
under the Merger Credit Facilities (as defined herein). Loans made under the
Tender Offer Credit Facilities bore interest at a rate equal to LIBOR plus 2.50%
per annum (or Citibank's base rate plus 1.50% per annum) through June 10, 1998,
at the Company's option. To complete the Merger, IT effected a $378,000,000
refinancing ("Merger Credit Facilities") on June 11, 1998 and initially borrowed
$228,000,000 under the term loan provisions and approximately $85,000,000
through the revolving credit facility. The proceeds of the loans made under the
Merger Credit Facilities were used to finance the cash consideration paid in the
Merger, to pay related expenses and costs, to refinance loans outstanding under
the Tender Offer Credit Facilities and OHM's loans outstanding under its
existing credit facility. The Merger Credit Facilities consist of an eight-year
amortizing term loan of $228,000,000 and a six-year revolving credit facility of
$150,000,000. The $150,000,000 revolving facility provides working capital for
IT and its subsidiaries (including OHM and its subsidiaries) and for general
corporate purposes. The Merger Credit Facilities are secured by a security
interest in substantially all of the assets of IT and its subsidiaries
(including the assets of OHM and its subsidiaries).
The term loans made under the Merger Credit Facilities bear interest at a
rate equal to LIBOR plus 2.50% per annum (or Citibank's base rate plus 1.50% per
annum), and revolving loans made under the Merger Credit Facilities
24
<PAGE> 26
INTERNATIONAL TECHNOLOGY CORPORATION
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
bear interest at a rate equal to LIBOR plus 2.00% per annum (or Citibank's base
rate plus 1.00% per annum), through the date that is six months after completion
of the Merger, with adjustments thereafter based on the ratio of IT's
consolidated total debt to consolidated earnings before interest and taxes and
depreciation and amortization, "EBITDA" as defined by the Merger Credit
Facilities loan agreement.
The Merger Credit Facilities amortize on a semi annual basis in aggregate
annual installments of $4,500,000 for the first six years after the Merger, with
the remainder payable in eight equal quarterly installments in the seventh and
eighth years after the Merger. IT is required to prepay the loans under the
Merger Credit Facilities with the net proceeds of asset sales and certain debt
and equity financing, and with a portion of IT's consolidated excess cash flow.
In addition, OHM is required by the terms of its 8% Convertible Subordinated
Debentures to make annual redemptions (or sinking fund payments) in an amount
equal to approximately $4,300,000. These Debentures are guaranteed by the
Company and are convertible into a combination of IT common stock (based on a
conversion price, subject to adjustment, of $22.50 per share) and cash (based on
a conversion price of $24.00 per share).
The Credit Facilities include certain representations, warranties and
covenants customary for facilities of this type, including: various financial
covenants and limitations (subject to certain exceptions) on indebtedness, lease
obligations, mergers and acquisitions, and other fundamental changes. The Credit
Facilities also include customary events of default as well as upon a change of
control of IT including, among other things, on or after the funding of the
Merger Credit Facilities on June 11, 1998, the disposition of the 6% Cumulative
Convertible Participating Preferred Stock or the Carlyle Warrants to a person
other than the Preferred Stock Group (any person or group of persons other than
the Convertible Preferred Stock or the Carlyle Warrants to a person other than
the Parent Stockholders or certain persons affiliated with the Parent
Stockholders).
Long-term debt (including the 8% convertible subordinated debentures) of
$284,697,000 at March 27, 1998 increased from the $65,874,000 at March 28, 1997
primarily due to the acquisition of OHM. (See Notes to Consolidated Financial
Statements - Long-term debt.) The Company's ratio of debt (including current
portion) to equity increased to 2.03:1 at March 27, 1998 from 0.42:1 at March
28, 1997 and 0.47:1 at March 29, 1996, respectively.
With regard to the transportation, treatment and disposal discontinued
operations, a number of items could potentially affect the liquidity and capital
resources of the Company, including changes in closure and post-closure costs,
realization of excess and residual land values, demonstration of financial
assurance and resolution of other regulatory and legal contingencies. (See Notes
to Consolidated Financial Statements - Discontinued operations.)
The Company's shareholder agreements relating to Quanterra (an
environmental analytical services business 81% owned by an affiliate of Corning
Incorporated and 19% owned by IT) contain certain provisions which have affected
and, in the future, could affect liquidity. IT was required by these agreements
to contribute $2,500,000 to Quanterra in October 1995 and an additional
$2,500,000 to Quanterra in January 1996. In connection with a recapitalization
of Quanterra in January 1996, the Company committed an additional $2,500,000 to
Quanterra, of which $475,000 was paid in each of March, April and July 1996 and
$1,075,000 was paid in December 1996, completing the commitment. Additionally,
in fiscal year 1997, the Company made a one-time $1,300,000 contribution to
Quanterra in the form of work performed related to the decommissioning/closure
of a Quanterra laboratory facility. On May 27, 1998, IT's Board of Directors
considered and approved the divestiture of certain non-core assets. The non-core
assets include the Company's 19% common stock ownership interest in Quanterra.
As a result of this action, the Company anticipates recording a non-cash charge
of approximately $10,000,000 in the quarter ending June 26, 1998. (See Notes to
Consolidated Financial Statements - Subsequent Events.) (See Notes to
Consolidated Financial Statements - Quanterra.)
25
<PAGE> 27
INTERNATIONAL TECHNOLOGY CORPORATION
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
The Company's bond surety programs provide for $300,000,000 of contract
capacity. The evaluation of capacity is based upon bonded projects estimated
cost to complete. Approximately thirty-three percent of the capacity is being
utilized currently. A portion of the Company's bonding lines is collateralized
in the form of letters of credit.
At June 11, 1998, giving effect to borrowings made in connection with the
consummation of the Merger, the Company had $38,000,000 of availability under
its revolving credit facility and $2,800,000 in cash and short-term investments.
The Company continues to have significant cash requirements, including
expenditures for the closure of its inactive disposal sites and PRP matters (see
Notes to Consolidated Financial Statements - Discontinued operations), interest,
required term loan and subordinated debenture principal payments, preferred
dividend obligations, operating lease payments, contingent liabilities and
potential future acquisitions. The Company's liquidity position with the
availability of the Merger Credit Facilities and cash generated from operations
is expected to be sufficient to meet the foreseeable requirements, as well as to
in part fund expansion and diversification of the Company's business through
both internal growth and acquisitions but will require careful management,
particularly during periods of integration of major acquisitions. In connection
with the Company's plans for continued growth through acquisition, additional
capital sources will be required.
YEAR 2000
The Company's core financial and administrative software system is
certified as Year 2000 compliant by the vendor. During fiscal year 1998, the
Company established an integration test plan to test this software and verify
Year 2000 compliance. In February 1998, these integration tests were
successfully completed. The Company's core hardware was also tested and fully
compliant with the year 2000 limitations. The Company also is communicating with
customers, suppliers, financial institutions and others with which it does
business to coordinate year 2000 conversion. The total cost of compliance and
its effect on the Company's future results of operations is being determined as
part of the detailed conversion plan and is not expected to be material.
FORWARD LOOKING STATEMENTS
Statements of the Company's or management's intentions, beliefs,
expectations or predictions for the future, denoted by the words "anticipate",
"believe", "estimate", "expect", "project", "imply", "intend", and similar
expressions are forward-looking statements that reflect the current views of the
Company and its management about future events and are subject to certain risks,
uncertainties and assumptions. Such risks, uncertainties and assumptions include
those identified in "Business - Operations" - "Regulations", - "Environmental
Contractor Risks", - "Insurance and Risk Management", - "Risk of Achievement of
Synergies and Integration of Operations", - "Leverage", - "History of Losses",
and "Legal Proceedings", and other general economic and business conditions, the
business opportunities (or lack thereof) that may be presented to and pursued by
the Company, changes in laws or regulations affecting the Company's operations
and other factors, many of which are beyond the control of the Company as well
as competitive factors and pricing pressures, funding of backlog, matters
affecting contracting and engineering businesses generally, such as the
seasonality of work, weather and clients' timing of projects, and the ultimate
costs and results of closure and divestiture of the Company's discontinued
operations, the effects of the integration of OHM and any other major
acquisitions and achievement of expected synergies therefrom, and industry-wide
market factors. The Company's actual results could differ materially from those
projected in such forward-looking statements as a result of such factors.
26
<PAGE> 28
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND FINANCIAL STATEMENT
SCHEDULE FOR THE THREE YEARS IN THE PERIOD ENDED MARCH 28, 1997
<TABLE>
<CAPTION>
CONSOLIDATED FINANCIAL STATEMENTS. PAGE
----
<S> <C>
Report of Ernst & Young LLP, Independent Auditors.............................................. 28
Consolidated Balance Sheets ----- March 27, 1998 and March 28, 1997............................. 29
Consolidated Statements of Operations ----- Three Years Ended
March 27, 1998................................................................................ 30
Consolidated Statements of Stockholders' Equity ----- Three
Years Ended March 27, 1998.................................................................... 31
Consolidated Statements of Cash Flows ----- Three Years Ended
March 27, 1998................................................................................ 32
Notes to Consolidated Financial Statements...................................................... 33
FINANCIAL STATEMENT SCHEDULE.
II. Valuation and qualifying accounts...................................................... 65
</TABLE>
Schedules not filed herewith are omitted because of the absence in all
material respects of conditions under which they are required or because the
information called for is shown in the consolidated financial statements or
notes thereto.
27
<PAGE> 29
REPORT OF ERNST & YOUNG LLP INDEPENDENT AUDITORS
The Board of Directors
International Technology Corporation
We have audited the accompanying consolidated balance sheets of International
Technology Corporation as of March 27, 1998 and March 28, 1997 and the related
consolidated statements of operations, stockholders' equity, and cash flows for
each of the three years in the period ended March 27, 1998. Our audits also
included the financial statement schedule listed in the index at Item 8. These
consolidated financial statements and schedule are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
International Technology Corporation at March 27, 1998 and March 28, 1997 and
the consolidated results of its operations and its cash flows for each of the
three years in the period ended March 27, 1998 in conformity with generally
accepted accounting principles. Also, in our opinion, the related financial
statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.
ERNST & YOUNG LLP
Pittsburgh, Pennsylvania
May 15, 1998 except the subsequent
event disclosures related to: (i) HTTS
and Quanterra; and, (ii) the completion
of the OHM merger, as to which the
dates are May 27, 1998 and June 11, 1998,
respectively.
28
<PAGE> 30
INTERNATIONAL TECHNOLOGY CORPORATION
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 27, MARCH 28,
1998 1997
--------- --------
ASSETS (IN THOUSANDS)
<S> <C> <C>
Current assets:
Cash and cash equivalents............................................. $ 24,765 $ 78,897
Accounts receivable, less allowance for doubtful
accounts of $19,026,000 in 1998 and $2,055,000 in 1997............ 210,630 108,207
Prepaid expenses and other current assets............................. 25,523 4,077
Deferred income taxes................................................. 12,750 11,324
-------- --------
Total current assets.............................................. 273,668 202,505
Property, plant and equipment, at cost:
Land and land improvements............................................ 846 1,330
Buildings and leasehold improvements.................................. 18,222 9,232
Machinery and equipment............................................... 159,433 140,630
------- -------
178,501 151,192
Less accumulated depreciation and amortization.................... 102,480 106,891
------- -------
Net property, plant and equipment............................ 76,021 44,301
Cost in excess of net assets of acquired businesses........................ 211,878 9,363
Investment in Quanterra.................................................... 16,300 16,300
Other assets ............................................................. 17,557 9,222
Deferred income taxes...................................................... 73,745 20,792
Long-term assets of discontinued operations................................ 40,048 40,048
-------- --------
Total assets.......................................................... $709,217 $342,531
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable...................................................... $ 82,597 $ 29,571
Accrued wages and related liabilities................................. 38,395 18,852
Billings in excess of revenues........................................ 3,723 7,227
Other accrued liabilities............................................. 42,091 13,788
Short-term debt, including current portion of long-term debt.......... 16,738 5,343
Net current liabilities of discontinued operations.................... 15,200 17,019
-------- --------
Total current liabilities......................................... 198,744 91,800
Long-term debt............................................................. 240,147 65,874
8% convertible subordinated debentures..................................... 44,550 -
Long-term accrued liabilities of discontinued operations, net.............. 3,773 9,280
Other long-term accrued liabilities........................................ 23,755 5,904
Minority interest.......................................................... 50,098 820
Commitments and contingencies
Stockholders' equity:
Preferred stock, $100 par value; 180,000 shares authorized:
7% cumulative convertible exchangeable, 20,556
issued and outstanding....................................... 2,056 2,056
6% cumulative convertible participating, 45,271 and 45,000 shares
issued and outstanding, respectively......................... 4,451 4,204
Common stock, $.01 par value; 50,000,000 shares authorized; 9,729,511
and 9,744,583 shares issued and outstanding, respectively......... 97 97
Treasury stock at cost, 8,078 shares ................................. (74) (74)
Additional paid-in capital............................................ 246,681 244,287
Deficit ............................................................. (105,061) (81,717)
-------- --------
Total stockholders' equity........................................ 148,150 168,853
-------- --------
Total liabilities and stockholders' equity............................ $709,217 $342,531
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
29
<PAGE> 31
INTERNATIONAL TECHNOLOGY CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED
----------------------------------------------
MARCH 27, MARCH 28, MARCH 29,
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Revenues .................................................. $ 442,216 $ 362,131 $ 400,042
Cost and expenses:
Cost of revenues ....................................... 391,126 323,993 341,890
Selling, general and administrative expenses ........... 31,774 33,431 38,125
Special charges ........................................ 14,248 8,403 --
--------- --------- ---------
Operating income (loss) ................................... 5,068 (3,696) 20,027
Quanterra related losses .................................. -- -- (26,416)
Other income, net ......................................... 716 -- 1,090
Interest, net ............................................. (7,969) (5,260) (6,445)
--------- --------- ---------
Loss from continuing operations before income taxes ....... (2,185) (8,956) (11,744)
Benefit (provision) for income taxes ...................... (4,175) 179 12,290
--------- --------- ---------
Income (loss) from continuing operations .................. (6,360) (8,777) 546
Discontinued operations (net of $3,040 income tax benefit):
Loss from disposition .................................. (4,960) -- --
--------- --------- ---------
Income (loss) before extraordinary item ................... (11,320) (8,777) 546
Extraordinary item: (net of $3,497 income tax benefit)
early extinguishment of debt ........................... (5,706) -- --
--------- --------- ---------
Net income (loss) ......................................... (17,026) (8,777) 546
Less preferred stock dividends ............................ (6,167) (4,916) (4,200)
--------- --------- ---------
Net loss applicable to common stock ....................... $ (23,193) $ (13,693) $ (3,654)
========= ========= =========
Net loss per share basic and diluted:
Continuing operations (net of preferred stock dividends) $ (1.28) $ (1.48) $ (.41)
Discontinued operations:
Loss from disposition ................................ (.51) -- --
Extraordinary item: early extinguishment of debt ....... (.59) -- --
--------- --------- ---------
$ (2.38) $ (1.48) $ (.41)
========= ========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
30
<PAGE> 32
INTERNATIONAL TECHNOLOGY CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE THREE YEARS ENDED MARCH 27, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
7% 6%
CUMULATIVE CUMULATIVE
CONVERTIBLE CONVERTIBLE
EXCHANGEABLE PARTICIPATING ADDITIONAL
PREFERRED PREFERRED COMMON TREASURY PAID-IN
STOCK STOCK STOCK STOCK CAPITAL DEFICIT TOTALS
----- ----- ----- ----- ------- ------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at March 31, 1995 .............. $ 2,400 $ -- $ 89 $ -- $ 207,785 $ (64,353) $ 145,921
Repurchase of common stock .......... -- -- -- (740) -- -- (740)
Restricted stock awards, net ........ -- -- 2 656 238 -- 896
Retirement of warrant and common
stock resulting from the
recapitalization of Quanterra ..... -- -- (1) -- (2,399) -- (2,400)
Issuances of common stock ........... -- -- 1 -- 841 -- 842
Dividends paid on preferred stock ... -- -- -- -- -- (4,200) (4,200)
Net income .......................... -- -- -- -- -- 546 546
------- ------ ---- ----- --------- --------- ---------
Balance at March 29, 1996 .............. 2,400 -- 91 (84) 206,465 (68,007) 140,865
Net proceeds from preferred stock and
warrants issued to Carlyle ...... -- 4,117 -- -- 36,492 -- 40,609
Conversion of preferred stock ....... (344) -- 7 -- 337 -- --
Restricted stock awards, net ........ -- -- (1) 10 214 -- 223
Dividends on preferred stock ........ -- 87 -- -- 779 (4,916) (4,050)
Cumulative translation adjustment ... -- -- -- -- -- (17) (17)
Net loss ............................ -- -- -- -- -- (8,777) (8,777)
------- ------ ---- ----- --------- --------- ---------
Balance at March 28, 1997 ............. 2,056 4,204 97 (74) 244,287 (81,717) 168,853
Restricted stock .................... -- -- -- -- 223 -- 223
Dividends on preferred stock ........ -- 247 -- -- 2,232 (6,167) (3,688)
Cumulative translation adjustment ... -- -- -- -- -- (151) (151)
Stock options exercised ............. -- -- -- -- (61) -- (61)
Net loss ............................ -- -- -- -- -- (17,026) (17,026)
------- ------ ---- ----- --------- --------- ---------
Balance at March 27, 1998 ............. $ 2,056 $4,451 $ 97 $ (74) $ 246,681 $(105,061) $ 148,150
======= ====== ==== ===== ========= ========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
31
<PAGE> 33
INTERNATIONAL TECHNOLOGY CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED
----------------------------------------------
MARCH 27, MARCH 28, MARCH 29,
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)........................................ $(17,026) $ (8,777) $ 546
Adjustments to reconcile net income (loss) to net cash
provided by (used for) operating activities:
Net loss from discontinued operations ............. 4,960 -- --
Extraordinary charge for early retirement of debt.. 3,640 -- --
Depreciation and amortization ..................... 13,158 14,363 14,502
Loss on disposition of business ................... 1,800 -- --
Loss on Helen Kramer claim ........................ 3,943 -- --
Deferred income taxes ............................. 678 370 (13,734)
Quanterra related losses .......................... -- -- 26,416
Gain from settlement of lawsuits .................. -- -- (9,090)
Writedown of equipment ............................ -- -- 8,000
Other ............................................. (980) (45) (10)
Changes in assets and liabilities, net of effects
from acquisitions and dispositions of businesses:
Decrease in receivables ........................... 386 25,422 12,904
(Increase) decrease in prepaid expenses and
other current assets ............................ (717) 601 1,416
(Decrease) increase in accounts payable ........... (7,687) 905 (2,204)
(Decrease) increase in accrued wages
and related liabilities ......................... (4,471) 2,473 (3,987)
(Decrease) increase in billings in
excess of revenues .............................. (4,634) 5,183 (1,986)
Increase (decrease) in other
accrued liabilities ............................. 1,591 (2,111) (6,613)
Increase (decrease) in other long-term
accrued liabilities ............................. 733 452 (275)
Decrease in liabilities of discontinued
operations ...................................... (14,914) (14,041) (11,704)
-------- -------- ---------
Net cash (used for) provided by operating activities... (19,540) 24,795 14,181
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from thermal HTTS project settlement ........... -- -- 41,100
Capital expenditures .................................... (4,766) (3,361) (4,696)
Investment in Quanterra ................................. -- (3,325) (5,475)
Proceeds from disposition of business ................... 2,800 -- --
Acquisition of businesses, net of cash acquired ......... (163,189) (1,455) (2,223)
Other, net .............................................. (4,896) 700 4,247
-------- -------- ---------
Net cash (used for) provided by investing activities .... (170,051) (7,441) 32,953
CASH FLOWS FROM FINANCING ACTIVITIES:
Financing costs ......................................... (4,113) -- (4,902)
Repayments of long-term borrowings ...................... (68,666) (438) (110,751)
Long-term borrowings .................................... 210,940 962 89,598
Net proceeds from issuance of preferred stock ........... -- 40,609 --
Dividends paid on preferred stock ....................... (2,702) (4,050) (4,200)
Issuances of common stock, net .......................... -- (33) 1,807
Repurchase of common stock .............................. -- -- (740)
-------- -------- ---------
Net cash provided by (used for) financing activities .... 135,459 37,050 (29,188)
-------- -------- ---------
Net (decrease) increase in cash and cash equivalents ....... (54,132) 54,404 17,946
Cash and cash equivalents at beginning of year ............. 78,897 24,493 6,547
-------- -------- ---------
Cash and cash equivalents at end of year.................... $ 24,765 $ 78,897 $ 24,493
======== ======== =========
</TABLE>
See accompanying notes to consolidated financial statements.
32
<PAGE> 34
INTERNATIONAL TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Basis of presentation and principles of consolidation
The consolidated financial statements include International Technology
Corporation (IT or the Company) and its wholly-owned and majority-owned
subsidiaries. The Company uses the equity method to account for certain joint
ventures in which the Company does not have in excess of 50% of voting control.
Intercompany transactions are eliminated. Certain reclassifications have been
made to prior years' consolidated financial statements in order to conform to
the current year presentation.
The Company's fiscal year consists of four thirteen-week fiscal quarters
with the fourth quarter ending on the last Friday of March. On June 9, 1998, the
Board of Directors of IT approved a change in IT's fiscal year end from the last
Friday in March of each year to the last Friday of December of each year. The
report covering the transition period will be IT's Annual Report on Form 10-K
for the nine month period ending December 25, 1998.
Business Acquisitions:
OHM Acquisition
In January 1998, the Company entered into a merger agreement to acquire OHM
Corporation (OHM), an environmental and hazardous waste remediation services
company servicing primarily industrial, federal government and local government
agencies located primarily in the United States and Canada. The transaction was
effected through a two-step process consisting of (a) the acquisition of 54% of
the total outstanding shares through a cash tender offer, which was consummated
on February 25, 1998, at $11.50 per share for 13,933,000 shares of OHM common
stock, for a total consideration of approximately $160,200,000 plus,
approximately $4,600,000 in asset acquisition costs and (b) the acquisition on
June 11, 1998 of the remaining 46% of the total outstanding shares through the
exchange of approximately 12,900,000 shares of Company common stock and payment
of approximately $30,800,000.
This transaction was accounted for as a step acquisition purchase and
therefore the effects of the second step of the merger have not been included in
the March 27, 1998 financial statements because the issuance of additional
Company shares was subject to shareholder approval which was received subsequent
to year end. As a result of the Company acquiring less than 100% of OHM
outstanding stock in the first step of the Merger, the valuation of assets
acquired and liabilities assumed has been based upon the prorata ownership
allocation of the fair values of the assets acquired and liabilities assumed
(54%). The excess of the purchase price over the prorata ownership allocation of
the fair value of assets acquired and liabilities assumed in the first step of
the merger of approximately $194,000,000 is classified as cost in excess of net
assets of acquired businesses and is being amortized over forty years. The
remaining 46% of OHM's assets and liabilities are included in the Company's
financial statements at historical cost with an amount designated as minority
interest. Results of operations include OHM for the period from February 24,
1998 through March 27, 1998.
33
<PAGE> 35
INTERNATIONAL TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The estimated fair value of the assets acquired and liabilities assumed at
the date of the first step of acquisition of OHM are as follows:
Description Amount
----------- ------
(In thousands)
Current assets $ 153,509
Property and equipment 36,478
Cost in excess of net assets of acquired businesses 194,318
Other long term assets 43,920
Current liabilities 119,234
Long term liabilities, primarily debt 96,716
As a result of the Merger, the Company has plans to close specific
overlapping properties and reduce consolidated employment. The acquired balance
sheet includes an estimated accrual of approximately $7,200,000 for 54% of the
estimated OHM severance, office closure costs and lease termination costs of
which $650,000 was paid prior to March 27, 1998. The OHM integration plan will
be finalized, approved and communicated prior to December 31, 1998.
The purchase price allocation is preliminary and based upon information
currently available. Management is continuing to gather and evaluate information
regarding the valuation of assets and liabilities at the dates of both the first
and second steps of the acquisition. This assessment involves gathering
additional information to complete the allocation. Management does not
anticipate material changes to the preliminary allocation.
The following unaudited pro forma condensed statements of operations give
effect to the first step of the OHM merger as if the transaction occurred at the
beginning of each period presented.
52 weeks ended
-------------------------------------
(In thousands, except per share data)
March 27, 1998 March 28, 1997
Pro Forma Pro Forma
--------- ---------
Revenues $ 955,381 $ 984,945
Loss from continuing operations
before extraordinary item (14,133) (12,280)
Net loss (24,779) (12,280)
Net loss applicable to common stock (30,946) (17,196)
Loss per share:
Basic and diluted (3.18) (1.86)
The above amounts are based upon certain assumptions and estimates which
the Company believes are reasonable. The pro forma results do not reflect
anticipated cost savings and do not necessarily represent results which would
have occurred if the merger had taken place at the date and on the basis assumed
above.
Other Acquisitions
The Company acquired certain other businesses during 1998 and 1997 for
aggregate consideration of $12,300,000 and $1,500,000, respectively. These
acquisition agreements include potential future earnout payments. Potential
future contingent payments relating to these acquisitions range from a low of
zero to a maximum of approximately $9,900,000, of which approximately $3,700,000
is payable in the Company's common stock at the Company's option. In accordance
with Accounting Principles Board Opinion No. 16 - Business Combinations, these
acquisitions were accounted for using the purchase method and in the aggregate
were not material enough to require disclosure of pro forma financial
information.
34
<PAGE> 36
INTERNATIONAL TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
In addition, in connection with the acquisition of OHM, the Company assumed
the potential future earnout payments relating to Beneco, a company acquired by
OHM in June 1997, which range from a low of zero to a maximum of $10,000,000,
which at the option of the Company, may be paid in any combination of cash or
Company common stock determined by the Company.
Recent Accounting Pronouncements
In June 1997, the Financial Accounting Standards Board ("FASB") issued
Statements No. 130, "Reporting Comprehensive Income," and Statement No. 131,
"Disclosures about Segments of an Enterprise and Related Information." Statement
No. 130 which does not materially impact the Company and is effective for fiscal
years beginning after December 15, 1997, requires separate reporting of certain
items affecting shareholders' equity outside of those included in arriving at
net earnings. Statement No. 131, effective for the period ending December 25,
1998, establishes requirements for reporting information about operating
segments in annual and interim statements. This statement may require a change
in the Company's financial reporting, however, the extent of this change, if
any, has not been determined.
Estimates used in the preparation of the consolidated financial statements
The preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
the accompanying notes. Actual results inevitably will differ from those
estimates and such differences may be material to the consolidated financial
statements.
Cash equivalents
Cash equivalents include highly liquid investments with an original
maturity of three months or less.
Contract accounting and accounts receivable
The Company primarily derives its revenues from providing environmental
management services in the United States, principally to federal, state and
local governmental entities, large industrial companies, utilities and waste
generators. Services are performed under time-and-material, cost-reimbursement,
fixed-price and unit-bid contracts.
Revenues from time-and-material and cost-reimbursement contracts are
recognized as costs are incurred. Estimated fees on such contracts and revenues
on fixed-price and certain unit-bid contracts are recognized under the
percentage-of-completion method determined based on the ratio of costs incurred
to estimated total costs. Anticipated losses on contracts are recorded as
identified. Certain contracts include provisions for revenue adjustments to
reflect scope changes and other matters, including claims, which require
negotiations with clients in the ordinary course of business, leading to some
estimates of claim amounts being included in revenues. When such amounts are
finalized, any changes from the estimates are reflected in earnings.
Unbilled receivables typically represent amounts earned under the Company's
contracts but not billable according to the contract terms, which usually
consider the passage of time, achievement of certain milestones or completion of
the project. Generally, unbilled receivables are expected to be billed and
collected in the subsequent fiscal year. Included in unbilled receivables at
March 27, 1998 is $23,000,000 associated with claims and unapproved change
orders, which are believed by management to be probable of realization. Most of
these claims and change orders are being negotiated or are in arbitration and
should be settled within one year. This $23,000,000 excludes contract claims in
litigation (see Notes to Consolidated Financial Statements - Contingencies).
While management believes no material loss will be incurred related to these
claims and change orders, the actual amounts realized could be materially
different than the amount recorded. Included in unbilled receivables at March
28, 1997 was $9,200,000 of claims related to the Helen Kramer project which was
subject to a governmental investigation. The Company settled this claim in
December 1997. (See Commitments and contingencies-Helen Kramer contract.)
35
<PAGE> 37
INTERNATIONAL TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Included in accounts receivable at March 27, 1998 are billed receivables,
unbilled receivables and retention in the amounts of $191,773,000, $26,996,000
and $10,887,000, respectively. Billed receivables, unbilled receivables and
retention from the U.S. Government as of March 27, 1998 were $97,482,000,
$9,908,000 and $2,201,000, respectively. At March 28, 1997, billed receivables,
unbilled receivables and retention were $89,975,000, $12,305,000 and $7,982,000,
respectively. Billed receivables, unbilled receivables and retention from the
U.S. Government as of March 28, 1997 were $42,501,000, $9,162,000 and
$4,105,000, respectively. Billings in excess of revenues represent amounts
billed in accordance with contract terms, which are in excess of the amounts
includable in revenue.
The Company performs periodic evaluations of its customers' financial
condition and generally does not require collateral. At March 27, 1998, accounts
receivable are primarily concentrated in federal, state and local governmental
entities and in commercial clients in which the Company does not believe there
is any undue credit risk.
The allowance for doubtful accounts was $19,026,000 at March 27, 1998
compared to $2,055,000 at March 28, 1997. This increase was due to the OHM
acquisition which includes allowances for specifically identified receivables
that are currently in litigation.
Property, plant and equipment
The cost of property, plant and equipment is depreciated using primarily
the straight-line method over the following useful lives of the individual
assets: buildings-20 to 30 years, land improvements-3 to 20 years, and machinery
and equipment-5 to 10 years including salvage value. The Hybrid Thermal
Treatment System(R) (HTTS(R)) transportable incineration units are depreciated
over the shorter of in-production operating days or on an 8-year straight-line
basis (idle basis) to salvage value. The HTTS units are currently idle and
subsequent to fiscal year end 1998, on May 27, 1998, the Company announced a
plan to exit the HTTS thermal business. (See Notes to Consolidated Financial
Statements Subsequent Events.) Amortization of leasehold improvements is
provided using the straight-line method over the term of the respective lease.
In March 1995, the FASB issued Statement of Accounting Standards No. 121
(SFAS No. 121), "Accounting for the Impairment of Long-Lived Assets and
Long-Lived Assets to Be Disposed Of," which requires impairment losses to be
recorded on long-lived assets used in operations when indicators of impairment
are present and the undiscounted cash flows estimated to be generated by those
assets are less than the assets' carrying value. SFAS No. 121 also addresses the
accounting for long-lived assets that are expected to be disposed of. The
Company has adopted SFAS No. 121 in fiscal year 1997 which did not result in any
material impact on the results of operations or financial position of the
Company. Long-term assets of discontinued operations (see Discontinued
operations) are accounted for under APB Opinion No. 30, "Reporting the Results
of Operations" and are not subject to SFAS No. 121.
Interest
Interest incurred on qualified capital expenditures is capitalized and
included in the cost of such constructed assets. Interest incurred was
$10,730,000, $7,168,000 and $7,014,000 for fiscal years 1998, 1997 and 1996,
respectively. Interest capitalized was $10,000 in fiscal year 1998. No interest
was capitalized in fiscal years 1997 or 1996.
Interest income is principally earned on the Company's investments in cash
equivalents and was $2,751,000, $1,908,000 and $569,000 in fiscal years 1998,
1997 and 1996, respectively.
Intangible assets
Cost in excess of net assets of acquired businesses is amortized over 20 to
40 years on a straight-line basis. At March 27, 1998 and March 28, 1997,
accumulated amortization is $9,576,000 and $8,143,000, respectively. The
36
<PAGE> 38
INTERNATIONAL TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Company periodically evaluates the recoverability of intangibles resulting from
business acquisitions and measures the amount of impairment, if any, by
assessing current and future levels of income and cash flows as well as other
factors, such as business trends and prospects and market and economic
conditions. Other intangibles arising principally from acquisitions, are
amortized on a straight-line basis over periods not exceeding 20 years.
Stock-based compensation
The Company grants stock options for a fixed number of shares to employees
and members of the Board of Directors with an exercise price equal to the fair
value of the shares at the date of grant. The Company accounts for stock
compensation arrangements in accordance with APB Opinion No. 25, "Accounting for
Stock Issued to Employees," ("APB No. 25") and accordingly, recognizes no
compensation expense for the stock compensation arrangements. The pro forma
information regarding net income and earnings per share as required by Statement
of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("SFAS No. 123") is disclosed in the note Stock incentive plans:
Compensation cost.
Risks and uncertainties
The Company provides a broad range of environmental and hazardous waste
remediation services to its clients located primarily in the United States. The
assessment, remediation, analysis, handling and management of hazardous
substances necessarily involve significant risks, including the possibility of
damages or injuries caused by the escape of hazardous materials into the
environment, and the possibility of fines, penalties or other regulatory action.
These risks include potentially large civil and criminal liabilities for
violations of environmental laws and regulations, and liability to customers and
to third parties for damages arising from performing services for clients, which
could have a material adverse effect on the Company. Although the Company
believes that it generally benefits from increased environmental regulations and
from enforcement of those regulations, increased regulation and enforcement also
create significant risks for the Company.
The Company does not believe there are currently any material environmental
liabilities related to continuing operations not already recorded or disclosed
in its financial statements. The Company anticipates that its compliance with
various laws and regulations relating to the protection of the environment will
not have a material effect on its capital expenditures, future earnings or
competitive position.
The Company's revenue from governmental agencies accounted for 63%, 67% and
69% of revenue for fiscal years 1998, 1997 and 1996, respectively. Because of
its dependence on government contracts, the Company also faces the risks
associated with such contracting, which could include civil and criminal fines
and penalties. As a result of its government contracting business, the Company
has been, is and may in the future be subject to audits and investigations by
government agencies. The fines and penalties which could result from
noncompliance with the Company's government contracts or appropriate standards
and regulations, or the Company's suspension or debarment from future government
contracting, could have a material adverse effect on the Company's business. The
dependence on government contracts will also continue to subject the Company to
significant financial risk and an uncertain business environment caused by any
federal budget reductions.
In addition to the above, there are other risks and uncertainties that
involve the use of estimates in the preparation of the Company's consolidated
financial statements. (See Summary of significant accounting policies - Business
Acquisitions and Commitments and contingencies.)
37
<PAGE> 39
INTERNATIONAL TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Per share information
Per share information is based on the weighted average number of
outstanding common shares and common share equivalents during each period which
aggregated 9,737,130 in 1998, 9,226,596 in 1997 and 8,981,827 in 1996.
In February 1997, the Financial Accounting Standards Board issued Statement
No. 128, Earnings per Share, which was required to be adopted on December 31,
1997. The Company has changed the method used to compute earnings per share and
restated all prior periods. Under the new requirements for calculating basic
earnings per share, the dilutive effect of stock options is excluded. For all
periods presented, shares of common stock issuable upon conversion of the
Company's convertible preferred stock, common stock warrants, contingently
issuable shares and common stock options are antidilutive, and therefore
excluded from the diluted earnings per share calculation.
Fair value of financial instruments
The following methods and assumptions were used by the Company in
estimating the fair value of its financial instruments:
Cash and cash equivalents: The carrying amount reported in the balance
sheet approximates its fair value.
Long and short-term debt: The fair value of the 8% convertible subordinated
debentures was based on a quoted market price at March 27, 1998. For fiscal year
1997, a reasonable estimate of the fair value for the 9.42% senior secured notes
was based upon a discounted cash flow analysis. The carrying amount of the
credit agreement and other debt approximates its fair value.
The carrying amounts and estimated fair values of the Company's financial
instruments are:
<TABLE>
<CAPTION>
March 27, 1998 March 28, 1997
------------------------- -------------------------
Carrying Estimated Carrying Estimated
amount fair value amount fair value
------ ---------- ------ ----------
(In thousands)
<S> <C> <C> <C> <C>
Cash and cash equivalents $ 24,765 $ 24,765 $78,897 $78,897
Long and short-term debt:
9.42% senior secured notes -- -- 65,000 63,329
Credit agreement debt:
Revolver borrowings outstanding-
Bank of America 33,200 33,200 -- --
Revolver borrowings outstanding-
Citibank 126,293 126,293 -- --
Term Loan - Citibank 80,000 80,000 -- --
8% Convertible Subordinated Debentures-
Due October 1, 2006 46,753 45,643 -- --
Other 15,189 15,189 6,217 6,217
</TABLE>
38
<PAGE> 40
INTERNATIONAL TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
CONSOLIDATED STATEMENTS OF CASH FLOWS SUPPLEMENTAL DISCLOSURES:
Supplemental cash flow information is:
Year ended
----------------------------------------
March 27, March 28, March 29,
1998 1997 1996
------------ ------------ ----------
(In thousands)
Interest paid, net of amounts
capitalized $ 11,060 $ 6,713 $ 7,184
Interest received 2,652 1,730 293
Income taxes paid 770 287 1,860
Income tax refunds received 3 1,178 2
Acquisition liabilities assumed 218,440 6,346 1,155
SPECIAL CHARGES:
Special charges of $14,248,000 were recorded in fiscal year 1998. These
special items include $5,694,000 for integration costs associated with the
acquisition of OHM, $3,943,000 non-cash charge related to the Helen Kramer
project claim settlement, $2,811,000 charge associated with the relocation of
the Company's corporate headquarters, and $1,800,000 loss from the sale of a
small remediation services business.
In the fourth quarter of fiscal year 1998, the Company recorded a
$5,694,000 special charge for integration costs associated with the acquisition
of OHM. The integration charge included $2,197,000 of costs for severance and
$3,497,000 of costs and other related items for closing and consolidating IT
offices with OHM offices. As part of the plan of integration, the Company
identified slightly more than 100 IT employees, primarily in the operating group
and administrative support functions, to be laid-off. In addition, the Company
approved an integration plan to close three leased facilities, reduce the size
of three facilities and subleased a portion of eight IT facilities by moving
into OHM facilities to consolidate offices located in the same area. As of March
27, 1998, $4,526,000 of the integration charge remained to be paid. By December
25, 1998, approximately 50% of this amount is expected to be paid as the
integration process between IT and OHM becomes substantially complete. The
remaining costs relate to the facility closures and office consolidations and
will be paid over the remaining terms of the leases. Most of these lease
commitments will be paid within the next four years. One lease requires payments
over the next seven years. Subleasing efforts commenced in February 1998
primarily through a relationship established with a national real estate firm.
In December 1997, the Company settled a contract claim which has been
outstanding in excess of five years with the US Army Corps of Engineers, the
Environmental Protection Agency and the Department of Justice (jointly
"Government") arising out of work performed by the joint venture of IT and Davy
International at the Helen Kramer Superfund project. On December 26, 1997, the
joint venture received a $14,500,000 payment from the Government to resolve all
outstanding project claims related to additional work resulting from differing
site conditions. In early January 1998, the joint venture paid $4,300,000 to the
Government to resolve related civil claims by the Government. IT's share of the
joint venture results is 60%, accordingly, IT received net cash of $6,000,000,
its proportionate share of the settlement. In December 1997, the Company
recorded a non-cash pre-tax charge of $3,943,000 as the cash received was less
than the unbilled and billed receivables related to this project which totaled
approximately $9,200,000 and $700,000, respectively.
The special charges that occurred in the first quarter of fiscal 1998
resulted from the relocation of the Company's corporate headquarters from
Torrance, California to Monroeville (Pittsburgh), Pennsylvania and the sale of
its California based small project remediation services business. The
headquarters relocation consolidated the corporate overhead functions with the
Company's largest operations office and closer to its lenders and largest
shareholders which are located in the Eastern United States. As a result of this
relocation, the Company incurred a pre-tax charge of $2,811,000. The relocation
charge included $790,000 of costs for severance, $953,000 of costs for the
relocation of IT employees, $710,000 of costs related to the closure of the
offices in Torrance, California and $358,000 of other related costs. As part of
this relocation, 32 employees were laid off, primarily corporate management and
administrative support personnel. As
39
<PAGE> 41
INTERNATIONAL TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
of March 27, 1998, $312,000 remained to be paid, primarily relating to employee
relocation and office closure. In May 1997, the Company incurred a non-cash
pre-tax charge of $1,800,000 to sell its California based small projects
remediation services business.
In conjunction with the corporate restructuring which was initiated in the
second quarter of fiscal year 1997, the Company incurred a pre-tax restructuring
charge of $8,403,000. The restructuring charge included $3,400,000 of costs for
severance, $4,100,000 of costs for closing and reducing the size of a number of
the Company's offices, and $903,000 of costs for other related items. As part of
the plan of termination, the Company laid-off 133 employees and paid over
$2,460,000 in termination benefits. In addition, the Company approved a plan to
close five leased facilities and reduce the size of eleven other leased
facilities by either sublease or abandonment. Most of the remaining costs to be
paid relate to the facility closures and office space reductions which will be
paid out over the terms of the lease. One of these facility closures has a
remaining lease obligation of approximately seven years. At March 27, 1998,
$1,187,000 of the charge remained to be paid.
QUANTERRA:
In January 1996, the Company and Corning completed an agreement to
recapitalize Quanterra which resulted in a change in Quanterra's ownership to
19% by IT and 81% by Corning. IT decided it would be in the best interest of the
Company to negotiate a structure for its Quanterra investment that would sustain
Quanterra's future potential but limit future IT capital requirements. This
approach allowed IT to invest its available resources in its core business. The
recapitalization included a $25,000,000 infusion of new equity in Quanterra, of
which $2,500,000 was contributed by IT. In addition, IT sold a common stock
interest in Quanterra to Corning in consideration of the exchange of 83,250
shares of IT stock and warrants to purchase 500,000 shares of IT common stock,
previously issued to Corning in connection with the formation of Quanterra.
These shares and warrants were subsequently retired by IT. IT also received a
put option allowing it to sell its shares to Quanterra at market value in the
year 2003. The Company reported a pre-tax charge of $24,595,000 to reflect the
impairment in the value of IT's investment resulting from and subsequent to the
recapitalization transaction. The events that led to the other than temporary
decline in the value of the Company's investment in Quanterra occurred in
December 1995 when it became evident that Quanterra's net loss would increase
significantly in comparison to the September 1995 quarterly results and it
became apparent that Quanterra would require additional capital from its owners
to meet its liquidity needs in 1996. These two events led to the
recapitalization transaction and the Company's loss recognition. As a result of
the recapitalization, IT's investment in Quanterra, which was previously
accounted for under the equity method, is currently accounted for on the cost
basis.
On May 27, 1998, IT's Board of Directors considered and approved the
divestiture of certain non-core assets. The non-core assets include the
Company's 19% common stock ownership interest in Quanterra, Inc., an
environmental laboratory business, which is currently recorded at $16,300,000.
The Company expects to sell its investment in Quanterra for approximately
$6,000,000, and as a result, the Company anticipates recording a non-cash charge
of approximately $10,000,000 in the quarter ended June 26, 1998. (See Notes to
Consolidated Financial Statements - Subsequent Events).
40
<PAGE> 42
INTERNATIONAL TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DISCONTINUED OPERATIONS:
Overview
Prior to December 1987 the Company was a major provider of hazardous waste
transportation, treatment, and disposal operations in California. In December
1987, the Company's Board of Directors adopted a strategic restructuring program
which included a formal plan to divest the transportation, treatment and
disposal operations through sale of some facilities and closure of certain other
facilities. Subsequent to this date, the Company ceased obtaining new business
for these operations. During the quarter ended March 27, 1998, the Company
recorded an increase in the provision for loss on disposition of $8,000,000 or
$4,960,000, net of income tax benefit of $3,040,000, primarily for additional
closure costs related to the approval of the closure plan by the DTSC for the
Panoche disposal site. Prior to fiscal year 1998, the Company cumulatively
recorded a provision for loss on disposition of transportation, treatment and
disposal discontinued operations (including the initial provision and three
subsequent adjustments) in the amount of $160,192,000, net of income tax benefit
of $32,879,000. The adjustments principally related to a writeoff of the
contingent purchase price from the earlier sale of certain assets, increased
closure costs principally due to delays in the regulatory approval process, and
costs related to certain waste disposal sites where IT has been named a
potentially responsible party (PRP). The Company has funded previously accrued
costs of $14,914,000 in 1998, $15,698,000 in 1997 and $11,704,000 in 1996
relating to the closure plans and construction and PRP matters. The Company
expects to incur costs over the next several years; however, the nature of the
costs will change from closure to monitoring. At March 27, 1998, the Company's
consolidated balance sheet included accrued liabilities of approximately
$19,000,000 to complete the closure and post-closure of its disposal facilities
and the PRP matters, net of certain trust fund and annuity investments,
restricted to closure and post-closure use.
The $19,000,000 in accrued liabilities includes reserves of $42,200,000 for
the closure, clean up and post closure care of the Company's Northern California
Sites and $2,400,000 for the settlement of alleged liabilities with regard to
the OII, GBF and other third party site clean up matters, offset against
$25,600,000 of related assets predominantly consisting of trust funds primarily
invested in high quality common stock and AAA rated corporate and government
bonds, which are recognized at fair market value and annuity investments noted
above.
The annuities and trust fund assets are held in a legally binding trust
agreement by a third party trustee naming the California EPA, Department of
Toxic Substances control (DTSC) as the beneficiary of the trust. The trust
agreement was entered into pursuant to a 1989 consent agreement between the
Company and DTSC. As closure and post closure obligations are met by the
Company, DTSC is obligated to release funds from the trusts to reimburse the
Company to pay for work completed.
The provision for loss on disposition of transportation, treatment and
disposal discontinued operations is based on various assumptions and estimates,
including those discussed below. The adequacy of the provision for loss has been
currently reevaluated in light of the developments since the adoption of the
divestiture plan, and management believes that the provision as adjusted is
reasonable; however, the ultimate effect of the divestiture on the consolidated
financial condition, liquidity and results of operations of the Company is
dependent upon future events, the outcome of which cannot be determined at this
time. Outcomes significantly different from those used to estimate the provision
for loss could result in a material adverse effect on the consolidated financial
condition, liquidity and results of operations of the Company.
Northern California Facilities
As a part of the Company's discontinued transportation, treatment, and
disposal operations, the Company operated a series of treatment, storage and
disposal facilities in California, including four (4) major disposal facilities.
Closure plans for all four of these facilities have now been approved by all
applicable regulatory agencies. Closure construction has been completed at two
of these facilities (Montezuma Hills and Benson Ridge) and is substantially
completed at a third (Vine Hill), with final completion expected during the
spring of 1999.
41
<PAGE> 43
INTERNATIONAL TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
On March 18, 1998, the DTSC certified the Environmental Impact Report and
approved the Closure Plan for the Panoche facility. The approved plans are
generally consistent with IT's proposed plans for most of the site, with some
modifications to the Company's plans for the landfill cap and additional
relocation of certain wastes in a peripheral area of the site. The approved
plans also provide for future submittal of technical studies that will be
utilized to determine final aspects, details and costs of closure construction
and monitoring programs. While IT believes that the approved closure plans
substantially reduce future cost uncertainties to complete the closure of the
Panoche facility, the ultimate costs will depend upon the results of the
technical studies called for in the approved plans. Closure construction for the
plan is scheduled to be completed within three years of approval of the plan. As
a part of the closure process, the Company will excavate drums buried in a
portion of the facility. The drums are the alleged source of low levels of
contaminants which have migrated through groundwater underneath a portion of
municipally-owned land adjacent to the facility.
Closure and post-closure costs are incurred over a significant number of
years and are subject to a number of variables including, among others,
negotiations regarding the details of site closure and post-closure, with DTSC,
USEPA, the California State Water Resources Control Board, the California Air
Resources Board, Regional Water Quality Control Boards (RWQCBs), Air Quality
Management Districts, various other state authorities and certain applicable
local regulatory agencies. Operation of the facilities in the closure and
post-closure periods is also subject to regulation by the same agencies. Closure
costs are comprised principally of engineering, design and construction costs
and of caretaker and monitoring costs during closure. Upon completion of closure
construction, the Company is required to perform post-closure monitoring and
maintenance of its disposal facilities for at least 30 years. The Company has
estimated the impact of closure and post-closure costs in the provision for loss
on disposition of transportation, treatment and disposal discontinued
operations; however, closure and post-closure costs could be higher than
estimated if regulatory agencies were to require closure and/or post-closure
procedures significantly different than those in the approved plans, or if the
Company is required to perform unexpected remediation work at the facilities in
the future or to pay penalties for alleged noncompliance with regulatory permit
conditions.
Regulations of the DTSC and the United States Environmental Protection
Agency (USEPA) require that owners and operators of hazardous waste treatment,
storage and disposal facilities provide financial assurance for closure and
post-closure costs of those facilities. The Company has provided such financial
assurance equal to its estimate for closure and post closure costs at March 1,
1998, which could be subject to increase at a later time as a result of
regulatory requirements, in the form of a corporate guarantee of approximately
$18,000,000, and approximately $25,600,000 in trust funds and purchased
annuities which will ultimately mature over the next 30 years to pay for its
estimates of post-closure costs. Additionally, the Company will be required to
notify the DTSC with respect to the impact, if any of the Merger with OHM and
any other related transactions on the Company's requirement to provide financial
assurance for the closure and post closure of its Northern California facilities
and may be required to provide additional or alternate financial assurance.
The carrying value of the long-term assets of transportation, treatment and
disposal discontinued operations of $40,048,000 at March 27, 1998 is principally
comprised of residual land at the inactive disposal facilities (a substantial
component of which is adjacent to those facilities and was never used for waste
disposal) and assumes that sales will occur at market prices estimated by the
Company based on certain assumptions (entitlements, development agreements,
etc.), taking into account market value information provided by independent real
estate appraisers. A portion of the residual land is the subject of a local
community review of growth strategy. This review has recommended strategies for
limiting growth in the area applicable to certain of the Company's property,
which have been incorporated in a draft general plan and environmental impact
report which were released for public comment in the spring of 1998. Ultimately,
if development plans are materially restricted or acceptable entitlements are
unobtainable, the carrying value of this property could be significantly
impaired. The Company is also pursuing favorable planning changes with respect
to certain other nearby property. None of these strategies or changes have been
finalized. There is no assurance as to the timing of development or sales of any
of the Company's residual land, or the Company's ability to ultimately liquidate
the land for the sale prices assumed. If the assumptions used to determine such
prices are not realized, the value of the land could be materially different
from the current carrying value.
42
<PAGE> 44
INTERNATIONAL TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The Company maintains Environmental Impairment Liability coverage for the
Northern California facilities through the Company's captive insurance company.
The limits of the policy are $32,000,000 which meet the current requirements of
both federal and state law.
Operating Industries, Inc. Superfund Site
In June 1986, USEPA notified a number of entities, including the Company,
that they were PRPs with respect to the Operating Industries, Inc. (OII)
Superfund site in Monterey Park, California. Subsequently, USEPA alleged that
the Company had generated approximately 2% by volume of the manifested hazardous
wastes disposed of at the site, and the Company was also served with lawsuits
brought by members of a group of PRPs (the Steering Committee).
Between October 1995 and April 1996, the Company, the USEPA and the
Steering Committee agreed to settlements of the Company's alleged liability for
response costs incurred by the USEPA pursuant to the first three partial consent
decrees entered into in connection with the OII site pursuant to which the
Company paid $5,400,000 to the USEPA and $250,000 to the Steering Committee.
While resolving the Company's alleged liability for these response costs, the
settlement did not include a release of liability for future or final OII
remedies. In September 1996, the USEPA released a final record of decision
selecting the final remedy for the site. Response costs for the final remedy are
estimated by USEPA to be approximately $161,800,000. The Company believes that
this estimate does not take into account the benefits of certain work to be
performed under the previous consent decrees and therefore substantially
overstates the remaining cost. The USEPA has requested, and the Steering
Committee and the Company have submitted, proposals to work cooperatively with
interested parties respect to the final remedy.
Should the costs of the final remedy be greater than the amounts recognized
or should the Company be forced to assume a disproportionate share of the costs
of the final remedy (whether because of differences in the protections obtained
by the Steering Committee and the Company under the various consent decrees to
which Steering Committee members and the Company are subject, failure of other
PRPs to pay their proportionate shares, or otherwise), the cost to the Company
of concluding this matter could materially increase.
GBF Pittsburg Site
In September 1987, the Company and 17 other companies were served with a
Remedial Action Order (RAO) issued by the DTSC, concerning the GBF Pittsburg
landfill site near Antioch, California, a site which had been proposed by the
USEPA to be added to the National Priorities List under CERCLA. (Additional
PRPs, consisting primarily of known waste generators, were subsequently served
with amended RAOs by the DTSC.) From the 1960's through 1974, a predecessor to
IT Corporation operated a portion of one of the two parcels as a liquid
hazardous waste site. The activity ceased in 1974, and the Company's
predecessor's facility was closed pursuant to a closure plan approved by the
appropriate RWQCB. Both of the parcels were then operated by other parties as a
municipal and industrial waste site (overlying the former liquid hazardous waste
site) and, until 1992, continued to accept municipal waste. Water quality
samples from monitoring wells in the vicinity of the site were analyzed by the
property owner in August 1986 and indicated the presence of volatile organics
and heavy metals along the periphery of the site.
In June 1997, the DTSC completed and released a final Remedial Action Plan
(RAP) selecting DTSC's preferred alternative of actively pumping and treating
groundwater from both the alleged source points of contamination and the edge of
the allegedly contaminated groundwater plume emanating from the site, which DTSC
estimated to cost between $18,000,000 and $33,000,000, depending upon whether
certain options for discharge of produced waters are available. As part of the
RAP, the DTSC also advised the PRP group of its position that all PRPs,
including the company, are responsible for paying the future closure and
postclosure costs of the overlying municipal landfill, which have been estimated
at approximately $4,000,000. (The DTSC also seeks approximately $1,000,000 in
oversight costs from all PRPs.) The PRP group continues to believe that its
preferred alternative of continued limited site monitoring, which was estimated
to cost approximately $4,000,000, is appropriate in part because the studies
conducted by the PRP group indicate that groundwater quality impact is not
affecting drinking water supplies and has filed an application with the
appropriate RWQCB for designation of the site as a containment zone which, if
approved, would facilitate the PRP group's preferred remedial alternative.
43
<PAGE> 45
INTERNATIONAL TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The Company and the PRP group initiated litigation (Members of the
GBF/Pittsburg Landfill(s) Respondents Group, etc., et al, v. State of California
Environmental Protection Agency Contra Costa County, California Superior Court
Case No. C97-02936) challenging the final RAP, and the PRP group and the DTSC
have agreed to stay this litigation and implementation of major RAP elements
pending the RWQCB's review of the containment zone application.
In the final RAP the DTSC assigned the Company and the other members of the
PRP group collective responsibility for 50% of the site's response costs.
Although the DTSC's allocation of responsibility is not binding except in very
limited circumstances, the PRP group continues to believe that the DTSC
allocation is inappropriate and current owner/operators should pay a larger
portion of the site's response costs because, among other things, the ground
water quality impact is not attributable solely to the portion of the site
previously operated by it's predecessor, and the PRP group has initiated
litigation (Members of the GBF/Pittsburg Landfill(s) Respondents Group, etc., et
al, v. Contra Costa Waste Service, etc., et al. U.S.D.C., N.D. CA, Case No.
C96-03147SI) against the owner/operators of the site and other non-cooperating
PRPs to cause them to bear their proportionate share of site remedial costs. The
owner/operators of the site have denied responsibility and have not cooperated
with the PRP group in its efforts to study and characterize the site, except for
limited cooperation which was offered shortly after the September 1987 RAO and,
currently, with respect to DTSC's attempts to cause the selection of its
preferred remedial alternative. The owner/operators are vigorously defending the
PRP group's litigation, and the outcome of the litigation cannot be determined
at this time.
Failure of the PRP group to effect a satisfactory resolution with respect
to the choice of appropriate remedial alternatives or to obtain an appropriate
contribution towards site remedial costs from the current owner/operators of the
site and other non-cooperating PRPs, could substantially increase the cost to
the Company of remediating the site.
Environmental Protection Corporation Site
In March 1995, IT was notified by the DTSC that it was among 13 companies
identified as potentially responsible for costs associated with investigation
and cleanup of the Environmental Protection Corporation (EPC) site known as the
Eastside Facility near Bakersfield, California. IT transported various waste
streams both generated by IT and on behalf of its customers to the Eastside
Facility at various times during that facility's operation and it was a minority
shareholder in EPC for a period of its operations. Because of the early stage of
the matter, the potential costs associated with the remediation of the Eastside
facility cannot be reasonably estimated.
Other Site Cleanup Actions
The Company, as a major provider of hazardous waste transportation,
treatment and disposal operations in California prior to the December 1987
adoption of its strategic restructuring program, has been named a PRP at a
number of other sites and may from time to time be so named at additional sites
and may also face damage claims by third parties for alleged releases or
discharges of contaminants or pollutants arising out of its transportation,
treatment and disposal discontinued operations. The Company has either denied
responsibility and/or is participating with others named by the USEPA and/or the
DTSC in conducting investigations as to the nature and extent of contamination
at the sites. Based on the Company's experience in resolving claims against it
at a number of sites and upon current information, in the opinion of management,
with advice of counsel, claims with respect to sites not described above at
which the Company has been notified of its alleged status as a PRP will not
individually or in the aggregate result in a material adverse effect on the
consolidated financial condition, liquidity and results of operations of the
Company.
The Company has initiated against a number of its past insurers claims for
recovery of certain damages and costs with respect to both its Northern
California sites and certain PRP matters. The carriers dispute their allegations
to the Company and the Company expects them to continue to contest the claims.
The Company has included in its provision for loss on disposition of
discontinued operations (as adjusted) an amount that, in the opinion of
management, with advice of counsel, represents a probable recovery with respect
to those claims.
44
<PAGE> 46
INTERNATIONAL TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
LONG-TERM DEBT:
Long-term debt consists of the following:
<TABLE>
<CAPTION>
March 27, March 28,
1998 1997
---- ----
(In thousands)
<S> <C> <C>
8% Convertible Subordinated Debentures-
Due October 1, 2006 ....................... $ 46,753 $ --
Senior secured notes, due 2001 - 2003 ............. -- 65,000
Credit Agreement Debt:
Revolver borrowings outstanding-Bank of America 33,200 --
Revolver borrowings outstanding-Citibank ...... 126,293 --
Term Loan-Citibank ............................ 80,000 --
Other ............................................. 15,189 6,217
-------- -------
301,435 71,217
Less current portion .............................. 16,738 5,343
-------- -------
$284,697 $65,874
======== =======
</TABLE>
Aggregate maturity of long-term debt, including annual mandatory sinking
fund payments for the convertible subordinated debentures, for the five fiscal
years following March 27, 1998 is: 1999, $16,738,000; 2000, $11,387,000; 2001,
$9,143,000; 2002, $8,813,000; 2003 and thereafter $255,354,000.
The convertible subordinated debentures are convertible into 45.04 shares
of common stock and $107.50 cash per $1,000 unit with interest payable
semiannually on April 1 and October 1, and are redeemable at the option of the
Company. The convertible subordinated debentures require annual mandatory
sinking fund payments of 7.5% of the principal amount which commenced in 1996,
and continue through October 1, 2005.
On May 31, 1995, OHM entered into a $150,000,000 revolving credit agreement
with a group of banks (the "Bank Group") to provide letters of credit and cash
borrowings. The agreement has a five year term to expire on May 30, 2000. Under
the terms of the agreement the entire credit facility could be used for either
cash borrowings or letters of credit subject to certain covenants. Cash
borrowings bore interest at either the prime rate (8.5% at March 27, 1998) plus
a percentage up to 0.625% or, at the Company's option, the Eurodollar market
rate (6.11% at March 27, 1998) plus a percentage ranging from 0.325% to 1.625%.
This facility was repaid in full, and canceled with the closing and funding of
the Merger Credit Facility on June 11, 1998.
IT executed the OHM Tender Offer with a $240,000,000 credit facility (the
"Tender Offer Credit Facilities"). The Tender Offer Credit Facilities were used
to complete the Tender Offer, to refinance IT's $65,000,000 principal amount of
senior notes and for working capital purposes during the period from the Tender
Offer closing date of February 25, 1998 until the merger closing date of June
11, 1998. The Tender Offer Credit Facilities provided amounts up to
$240,000,000, consisting of an $80,000,000 tender note for eighteen-months, and
a $160,000,000 revolving credit facility, including a sublimit of $25,000,000
for letter of credit issuance. Loans made under the Tender Offer Credit
Facilities bore interest at a rate equal to LIBOR plus 2.50% per annum (or
Citibank's base rate plus 1.50% per annum) through June 10, 1998, at the
Company's option. The Company recorded an extraordinary charge of $9,203,000,
reduced by $3,497,000 of deferred tax benefit, as the result of the early
extinguishment of existing Company debt, to obtain the Tender Offer Credit
Facilities. On June 11, 1998, upon consummation of the second step of the OHM
acquisition (see Business Acquisitions above), the Company's Tender Offer Credit
Facilities were replaced by the Merger Credit Facilities. As such, the Company
classified applicable portions of the Tender Offer Credit Facilities outstanding
as of March 27, 1998 as long-term debt in accordance with the provisions of the
Merger Credit Facilities.
The Merger Credit Facilities consist of an eight-year amortizing term loan
(term loans) of $228,000,000 and a six-year revolving credit facility (revolving
loans) of $150,000,000 that contains a sublimit of $50,000,000 for letter of
credit
45
<PAGE> 47
INTERNATIONAL TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
issuance. The term loans made under the Merger Credit Facilities bear interest
at a rate equal to LIBOR plus 2.50% per annum (or Citibank's base rate plus
1.50% per annum)and amortize on a semi annual basis in aggregate annual
installments of $4,500,000 for the first six years after the Merger, with the
remainder payable in eight equal quarterly installments in the seventh and
eighth years after the Merger. The revolving loans made under the Merger Credit
Facilities bear interest at a rate equal to LIBOR plus 2.00% per annum (or
Citibank's base rate plus 1.00% per annum). Six months after completion of the
merger, adjustments to the interest rates will be made based on the ratio of
IT's consolidated total debt to consolidated earnings before interest, taxes,
depreciation and amortization. The Merger Credit Facilities are secured by a
security interest in substantially all of the assets of the Company and its
subsidiaries. In addition, the facilities also contain certain restrictive
covenants that, among other things, prohibit the payment of cash dividends on
common stock, limit capital expenditures, and require the Company to meet
certain financial targets. Letters of credit outstanding at March 27, 1998 were
$26,600,000 for the consolidated company.
The Company also has various miscellaneous outstanding notes payable and
capital lease obligations totaling $15,189,000. These notes payable mature at
various dates between June 1998 and November 2000, at interest rates ranging
from to 6.909% to 9.50%.
46
<PAGE> 48
INTERNATIONAL TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
INCOME TAXES:
The benefit for income taxes, net of changes in the deferred tax valuation
allowance, consists of the following:
Year ended
--------------------------------------------------
March 27, March 28, March 29,
1998 1997 1996
---- ---- ----
(In thousands)
Current:
Federal $ 54 $ (764) $ 1,098
State 559 215 346
------- -------- --------
613 (549) 1,444
------- -------- --------
Deferred:
Federal (2,801) 336 (11,942)
State (174) 57 (1,792)
Foreign -- (23) --
------- -------- --------
(2,975) 370 (13,734)
------- -------- --------
Total benefit $(2,362) $ (179) $(12,290)
======= ======== ========
The benefit for income taxes is included in the statements of operations as
follows:
<TABLE>
<CAPTION>
Year ended
--------------------------------------------------
March 27, March 28, March 29,
1998 1997 1996
---- ---- ----
(In thousands)
<S> <C> <C> <C>
Continuing operations before extraordinary items $ 4,175 $ (179) $(12,290)
Extraordinary item: early extinguishment of debt (3,497) -- --
------- -------- --------
678 (179) (12,290)
Discontinued operations (3,040) -- --
------- -------- --------
Total benefit $(2,362) $ (179) $(12,290)
======= ======== ========
</TABLE>
A reconciliation of the provision (benefit) for income taxes on the total
benefit computed by applying the federal statutory rate of 34% to the loss from
continuing operations before income taxes and the reported provision (benefit)
for income taxes of the total benefit is as follows:
<TABLE>
<CAPTION>
Year ended
--------------------------------------------------
March 27, March 28, March 29,
1998 1997 1996
---- ---- ----
(In thousands)
<S> <C> <C> <C>
Income tax benefit computed at
statutory federal income tax rate $ (743) $(3,045) $ (3,993)
State income taxes, net of federal tax
benefit, if any 504 179 (954)
Equity in income (loss) of foreign subsidiaries 121 -- --
Amortization of cost in excess of net assets
of acquired businesses 287 100 199
Equity in net loss of Quanterra -- -- (2,366)
Extraordinary item: early extinguishment
of debt (3,129) -- --
Discontinued operations (2,720) -- --
Federal deferred tax asset valuation
allowance adjustment 1,906 2,597 (5,539)
Other 1,412 (10) 363
------- ------- --------
Total provision (benefit) $(2,362) $ (179) $(12,290)
======= ======= ========
</TABLE>
47
<PAGE> 49
INTERNATIONAL TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
At March 27, 1998 and March 28, 1997, the Company had deferred tax assets
and liabilities as follows:
<TABLE>
<CAPTION>
March 27, March 28,
1998 1997
---- ----
(In thousands)
<S> <C> <C>
Deferred tax assets:
Closure accruals - discontinued operations $ 15,771 $ 18,468
NOL carryforwards 72,319 20,481
Tax basis in excess of book basis in Quanterra 11,145 11,145
Alternative minimum tax credit carryforwards 3,458 2,240
Investment and other tax credit carryforwards 10,474 2,601
Other accrued liabilities 17,050 11,193
Asset basis difference - OHM 25,987 --
Other, net 7,933 3,053
--------- --------
Gross deferred tax asset 164,137 69,181
Valuation allowance for deferred tax asset (31,865) (9,471)
--------- --------
Total deferred tax asset 132,272 59,710
Deferred tax liabilities:
Tax depreciation in excess of book depreciation (19,465) (9,235)
Asset basis difference - discontinued operations (13,012) (13,012)
Other, net (13,300) (5,347)
--------- --------
Total deferred tax liabilities (45,777) (27,594)
--------- --------
Net deferred tax asset $ 86,495 $ 32,116
========= ========
Net current asset $ 12,750 $ 11,324
Net noncurrent asset 73,745 20,792
--------- --------
Net deferred tax asset $ 86,495 $ 32,116
========= ========
</TABLE>
Approximately $7,100,000 of the valuation allowance relates to the OHM
acquisition. Tax benefits subsequently recognized that are related to these
amounts will reduce cost in excess of net assets of acquired businesses.
At March 27, 1998, the Company had net operating losses (NOL's) and tax
credit carryforwards with expiration dates as follows:
<TABLE>
<CAPTION>
Research
Net and
Operating Development Other
Expiration Dates Losses Tax Credits Credits
- ---------------- ------ ----------- -------
(In thousands)
<S> <C> <C> <C>
1998 - 2003 $ 516 $ 1,140 $ 2,381
2004 - 2008 13,831 3,393 107
2009 - 2013 166,944 3,452 -
Indefinite - - 3,458
---------- ----------- -----------
Total $ 181,291 $ 7,985 $ 5,946
========== =========== ===========
</TABLE>
During the year ended March 27, 1998, the Company increased its deferred
tax asset valuation allowance from $9,471,000 to $31,865,000. The increase was
principally related to the acquisition of OHM corporation and the Company's
assessment of its ability to fully utilize the deferred tax asset. During 1998,
prior to the acquisition of OHM, the Company increased its valuation allowance
to offset increases in the deferred tax asset balance. During the fourth
quarter, the Company acquired
48
<PAGE> 50
INTERNATIONAL TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
OHM (see OHM Acquisition) which substantially increased projected taxable
income. Because of the Company's position in the industry, recent restructuring
and acquisitions and existing backlog, management expects that its future
taxable income will more likely than not allow the Company to fully realize its
deferred tax asset. The company evaluates the adequacy of the valuation
allowance and the realizability of the deferred tax asset on an ongoing basis.
During the year ended March 28, 1997, the Company increased its deferred
tax asset valuation allowance from $4,869,000 to $9,471,000. This change was
principally due to the Company's assessment of the uncertainty as to when it
will generate a sufficient level of future earnings to realize the deferred tax
asset created by the special charges (see Special Charges).
During the year ended March 29, 1996, the Company decreased its deferred
tax asset valuation from $12,650,000 to $4,869,000. The cumulative impact of the
resolution in fiscal year 1996 of a number of uncertainties led to a
reassessment of the Company's ability to generate a sufficient level of future
earnings to realize a greater portion of its related deferred tax asset,
resulting in a release of valuation allowance.
49
<PAGE> 51
INTERNATIONAL TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted earnings per
share:
<TABLE>
<CAPTION>
YEAR ENDED
--------------------------------------------------
MARCH 27, MARCH 28, MARCH 29,
1998 1997 1996
---- ---- ----
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Numerator:
Income (loss) from continuing operations
and before extraordinary items $ (6,360) $ (8,777) $ 546
Preferred stock dividends (6,167) (4,916) (4,200)
-------- -------- -------
Numerator for basic and dilutive earnings
per share-income available to common
stockholders (12,527) (13,693) (3,654)
Discontinued operations (net of income tax benefit)
loss from disposition (4,960) -- --
-------- -------- -------
(17,487) (13,693) (3,654)
Extraordinary charge for early retirement of debt
(net of income tax benefit) (5,706) -- --
-------- -------- -------
Net income (loss) applicable to common stock $(23,193) $(13,693) $(3,654)
======== ======== =======
Denominator:
Weighted-average number of common shares
outstanding for basic and dilutive
earnings per share 9,737 9,227 8,982
======== ======== =======
Net loss per share:
Earnings from continuing operations
(net of preferred stock dividends) $ (1.28) $ (1.48) $ (.41)
Earnings from discontinued operations (.51) -- --
Extraordinary item - early extinguishment of debt (.59) -- --
-------- -------- -------
Net loss per share $ (2.38) $ (1.48) $ (.41)
======== ======== =======
</TABLE>
- ----------
In June 1998, approximately 12,900,000 shares were issued in connection with the
second step of the OHM Merger. (See Business Acquisitions.)
COMMITMENTS AND CONTINGENCIES:
LEASE COMMITMENTS
The Company's operating lease obligations including OHM are principally for
buildings and equipment. Most leases contain renewal options at varying terms.
Generally, the Company is responsible for property taxes and insurance on its
leased property. At March 27, 1998, future minimum rental commitments under
noncancelable operating leases with terms longer than one year aggregate
$116,938,000 and require payments in the five succeeding years and thereafter of
$27,618,000,
50
<PAGE> 52
INTERNATIONAL TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
$28,995,000, $24,804,000, $16,728,000, $6,943,000, and $11,850,000,
respectively. A significant portion of these leased assets represent duplicative
facilities and equipment resulting from the OHM acquisition. The Company is
currently and actively involved in subleasing these assets.
Rental expense related to continuing operations was $12,931,000 (including
$1,175,000 of the special charges), $12,564,000 (including $2,184,000 of the
special charges) and $11,037,000 for fiscal years 1998, 1997 and 1996,
respectively.
CONTINGENCIES
Helen Kramer
The governmental investigation and related contract claims were settled in
December 1997. (See Special Charges.)
Central Garden
The Company has determined that the previously disclosed settlements of the
three remaining personal injury cases do not require court approval as a class
action settlement. While there is some potential for additional personal injury
claims to be asserted, the Company believes that this matter can be concluded
within the amounts previously reserved by the Company and the coverage of its
insurance policies.
Coakley Landfill Action
On March 9, 1998, the Coakley Landfill PRP Steering Committee terminated,
allegedly for cause, IT's contract to perform design and remediation services at
the Coakley Landfill and sued IT for damages for delay, redesign, regrading,
repair costs, as well as for possible exposure to penalties by the USEPA. (The
Coakley Landfill Group v. IT Corporation v. Gary W. Blake, Inc., et al.,
U.S.D.C., D.N.H., Case No. 98-167-JD) The Company disputes that the Steering
Committee is entitled to terminate the agreement for cause and believes the
termination action arose from the Company's pending change order request of
approximately $6,300,000. The Company has answered and counterclaimed for
damages for wrongful termination, issuing defective plans and specifications,
breach of contract and unfair trade practices. Discovery of the case is ongoing,
and no trial date has been set and the ultimate outcome of this matter cannot
yet be predicted.
Occidental Chemical Litigation
OHM is in litigation in the U.S. District Court for the Western District of
New York with Occidental Chemical Corporation ("Occidental") relating to the
Durez Inlet Project performed in 1993 and 1994 for Occidental in North
Tonawanda, New York. (Occidental Chemical Corporation v. OHM Remediation
Services Corporation, U.S.D.C., W.D.N.Y, Case No 94-0955(H)) OHM's account
receivables at March 27, 1998 include a claim receivable of $8,653,000 related
to this matter. OHM's work was substantially delayed and its costs of
performance were substantially increased as a result of conditions at the site
that OHM believes were materially different than as represented by Occidental.
Occidental's amended complaint seeks $8,806,000 in damages primarily for alleged
costs incurred as a result of project delays and added volumes of incinerated
waste. OHM's counterclaim seeks an amount in excess of $9,200,000 (inclusive of
$8,653,000 of claim receivable) for damages arising from Occidental's breach of
contract, misrepresentation and failure to pay outstanding contract amounts. OHM
has established additional reserves for a portion of the receivables related to
this matter. Management believes that it has established adequate reserves
should the resolution of the above matter be lower than the amounts recorded.
Due to the early stage of this matter, its ultimate outcome cannot be predicted.
51
<PAGE> 53
INTERNATIONAL TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
GM - Hughes Massena Litigation
OHM is in litigation with General Motors Corporation ("GM") in the U.S.
District Court for the Northern District of New York. GM filed suit in January
1996 (General Motors Corporation v. OHM Remediation Services Corporation,
U.S.D.C., N.D.N.Y., Case No. 7:96-CV-1214TJMDS) alleging that OHM breached a
contract between Hughes Environmental Systems, Inc. (HESI), a GM subsidiary, for
work in 1994 for the remediation of 22,000 cubic yards of PCB contaminated
sediment in the St. Lawrence River in Massena. GM seeks damages for $3,800,000.
OHM in turn filed suit against HESI and ERM Northeast, Inc. in U.S. District
Court in Northern New York seeking $3,600,000 in damages for breach of contract.
(OHM Remediation Services Corporation v. Hughes Environmental Systems, Inc. And
ERM Northeast, Inc., U.S.D.C., N.D.N.Y., Case No. 7:96-CV-0110TJMDS) The GM suit
was later consolidated with OHM's suit against HESI and ERM. GM alleges that OHM
abandoned the contract through inability to perform while OHM claims that
performance was impacted by conditions at the site that were not as represented.
Due to the early stage of this matter, its ultimate outcome cannot be predicted.
Other
The Company is subject to other claims and lawsuits in the ordinary course
of its business. In the opinion of management, all such other pending claims are
either adequately covered by insurance or, if not insured, will not individually
or in the aggregate result in a material adverse effect on the consolidated
financial condition, liquidity and results of operations of the Company. In the
course of the Company's business, there is always risk and uncertainty in
pursuing and defending claims and litigation and, not withstanding the reserves
currently established, adverse future results in litigation or other proceedings
could have a material adverse effect upon the Company's consolidated future
results of operations or financial condition.
The Company maintains a liability insurance program which includes
commercial general liability, product liability, automotive liability,
employer's liability, workers' compensation, all risk property coverage,
consultants' environmental liability (including errors and omissions),
employment practices liability and directors' and officers' liability insurance
coverage. A portion of the Company's commercial general liability, product
liability, automotive liability and workers' compensation insurance is provided
through arrangements which require the Company to indemnify the insurance
carriers for all losses and expenses under the policies and to support the
indemnity commitments with letters of credit and is, in effect, a self-insurance
layer.
Environmental Impairment Liability coverage for IT's inactive treatment,
storage and disposal facilities located in Northern California is provided
through the Company's captive insurance subsidiary, which has issued a
$32,000,000 policy which meets the current requirements of both federal and
state law. See Discontinued operations for information regarding certain legal
and governmental proceedings affecting the Company's treatment, storage and
disposal facilities.
GOVERNMENTAL REGULATION:
The Company is subject to extensive regulation by applicable federal, state
and local agencies. All facets of the Company's business are conducted in the
context of a complex statutory, regulatory and governmental enforcement
framework and a highly visible political environment. The Company's operations
must satisfy stringent laws and regulations applicable to performance. Future
changes in regulations may have an adverse effect on the Company's business.
52
<PAGE> 54
INTERNATIONAL TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
PREFERRED STOCK:
Carlyle Investment
At the November 20, 1996 Annual Meeting of Stockholders, IT's shareholders
voted to approve a $45,000,000 investment (the Carlyle Investment) by The
Carlyle Group (Carlyle), a Washington, D.C. based merchant banking firm. The
Carlyle Investment consists of 45,000 shares of 6% Cumulative Convertible
Participating Preferred Stock, par value $100 per share (Convertible Preferred
Stock) and warrants to purchase 1,250,000 shares of IT common stock, par value
$.01 per share (Carlyle Warrants). The net proceeds to IT (after related
offering costs of $4,391,000) from the Carlyle Investment were $40,609,000.
Carlyle held approximately 38% of the voting power of IT prior to the
consummation of the Merger (approximately 43% assuming exercise of the Carlyle
Warrants) and approximately 21% (approximately 24% assuming exercise of the
Carlyle Warrants) of the voting power thereafter. Until November 20, 2001, the
holders of the Convertible Preferred Stock have the right to elect a majority of
the IT Board of Directors, provided that such holders continue to hold at least
20% of the voting power of IT. As a result, the Parent Stockholders are in a
position to control the strategic direction of IT, to elect and dismiss IT's
officers and to approve and disapprove significant transactions. The terms of
the Convertible Preferred Stock provide that, to November 20, 2001, the holders
of the Convertible Preferred Stock have the right to elect a majority of the
Board of Directors of the Company, provided that Carlyle continues to own at
least 20% of the voting power of the Company.
The Convertible Preferred Stock ranks, as to dividends and liquidation,
pari passu to the Company's 7% Preferred Stock (see 7% Preferred Stock) and
prior to the Company's common stock. The Convertible Preferred Stock is entitled
to cumulative annual dividends. No dividends were payable in the first year;
dividends are payable quarterly in kind for the second year at the rate of 3%
per annum and, as of March 27, 1998, Carlyle has been paid dividends of an
additional 271 shares of Convertible Preferred Stock. Thereafter, dividends will
be paid quarterly in cash at the rate of 6% per annum. The Convertible Preferred
Stock is entitled to a liquidation preference of $1,000 per share.
The Convertible Preferred Stock and warrants may at any time, at the option
of Carlyle, be converted into IT common shares. At March 27, 1998, 5,964,454 and
1,250,000 common shares are issuable upon conversion of the Convertible
Preferred stock and Carlyle Warrants, respectively. The conversion price of the
Convertible Preferred Stock is $7.59 per share and the exercise price of the
warrants is $11.39 per share. The Company will be entitled at its option to
redeem all of the Convertible Preferred Stock at its liquidation preference plus
accumulated and unpaid dividends on or after November 21, 2003.
Although the first two years' dividends are paid at a rate of 0% and 3%,
respectively, dividends will be imputed during this period at a rate of
approximately 6% per annum. Imputed dividends were $2,105,000 and $866,000 in
fiscal years 1998 and 1997, respectively. Any imputed dividends will never be
paid in cash or stock.
7% Preferred stock
In a September 1993 public offering, the Company issued 2,400,000
depositary shares, each representing a 1/100th interest in a share of the
Company's 7% Cumulative Convertible Exchangeable Preferred Stock (7% Preferred
Stock). The depositary shares entitle the holder to all proportional rights and
preferences of the 7% Preferred Stock, including dividend, liquidation,
conversion, redemption and voting rights and preferences.
The 7% Preferred Stock ranks, as to dividends and liquidation, pari passu
to the Convertible Preferred Stock (see Carlyle Investment) and prior to the
Company's common stock. The dividend per annum and liquidation preference for
each share of 7% Preferred Stock are $175 and $2,500, respectively, and for each
depositary share are $1.75 and $25, respectively. Dividends on the 7% Preferred
Stock and depositary shares are cumulative and payable quarterly.
53
<PAGE> 55
INTERNATIONAL TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The 7% Preferred Stock is convertible at the option of the holder into
shares of the Company's common stock at a conversion price of $23.36 per share,
subject to adjustment under certain circumstances. At March 27, 1998, 2,199,903
shares of common stock are issuable upon conversion of the 7% Preferred stock.
On any dividend payment date, the 7% Preferred Stock is exchangeable at the
option of the Company, in whole but not in part, for 7% Convertible Subordinated
Debentures Due 2008 in a principal amount equal to $2,500 per share of Preferred
Stock (equivalent to $25 per depositary share). The 7% Preferred Stock may be
redeemed at any time, at the option of the Company, in whole or in part,
initially at a price of $2,622.50 per share of Preferred Stock (equivalent to
$26.225 per depositary share) and thereafter at prices declining to $2,500 per
share of Preferred Stock (equivalent to $25 per depositary share) on or after
September 30, 2003.
Additionally, the 7% Preferred Stock has a special conversion right that
becomes effective in the event of certain significant transactions affecting
ownership or control of the Company. In such situations, the special conversion
right would, for a limited period, reduce the then prevailing conversion price
to the greater of the market value of the common stock or $12.68 per share. The
Carlyle Investment (see Carlyle Investment) triggered this special conversion
right. On January 9, 1997, holders of 344,308 depositary shares elected to
convert such shares to 678,816 shares of IT common stock.
The 7% Preferred Stock is non-voting, except that holders are entitled to
vote as a separate class to elect two directors if the equivalent of six or more
quarterly dividends (whether consecutive or not) on the 7% Preferred Stock are
in arrears. Such voting rights will continue until such time as the dividend
arrearage on the 7% Preferred Stock has been paid in full.
STOCK INCENTIVE PLANS:
Summary
At the November 20, 1996 Annual Meeting of Stockholders, IT's shareholders
voted to approve the Company's 1996 Stock Incentive Plan (1996 Plan) which
provides for the issuance of the Company's common stock or any other security or
benefit with a value derived from the value of its common stock. Options are
granted at exercise prices equal to or greater than the quoted market price at
the date of grant. At March 27, 1998, the maximum number of shares of the
Company's common stock that may be issued pursuant to awards granted under the
1996 Plan is 140,846. At April 1 of each year, the maximum number of shares
available for award under the 1996 Plan may be increased by Board approval by an
amount which represents up to 2% of the number of the Company's common stock
which are issued and outstanding at that date. During fiscal year 1998, 132,921
stock options were granted under the 1996 Plan, which expires in fiscal year
2002.
The Company's 1991 Stock Incentive Plan (1991 Plan) and 1983 Stock
Incentive Plan (1983 Plan) provided for the granting of incentive and
non-qualified stock options and the issuance of the Company's common stock or
any other security or benefit with a value derived from the value of its common
stock. No shares are available for grant under these plans as such authority to
grant as to the 1991 Plan expired in March 1996 and as to the 1983 Plan expired
in September 1993. Options granted under the plans and outstanding at March 27,
1998 will expire at various dates through January 20, 2008.
Changes in the number of shares represented by outstanding options under
the 1996 Plan, the 1991 Plan and the 1983 Plan during the fiscal years ended
March 27, 1998, March 28, 1997 and March 29, 1996 are summarized as follows:
54
<PAGE> 56
INTERNATIONAL TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
Year ended
----------------------------------------------------
March 27, March 28, March 29,
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Outstanding at beginning
of year 747,679 744,847 784,895
Options granted
(1998, $7.00 - $8.50 per share;
1997, $8.63 per share;
1996, $10.50 - $13.00 per share) 132,921 171,000 39,750
Options exercised
(1997 and 1996, $11.50 per share) - (3,629) (575)
Options expired and forfeited (110,143) (164,539) (79,223)
---------- ---------- ----------
Outstanding at end of year
($7.00 - $32.50 per share) 770,457 747,679 744,847
========== ========== ==========
Vested options 486,520 473,257 462,793
========== ========== ==========
Common stock reserved for future issuance 911,298
</TABLE>
The weighted-average grant date fair values of options granted to employees
in fiscal years 1998, 1997 and 1996 were $6.32, $8.63 and $11.96, respectively.
The weighted-average exercise price for all options outstanding at the end of
fiscal years 1998, 1997 and 1996 were $13.99, $15.96 and $17.55, respectively.
The weighted-average exercise price of options currently exercisable at the end
of fiscal years 1998, 1997 and 1996 was $16.95, $19.04 and $20.64, respectively.
The weighted-average exercise price of options exercised in fiscal years 1997
and 1996 was $11.50 for each year, no options were exercised in 1998, and the
weighted-average exercise price for expired and forfeited options in fiscal
years 1998, 1997 and 1996 was $19.69, $18.53 and $24.78, respectively. The
weighted-average remaining contractual life of options outstanding at the end of
fiscal years 1998, 1997 and 1996 was 6.7 years, 6.8 years and 6.0 years,
respectively.
As of March 27, 1998, approximately 188,000 OHM stock options remained
outstanding and converted into approximately 262,000 IT stock options on June
11, 1998.
Compensation cost
The Company has elected to follow Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees" (APB 25) and related
interpretations in accounting for its employee stock options because, as
discussed below, the alternative fair value accounting provided for under FASB
Statement No. 123, "Accounting for Stock-Based Compensation," (SFAS No. 123)
requires use of option valuation models that were not developed for use in
valuing employee stock options. Under APB 25, because the exercise price of the
Company's employee stock options equals the market price of the underlying stock
on the date of grant, no compensation expense is recognized.
SFAS No. 123 provides that, if its optional method of accounting for stock
options is not adopted (and which the Company has not adopted), disclosure is
required of pro forma net income and net income per share. In determining the
pro forma information for stock options granted in fiscal years 1998 and 1997,
the fair value for these options were estimated at the date of grant using a
Black-Scholes option pricing model with the following weighted average
assumptions: risk-free interest rate
55
<PAGE> 57
INTERNATIONAL TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
based upon zero-coupon U.S. Treasury Notes of 6.38% and 6.0% in fiscal years
1997 and 1998, respectively; no dividend yield; volatility factor of the
expected market price of the Company's common stock of 0.395; and a weighted
average expected life of each option of 6.7 years.
The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting restrictions
and are fully transferrable. In addition, option valuation models require the
input of highly subjective assumptions including the expected stock price
volatility. Because the Company's employee stock options have characteristics
significantly different from those of traded options, and because changes in the
subjective input assumptions can materially affect the fair value estimate, in
management's opinion, the existing models do not necessarily provide a reliable
single measure of the fair value of its employee stock options.
If compensation cost for the Company's stock options had been determined
based on the fair value at the grant dates as defined by FAS123, the Company's
net loss applicable to common stock and net loss per common share would have
been reduced to the following pro forma amounts:
<TABLE>
<CAPTION>
Year ended
-----------------------------------------
March 27, 1998 March 28, 1997
-------------- --------------
(In thousands, except per share data)
<S> <C> <C>
Net loss applicable to common stock
As reported $ (23,193) $ (13,693)
============= =============
Pro forma $ (24,024) $ (13,735)
============= =============
Net loss per common share
As reported $ (2.38) $ (1.48)
============= =============
Pro forma $ (2.47) $ (1.49)
============= =============
</TABLE>
Additionally, under the 1991 Plan, the Company awarded shares of
nonvested restricted stock to officers and key employees which amounted to
266,019 in fiscal year 1996. Vesting of awards is dependent upon continued
employment and, in the case of certain performance-related awards, the sustained
level of a target market price for the Company's common stock that exceeds the
related market price on the date of grant. On March 27, 1998, the total number
of shares of restricted stock outstanding was 169,908. The cost of restricted
stock awards is generally expensed over the vesting period, which ranges from
two to five years, and amounted to $477,000, $575,000 and $568,000 in fiscal
years 1998, 1997 and 1996, respectively.
MAJOR CUSTOMERS:
A total of 63%, 67% and 69% of the Company's revenues during fiscal years
1998, 1997 and 1996, respectively, were from federal governmental agencies,
primarily the U.S. Department of Defense (DOD) and the U.S. Department of Energy
(DOE). In fiscal years 1998, 1997 and 1996, the DOD provided 47%, 42% and 51%,
respectively, of the Company's revenues. The DOE provided 9%, 14% and 11% of the
Company's revenues during fiscal years 1998, 1997 and 1996, respectively.
EMPLOYEE BENEFIT PLANS:
The Company has a defined contribution, contributory pension and profit
sharing plan (the Plan), covering all employees with one year of continuous
service. The Company funds current costs as accrued, and there are no unfunded
vested benefits. Through June 30, 1995, the Plan required a minimum annual
contribution of 4% of participants' eligible compensation; thereafter, the
required minimum annual contribution is 3% of participants' eligible
compensation. Additionally, beginning July 1, 1995, the Company contributes up
to 2% of participants' eligible compensation by matching 50% of each
participant's contribution (up to 4% of eligible compensation) to the Company's
voluntary 401(k) savings plan. The Plan currently allows a maximum contribution
of up to 15% of participants' eligible compensation up to $160,000 annually.
56
<PAGE> 58
INTERNATIONAL TECHNOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Pension and profit sharing expense was $3,583,000, $3,614,000 and
$3,601,000 for fiscal years 1998, 1997 and 1996, respectively.
QUARTERLY RESULTS OF OPERATIONS (IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED):
<TABLE>
<CAPTION>
First Second Third Fourth
quarter quarter quarter quarter
------- ------- ------- -------
<S> <C> <C> <C> <C>
1998:
Revenues ......................................... $ 98,181 $ 102,840 $ 105,157 $ 136,038
Gross margin ..................................... 11,424 11,412 11,770 17,200
Income (loss) from continuing operations
before extraordinary item ...................... (2,914) 1,922 (1,840) (3,528)
Discontinued operations: transportation, treatment
and disposal business .......................... -- -- -- 4,960
Extraordinary item-early extinguishment of debt .. -- -- -- 5,706
Net income (loss) applicable to common stock ..... (4,447) 385 (3,379) (15,752)
Net income (loss) per share:
Earnings from continuing operations
(net of preferred stock dividends) ............. (.46) .04 (.35) (.52)
Discontinued operations ........................ -- -- -- (.51)
Extraordinary item-early extinguishment of debt -- -- -- (.59)
-------- --------- --------- ---------
$ (.46) $ .04 $ (.35) $ (1.62)
======== ========= ========= =========
1997:
Revenues ......................................... $ 81,416 $ 92,490 $ 92,513 $ 95,712
Gross margin ..................................... 7,779 9,139 9,723 11,497
Income (loss) from continuing operations ......... (1,541) (8,890) 371 1,283
Net income (loss) applicable to common stock ..... (2,591) (9,940) (924) (238)
Net income (loss) per share ...................... $ (.28) $ (1.09) $ (.10) $ (.02)
======== ========= ========= =========
</TABLE>
From February 25, 1998 through the end of the fourth quarter of fiscal year
1998 results of operations includes the Company's 54% ownership of OHM and the
related 46% minority interest.
In fiscal year 1998, the Company recorded special charges of $14,248,000.
These special items include a fourth quarter charge of $5,694,000 for
integration costs associated with the acquisition of OHM, a third quarter
non-cash charge of $3,943,000 related to the Helen Kramer project claim
settlement, and first quarter charges including $2,811,000 associated with the
relocation of the Company's corporate headquarters, and $1,800,000 loss from the
sale of a small remediation services business.
During the second quarter of fiscal year 1997, the Company recorded a
$8,403,000 ($.92 per share) pre-tax and after tax (see Income taxes)
restructuring charge in connection with an organizational realignment (see
Special charges).
SUBSEQUENT EVENTS:
On May 27, 1998, IT's Board of Directors considered and approved the
divestiture of certain non-core assets. The non-core assets primarily include
the Company's 19% common stock ownership interest in Quanterra, Inc., an
environmental laboratory business, and the assets associated with IT's thermal
incineration business. As a result of these actions, the Company anticipates
recording a non-cash charge of approximately $25,000,000 in the quarter ending
June 26, 1998 and anticipates receiving future cash proceeds of approximately
$7,000,000.
57
<PAGE> 59
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
There were none.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The section entitled "Election of Directors" in the registrant's Definitive
Proxy Statement to be filed with the Securities and Exchange Commission for the
Annual Meeting of Stockholders scheduled for September 23, 1998 (the Proxy
Statement) is incorporated herein by reference. See also "Executive Officers of
the Company" in Part I of this report for certain information concerning the
Company's executive officers.
ITEM 11. EXECUTIVE COMPENSATION.
The section entitled "Executive Compensation" in the Proxy Statement is
incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The section entitled "Beneficial Ownership of Shares" in the Proxy
Statement is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The Section entitled "Certain Transactions" in the Proxy Statement is
incorporated herein by reference.
58
<PAGE> 60
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE AND REPORTS ON FORM 8-K.
EXHIBITS
These Exhibits are numbered in accordance with the Exhibit
Table of Item 601 of Regulation S-K.
Exhibit No. Description
- ----------- -----------
2 Omitted - Inapplicable.
3(i) Certificate of Incorporation of the Registrant as amended by
Amendment to Certificate of Incorporation filed September 17,
1987, with Delaware Secretary of State.(1) and by Certificate
of Amendment to Certificate of Incorporation filed June 19,
1998, with Delaware Secretary of State.
3(ii) Amended and Restated Bylaws of the Registrant as amended
through June 12, 1998.
4(i) 1. Certificate of Designations with respect to the
Registrant's 7% Cumulative Convertible Exchangeable
Preferred Stock, $100 par value.(2)
2. Certificate of Designations, Preferences and Relative,
Participating, Optional and Other Special Rights and
Qualifications, Limitations and Restrictions Thereof of
Cumulative, Convertible Participating Preferred Stock of
International Technology Corporation, issued November 20,
1996.(3)
4(ii) 1. Indenture for the Registrant's 7% Convertible Subordinated
Debentures Due 2008.(2)
2. Indenture dated as of October 1, 1986 between OHM
Corporation and United States Trust Company of New York,
Trustee, relating to OHM Corporation's 8% Convertible
Subordinated Debentures due October 1, 2006.(4)
3. Specimen Debenture Certificate.(5)
4. First Supplemental Indenture dated as of May 20, 1994 by
and among OHM Corporation and United States Trust Company
of New York.(6)
5. Second Supplemental Indenture dated as of June 11, 1998
among OHM Corporation, International Technology
Corporation, a guarantor, and United States Trust Company
of New York
9 Omitted - Inapplicable.
10(ii) 1. Amended and Restated Credit Agreement, dated as of June
11, 1998, among the Registrant, IT Corporation, OHM
Corporation, the institutions from time to time party
thereto as lenders, the institutions from time to time
party thereto as issuing banks, Citicorp USA Inc., in its
capacity as administrative agent, and BankBoston, M.A., in
its capacity as documentation agent.(7)
59
<PAGE> 61
Exhibit No. Description
- ----------- -----------
2. Agreement and Plan of Merger, dated as of January 15,
1998, among OHM Corporation, Registrant and IT-Ohio,
Inc.(8)
3. Parent Voting Agreement dated January 15, 1998 among OHM
Corporation, Registrant and the stockholders of Registrant
named therein.(8)
4. Company Voting Agreement dated January 15, 1998 among OHM
Corporation, Registrant and the shareholders of OHM
Corporation named therein.(8)
5. Option Termination Agreement dated January 15, 1998
between James L. Kirk and OHM Corporation.(8)
6. Share Repurchase Agreement dated January 15, 1998 among
OHM Corporation, Registrant, Rust International, Inc. and
Waste Management, Inc.(8)
7. Second Amended and Restated Share Repurchase Agreement,
dated as of February 17, 1998, among OHM Corporation, WMX,
Rust, Rust Remedial Services Holding Company Inc. and
Registrant.(9)
8. Asset Transfer Agreement among MetPath Inc., the
Registrant and IT Corporation dated as of May 2, 1994.(10)
9. Amended and Restated Shareholders' Agreement between
Corning Incorporated, the Registrant, IT Corporation and
Quanterra Incorporated, dated January 1, 1996.(11)
10. Amended and Restated Equity Investors' Undertaking, dated
January 19, 1996, from the Equity Investors in favor of
Quanterra Incorporated, Citibank, N.A., and Citicorp USA,
Inc.(11)
11. Agreement, dated January 19, 1996, related to the
ownership of IT Corporation, Corning Clinical Laboratories
Inc., and Corning Incorporated in Quanterra
Incorporated.(11)
12. Stock Purchase Agreement dated as of June 17, 1997 by and
among OHM Corporation, Beneco Enterprises, Inc., Bennie
Smith, Jr., Robert Newberry and Scott Doxey.(12)
13. Securities Purchase Agreement dated as of August 28, 1996
between the Registrant and certain Purchasers identified
therein affiliated with The Carlyle Group (3), including
agreement by and between The Carlyle Group and the
Registrant re financial advisory and investment banking
fees.(13)
14. Amendment No. 1, dated November 20, 1996, to Securities
Purchase Agreement dated August 28, 1996, by and among the
Registrant and certain Purchasers identified therein
affiliated with The Carlyle Group.(14)
15. Form of Warrant Agreement by and among the Registrant and
certain Warrant Holders defined herein affiliated with The
Carlyle Group, dated as of November 20, 1996.(3)
16. Form of Registration Rights Agreement by and among the
Registrant and certain Investors affiliated with The
Carlyle Group, dated November 20, 1996.(3)
60
<PAGE> 62
Exhibit No. Description
- ----------- -----------
17. Master Loan and Security Agreement dated May 11, 1993,
between OHM Remediation Services Corp. and BOT Financial
Corporation (15)
18. Amendment No. 1 to Master Loan and Security Agreement
dated as of January 19, 1995 between BOT Financial
Corporation and OHM Remediation Services Corp.(16)
19. Promissory Note dated December 23, 1993 executed by OHM
Remediation Services Corp. in favor of BOT Financial
Corporation.(17)
20. Promissory Note dated December 28, 1994 executed by OHM
Remediation Services Corp. in favor of BOT Financial
Corporation.(6)
21. Loan and Security Agreement dated as of August 1, 1994 by
and between OHM Remediation Services Corp. and
Internationale Nederlanden Lease Structured Finance B.V.
(18)
22. Promissory Note dated August 31, 1994 executed by OHM
Remediation Services Corp. in favor of Internationale
Nederlanden Lease Structured Finance B.V.(18)
23. Continuing Corporate Guaranty dated as of August 1, 1994
executed by OHM Corporation in favor of Internationale
Nederlanden Lease Structured Finance B.V.(18)
10(iii) 1. Non-Employee Directors' Retirement Plan, as amended and
restated June 2, 1994 (19)(10), as amended by the Amended
and Restated Non-Employee Directors Retirement Plan,
Amendment No. 5, dated November 20, 1996.(19)(13)
2. Description of the Special Turn-a-Round Plan (Fiscal Year
1995 Management Incentive Plan) of the Registrant.(19)(20)
3. 1983 Stock Incentive Plan, as amended.(19)(21)
4. 1991 Stock Incentive Plan (19)(22) as modified by waiver
dated November 20, 1996, by certain former Non-Employee
Directors, in favor of the Registrant.(13)(19)
5. 1996 Stock Incentive Plan, as amended and restated
effective June 11, 1998.(19)(23)
6. OHM Corporation 1986 Stock Option Plan, as amended and
restated as of May 10, 1994.(19)(24)
7. OHM Corporation Nonqualified Stock Option Plan for
Directors.(19)(25)
8. OHM Corporation Directors' Deferred Fee Plan. (6)(19)
9. Amendment No. 1 to OHM Corporation Directors' Deferred Fee
Plan.(16)(19)
10. OHM Corporation Retirement Savings Plan, as amended and
restated as of January 1, 1994.(6)(19)
11. Amendment No. 1 to OHM Corporation Retirement Savings
Plan, as amended and restated as of January 1,
1994.(16)(19)
61
<PAGE> 63
Exhibit No. Description
- ----------- -----------
12. Amendment No. 2 to OHM Corporation Retirement Savings
Plan, as amended and restated as of January 1, 1994.
(19)(26)
13. OHM Corporation Retirement Savings Plan Trust Agreement
between OHM Corporation and National City Bank, as
Trustee, as amended and restated effective July 1, 1994.
(6)(19)
14. Fiscal Year 1997 Management Incentive Plan.(13) (19)
15. Fiscal Year 1998 Management Incentive Plan.(13) (19)
16. Separation Agreement dated July 24, 1996 between Robert B.
Sheh and the Registrant.(19) (27)
17. Retirement Agreement dated March 3, 1994 between Murray H.
Hutchison and the Registrant.(6)(19) as amended by First
Amendment dated January 6, 1995 to the Retirement
Agreement dated March 3, 1994 between Murray H. Hutchison
and the Registrant.(19)(28)
18. Retirement Plan of IT, 1993 Restatement.(19)(20)
19. Amendment Number One to IT Corporation Retirement Plan,
dated as of July 1, 1995.(19)(29)
20. Amendment Number Two to IT Corporation Retirement Plan,
dated as of October 1, 1995.(19) (29)
21. Amendment Number Three to IT Corporation Retirement Plan,
dated as of July 15, 1996.(19) (30)
22. Amendment Number Four to IT Corporation Retirement Plan,
dated as of February 1, 1997.(13) (19)
23. Amendment Number Five to IT Corporation Retirement Plan,
dated as of May 13, 1997.(13) (19)
24. Amendment Number Six to IT Corporation Retirement Plan
dated as of May 27, 1998.(19)
25. Executive Stock Purchase Interest Reimbursement Plan,
approved September 6, 1995.(19) (22)
26. Executive/Directors Deferred Compensation Plan, effective
January 1, 1996.(19) (22)
27. Executive Restoration Plan, effective July 1, 1995 as
amended through May 13, 1997.(19) (22)
28. IT Corporation Deferred Compensation Plan (amended and
restated effective January 1, 1998).(19)
29. IT Corporation Restoration Plan amended and restated
effective January 1, 1998.(19)
30. 1997 International Technology Corporation Non-Employee
Directors Stock Plan - Director Fees, dated as of February
26, 1997.(19) (30)
31. Employment Agreement, dated as of November 20, 1996, by
and between the Registrant, IT Corporation, and Anthony J.
DeLuca.(13) (19)
62
<PAGE> 64
Exhibit No. Description
- ----------- -----------
32. Separation Agreement, dated as of April 10, 1998, by and
between the Registrant, its subsidiaries and affiliates,
and Franklin E. Coffman.(19)
33. Employment Agreement, dated as of November 20, 1996, by
and between the Registrant, IT Corporation, and James R.
Mahoney.(13) (19)
34. Employment Agreement, dated as of November 20, 1996, by
and between the Registrant, IT Corporation, and Raymond J.
Pompe.(13) (19)
35. Employment Continuation, Non-competition and
Confidentiality Agreement dated the 17th day of June,
1997, by and between Beneco Enterprises, Inc., a Utah
corporation, OHM Corporation, an Ohio corporation, and
Scott Doxey.(19)
36. Employment Continuation, Non-competition and
Confidentiality Agreement dated the 17th day of June,
1997, by and between Beneco Enterprises, Inc., a Utah
corporation, OHM Corporation, an Ohio corporation, and
Robert Newberry.(19)
37. Employment Continuation, Non-competition and
Confidentiality Agreement dated the 17th day of June,
1997, by and between Beneco Enterprises, Inc., a Utah
corporation, OHM Corporation, an Ohio corporation, and
Bennie Smith, Jr.(19)
38. Form of Employment Agreement by and between OHM
Corporation, and each of Pamela K.M. Beall, Robert J.
Blackwell, Kris E. Hansel, Steven E. Harbour, James L.
Kirk, Philip V. Petrocelli, Philip O. Strawbridge, and
Michael A. Szomjassy, as amended by Amendment No. 1 in the
case of each of Ms. Beall and Messrs. Blackwell, Hansel,
Harbour, Strawbridge and Szomjassy, and as amended by
Amendment No. 2 in the case of each of Ms. Beall and
Messrs. Blackwell, Hansel, and Harbour.(19)
39. International Technology Corporation Severance and
Retention Bonus Plan dated March 5, 1998.(19)
11 Omitted - Inapplicable.
12 Omitted - Inapplicable.
13 Omitted - Inapplicable.
16 Omitted - Inapplicable.
18 Omitted - Inapplicable.
20 Notice to All Holders of Depositary Shares each representing
1/100 of a share of 7% Cumulative Convertible Exchangeable
Preferred Stock dated November 25, 1996.(31)
21 List of the Registrant's subsidiaries.
22 Omitted - Inapplicable.
23 1. Consent of Ernst & Young LLP, Independent Auditors.
63
<PAGE> 65
Exhibit No. Description
- ----------- -----------
24 Omitted - Inapplicable.
27 Financial Data Schedule for the year ended March 27, 1998.
28 Omitted - Inapplicable.
99 Omitted - Inapplicable.
- ----------
(1) Previously filed with the Securities and Exchange Commission
as an Exhibit to the Registrant's Annual Report on Form 10-K
for the year ended March 31, 1988 (No. 1-9037) and
incorporated herein by reference.
(2) Previously filed with the Securities and Exchange Commission
as an Exhibit to the Registrant's Registration Statement on
Form S-3 (No. 33-65988) and incorporated herein by reference.
(3) Previously filed with the Securities and Exchange Commission
as an Exhibit to the Registrant's Form 8-K dated September 20,
1996 and incorporated herein by reference.
(4) Previously filed with the Securities and Exchange Commission
as an Exhibit to OHM Corporation's Annual Report on Form 10-K
for the year ended December 31, 1986 and incorporated herein
by reference.
(5) Previously filed with the Securities and Exchange Commission
as an Exhibit to OHM Corporation's Amendment No. 1 to
Registration Statement of Form S-1, No. 33-8296 and
incorporated by reference.
(6) Previously filed with the Securities and Exchange Commission
as an Exhibit to OHM Corporation's Annual Report on Form 10-K
for the year ended December 31, 1994 and incorporated herein
by reference.
(7) Previously filed with the Securities and Exchange Commission
as an Exhibit to Registrant's Report on Form 8-K dated June
11, 1998 and incorporated herein by reference.
(8) Previously filed with the Securities and Exchange Commission
as an Exhibit to the Registrant's Report on Form 8-K dated
January 15, 1998.
(9) Previously filed with the Securities and Exchange Commission
as an Exhibit to the Registrant's Schedule 14D-1 (Amendment
No. 5) dated February 18, 1998 and incorporated herein by
reference.
(10) Previously filed with the Securities and Exchange Commission
as an Exhibit to the Registrant's Annual Report on Form 10-K
for the year ended March 31, 1995 and incorporated herein by
reference.
(11) Previously filed with the Securities and Exchange Commission
as an Exhibit to the Registrant's Quarterly Report on Form
10-Q for the quarter ended December 29, 1995.
(12) Previously filed with the Securities and Exchange Commission
as an Exhibit to OHM Corporation's Report on Form 8-K filed on
July 2, 1997 and incorporated herein by reference.
(13) Previously filed with the Securities and Exchange Commission
as an Exhibit to Registrant's Report on Form 10-K for the year
ended March 28, 1997.
64
<PAGE> 66
(14) Previously filed with the Securities and Exchange Commission
as an Exhibit to the Registrant's Quarterly Report on Form
10-Q for the quarter ended December 27, 1996 and incorporated
herein by reference.
(15) Previously filed with the Securities and Exchange Commission
as an Exhibit to OHM Corporation's Quarterly Report on Form
10-Q for the quarter ended June 30, 1993 and incorporated
herein by reference.
(16) Previously filed with the Securities and Exchange Commission
as an Exhibit to OHM Corporation's Quarterly Report on Form
10-Q for the quarter ended June 30, 1995 and incorporated
herein by reference.
(17) Previously filed with the Securities and Exchange Commission
as an Exhibit to the Registrant's Annual Report on Form 10-K
for the year ended December 31, 1993 and incorporated herein
by reference.
(18) Previously filed with the Securities and Exchange Commission
as an Exhibit to OHM Corporation's Quarterly Report on Form
10-Q for the quarter ended September 30, 1994 and incorporated
herein by reference.
(19) Filed as a management compensation plan or arrangement per
Item 14(a)(3) of the Securities Exchange Act.
(20) Previously filed with the Securities and Exchange Commission
as an Exhibit to the Registrant's Annual Report on Form 10-K
for the year ended March 31, 1994 and incorporated herein by
reference.
(21) Previously filed with the Securities and Exchange Commission
as an Exhibit to the Registrant's Annual Report on Form 10-K
for the year ended March 31, 1993 and incorporated herein by
reference.
(22) Previously filed with the Securities and Exchange Commission
as an Exhibit to the Registrant's Annual Report on Form 10-K
for the year ended March 29, 1996 and incorporated herein by
reference.
(23) Previously filed with the Securities and Exchange Commission
as an Exhibit to the Registrant's Proxy Statement dated May
11, 1998 and incorporated herein by reference.
(24) Previously filed with the Securities and Exchange Commission
as an Appendix to OHM Corporation's Proxy Statement for its
Annual Meeting held May 10, 1994 and incorporated herein by
reference.
(25) Previously filed with the Securities and Exchange Commission
as an Exhibit to OHM Corporation's Quarterly Report on Form
10-Q for the quarter ended September 30, 1992 and incorporated
herein by reference.
(26) Previously filed with the Securities and Exchange Commission
as an Exhibit to the Registrant's Annual Report on Form 10-K
for the year ended December 31, 1995 and incorporated herein
by reference.
(27) Previously filed with the Securities and Exchange Commission
as an Exhibit to the Registrant's report on Form 10-K/A,
Amendment No. 1, dated July 29, 1996, to the Annual Report of
Form 10-K for the year ended March 29, 1996 and incorporated
herein by reference.
65
<PAGE> 67
(28) Previously filed with the Securities and Exchange Commission
as an Exhibit to the Registrant's Quarterly Report on Form
10-Q for the quarter ended December 31, 1994 and incorporated
herein by reference.
(29) Previously filed with the Securities and Exchange Commission
as an Exhibit to the Registrant's Form S-8 (No. 333-00651) and
incorporated herein by reference.
(30) Previously filed with the Securities and Exchange Commission
as an Exhibit to the Registrant's Registration Statement on
Form S-8 (No. 333-26143) and incorporated herein by reference.
(31) Previously filed with the Securities and Exchange Commission
as an Exhibit to the Registrant's Form 8-K, dated January 17,
1997 and incorporated herein by reference.
Reports on Form 8-K
1. Current report on Form 8-K, dated January 15, 1998, reporting under Item 5
relating to the announcement of the Agreement and Plan of Merger entered
into among the Registrant, OHM Corporation, an Ohio corporation and
IT-Ohio, Inc., an Ohio corporation and newly formed subsidiary of the
Registrant.
2. Current report on Form 8-K, dated February 25, 1998, reporting under Item
2 relating to the cash tender offer by IT-Ohio, Inc., a wholly owned
subsidiary of the Registrant, for 13,933,000 shares of OHM Corporation
common stock and Item 7 the Financial Statements of Businesses Acquired
and Pro Forma Financial Information.
66
<PAGE> 68
INTERNATIONAL TECHNOLOGY CORPORATION
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
<TABLE>
<CAPTION>
PROVISION
BALANCE AT (BENEFIT) ACCOUNTS BALANCE
BEGINNING CHARGED WRITTEN AT END
OF PERIOD TO INCOME OFF OTHER OF PERIOD
--------- --------- --- ----- ---------
<S> <C> <C> <C> <C> <C>
YEAR ENDED MARCH 27, 1998:
Allowance for doubtful
accounts ............ $ 2,055 $ 206 $(1,147) $17,912(1) $19,026
Valuation allowance for
deferred tax asset .. $ 9,471 $ 2,252(4) $ -- $20,142(5) $31,865
YEAR ENDED MARCH 28, 1997:
Allowance for doubtful
accounts ............ $ 2,943 $ 304 $(1,208) $ 16(2) $ 2,055
Valuation allowance for
deferred tax asset .. $ 4,869 $ 4,602 $ -- $ -- $ 9,471
YEAR ENDED MARCH 29, 1996:
Allowance for doubtful
accounts ............ $ 3,107 $ 614 $ (842) $ 64(3) $ 2,943
Valuation allowance for
deferred tax asset .. $12,650 $(7,781)(4) $ -- $ -- $ 4,869
</TABLE>
- ----------
(1) Represents allowance for doubtful accounts at the date of acquisition for
business acquired during fiscal year 1998 totaling $18,020 less the
allowance for doubtful accounts of $108 relating to the sale of IT's
remediation services business.
(2) Represents allowance for doubtful accounts at November 1996 for receivables
acquired in the purchase of Chi Mei.
(3) Represents allowance for doubtful accounts at March 1, 1996 for receivables
acquired in the purchase of Gradient Corporation.
(4) Represents benefit for income taxes.
(5) Represents valuation allowance adjustment principally relating to the
acquisition of OHM Corporation.
67
<PAGE> 69
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized, in Monroeville,
Pennsylvania on the 25th day of June, 1998.
INTERNATIONAL TECHNOLOGY CORPORATION
By: ANTHONY J. DELUCA
-------------------------------------
Anthony J. DeLuca
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<S> <C> <C>
DANIEL A. D'ANIELLO
- ---------------------------
Daniel A. D'Aniello Chairman of the Board of June 25, 1998
Directors
ANTHONY J. DELUCA
- ---------------------------
Anthony J. DeLuca Director, President and June 25, 1998
Chief Executive Officer and
Duly Authorized Officer
PHILIP B. DOLAN
- ---------------------------
Philip B. Dolan Director June 25, 1998
E. MARTIN GIBSON
- ---------------------------
E. Martin Gibson Director June 25, 1998
JAMES C. MCGILL
- ---------------------------
James C. McGill Director June 25, 1998
- ---------------------------
Richard W. Pogue Director
ROBERT F. PUGLIESE
- ---------------------------
Robert F. Pugliese Director June 25, 1998
CHARLES W. SCHMIDT
- ---------------------------
Charles W. Schmidt Director June 25, 1998
JAMES DAVID WATKINS
- ---------------------------
James David Watkins Director June 25, 1998
PHILIP O. STRAWBRIDGE
- ---------------------------
Philip O. Strawbridge Senior Vice President, Chief June 25, 1998
Administrative Officer and
Principal Financial Officer
HARRY J. SOOSE
- ---------------------------
Harry J. Soose Vice President, Finance and Controller June 25, 1998
and Principal Accounting Officer
</TABLE>
<PAGE> 1
Exhibit 3(i)
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
INTERNATIONAL TECHNOLOGY CORPORATION
International Technology Corporation, a corporation organized and existing
under and by virtue of the General Corporation Law of the State of Delaware (the
"Company"),
DOES HEREBY CERTIFY:
FIRST, that on April 27, 1998 the Board of Directors of the Corporation
(the "Board") duly adopted resolutions setting forth a proposed amendment to the
Certificate of Incorporation of the Company (the "Charter Amendment"), declared
the Charter Amendment to be advisable and called for the Charter Amendment to be
put before the stockholders of the Company for approval. The resolutions setting
forth the Charter Amendment are as follows:
CHARTER AMENDMENT
WHEREAS, the Board of Directors of the Corporation (the "Board of
Directors") has determined that it is in the best interests of the
corporation to amend the Corporation's Certificate of Incorporation (the
"Charter") to eliminate the classification of the Board of Directors with
respect to directors elected by common stockholders;
NOW, THEREFORE, BE IT RESOLVED, that an amendment to the Charter (the
"Charter Amendment") to delete Article SEVENTH (which provides for the
classification of the Board of Directors with respect to directors elected
by the common stockholders) and to renumber the remaining Articles of the
Charter accordingly be and hereby is approved;
RESOLVED FURTHER, that the Charter Amendment shall be subject to approval
by the holders of not less than two-thirds of the total voting power of all
outstanding shares of voting stock of the Corporation, and shall be
submitted to stockholders for approval; provided, however, that the Board
of Directors may abandon the Charter Amendment at any time, notwithstanding
approval of stockholders of such amendment, pursuant to Section 242(c) of
the DGCL;
RESOLVED FURTHER, that the officers of the Corporation be, and each of them
hereby is, authorized and directed on behalf of the Corporation and in its
name to take any and all acts necessary or advisable to execute,
acknowledge, file and record such proposed Charter Amendment with the State
of Delaware and any other public authorities as they shall deem necessary
or advisable, upon the approval of the Charter Amendment by the
Corporation's stockholders in accordance with the provisions of the Charter
and applicable law.
<PAGE> 2
SECOND, that on June 11, 1998, pursuant to a resolution of the Board and
upon notice given in accordance with Section 222 of the DGCL, a special meeting
of stockholders of the Company was duly called and held, at which meeting the
necessary number of votes as required by statue were given in favor of the
Charter Amendment.
THIRD, that the Charter Amendment was duly adopted in accordance with the
provisions of Section 242 of the DGCL.
FOURTH, that the capital of the Company shall not be reduced under or by
reason of the Charter Amendment.
IN WITNESS WHEREOF, the Company has caused this certificate to be signed by
Anthony J. DeLuca, its President and Chief Executive Officer, and James M.
Redwine, its Assistant Secretary, this ______ day of June, 1998.
INTERNATIONAL TECHNOLOGY
CORPORATION, a Delaware corporation
BY: /s/ Anthony J. DeLuca
------------------------------------------
Anthony J. DeLuca,
Chief Executive Officer and President
ATTEST: /s/ James M. Redwine
--------------------------------------
James M. Redwine,
Assistant Secretary
<PAGE> 1
Exhibit 3(ii)
As of June 12, 1998
AMENDED AND RESTATED
BYLAWS OF
INTERNATIONAL TECHNOLOGY CORPORATION
(a Delaware corporation)
ARTICLE I
OFFICES
Section 1.01 Registered Office. The registered office of
INTERNATIONAL TECHNOLOGY CORPORATION (hereinafter called the "Corporation") in
the State of Delaware shall be at 1013 Centre Road, City of Wilmington, County
of New Castle, 19805, and the name of the registered agent in charge thereof
shall be The Prentice-Hall Corporation System, Inc.
Section 1.02 Principal Office. The principal office for the
transaction of the business of the Corporation shall be at 2790 Mosside
Boulevard, Monroeville, Pennsylvania 15146-2792. The Board of Directors
(hereinafter called the "Board") is hereby granted full power and authority to
change said principal office from one location to another.
Section 1.03 Other Offices. The Corporation may also have an
office or offices at such other place or places, either within or without the
State of Delaware, as the Board may from time to time determine or as the
business of the Corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 2.01 Annual Meetings. Annual meetings of the
stockholders of the Corporation for the purpose of electing directors and for
the transaction of such other proper business as may come before such meetings
may be held at such time, date and place as the Board shall determine by
resolution.
Section 2.02 Special Meetings. Special meetings of the
stockholders may be called at any time by the Board, the Chairman of the Board
or the President. Special meetings of stockholders may not be called by any
other person or persons. Written notice of a special meeting shall be given as
provided in Section 2.04 of these Bylaws.
Section 2.03 Place of Meetings. All meetings of the
stockholders shall be held at such places, within or without the State of
Delaware, as may from time to time be designated by
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<PAGE> 2
the person or persons calling the respective meeting and specified in the
respective notices or waivers of notice thereof.
Section 2.04 Notice of Meetings. Except as otherwise required
by law, notice of each meeting of the stockholders, whether annual or special,
shall be given not less than ten (10) nor more than sixty (60) days before the
date of the meeting to each stockholder of record entitled to vote at such
meeting by delivering a typewritten or printed notice thereof to him personally,
or by depositing such notice in the United States mail, in a postage prepaid
envelope, directed to him at his post office address furnished by him to the
Secretary of the Corporation for such purpose or, if he shall not have furnished
to the Secretary his address for such purpose, then at his post office address
last known to the Secretary, or by transmitting a notice thereof to him at such
address by telegraph, cable, or wireless. Except as otherwise expressly required
by law, no publication of any notice of a meeting of the stockholders shall be
required. Every notice of a meeting of the stockholders shall state the place,
date and hour of the meeting, and, in the case of a special meeting, shall also
state the purpose or purposes for which the meeting is called. Notice of any
meeting of stockholders shall not be required to be given to any stockholder who
shall have waived such notice and such notice shall be deemed waived by any
stockholder who shall attend such meeting in person or by proxy, except as a
stockholder who shall attend such meeting for the express purpose of objecting,
at the beginning of the meeting, to the transaction of any business because the
meeting is not lawfully called or convened. Except as otherwise expressly
required by law, notice of any adjourned meeting of the stockholders need not be
given if the time and place thereof are announced at the meeting at which the
adjournment is taken.
Section 2.05 Quorum. Except in the case of any meeting of or
the election of directors summarily ordered as provided by law, the holders of
record of a majority in voting interest of the shares of stock of the
Corporation entitled to be voted thereat, present in person or by proxy, shall
constitute a quorum for the transaction of business at any meeting of the
stockholders of the Corporation or any adjournment thereof. In the absence of a
quorum at any meeting or any adjournment thereof, a majority in voting interest
of the stockholders present in person or by proxy and entitled to vote thereat
or, in the absence therefrom of all the stockholders, any officer entitled to
preside at or to act as a secretary of, such meeting may adjourn such meeting
from time to time. At any such adjourned meeting at which a quorum is present
any business may be transacted which might have been transacted at the meeting
as originally called.
Section 2.06 Voting.
(A) Each stockholder shall, at each meeting of the
stockholders, be entitled to vote in person or by proxy each share or fractional
share of the stock of the Corporation having voting rights on the matter in
question and which shall have been held by him and registered in his name on the
books of the Corporation:
(i) on the date fixed pursuant to Section 6.06 of
these Bylaws as the record date for the determination of stockholders entitled
to notice of and to vote at such
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<PAGE> 3
meeting, or,
(ii) if no such record date shall have been so fixed,
then (a) at the close of business on the day next preceding the day on which
notice of the meeting shall be given or (b) if notice of the meeting shall be
waived, at the close of business on the day next preceding the day on which the
meeting shall be held.
(B) Shares of its own stock belonging to the Corporation or to
another corporation, if a majority of the shares entitled to vote in the
election of directors in such other corporation is held, directly or indirectly,
by the Corporation shall neither be entitled to vote nor be counted for quorum
purposes. Persons holding stock of the Corporation in a fiduciary capacity shall
be entitled to vote such stock. Persons whose stock is pledged shall be entitled
to vote, unless in the transfer by the pledgor on the books of the Corporation
he shall have expressly empowered the pledges to vote thereon, in which case
only the pledgee, or his proxy, may represent such stock and vote thereon. Stock
having voting power standing of record in the names of two or more persons,
whether fiduciaries, members of a partnership, joint tenants in common, tenants
by entirety or otherwise, or with respect to which two or more persons have the
same fiduciary relationship, shall be voted in accordance with the provisions of
the General Corporation Law of the State of Delaware.
(C) Any such voting rights may be exercised by the stockholder
entitled thereto in person or by his proxy appointed by an instrument in
writing, subscribed by such stockholder or by his attorney thereunto authorized
and delivered to the secretary of the meeting; provided, however, that no proxy
shall be voted or acted upon after three years from its date unless said proxy
shall provide for a longer period. The attendance at any meeting of a
stockholder who may theretofore have given a proxy shall not have the effect of
revoking the same unless he shall in writing so notify the secretary of the
meeting prior to the voting of the proxy. At any meeting of the stockholders all
matters, except as otherwise provided in the Certificate of Incorporation, in
these Bylaws or by law, shall be decided by the vote of a majority in voting
interest of the stockholders present in person or by proxy and entitled to vote
thereat and thereon, a quorum being present. The vote at any meeting to the
stockholders on any question need not be by ballot, except as otherwise provided
in the Certificate of Incorporation or unless so directed by the chairman of the
meeting. On a vote by ballot each ballot shall be signed by the stockholder
voting, or by his proxy, if there be such proxy, and it shall state the number
of shares voted.
Section 2.07 List of Stockholders. The Secretary of the
Corporation shall prepare and make, at least ten (10) days before every meeting
of stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten (10) days prior to the meeting, either at a place within the city where the
meeting is to
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<PAGE> 4
be held, which place shall be specified in the notice of the meeting, or, if not
so specified, at the place where the meeting is to be held. The list shall also
be produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder who is present.
Section 2.08 Inspectors. The Chairman of the Board shall, in
advance of any meeting of stockholders, appoint one or more inspectors to act at
the meeting and make a written report thereof. Each inspector, before entering
upon the discharge of his duties, shall take and sign an oath faithfully to
execute the duties of the inspector with strict impartiality and according to
the best of his ability. The inspectors shall (i) ascertain the number of shares
outstanding in the voting power of each, (ii) determine the shares represented
at a meeting and the validity of proxies and ballots, (iii) count all votes and
ballots, (iv) determine and retain for a reasonable period of a record of the
disposition of any challenges made to any determination by the inspectors, and
(v) certify their determination of the number of shares represented at the
meeting, and account of all votes and ballots. The inspectors may appoint or
retain other persons or entities to assist the inspectors in the performance of
the duty of the inspectors. The inspectors need not be stockholders of the
Corporation, and any officer of the Corporation may be an inspector with respect
to any vote other than a vote for or against a proposal in which such officer
shall have a material interest.
SECTION 2.09 Advance Notice of Stockholder Proposals. At any
meeting of the stockholders, only such business shall be conducted as shall have
been brought before the meeting (i) by or at the direction of the Board or (ii)
by any stockholder of the Corporation who complies with the notice procedures
set forth in this Section 2.09. For business to be properly brought before any
meeting of the stockholders by a stockholder, the stockholder must have given
notice thereof in writing to the Secretary of the Corporation at the principal
executive offices of the Corporation, which written notice must be received by
the Secretary of the Corporation not less than 60 days in advance of such
meeting or, if later, the fifteenth day following the first public disclosure of
the date of such meeting (by mailing of notice of the meeting or otherwise). A
stockholder's notice to the Secretary shall set forth as to each matter the
stockholder proposes to bring before the meeting (1) a brief description of the
business desired to be brought before the meeting and the reasons for conducting
such business at the meeting, (2) the name and address, as they appear on the
Corporation's books, of the stockholder proposing such business, (3) the class,
series and number of shares of the Corporation that are beneficially owned by
the stockholder, and (4) any material interest of the stockholder in such
business. In addition, the stockholder making such proposal shall promptly
provide any other information reasonably requested by the Corporation.
Notwithstanding anything in these Bylaws to the contrary, no business shall be
conducted at any meeting of the stockholders except in accordance with the
procedures set forth in this Section 2.09. The Chairman of any such meeting
shall direct that any business not properly brought before the meeting shall not
be considered.
SECTION 2.10 Stockholder Action by Written Consent.
(A) In order that the Corporation may determine the
stockholders entitled to consent to corporate action in writing without a
meeting, the Board may fix a record date, which
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<PAGE> 5
record date shall not precede the date upon which the resolution fixing the
record date is adopted by the Board, and which date shall not be more than 10
days after the date upon which the resolution fixing the record date is adopted
by the Board. Any stockholder of record seeking to have the stockholders
authorize or take corporate action by written consent shall, by written notice
to the Secretary, request the Board to fix a record date. The Board shall
promptly, but in all events within 10 days after the date upon which such
request is received, adopt a resolution fixing the record date. If no record
date has been fixed by the Board within 10 days of the date upon which such
request is received, the record date for determining stockholders entitled to
consent to corporate action in writing without a meeting, when no prior action
by the Board is required by applicable law, shall be the first date on which a
signed written consent setting forth the action taken or proposed to be taken is
delivered to the Corporation by delivery to its registered office in the State
of Delaware, its principal place of business, or an officer or agent of the
Corporation having custody of the book in which proceedings of meetings of
stockholders are recorded, addressed to the attention of the Secretary. Delivery
shall be by hand or by certified or registered mail, return receipt requested.
If no record date has been fixed by the Board and prior action by the Board is
required by applicable law, the record date for determining stockholders
entitled to consent to corporate action in writing without a meeting shall be at
the close of business on the day on which the Board adopts the resolution taking
such prior action.
(B) In the event of the delivery to the Corporation of a
written consent or consents purporting to authorize or take corporate action
and/or revocations related to any such consents (each such written consent and
any revocation thereof is referred to in this Section 2.10(B) as a "Consent"),
the Secretary of the Corporation shall provide for the safekeeping of such
Consents and shall, as soon as practicable after receipt thereof, conduct such
reasonable investigation as he deems necessary or appropriate for the purpose of
ascertaining the validity of such Consents and all matters incident thereto,
including, without limitation, whether the holders of shares having the
requisite voting power to authorize or take the action specified in the Consents
have given consent; provided, however, that the Chairman of the Board, in his
discretion, may designate an inspector to act with respect to such Consents and
such inspector shall discharge the functions of the Secretary of the Corporation
under this Section 2.10(B). If after such investigation the Secretary or the
inspector (as the case may be) shall determine that any action purportedly taken
by such Consents has been validly taken, that fact shall be certified on the
records of the Corporation kept for the purpose of recording the proceedings of
meetings of the stockholders and the Consents shall be filed with such records.
In conducting the investigation required by this Section 2.10(B), the Secretary
or the inspector (as the case may be) may, at the expense of the Corporation,
retain to assist them special legal counsel and any other necessary or
appropriate professional advisors, and such other personnel as they may deem
necessary or appropriate.
5
<PAGE> 6
ARTICLE III
BOARD OF DIRECTORS
Section 3.01 General Powers. The property, business and
affairs of the Corporation shall be managed by the Board.
Section 3.02 Number. In accordance with paragraph SIXTH of the
Certificate of Incorporation of this Corporation, the number of Directors of the
Corporation is fixed at nine.
Section 3.03 Election of Directors. The directors shall be
elected annually by the stockholders of the Corporation and the persons
receiving the greatest number of votes, up to the number of directors to be
elected, shall be the persons then elected.The election of directors that may be
elected only by holders of preferred stock is provided for in the Certificate of
Designations. The election of directors other than those elected solely by the
holders of preferred stock is subject to any provisions contained in the
Certificate of Incorporation, including, without limitation, any certificates of
designations, relating thereto, including any provisions for a classified board,
for cumulative voting, and for voting by holders of preferred stock. Nominations
for the election of directors who may be elected by the holders of common stock
may be made by the Board or a Committee thereof or by any stockholder entitled
to vote in the election of directors; provided, however, that a stockholder may
nominate a person for election as a director at a meeting only if written notice
of such stockholder's intent to make such nomination has been given by such
stockholder to, and received by, the Secretary of the Corporation at the
principal executive offices of the Corporation not later than 60 days in advance
of such meeting or, if later, the fifteenth day following the first public
disclosure of the date of such meeting (by mailing of notice or otherwise). Each
such notice shall set forth: (i) the name and address of the stockholder who
intends to make the nomination and of the person or persons to be nominated;
(ii) a representation that the stockholder is a holder of record of stock of the
Corporation entitled to vote at such meeting and intends to appear in person or
by proxy at the meeting and nominate the person or persons specified in the
notice; (iii) a description of all arrangements or understandings between the
stockholder and each nominee and any other person or persons (naming such person
or persons) pursuant to which the nomination or nominations are to be made by
the stockholder; (iv) such other information regarding each nominee proposed by
such stockholder as would be required to be included in a proxy statement filed
pursuant to the rules and regulations of the Securities and Exchange Commission
had the nominee been nominated, or intended to be nominated, by the Board; and
(v) the consent of each nominee to serve as a director of the Corporation if so
elected. In addition, the stockholder making such nomination shall promptly
provide any other information reasonably requested by the Corporation. No person
shall be eligible for election as a director of the Corporation unless nominated
in accordance with the procedures set forth in this Section 3.03. The Chairman
of any meeting of stockholders shall direct that any nomination not made in
accordance with these procedures be disregarded.
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<PAGE> 7
Section 3.04 Resignations. Any director of the Corporation may
resign at any time by giving written notice to the Board or to the Secretary of
the Corporation. Any such resignation shall take effect at the time specified
therein, or, if the time be not specified, it shall take effect immediately upon
its receipt; and unless otherwise specified therein, the acceptance of such
resignation shall not be necessary to make it effective.
Section 3.05 Vacancies. Except as otherwise provided in the
Certificate of Incorporation, including without limitation, the certificate of
designations, any vacancy in the Board, whether because of death, resignation,
disqualification, an increase in the number of directors, or any other cause,
may be filled by vote of the majority of the remaining directors, although less
than a quorum. Each director so chosen to fill a vacancy shall hold office until
his successor shall have been elected and shall qualify or until he shall resign
or shall have been removed.
Section 3.06 Place of Meeting, Etc. The Board may hold any of
it meetings at such place or places within or without the State of Delaware as
the Board may from time to time by resolution designate or as shall be
designated by the person or persons calling the meeting or in the notice or a
waiver of notice of any such meeting. Directors may participate in any regular
or special meeting of the Board by means of conference telephone or similar
communications equipment pursuant to which all persons participating in the
meeting of the Board can hear each other, and such participation shall
constitute presence in person at such meeting.
Section 3.07 First Meeting. The Board shall meet as soon as
practicable after each annual election of directors and notice of such first
meeting shall not be required.
Section 3.08 Regular Meetings. Regular meetings of the Board
may be held at such times as the Board shall from time to time by resolution
determine. If any day fixed for a regular meeting shall be a legal holiday at
the place where the meeting is to be held, then the meeting shall be held at the
same hour and place on the next succeeding business day not a legal holiday.
Except as provided by law, notice of regular meetings need not be given.
Section 3.09 Special Meetings. Special meetings of the Board
may be called at any time by the Board, the Chairman of the Board or the
President, to be held at the principal office of the Corporation, or at such
other place or places, within or without the State of Delaware, as the person or
persons calling the meeting may designate. Notice of all special meetings of the
Board shall be mailed to each director, addressed to him at his residence or
usual place of business, at least four (4) days before the day on which the
meeting is to be held, or shall be sent to him at such place by telegram or
given personally, on the second day, or sooner, before the day on which the
meeting is to be held. Such notice may be waived by any director and any meeting
shall be a legal meeting without notice having been given if all the directors
shall be present thereat or if those not present shall, either before or after
the meeting, sign a written waiver of notice of, or a consent to, such meeting
or shall after the meeting sign the approval of the minutes thereof. All such
waivers, consents or approvals shall be filed with the corporate records or be
made a part of the minutes of the meeting.
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Section 3.10 Quorum and Manner of Acting. Except as otherwise
provided in these Bylaws or bylaw, the presence of a majority of the total
number of directors then in office as directors shall be required to constitute
a quorum for the transaction of business at any meeting of the Board, and all
matters shall be decided at any such meeting, a quorum being present, by the
affirmative votes of a majority of the directors present. In the absence of a
quorum, a majority of directors present at any meeting may adjourn the same from
time to time until a quorum shall be present. Notice of any adjourned meeting
need not be given. The directors shall act only as a Board, and the individual
directors shall have no power as such.
Section 3.11 Action by Consent. Any action required or
permitted to be taken at any meeting of the Board of any committee thereof may
be taken without a meeting if a written consent thereto is signed by all members
of the Board or of such committee, as the case may be, and such written consent
is filed the minutes of proceedings of the Board or committee.
Section 3.12 Compensation. No stated salary need be paid
directors, as such, for their services, but, by resolution of the Board, a fixed
sum and expenses of attendance, if any, may be allowed for attendance at each
regular or special meeting of the Board or an annual directors' fee may be paid;
provided that nothing herein contained shall be construed to preclude any
director from serving the Corporation in any other capacity and receiving
compensation therefor. Members of special or standing committees may be allowed
like compensation for attending committee meetings.
Section 3.13 Committees. The Board may, by resolution passed
by a majority of the whole Board, designate one or more committees, each
committee to consist of one or more of the directors of the Corporation. Any
such committee, to the extent provided in the resolution of the Board, shall
have and may exercise all the powers and authority of the Board in the
management of the business and affairs of the Corporation, and may authorize the
seal of the Corporation to be affixed to all papers which may require it; but no
such committee shall have any power or authority in reference to amending the
Certificate of Incorporation, adopting an agreement of merger or consolidation,
recommending to the stockholders the sale, lease or exchange of all or
substantially all of the Corporation's property and assets, recommending to the
stockholders a dissolution of the Corporation or a revocation of the dissolution
or amending the Bylaws of the Corporation; and unless the resolution of the
Board expressly so provides, no such committee shall have the power or authority
to declare a dividend or to authorize the issuance of stock. Any such committee
shall keep written minutes of its meetings and report the same to the Board at
the next regular meeting of the Board.
Section 3.14 Officers of the Board. The Board shall have a
Chairman of the Board and may, at the discretion of the Board, have a Vice
Chairman. Subject to the provisions of the Securities Purchase Agreement dated
August 28, 1996 (as at any time amended) by and between the Corporation and
Purchasers identified therein, the Chairman of the Board and the Vice Chairman
shall be appointed from time to time by the Board and shall have such powers and
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duties as shall be designated by the Board.
Section 3.15 Chairman of the Board. The Chairman of the Board
shall preside at all meetings of stockholders, the Board and the Executive
Committee of the Board at which he is present.
He shall have the power to call special meetings of the Board,
to determine the order of business and the procedure for meetings of the
stockholders and meetings of the Board, and to appoint, subject to approval of
the Board, the members and chairpersons of the various committees designated by
the Board. The Chairman of the Board shall be a member ex officio of all
committees designated by the Board, other than those on which he serves as a
voting member, except that, so long as the Chairman of the Board is designated
by the Board the Chief Executive Officer of the Corporation, he shall not be a
member of either the Audit Committee or of the Compensation Committee of the
Board; provided, however, that a Chairman of the Board who is also the Chief
Executive Officer may attend meetings of the Compensation Committee to provide
information and respond to inquiries, but without any vote on any matter
considered by the Committee. In the event the Chairman of the Board is
designated by the Board as the Chief Executive Officer of the Corporation, he
shall have, subject to the direction of the Board, general and active
supervision and management over the business, operations and affairs of the
Corporation and over its several officers, agents and employees. The Chairman of
the Board shall exercise and perform such other powers and duties as may from
time to time be assigned by the Board.
Subject to the provisions of the Securities Purchase Agreement
dated August 28, 1996 (as at any time amended) by and between the Corporation
and Purchasers identified therein, although the Chairman of the Board shall not
be an employee or officer of the Corporation, the position of Chairman shall be
subject to the provisions of Article IV hereof, including Sections 4.02
(Election), 4.04 (Removal and Resignation), 4.05 (Vacancies) and 4.11
(Compensation) as though the Chairman of the Board were an officer of the
Corporation.
ARTICLE IV
OFFICERS
Section 4.01 Number. The officers of the Corporation shall be
a President, one or more Vice Presidents, a Secretary and a Treasurer. The
Corporation may also have, at the discretion of the Board, one or more Assistant
Vice Presidents, one or more Assistant Secretaries, one or more Assistant
Treasurers and such other officers as may be appointed in accordance with the
provisions of Section 4.03 of this Article IV. One person may hold two or more
offices, except that the Secretary may not also hold the office of President.
Section 4.02 Election. The officers of the Corporation, except
such officers as may be appointed in accordance with Section 4.03 or 4.05, shall
be chosen annually by the Board,
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and each shall hold office until his successor shall have been duly chosen and
shall qualify or until his resignation, removal or other disqualification for
service.
Section 4.03 Subordinate Officers, Etc. The Board may appoint
such other officers as the business of the Corporation may require, each of whom
shall have such authority and perform such duties as are provided in these
Bylaws or as the Board may from time to time specify, and shall hold office
until he shall resign or shall be removed or otherwise disqualified to serve.
Section 4.04 Removal and Resignation. Any officer may be
removed, either with or without cause, by a majority of the directors at the
time in office, at any regular or special meeting of the Board, or except in the
case of an office chosen by the Board, by any officer upon whom such power of
removal may be conferred by the Board.
Any officer may resign at any time by giving written notice to
the Board, the Chairman of the Board, the President or the Secretary of the
Corporation. Any such resignation shall take effect at the date of the receipt
of such notice or at any later time specified therein; and unless otherwise
specified therein, the acceptance of such resignation shall not be necessary to
make it effective.
Section 4.05 Vacancies. A vacancy in any office because of
death, resignation, removal, disqualification, or other cause, may be filled in
the manner prescribed in these Bylaws for regular appointments to such office.
Section 4.06 Chairman of the Board. The Chairman of the Board
shall not be an employee or officer of the Corporation, unless he is designated
by the Board as the Chief Executive Officer of the Corporation. The duties of
the Chairman are set forth in Section 3.15 above.
Section 4.07 President.
(A) In the event the Chairman of the Board is designated by
the Board as the Chief Executive Officer of the Corporation, the President shall
be the Chief Operating Officer of the Corporation, and subject to the direction
of the Board and the Chairman of the Board and Chief Executive Officer, shall
have general responsibility for the operation, administration and direction of
the business of the Corporation and its several offices, agents and employees,
and shall see that all resolutions and orders of the Board and of the Chairman
of the Board and Chief Executive Officer are carried into effect.
(B) In the event the Chairman of the Board is not designated
by the Board as the Chief Executive Officer of the Corporation, the President
shall have, subject to the direction of the Board, general and active
supervision and management over the business, operations and affairs of the
Corporation and over its several officers, agents and employees. The President
shall exercise and perform such other powers and duties as may from time to time
be assigned by the
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Board.
Section 4.08 Vice Presidents. In the absence or disability of
the President, the Vice Presidents in order of their rank as fixed by the Board
or, if not ranked, the Vice President designated by the Board, shall perform all
the duties of the President, and when so acting shall have all the powers of,
and be subject to all the restrictions upon, the President.
Section 4.09 Secretary. The Secretary shall, if present,
record the proceedings of all meetings of the Board, of the stockholders, and of
all committees of which a secretary shall not have been appointed, in one or
more books provided for that purpose. The Secretary shall see that all notices
are duly given in accordance with these Bylaws and as required by law. The
Secretary shall be custodian of the seal of the Corporation and shall affix and
attest the seal to all documents to be executed on behalf of the Corporation
under its seal. In general, the Secretary shall perform all the duties incident
to the office of Secretary and such other duties as may from time to time be
assigned by the Board.
Section 4.10 Treasurer. The Treasurer is the chief financial
officer of the Corporation and shall keep and maintain, or cause to be kept and
maintained adequate and correct accounts of the properties and business
transactions of the Corporation.
Section 4.11 Compensation. The compensation of the officers,
agents or employees of the Corporation shall be fixed from time to time by the
Board. The Board may delegate to any officer of the Corporation or any committee
of the Board the power to fix the compensation of any officer, agent or employee
of the Corporation. No officer shall be prevented from receiving such
compensation by reason of the fact that such officer is also a director of the
Corporation.
ARTICLE V
CONTRACTS, CHECKS, DRAFTS, BANK ACCOUNTS, ETC.
Section 5.01 Execution of Contracts. The Board, except as in
these Bylaws otherwise provided, may authorize any officer or officers, agent or
agents, to enter into any contract or execute any instrument in the name of and
on behalf of the Corporation, and such authority may be general or confined to
specific instances.
Section 5.02 Checks, Drafts, Etc. All checks, drafts or other
orders for payment of money, notes or other evidence of indebtedness, issued in
the name of or payable to the Corporation, shall be signed or endorsed by such
person or persons and in such manner as, from time to time, shall be determined
by resolution of the Board. Each such officer, assistant, agent or attorney
shall give such bond, if any, as the Board may require.
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<PAGE> 12
Section 5.03 Deposits. All funds of the Corporation not
otherwise employed shall be deposited from time to time to the credit of the
Corporation in such banks, trust companies or other depositories as the Board
may select, or as may be selected by any officer or officers, assistant or
assistants, agent or agents, or attorney or attorneys of the Corporation to whom
such power shall have been delegated by the Board. For the purpose of deposit
and for the purpose of collection for the account of the Corporation, the
President, any Vice President or the Treasurer (or any other officer or
officers, assistant or assistants, agent or agents, or attorney or attorneys of
the Corporation who shall from time to time be determined by the Board) may
endorse, assign and deliver checks, drafts and other orders for the payment of
money which are payable to the order of the Corporation.
Section 5.04 General and Special Bank Accounts. The Board may
from time to time authorize the opening and keeping of general and special bank
accounts with such banks, trust companies or other depositories as the Board may
select or as may be selected by any officer or officers, assistant or
assistants, agent or agents, or attorney or attorneys of the Corporation to whom
such power shall have been delegated by the Board. The Board may make such
special rules and regulations with respect to such bank accounts, not
inconsistent with the provisions of these Bylaws, as it may deem expedient.
ARTICLE VI
SHARES AND THEIR TRANSFER
Section 6.01 Certificates for Stock. Every owner of stock of
the Corporation shall be entitled to have a certificate or certificates, to be
in such form as the Board shall prescribe, certifying the number and class of
shares of the stock of the Corporation owned by him. The certificates
representing shares of such stock shall be numbered in the order in which they
shall be issued and shall be signed in the name of the Corporation by the
President or a Vice President, and by the Secretary or an Assistant Secretary or
by the Treasurer or an Assistant Treasurer. Any of or all of the signatures on
the certificates may be a facsimile. In case any officer, transfer agent or
registrar who has signed, or whose facsimile signature has been placed upon, any
such certificate, shall have ceased to be such officer, transfer agent or
registrar before such certificate is issued, such certificate may nevertheless
be issued by the Corporation with the same effect as though the person who
signed such certificate, or whose facsimile signature shall have been placed
thereupon, were such officer, transfer agent or registrar at the date of issue.
A record shall be kept of the respective names of the persons, firms or
corporations owing the stock represented by such certificates, the number and
class of shares represented by such certificates, respectively, and the
respective dates thereof, and in case of cancellation, the respective dates of
cancellation. Every certificate surrendered to the Corporation for exchange or
transfer shall be cancelled, and no new certificate or certificates shall be
issued in exchange for any existing certificate until such existing certificate
shall have been so cancelled, except in cases provided for in Section 6.05.
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<PAGE> 13
Section 6.02 Stock Purchase Plans. The Corporation may adopt
and carry out a stock purchase plan or agreement or stock option plan or
agreement providing for the issue and sale for such consideration as may be
fixed of its unissued shares, or of issued shares acquired or to be acquired, to
one or more of the employees or directors of the Corporation or of a subsidiary
or to a trustee on their behalf and for the payment of such shares in
installments or at one time, and may provide for aiding any such persons in
paying for such shares by compensation for services rendered, promissory notes
or otherwise.
Any such stock purchase plan or agreement or stock option plan
or agreement may include, among other features, the fixing of eligibility for
participation therein, the class and price of shares to be issued or sold under
the plan or agreement, the number of shares which may be subscribed for, the
method of payment therefor, the reservation of title until full payment
therefor, the effect of the termination of employment and option or obligation
on the part of the Corporation to repurchase the shares upon termination of
employment, restrictions upon transfer of the shares, the time limits of and
termination of the plan and any other matters, not in violation of applicable
law, as may be included in the plan as approved or authorized by the Board or
any committee of the Board.
Section 6.03 Transfers of Stock. Transfers of shares of stock
of the Corporation shall be made only on the books of the Corporation by the
registered holder thereof, or by his attorney thereunto authorized by power of
attorney duly executed and filed with the Secretary, or with a transfer clerk or
a transfer agent appointed as provided in Section 6.04, and upon surrender of
the certificate or certificates for such shares properly endorsed and the
payment of all taxes thereon. The person in whose name shares of stock stand on
the books of the Corporation shall be deemed the owner thereof for all purposes
as regards the Corporation. Whenever any transfer of shares shall be made for
collateral security, and not absolutely, such fact shall be so expressed in the
entry or transfer if, when the certificate or certificates shall be presented to
the Corporation for transfer, both the transferor and the transferee request the
Corporation to do so.
Section 6.04 Regulations. The Board may make such rules and
regulations as it may deem expedient, not inconsistent with these Bylaws,
concerning the issue, transfer and registration of certificates for shares of
the stock of the Corporation. It may appoint, or authorize any officer or
officers to appoint, one or more transfer clerks or one or more transfer agents
and one or more registrars, and may require all certificates for stock to bear
the signature or signatures of any of them.
Section 6.05 Lost, Stolen, Destroyed, and Mutilated
Certificates. In any case of loss, theft, destruction, or mutilation of any
certificate of stock, another may be issued in its place upon proof of such
loss, theft, destruction, or mutilation and upon the giving of a bond of
indemnity to the Corporation in such form and in such sum as the Board may
direct; provided, however, that a new certificate may be issued without
requiring any bond when, in the judgment of the Board, it is proper so to do.
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<PAGE> 14
Section 6.06 Fixing Date for Determination of Stockholders of
Record. In order that the Corporation may determine the stockholders entitled to
notice of or to vote at any meeting of stockholders or any adjournment thereof,
or entitled to receive payment of any dividend or other distribution or
allotment of any rights, or entitled to exercise any rights in respect of any
other change, conversion or exchange of stock or for the purpose of any other
lawful action, the Board may fix, in advance, a record date, which shall not be
more than 60 nor less than 10 days before the date of such meeting, nor more
than 60 days prior to any other action. If in any case involving the
determination of stockholders for any purpose other than notice of or voting at
a meeting of stockholders, the Board shall not fix such a record date, the
record date for determining stockholders for such purpose shall be the close of
business on the day on which the Board shall adopt the resolution relating
thereto. A determination of stockholders entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of such meeting;
provided, however, that the Board may fix a new record date for the adjourned
meeting.
ARTICLE VII
INDEMNIFICATION
Section 7.01 Indemnification of Directors, Officers,
Employees, and Agents. The Corporation shall indemnify to the full extent
authorized by law any person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (including without
limitation an action by or in the right of the Corporation) by reason of the
fact that such person is or was a director, officer, employee or agent of the
Corporation or any predecessor of the Corporation, or is or was serving at the
request of the Corporation or any predecessor of the Corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, against expenses (including attorneys' fees)
judgments, fines and amounts paid in settlement actually and reasonably incurred
by him in connection with such action, suit or proceeding if he acted in good
faith and in a manner he reasonably believed to be in or not opposed to the best
interests of the Corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the Corporation, and, with respect to any criminal action or
proceeding, that he had reasonable cause to believe that his conduct was
unlawful. The right of indemnity provided herein shall not be exclusive, and the
Corporation may provide indemnification to any person, by agreement or
otherwise, on such terms and conditions as the Board of Directors may approve.
Any agreement for indemnification of any director, officer, employee or other
person may provide indemnification rights which are broader or otherwise
different from those set forth herein.
Section 7.02 Other Rights and Remedies. The indemnification
provided by this
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<PAGE> 15
Article shall not be deemed exclusive of any other rights to which one seeking
indemnification may be entitled under any Bylaws, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in an
official capacity and as to action in another capacity while holding such
office, and shall continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.
Section 7.03 Insurance. Upon resolution passed by the Board,
the Corporation may purchase and maintain insurance on behalf of any person who
is or was a director, officer, employee or agent of the Corporation, or is or
was serving at the request of the Corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise, against any liability asserted against him and incurred by him in
any such capacity or arising out of his status as such, whether or not the
Corporation would have the power to indemnify him against such liability under
the provisions of this Article.
Section 7.04 Certain Definitions. For purposes of this
Article, (1) references to "the Corporation" shall include, in addition to the
resulting corporation, any constituent corporation (including any constituent of
a constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify its
directors, officers and employees or agents, so that any person who is or was a
director, officer, employee or agent of such constituent corporation or agent of
another corporation, partnership, joint venture, trust or other enterprise,
shall stand in the same position under the provisions of this Article with
respect to the resulting or surviving corporation as he would have with respect
to such constituent corporation if its separate existence had continued; (2)
references to "other enterprises" shall include employee benefit plans; (3)
references to "fines" shall include any excise taxes assessed on a person with
respect to an employee benefit plan; (4) references to "serving at the request
of the Corporation" shall include any service as a director, officer, employee
or agent of the Corporation which imposes duties on, or involves services by,
such director, officer, employee or agent with respect to an employee benefit
plan, its participants, or beneficiaries; and (5) a person who acted in good
faith and in a manner he reasonably believed to be in the interest of the
participants and beneficiaries of an employee benefit plan shall be deemed to
have acted in a manner "not opposed to the best interests of the Corporation" as
referred to in this Article.
ARTICLE VIII
MISCELLANEOUS
Section 8.01 Seal. The Board shall provide a corporate seal,
which shall be in the form of a circle and shall bear the name of the
Corporation and words and figures showing that the Corporation was incorporated
in the State of Delaware and the year of incorporation.
Section 8.02 Waiver of Notices. Whenever notice is required to
be given by
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<PAGE> 16
these Bylaws or the Certificate of Incorporation or bylaw, the person entitled
to said notice may waive such notice in writing, either before or after the time
stated therein, and such waiver shall be deemed equivalent to notice.
Section 8.03 Fiscal Year. The fiscal year of the Corporation
shall end on the last Friday of December in each year.
Section 8.04 Amendments. These Bylaws, or any of them, may be
altered, amended or repealed, and new Bylaws may be made by the Board, by vote
of a majority of the number of directors then in office as directors, acting at
any meeting of the Board. These Bylaws or any of them, except Sections 3.02,
3.03 and this Section 8.04, may be altered, amended or repealed and new Bylaws
may be made by the vote of the holders of not less than a majority of the
outstanding shares of voting stock of the Corporation at an annual meeting of
stockholders, without previous notice, or at any special meeting of
stockholders, provided that such proposed amendment, modification, repeal or
adoption is given in the notice of special meeting. Sections 3.02, 3.03 and this
Section 8.04 may be altered, amended or repealed by the vote of the holders of
not less than two-thirds of the total voting power of all outstanding shares of
voting stock of the Corporation, at an annual meeting of stockholders, without
previous notice, or at any special meeting of stockholders, provided that notice
of such proposed amendment, modification, repeal or adoption is given in the
notice of special meeting.
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<PAGE> 1
EXECUTION COPY
Exhibit 4(ii).5
OHM CORPORATION
--------------
Second Supplemental Indenture
dated as of June 11, 1998
------------------
with respect to:
$57,500,000
8% Convertible Subordinated Debentures Due October 1,
2006 Issued as of October 1, 1986
United States Trust Company of New York
as Trustee
<PAGE> 2
SECOND SUPPLEMENTAL INDENTURE dated as of June 11, 1998 (this
"Supplemental Indenture") among OHM CORPORATION, an Ohio corporation (the
"Company"), INTERNATIONAL TECHNOLOGY CORPORATION, a Delaware corporation
("ITC"), and UNITED STATES TRUST COMPANY OF NEW YORK, a banking company
organized under the laws of the State of New York, as trustee (the "Trustee")
for the Company's 8% Convertible Subordinated Debentures Due October 1, 2006
(the "Securities").
Recitals
A. The Company, as successor in interest to Environmental Treatment and
Technologies Corp., is party to an Indenture dated as of October 1, 1986, as
amended by the First Supplemental Indenture thereto dated as of May 20, 1994 (as
so amended, the "Indenture"), under which Securities in the aggregate principal
amount of $57,500,000 were issued. Securities in the aggregate principal amount
of $47,600,000 are outstanding on the date of this Supplemental Indenture.
B. The Company, ITC, and IT-Ohio, Inc., an Ohio corporation and a
wholly-owned subsidiary of ITC ("Merger Sub"), are parties to an Agreement and
Plan of Merger dated as of January 15, 1998 (the "Merger Agreement"). Pursuant
to the Merger Agreement, at the Effective Time (as defined in the Merger
Agreement), Merger Sub shall be merged with and into the Company and the
separate corporate existence of Merger Sub shall thereupon cease and the Company
shall continue as the surviving corporation therein and a wholly-owned
subsidiary of ITC (the "Merger").
C. Immediately prior to the Effective Time, under the terms of the
Indenture, each $1,000 in principal amount of Securities was convertible at the
then-applicable conversion price into 41.67 shares of Common Stock, par value
$.10 per share, of the Company (each, an "OHM Share").
D. At the Effective Time, each OHM Share issued and outstanding
immediately prior to the Effective Time (other than shares owned by Persons who
perfected dissenters' rights with respect thereto under applicable law) was
converted into the right to receive the Merger Consideration (as defined in the
Merger Agreement). The Merger Consideration consisted of a combination of (i)
1.081 shares of common stock, $.01 par value per share, of ITC (each, an "ITC
Share") and (ii) $2.58 in cash.
E. In the Merger, 41.67 OHM Shares would have been converted into the
right to receive $107.51 in cash and 45.045 ITC Shares (provided that the holder
of such OHM Shares would have received cash in lieu of any fractional ITC
Share).
F. The parties desire to amend the Indenture pursuant to Sections 9.01,
5.01 and 10.15 thereof in order to provide that the holder of any Security may
convert it into the kind and amount of securities, cash or other assets which it
would have owned immediately after the Effective Time if it had converted the
Security to OHM Shares immediately prior to the Effective Time.
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<PAGE> 3
NOW, THEREFORE, THIS SECOND SUPPLEMENTAL INDENTURE WITNESSETH:
For and in consideration of the premises, it is mutually covenanted and
agreed, as follows:
Agreements
Section 1. Defined Terms. Capitalized terms not otherwise
defined herein shall have the meanings ascribed to them in the Merger Agreement.
Section 2. Amendment to Section 1.01 of Indenture.
Section 1.01 of the Indenture is hereby amended by the inclusion, in
alphabetical order, of the following additional defined terms:
"ITC" means International Technology Corporation, a Delaware
corporation.
"ITC Common Stock" means the common stock, $.01 par value, of
ITC.
"ITC Conversion Price" means the ITC Initial Conversion Price,
as adjusted pursuant to Article X hereof.
"ITC Initial Conversion Price" means $22.20.
"OHM Effective Time Conversion Price" means $24.
Section 3. Amendment and Restatement of Article X of Indenture.
Article X of the Indenture is hereby amended and restated to provide in its
entirety as follows:
ARTICLE X
CONVERSION
SECTION 10.01 Conversion Privilege. A Holder of a Security may
convert it into a combination of ITC Common Stock and cash at any time
during the period stated in paragraph 8 of the Securities. The number
of shares of ITC Common Stock issuable upon conversion of a Security is
determined as follows: (1) divide the principal amount to be converted
by the ITC Conversion Price, and (2) round the result to the nearest
1/100th of a share. The amount of cash payable upon conversion of a
Security is determined as follows: (1) divide the principal amount to
be converted by the OHM Effective Time Conversion Price, (2) multiply
the result by $2.58 and (3) round the result to the nearest cent.
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<PAGE> 4
The ITC Initial Conversion Price is stated in paragraph 8 of
the Securities. The ITC Conversion Price is subject to adjustment.
A Holder may convert a portion of a Security if the portion is
$1,000 or a whole multiple of $1,000. Provisions of this Indenture that
apply to conversion of all of a Security also apply to conversion of a
portion of it.
SECTION 10.02 Conversion Procedure. To convert a Security a
Holder must satisfy the requirements in paragraph 8 of the Securities.
The date on which the Holder satisfies all those requirements is the
conversion date. As soon as practical after the conversion date, ITC
shall deliver through the Conversion Agent a certificate for the number
of full shares of ITC Common Stock issuable upon the conversion and a
check in the amount of any cash consideration payable upon the
conversion plus the amount payable in respect of any fractional share.
The person in whose name the certificate is registered shall be treated
as the stockholder of record on and after the conversion date.
No payment or adjustment will be made for accrued interest on
a converted Security.
If a Holder converts more than one Security at the same time,
the number of full shares issuable upon the conversion shall be based
on the total principal amount of the Securities converted.
Upon surrender of a Security that is converted in part, the
Trustee shall authenticate for the Holder a new Security equal in
principal amount to the unconverted portion of the principal amount of
the Security surrendered.
If the last day on which a Security may be converted is a
Legal Holiday in a place where a Conversion Agent is located, the
Security may be surrendered to that Conversion Agent on the next
succeeding day that is not a Legal Holiday.
SECTION 10.03 Fractional Shares. ITC will not issue a
fractional share of ITC Common Stock upon conversion of a Security.
Instead, ITC will deliver its check for the amount of any cash
consideration payable upon the conversion plus the amount payable in
respect of any fractional share (based on the current market value of
such fractional share). The current market value of a fraction of a
share of ITC Common Stock is determined as follows: Multiply the
current market price of a full share of ITC Common Stock by the
fraction. Round the result to the nearest cent.
The current market price of a share of ITC Common Stock is the
Quoted Price of the ITC Common Stock on the last trading day prior to
the conversion date. "Quoted Price" is the last reported sale price on
the principal national securities exchange on which the ITC Common
Stock is listed or, if the ITC Common Stock is not listed on any
national securities exchange, the NASDAQ National Market System, or, if
the ITC Common Stock is not designated for trading on the NASDAQ
National Market System, the average
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<PAGE> 5
of the closing bid and asked prices as reported on NASDAQ or, if not
so reported, as furnished by the National Quotation Bureau
Incorporated. In the absence of such a quotation, ITC shall determine
the current market price on the basis of such quotations as it
considers appropriate.
SECTION 10.04 Taxes on Conversion. If a Holder of a Security
converts such Security, ITC shall pay any documentary, stamp or similar
issue or transfer tax due on the issue of shares of ITC Common Stock
upon the conversion but no other taxes. However, the Holder shall pay
any tax which is due because the shares are issued in a name other than
the Holder's name.
SECTION 10.05 ITC to Provide Stock. ITC shall reserve out of
its authorized but unissued ITC Common Stock or its ITC Common Stock
held in treasury enough shares of ITC Common Stock to permit the
conversion of the Securities.
All shares of ITC Common Stock which may be issued upon
conversion of the Securities, when issued, shall be fully paid and
non-assessable.
ITC will endeavor to comply with all securities laws
regulating the offer and delivery of shares of ITC Common Stock upon
conversion of Securities and will endeavor to list such shares on each
national securities exchange on which the ITC Common Stock is listed,
if the ITC Common Stock is so listed.
SECTION 10.06 Adjustment for Change in Capital Stock. If ITC:
(1) pays a dividend or makes a distribution on the
ITC Common Stock, in either case payable in shares of ITC
Common Stock;
(2) subdivides its outstanding shares of ITC Common
Stock into a greater number of shares;
(3) combines its outstanding shares of ITC Common
Stock into a smaller number of shares;
(4) makes a distribution on the ITC Common Stock in
shares of its capital stock other than ITC Common Stock; or
(5) issues by reclassification of the ITC Common
Stock any shares of its capital stock;
then the conversion privilege and the ITC Conversion Price in effect
immediately prior to such action shall be adjusted so that the Holder
of a Security thereafter converted may receive the number of shares of
ITC Common Stock which he would have owned immediately following such
action if he had converted the Security immediately prior to such
action.
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The adjustment shall become effective (i) immediately after
the record date in the case of a dividend or distribution and (ii)
immediately after the effective date in the case of a subdivision,
combination or reclassification.
If, after an adjustment, a Holder of a Security upon
conversion of it may receive shares of two or more classes of capital
stock of ITC, ITC shall determine the allocation of the adjusted ITC
Conversion Price between the classes of capital stock. After such
allocation, the conversion privilege and the ITC Conversion Price of
each class of capital stock shall thereafter be subject to adjustment
on terms comparable to those applicable to the ITC Common Stock in this
Article.
SECTION 10.07 Adjustment for Rights Issue. If ITC distributes
any rights or warrants to all holders of the ITC Common Stock entitling
them for a period expiring within 60 days after the record date
mentioned below to purchase shares of ITC Common Stock (or securities
convertible into ITC Common Stock) at a price per share (or having a
conversion price per share) less than the current market price per
share on that record date, the ITC Conversion Price shall be adjusted
in accordance with the formula:
-- --
|O + N * P|
|---------|
C(1) = C * | M |
|---------|
| O + N |
-- --
where
C(1) = the adjusted ITC Conversion Price.
C = the current ITC Conversion Price.
O = the number of shares of ITC Common Stock outstanding on
the record date.
N = the number of additional shares of ITC Common Stock
issuable upon exercise of the rights or warrants or upon conversion of
any convertible securities.
P = the exercise price per share of ITC Common Stock of rights
or warrants or the conversion price of any securities convertible into
shares of ITC Common Stock.
M = the current market price per share of ITC Common Stock on
the record date.
The adjustment shall become effective immediately after the
record date for the determination of stockholders entitled to receive
the rights or warrants.
SECTION 10.08. Adjustment for Other Distributions. If ITC
distributes to all holders of the ITC Common Stock any of its assets or
debt securities or any rights or
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warrants to purchase securities of ITC, the ITC Conversion Price shall
be adjusted in accordance with the formula:
-- --
|M - F|
C(1) = C * |-----|
| M |
-- --
where
C(1) = the adjusted ITC Conversion Price.
C = the current ITC Conversion Price.
M = the current market price per share of ITC Common Stock on
the record date mentioned below.
F = the fair market value on the record date of the assets,
securities, rights or warrants applicable to one share of ITC Common
Stock. ITC shall determine the fair market value.
The adjustment shall become effective immediately after the
record date for the determination of stockholders entitled to receive
the distribution.
This Section does not apply to cash dividends or cash
distributions paid out of consolidated current or retained earnings as
shown on the books of ITC. Also, this Section does not apply to rights
or warrants referred to in Section 10.07.
SECTION 10.09. Current Market Price. In Sections 10.07 and
10.08 the current market price per share of ITC Common Stock on any
date is the average of the Quoted Prices of the ITC Common Stock for 30
consecutive trading days commencing 45 trading days before the date in
question. In the absence of one or more such quotations, ITC shall
determine the current market price on the basis of such quotations as
it considers appropriate.
SECTION 10.10 When Adjustment May Be Deferred. No adjustment
in the ITC Conversion Price need be made unless the adjustment would
require an increase or decrease of at least 1% in the ITC Conversion
Price. Any adjustments that are not made shall be carried forward and
taken into account in any subsequent adjustment.
All calculations under this Article shall be made to the
nearest cent or to the nearest 1/100th of a share, as the case may be.
SECTION 10.11. When No Adjustment Required. No adjustment need
be made for a transaction referred to in Section 10.06, 10.07 or 10.08
if Securityholders may participate in the transaction on a basis the
Board of Directors of ITC determines to be fair and appropriate in
light of the basis on which holders of ITC Common Stock participate in
the transaction.
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<PAGE> 8
No adjustment need be made for sales of ITC Common Stock
pursuant to an ITC plan for reinvestment of dividends or interest.
No adjustment need be made for a change in the par value or no
par value of the ITC Common Stock.
To the extent that the Securities become convertible into
cash, no adjustment need be made thereafter as to the portion
convertible into cash. Interest will not accrue on the cash.
SECTION 10.12. Notice of Adjustment. Whenever the ITC
Conversion Price is adjusted, ITC shall promptly mail to
Securityholders a notice of the adjustment. ITC shall file with the
Trustee a certificate from ITC's independent public accountants briefly
stating the facts requiring the adjustment and the manner of computing
it. The certificate and notice shall be conclusive evidence that the
adjustment is correct.
SECTION 10.13. Voluntary Reduction. ITC from time to time may
reduce the ITC Conversion Price (provided the reduced ITC Conversion
Price is not less than the par value of the ITC Common Stock) (1) as it
shall determine to be advisable in order that certain distributions
which may hereafter be made by ITC with respect to the shares of ITC
Common Stock will not be taxable to holders of ITC Common Stock or (2)
by any amount for any period of time if the period is at least 20 days
and if the reduction is irrevocable during the period.
Whenever the ITC Conversion Price is reduced, ITC shall mail
to Securityholders a notice of the reduction at least 10 days before
the date the reduced ITC Conversion Price takes effect. The notice
shall state the reduced ITC Conversion Price and the period it will be
in effect.
A reduction of the ITC Conversion Price does not change or
adjust the ITC Conversion Price otherwise in effect for purposes of
Sections 10.06 through 10.08.
SECTION 10.14. Notice of Certain Transactions. If:
(1) ITC takes any action that would require an adjustment in
the ITC Conversion Price pursuant to Section 10.07, 10.08 or clause (4)
or (5) of Section 10.06 and if ITC does not let Securityholders
participate pursuant to Section 10.11;
(2) ITC takes any action that would require a supplemental
indenture pursuant to Section 10.15;
(3) there shall be a liquidation or dissolution of ITC or the
Company;
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<PAGE> 9
ITC shall mail to Securityholders a notice stating the
proposed record date for such adjustment or distribution or effective
date of a reclassification, consolidation, merger, transfer, lease,
liquidation or dissolution.
ITC shall mail the notice at least 15 days before such date,
except if there is a liquidation or dissolution of ITC or the Company,
ITC shall mail the notice at least 30 days before such date. Failure to
mail the notice or any defect in it shall not affect the validity of
the transaction.
SECTION 10.15 Reorganization of ITC. ITC shall not consolidate
with or merge into any person, if such merger or consolidation
reclassifies or changes the outstanding ITC Common Stock, unless the
continuing or surviving corporation shall enter into a supplemental
indenture by which it is obligated to deliver securities, cash or other
assets upon conversion of Securities. If the issuer of securities
deliverable upon conversion of Securities is an affiliate of the
continuing or surviving corporation, that issuer shall join in the
supplemental indenture.
The supplemental indenture shall provide that the Holder of a
Security may convert it into the kind and amount of securities, cash or
other assets which he would have owned immediately after the
consolidation or merger if he had converted the Security immediately
before the effective date of the transaction. The supplemental
indenture shall provide for adjustments which shall be as nearly
equivalent as may be practical to the adjustments provided for in this
Article. The Company shall mail to Securityholders a notice briefly
describing the supplemental indenture.
If this Section applies, Section 10.06 does not apply.
SECTION 10.16. ITC Determination Final. Any determination that
ITC or the Board of Directors of ITC must make pursuant to Section
10.03, 10.06, 10.08, 10.09 or 10.11 is conclusive.
SECTION 10.17. Trustee's Disclaimer. The Trustee has no duty
to determine when an adjustment under this Article should be made, how
it should be made or what it should be. The Trustee has no duty to
determine whether any provisions of a supplemental indenture under
Section 10.15 are correct. The Trustee makes no representation as to
the validity or value of any securities or assets issued upon
conversion of Securities. The Trustee shall not be responsible for the
failure of ITC to comply with this Article. Each Conversion Agent other
than ITC and the Company shall have the same protection under this
Section as the Trustee.
Section 4. Section 12.02 of the Indenture is hereby amended and
restated to provide in its entirety as follows:
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<PAGE> 10
SECTION 12.02 Notices. Any notice or communication by any of
the Company, ITC or the Trustee to any of the other parties hereto is
duly given if in writing and delivered in person or mailed by
first-class mail, postage prepaid, to the address for such party stated
in Section 12.10. Each party hereto may by notice to the other parties
designate additional or different addresses for subsequent notices or
communications.
Any notice or communication to a Securityholder shall be
mailed by first-class mail postage prepaid, to his address shown on the
register kept by the Registrar. Failure to mail a notice or
communication to a Securityholder or any defect in it shall not affect
its efficiency with respect to other Securityholders.
If a notice of communication is mailed in the manner provided
above within the time prescribed, it is duly given, whether or not the
addressee receives it.
If the Company or ITC mails a notice of communication to
Securityholders, it shall mail a copy to the Trustee and each Agent at
the same time.
Section 5. Section 12.10 of the Indenture is hereby amended by adding
as the last paragraph thereof the following.
If to ITC:
International Technology Corporation
2790 Mosside Boulevard
Monroeville, Pennsylvania 15146-2792
Attention: Chief Financial Officer
Section 6. Paragraph 8 of each Security is hereby amended to provide in
its entirety as follows.
8. CONVERSION. A holder of a Security may convert it into
Common Stock of International Technology Corporation ("ITC") at any
time before the close of business on October 1, 2006. If the Security
is called for redemption, the Securityholder may convert it at any time
before the close of business on the redemption date. The initial
conversion price is $22.20 per share (the "ITC Initial Conversion
Price"), subject to adjustment in certain events. To determine the
number of shares of Common Stock of ITC issuable upon conversion of a
Security, divide the principal amount converted by the conversion price
in effect on the conversion date, rounding the result to the nearest
1/100 of a share. In addition to the above, there shall be a cash
payment payable upon the conversion of each Security. The amount of
cash payable upon conversion of a Security is determined as follows:
(1) divide the principal amount to be converted by $24.00, (2) multiply
the result by $2.58 and (3) round the result to the nearest cent. On
conversion no payment or adjustment for accrued interest will be made.
ITC will deliver to the Securityholder a check for the combined value
of the cash payable upon conversion described above and any amounts
payable with respect to any fractional share.
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<PAGE> 11
To convert a Security a holder must (1) complete and sign the
conversion notice on the back of the Security, (2) surrender the
Security to the Conversion Agent, (3) furnish appropriate endorsements
and transfer documents if required by the Registrar or Conversion
Agent, (4) pay any transfer or similar tax if required and (5) in case
such surrender shall be made during the period between the close of
business on any regular record date and the opening of business on the
next succeeding Interest Payment Date, also provide payment of an
amount equal to the interest payable on such Interest Payment Date on
the principal amount of the Security being converted (except in the
case of Securities which have been called for redemption on a
redemption date within such period). A Securityholder may convert a
portion of a Security if the portion is $1000 or a whole multiple of
$1000.
The conversion price will be adjusted for dividends or
distributions on Common Stock of ITC payable in Common Stock of ITC;
subdivisions, combinations or certain reclassifications of Common Stock
of ITC; distributions to all holders of Common Stock of ITC of certain
rights to purchase Common Stock of ITC at less than the current market
price at the time; and distributions to such holders of assets or debt
securities of ITC or certain rights to purchase securities of ITC
(excluding cash dividends or distributions from current or retained
earnings). However, no adjustment need be made if Securityholders may
participate in the transaction or in certain other cases. ITC from time
to time may voluntarily reduce the conversion price in certain
circumstances.
If ITC is a party to a consolidation or merger in which a
person other than ITC is the continuing or surviving corporation, the
right to convert a Security into Common Stock of ITC may be changed
into a right to convert it into securities, cash or other assets of
such other person.
Section 7. Guaranty.
(a) ITC hereby unconditionally and irrevocably guarantees the punctual
payment when due, whether at stated maturity, by acceleration or otherwise, of
all obligations of the Company now or hereafter existing under the Indenture, or
under or with respect to the Securities, whether for principal, interest, fees,
expenses or otherwise (such obligations being the "Guaranteed Obligations").
Without limiting the generality of the foregoing, ITC's liability shall extend
to all amounts that constitute part of the Guaranteed Obligations and would be
owed by the Company to any Holder under the Indenture but for the fact that they
are not then enforceable due to the existence of, or are not allowed claims in
any, bankruptcy, reorganization or similar proceeding.
(b) ITC shall be entitled to be reimbursed by the Company for, and
shall be subrogated to all rights of the Securityholders against the Company in
respect of, any amounts paid by ITC pursuant to the provisions of this Section
7.
(c) ITC hereby waives diligence, presentment, demand of payment, filing
of claims with a court in the event of insolvency or bankruptcy of the Company,
any right to require a
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<PAGE> 12
proceeding first against the Company, protest, notice and all demands whatsoever
with respect to the Guaranteed Obligations. ITC also hereby waives all defenses
to its obligations as guarantor hereunder, whether arising at law or in equity,
and agrees that its obligations pursuant to this Section 7 shall not be
discharged except by complete performance of the Guaranteed Obligations.
Section 8. Subordination of Guaranty.
(a) Agreement to Subordinate. The obligations of ITC arising under its
guaranty set forth in Section 7 hereof are subordinated in right of payment, to
the extent and in the manner provided in this Section, to the prior payment in
full of all Guarantor Senior Debt, and the subordination is for the benefit of
the holders from time to time of Guarantor Senior Debt. This Section shall
constitute a continuing offer to all persons or entities who, in reliance upon
such provisions, become holders of, or continue to hold, Guarantor Senior Debt,
and such holders or any of them may enforce such provisions.
(b) Liquidation, Dissolution, Bankruptcy. Upon any distribution to
creditors of the ITC in a liquidation, dissolution or winding up of ITC (whether
voluntary or otherwise) or in a bankruptcy, reorganization, insolvency,
receivership or similar proceeding relating to ITC or its property:
(1) holders of Guarantor Senior Debt shall be entitled to
receive payment in full in cash of the principal of and interest
(including interest accruing after the commencement of any such
proceeding) to the date of payment of the Guarantor Senior Debt before
Securityholders shall be entitled to receive any payment with respect
to the Guaranteed Obligations from ITC, including, without limitation,
any payment in respect of principal of and premium, if any, or interest
on the Guaranteed Obligations; and
(2) until the Guarantor Senior Debt is paid in full in cash,
any distribution from ITC to which Securityholders would be entitled
but for this Section shall be made to holders of Guarantor Senior Debt
or their representative pro rata in accordance with the amounts thereof
for application to the payment of the Guarantor Senior Debt, except
that Securityholders may receive securities that are subordinated to
Guarantor Senior Debt to at least the same extent as the Guaranteed
Obligations.
A distribution may consist of cash, securities or other property,
obtained by payment, conversion, redemption, set off or otherwise. ITC shall
provide prompt written notice to the Trustee of any distribution pursuant to
this Section 8(b).
(c) Default on Guarantor Senior Debt. ITC may not pay (and the
Securityholder shall not be entitled to receive from ITC) principal or interest
with respect to the Guaranteed Obligations and may not acquire any Guaranteed
Obligations for cash or property other than capital stock of ITC if either
immediately prior to such payment or as a result thereof:
(1) a default on Guarantor Senior Debt occurs and is
continuing that permits holders of Guarantor Senior Debt to accelerate
its maturity, and
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<PAGE> 13
(2) in the case of a default other than a payment default,
either (a) the default is the subject of judicial proceedings, (b) ITC
receives a notice of the default from a person who may give it pursuant
to Section 8(m) hereof or (c) ITC otherwise has actual knowledge of the
default.
ITC may resume payments with respect to the Guaranteed Obligations and
may acquire them when the default is cured or waived in writing by the requisite
holders of the Guarantor Senior Debt or their representative in accordance with
such debt instruments if this Section otherwise permits the payment or
acquisition at that time.
Upon the maturity of the principal of any Guarantor Senior Debt by
lapse of time, acceleration or otherwise (unless such maturity has been
extended, or such acceleration has been rescinded or revoked), all principal
thereof and interest thereon first shall be paid by ITC in full in cash before
any payment is made on account of the principal of or premium, if any, or
interest on the Guaranteed Obligations (except mandatory redemption payments
made in respect of Securities for which a notice of redemption shall have been
mailed before the maturity of such Guarantor Senior Debt, unless such payments
are otherwise prohibited by this Article).
(d) Acceleration of Guaranteed Obligations. If payment of the
Guaranteed Obligations is accelerated because of an Event of Default, ITC shall
promptly notify holders of Guarantor Senior Debt of the acceleration. In this
event, ITC shall pay in full in cash all of the principal of and interest on the
Guarantor Senior Debt before any payment is made on account of the principal of
or premium, if any, or interest on the Guaranteed Obligations, unless payments
in respect of the Guaranteed Obligations are otherwise permitted by this
Section.
(e) When Distribution Must Be Paid Over. If a distribution is made to
Securityholders that because of this Section should not have been made to them,
the Securityholders who receive the distribution shall hold it in trust for
holders of Guarantor Senior Debt and pay it over to them or their representative
pro rata in accordance with the amounts thereof for application to the payment
of Guarantor Senior Debt.
(f) Notice by ITC. ITC shall promptly notify the Trustee and the Paying
Agent of any facts known to ITC that would cause a payment of principal or
interest with respect to the Guaranteed Obligations to violate this Section.
(g) Subrogation. After all Guarantor Senior Debt is paid in full and
until the Guaranteed Obligations are paid in full, Securityholders shall be
subrogated to the rights of holders of Guarantor Senior Debt to receive
distributions applicable to Guarantor Senior Debt to the extent that
distributions otherwise payable to the Securityholders have been applied to
Guarantor Senior Debt. A distribution made under this Section to holders of
Guarantor Senior Debt which otherwise would have been made to Securityholders is
not, as between ITC and Securityholders, a payment by the Company on Guarantor
Senior Debt.
(h) Relative Rights. This Section defines the relative rights of
Securityholders and holders of Guarantor Senior Debt. Nothing in this
Supplemental Indenture or the Indenture shall:
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<PAGE> 14
(1) impair, as between ITC and Securityholders, the
obligations of ITC pursuant to Section 6 hereof;
(2) affect the relative rights of Securityholders and
creditors of ITC other than holders of Guarantor Senior Debt; or
(3) prevent the Trustee or any Securityholder from exercising
its available remedies upon a Default, subject to the rights of holders
of Guarantor Senior Debt to receive distributions otherwise to
Securityholders.
If ITC fails because of this Section to discharge its obligations under
Section 7, the failure is still a default of ITC pursuant hereto.
Upon any distribution of assets of ITC referred to in this Section 8,
the Trustee, subject to the provisions of Sections 7.01 and 7.02 of the
Indenture, and the Holders shall be entitled to rely upon any order or decree
made by any court of competent jurisdiction in which such dissolution, winding
up, liquidation or reorganization proceedings are pending, or a certificate of
the liquidating trustee or agent or other person making any distribution to the
Trustee or to the Holders for the purpose of ascertaining the persons entitled
to participate in such distribution, the holders of Guarantor Senior Debt of ITC
and other Guarantor Debt of ITC, the amount thereof or payable thereon, the
amount or amounts paid or distributed thereon and all other facts pertinent
thereto.
(i) Subordination May Not Be Impaired by ITC. No right of any holder of
Guarantor Senior Debt to enforce the subordination of the Guaranteed Obligations
shall be impaired by any act or failure to act by ITC or by its failure to
comply with this Supplemental Indenture or the Indenture.
(j) Whenever a distribution is to be made or a notice given to holders
of Guarantor Senior Debt pursuant to the terms of this Section, the distribution
may be made and the notice given to their Representative.
(k) Rights of Trustee and Paying Agent. The Trustee in its individual
or any other capacity may hold Guarantor Senior Debt with the same rights it
would have if it were not Trustee. Any Agent may do the same with like rights.
(l) Securityholders Authorize Trustee to Effectuate Subordination of
Guaranteed Obligations. Each Securityholder by accepting a Security authorizes
and expressly directs the Trustee on his behalf to take such action as may be
necessary or appropriate to effectuate as between the holders of Guarantor
Senior Debt and the Securityholders the subordination provided in this Section
and appoints the Trustee his attorney-in-fact for such purpose, including, in
the event of any dissolution, winding up, liquidation or reorganization of ITC
(whether in bankruptcy, insolvency or receivership proceedings or upon an
assignment for the benefit of creditors or otherwise) tending towards
liquidation of the business and assets of ITC, the immediate filing of a claim
for the unpaid balance of its or his Securities in the form required in said
proceedings and the causing of said claim to be approved. If the Trustee does
not file a proper claim or proof of
14
<PAGE> 15
debt in the form required in such proceeding prior to 30 days before the
expiration of the time to file such claims, then the holders of Guarantor Senior
Debt are hereby authorized to have the right to file and are hereby authorized
to file an appropriate claim for and on behalf of the Holders of said
Securities.
(m) Trustee Not Charged With Knowledge. Notwithstanding any of the
provisions of this Section 8 or any other provision in this Supplemental
Indenture or the Indenture, neither the Trustee nor any Paying Agent shall at
any time be charged with knowledge of the existence of any facts which would
prohibit the asking of any payment to or by the Trustee or such Paying Agent or
the taking of any other action under this Section 8 by the Trustee or such
Paying Agent unless and until such Paying Agent or a Trust Officer of the
Trustee shall have received written notice thereof from a Representative or a
holder of Guarantor Senior Debt of ITC; nor shall the Trustee or any Paying
Agent be charged with knowledge of the curing or waiving of any default or event
of default or that any fact or condition preventing any payment in respect of
the Guaranteed Obligations shall have ceased to exist unless and until a Trust
Officer of the Trustee shall have received an Officers' Certificate to such
effect.
Prior to the receipt of any such written notice, the Trustee and any
Paying Agent, subject to the provisions of Section 7.01 of the Indenture, shall
be entitled in all respect to assume that no such facts exist; provided, that if
on a date not less than two business days prior to the date upon which it is
determined hereunder that any such monies may become payable for any purpose
(including, without limitation, that payment of the principal of or interest on
any Securities), the Trustee and/or any Paying Agent shall not have received
with respect to such moneys the notice provided for in this Section, then
notwithstanding anything contained in this Supplemental Indenture or the
Indenture to the contrary, the Trustee and any Paying Agent have full power and
authority to receive moneys and to apply the same to the purpose of which they
were received, and shall not be affected by any notice to the contrary which may
be received by them on or after such prior date.
The Trustee or any Paying Agent shall be entitled to reply on the
delivery to it of a written notice by a person representing himself, herself or
itself to be a holder of Guarantor Senior Debt of ITC or a Representative
therefor.
(n) No Fiduciary Duty Created to Holders of Guarantor Senior Debt of
ITC. With respect to the holders of Guarantor Senior Debt of ITC, the Trustee
undertakes to perform or to observe only such of its covenants and obligations
as are specifically set forth in this Section 8, and no implied covenants or
obligations with respect to the holders of Guarantor Senior Debt of ITC shall be
read into this Indenture against the Trustee. The Trustee shall not be deemed to
owe any fiduciary duty to the holders of Guarantor Senior Debt of ITC and,
subject to the provisions of Section 7.01, the Trustee shall not be liable to
any holder of Guarantor Senior Debt of ITC if it shall mistakenly pay over or
deliver to holders of Securities, ITC or any other person, monies or assets to
which any holder of Guarantor Senior Debt of ITC shall be entitled by virtue of
this Section 8 or otherwise.
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<PAGE> 16
(o) Certain Definitions.
"Guarantor Debt" means any indebtedness of ITC outstanding on
the date hereof or hereafter created, incurred or assumed for borrowed
money or any guarantee of any indebtedness for borrowed money by ITC or
which is in effect guaranteed by ITC through an agreement to purchase
such indebtedness, through an agreement to make payments to the lender
in order to pay such indebtedness or through a similar arrangement or
any contingent or matured obligations of ITC in respect of letters of
credit, including, without limitation, any obligation to reimburse the
payor for payments made under a letter of credit or to deposit or pay
an amount to a payor equal to all or part of payments to be made under
a letter of credit.
"Guarantor Senior Indebtedness" means the principal of and
premium, if any and interest on, and any other payment due pursuant to
the terms of instruments or agreements, creating, securing or
evidencing Guarantor Debt of ITC outstanding on the date of this
Indenture or Guarantor Debt thereafter created, incurred or assumed by
ITC and all renewals, replacements, rearrangements, extensions,
increases and refundings of any of the foregoing (i) which is payable
to banks or other traditional long-term institutional lenders, such as
insurance companies and pension funds, unless it is expressly provided
in the instrument creating or evidencing such Guarantor Debt, that such
Guarantor Debt is not senior in right of payment to the Securities and
(ii) any other Guarantor Debt which is expressly agreed by ITC and the
holders of such Guarantor Debt to be Senior Indebtedness; provided,
however, that Senior Indebtedness shall not include any indebtedness
issued by ITC which is convertible into any equity securities of ITC.
"Representative" means, for purposes only of this Section 8,
the indenture trustee or other trustee, agent or representative for an
issue of Guarantor Senior Indebtedness. ITC shall, upon request of the
Trustee, provide to the Trustee an Officer's Certificate setting forth
the name and address of each Representative of all outstanding
Guarantor Senior Indebtedness of ITC.
(p) Notwithstanding any other provision of this Section 8, no provision
of this Section 8 shall be deemed to (i) impair , restrict, limit or affect the
obligations of the Company under the Indenture or (ii) impair, restrict, limit
or affect the rights of the Securityholders with respect to the obligations of
the Company under the Indenture (including without limitation any rights of the
Securityholders to exercise remedies upon a default by the Company under the
Indenture).
Section 9. Effective Date of this Supplemental Indenture. This
Supplemental Indenture shall be effective as of the date first written above.
Section 10. Indenture Ratified. Except as hereby otherwise expressly
provided, the Indenture is in all respects ratified and confirmed, and all the
terms, provisions and conditions thereof shall be and remain in full force and
effect.
Section 11. Counterparts. This Supplemental Indenture may be executed
in any number of counterparts, each of which shall be an original, but such
counterparts shall together constitute but one and the same instrument.
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<PAGE> 17
Section 12. Supplemental Indenture is an Amendment to Indenture. This
Supplemental Indenture is an amendment to the Indenture, and the Indenture and
this Supplemental Indenture shall be read together from and after the
effectiveness of this Supplemental Indenture.
Section 13. Governing Law. This Supplemental Indenture shall be
governed by and construed in accordance with the internal laws of the State of
New York.
[Remainder of Page Intentionally Blank]
17
<PAGE> 18
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed as of the day and year first above written.
OHM CORPORATION
By:_________________________________
Name:
Title:
INTERNATIONAL TECHNOLOGY CORPORATION
By:_________________________________
Name:
Title:
UNITED STATES TRUST COMPANY OF NEW
YORK, as Trustee
By:_________________________________
Name:
Title:
<PAGE> 1
Exhibit 10(iii).24
AMENDMENT NUMBER SIX
IT CORPORATION RETIREMENT PLAN
1993 RESTATEMENT
The IT Corporation Retirement Plan (1993 Restatement) shall be amended
as follows:
A. The first sentence of Section 7.10(e) shall be amended, effective
for loans originating after May 27, 1998, to read as follows:
All loans of at least $2,000 shall be repaid over a period not to
exceed five full years.
B. Section 8.2 shall be amended in its entirety, effective July 1,
1995, to read as follows:
8.2 Vesting of Company Fixed Contribution Accounts, Matching
Contribution Accounts, and Discretionary Company Contribution Accounts. The
Vested Interest of each Participant in his Company Fixed Contribution Account,
Matching Contribution Account, and Discretionary Company Contribution Account
shall be determined on the basis of the Participant's Years of Service, in
accordance with the following schedule.
Number of Years of Service Vesting Percentage
-------------------------- ------------------
Less than 2 years 0%
2 years but less than 3 years 20%
3 years but less than 4 years 40%
4 years but less than 5 years 60%
5 years but less than 6 years 80%
6 years or more 100%
Notwithstanding the foregoing, the determination of a participant's Vested
Interest in his Company Fixed Contribution Account, Matching Contribution
Account, and Discretionary Company Contribution Account shall be subject to the
following rules:
(a) A Participant shall become fully vested in his Company
Fixed Contribution Account, Matching Contribution Account, and
Discretionary Company Contribution Account upon the occurrence of any
of the following events, if such Participant is then still an Employee:
(i) Attainment of his sixty-fifth birthday;
<PAGE> 2
(ii) Attainment of Early Retirement Date;
(iii) Death; or
(iv) Severance due to a Disability.
(b) In the case of a Participant who has incurred five (5)
consecutive Breaks in Service, his Years of Service, if any, after such
Breaks in Service shall not be taken into account for purposes of
determining said Participant's Vested Interest in Company Contributions
allocated to his Company Fixed Contribution Account, Matching
Contribution Account, and Discretionary Contribution Account before
such Breaks in Service.
(c) At the discretion of the Committee, and solely to the
extent required to satisfy one of the tests described in Section 5.3(a)
for a Plan Year, a Participant shall be one hundred percent (100%)
vested in all or a portion of the Company Contributions allocated to
his Company Fixed Contribution Account, Matching Contribution Account,
and Discretionary Contribution Account for such Plan Year.
C. A New Article XXII shall be added effective January 1, 1998, to read
in its entirety as follows:
ARTICLE XXII
SPECIAL PROVISIONS REGARDING ACCOUNTS TRANSFERRED FROM THE JELLINEK,
SCHWARTZ & CONNOLLY, INC. PROFIT SHARING/SECTION 401(K) PLAN AND TRUST.
Section 22.1 IN GENERAL. The following special provisions in this
Article XXII shall be effective as of January 1, 1998, and shall apply
under the Plan to any Eligible Employee with an account under the
Jellinek, Schwartz & Connolly, Inc. Profit Sharing/Section 401(k) Plan
Trust (the "JSC Plan").
Section 22.2 SEPARATE ACCOUNT MAINTENANCE. Notwithstanding any other
provision hereof, amounts transferred from the JSC Plan shall be
separately accounted for and such amounts (the "JSC Plan Benefits")
may, in addition to other settlement forms available under the Plan, be
distributed to a Participant upon attainment of age 59-1/2 without
regard to whether the Participant is employed by the Company and upon
incurring a Hardship as defined in Section 9.14 hereof. In addition,
JSC Plan Benefits attributable to the so-called "Pension Account" may
be distributed pursuant to any settlement option available to such
benefits.
Section 22.3 COMPUTATION OF SERVICE. Eligible Employees under this
Section 22.3 shall have Years of Service computed pursuant to Section
2.54 hereof. However, each Eligible Employee shall automatically
receive credit for one Year of Service for the period beginning on his
or her anniversary date occurring during the 12 month period
2
<PAGE> 3
beginning on May 1, 1997 and ending on April 30, 1998, without regard
to actual Hours of Service performed.
IN WITNESS WHEREOF, this instrument of amendment is executed this __
day of _____, 1998.
3
<PAGE> 1
Exhibit 10(iii).28
IT CORPORATION
DEFERRED COMPENSATION PLAN
(AMENDED AND RESTATED
EFFECTIVE JANUARY 1, 1998)
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
ARTICLE 1 Definitions...................................................................................1
ARTICLE 2 Selection, Enrollment, Eligibility............................................................5
2.1 Selection by Committee........................................................................5
2.2 Enrollment Requirements.......................................................................5
2.3 Eligibility; Commencement of Participation....................................................5
ARTICLE 3 Deferral Commitments/Interest Crediting.......................................................6
3.1 Minimum Deferral..............................................................................6
3.2 Maximum Deferral..............................................................................6
3.3 Election to Defer; Effect of Election Form....................................................6
3.4 Withholding of Deferral Amounts...............................................................6
3.5 Interest Crediting Prior to Distribution......................................................6
3.6 Interest Crediting for Installment Distributions..............................................7
3.7 FICA Taxes....................................................................................7
3.8 Vesting.......................................................................................7
3.9 Disability Waiver.............................................................................7
3.10 Statement.....................................................................................7
ARTICLE 4 Short-Term Payout; Unforeseeable Financial Emergencies; Withdrawal Election..................8
4.1 Short-Term Payout.............................................................................8
4.2 Withdrawal Payout/Suspensions for Unforeseeable Financial Emergencies.........................8
4.3 Withdrawal Election...........................................................................8
ARTICLE 5 Retirement and Termination Benefits...........................................................9
5.1 Retirement Benefit............................................................................9
5.2 Termination Benefit...........................................................................9
5.3 Death Prior to Completion of Benefits.........................................................9
5.4 Disability....................................................................................9
ARTICLE 6 Pre-Termination Survivor Benefit.............................................................10
6.1 Pre-Termination Survivor Benefit.............................................................10
6.2 Payment of Pre-Termination Survivor Benefits.................................................10
ARTICLE 7 Beneficiary Designation......................................................................11
7.1 Beneficiary..................................................................................11
7.2 Beneficiary Designation; Change; Spousal Consent............................................11
7.3 Acknowledgment...............................................................................11
7.4 No Beneficiary Designation...................................................................11
7.5 Doubt as to Beneficiary......................................................................11
7.6 Discharge of Obligations.....................................................................11
</TABLE>
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<PAGE> 3
<TABLE>
<S> <C> <C>
ARTICLE 8 Leave Of Absence.............................................................................12
8.1 Paid Leave of Absence........................................................................12
8.2 Unpaid Leave of Absence......................................................................12
ARTICLE 9 Termination, Amendment or Modification.......................................................13
9.1 Termination..................................................................................13
9.2 Amendment....................................................................................13
9.3 Effect of Payment............................................................................13
ARTICLE 10 Administration...............................................................................14
10.1 Committee Duties.............................................................................14
10.2 Agents.......................................................................................14
10.3 Binding Effect of Decisions..................................................................14
10.4 Indemnity of Committee.......................................................................14
10.5 Employer Information.........................................................................14
ARTICLE 11 Claims Procedures............................................................................15
11.1 Presentation of Claim........................................................................15
11.2 Notification of Decision.....................................................................15
11.3 Review of a Denied Claim.....................................................................15
11.4 Decision on Review...........................................................................16
11.5 Legal Action.................................................................................16
ARTICLE 12 Trust........................................................................................17
12.1 Establishment of Trust.......................................................................17
12.2 Interrelationship of the Plan and the Trust..................................................17
ARTICLE 13 Miscellaneous................................................................................18
13.1 Unsecured General Creditor...................................................................18
13.2 Employer's Liability.........................................................................18
13.3 Nonassignability.............................................................................18
13.4 Coordination with Other Benefits.............................................................18
13.5 Not a Contract of Employment.................................................................18
13.6 Furnishing Information.......................................................................18
13.7 Terms........................................................................................18
13.8 Captions.....................................................................................19
13.9 Governing Law................................................................................19
13.10 Notice.......................................................................................19
13.11 Successors...................................................................................19
13.12 Spouse's Interest............................................................................19
13.13 Validity.....................................................................................19
13.14 Incompetent..................................................................................19
13.15 Distribution in the Event of Taxation........................................................20
13.16 Legal Fees to Enforce Rights After Change in Control.........................................20
13.17 Counterparts.................................................................................20
13.18 Small Payments...............................................................................20
</TABLE>
ii
<PAGE> 4
IT CORPORATION
DEFERRED COMPENSATION PLAN
AMENDED AND RESTATED
EFFECTIVE JANUARY 1, 1998
PURPOSE
The purpose of this Plan is to provide specified benefits to
non-employee directors and a select group of management or highly compensated
employees who contribute materially to the continued growth, development and
future business success of IT CORPORATION, a California corporation, and its
affiliates. The Plan constitutes an unfunded plan that is not qualified under
Code Section 401(a). The Plan was originally adopted effective July 1, 1995, but
is hereby amended and restated effective January 1, 1998.
ARTICLE 1
DEFINITIONS
For purposes hereof, unless otherwise clearly apparent from
the context, the following phrases or terms shall have the following indicated
meanings:
1.1 "Account Balance" shall mean, with respect to a Participant, the sum of
(i) the Participant's Deferral Amount plus (ii) interest thereon
credited in accordance with the applicable interest crediting
provisions of the Plan, net of all distributions from such account.
This account shall be a bookkeeping entry only and shall be utilized
solely as a device for the measurement and determination of the amounts
to be paid to or in respect of a Participant pursuant to the Plan.
1.2 "Annual Bonus" shall mean any compensation, in addition to Base Annual
Salary, paid annually during a Plan Year, either in cash or stock, to a
Participant as an employee under any Employer's annual bonus and
incentive plans without regard to Code Section 401(a)(17).
1.3 "Annual Deferral Amount" shall mean that portion of a Participant's
Base Annual Salary and Annual Bonus that a Participant elects to have
and is deferred, in accordance with Article 3, for any one Plan Year
without regard to Code Section 401(a)(17).
1.4 "Base Annual Salary" shall mean the annual compensation and commissions
(but excluding bonuses, overtime, incentive payments, non-monetary
awards, directors fees, and other fees) paid to a Participant for
services rendered to any Employer, before reduction for compensation
deferred pursuant to all qualified, non-qualified and Code Section 125
plans of any Employer. Notwithstanding the foregoing, in the case of
non-employee directors, "Base Annual Salary" shall mean directors fees.
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1.5 "Beneficiary" shall mean one or more persons, trusts, estates or other
entities, designated in accordance with Article 7, that are entitled to
receive benefits under the Plan upon the death of a Participant.
1.6 "Beneficiary Designation Form" shall mean the form established from
time to time by the Committee that a Participant completes, signs and
returns to the Committee to designate one or more Beneficiaries.
1.7 "Board" shall mean the board of directors of the Company.
1.8 "Change in Control" shall mean with respect to an Employer the first to
occur of any of the following events:
(a) Any "person" (as that term is used in Section 13 and 14(d)(2)
of the Securities Exchange Act of 1934 ("Exchange Act")),
after the date hereof becomes the beneficial owner (as that
term is used in Section 13(d) of the Exchange Act), directly
or indirectly, of 50% or more of the Employer's capital stock
entitled to vote in the election of directors;
(b) During any period of two consecutive years, individuals who at
the beginning of such period constitute the board of directors
of the Employer cease for any reason to constitute at least a
majority thereof, unless the election or the nomination for
election by the Employees shareholders of each new director
was approved by a vote of at least three-quarters of the
directors then still in office who were directors at the
beginning of the period;
(c) Any consolidation or merger of the Employer, other than a
consolidation or merger of the Employer in which the holders
of the common stock of the Employer immediately prior to the
consolidation or merger hold more than 50% of the common stock
of the surviving corporation immediately after the
consolidation or merger;
(d) The shareholders of the Employer approve any plan or proposal
for the liquidation or dissolution of the Employer; or
(e) Substantially all of the assets of the Employer are sold or
otherwise transferred to parties that are not within a
"controlled group of corporations" (as defined in Section 1563
of the Code) in which the Employer is a member.
1.9 "Claimant" shall have the meaning set forth in Section 11.1.
1.10 "Code" shall mean the Internal Revenue Code of 1986, as amended.
1.11 "Committee" shall mean the administrative committee appointed to manage
and administer the Plan in accordance: with its provisions pursuant to
Article 10.
1.12 "Company" shall mean IT Corporation, a Delaware corporation.
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<PAGE> 6
1.13 "Crediting Rate" shall mean, for a particular Plan Year, an interest
rate determined by the compensation committee of the Board, in its sole
and absolute discretion.
1.14 "Deferral Amount" shall mean the sum of all of a Participant's Annual
Deferral Amounts.
1.15 "Disability" shall mean a period of disability during which a
Participant qualifies for benefits under the Participant's Employer's
long-term disability plan (or would qualify if he were a participant in
such a plan).
1.16 "Election Form" shall mean the form established from time to time by
the Committee that a Participant completes, signs and returns to the
Committee to make an election under the Plan.
1.17 "Employer" shall mean the Company or any affiliate authorized by the
Board to participate in the Plan.
1.18 "Participant" shall mean any employee or non-employee director of an
Employer (i) who is selected to participate in the Plan, (ii) who
elects to participate in the Plan, (iii) who signs a Plan Agreement, an
Election Form and a Beneficiary Designation Form, (iv) whose signed
Plan Agreement, Election Form and Beneficiary Designation Form are
accepted by the Committee, (v) who commences participation in the Plan,
and (vi) whose Plan Agreement has not terminated.
1.19 "Plan" shall mean the IT Corporation Deferred Compensation Plan, which
shall be evidenced by this instrument, as it may be constituted from
time to time.
1.20 "Plan Agreement" shall mean a written agreement, as may be amended from
time to time, which is entered into by and between one or more
Employers and a Participant. Each Plan Agreement executed by, a
Participant shall provide for the entire benefit to which such
Participant is entitled under the Plan, and shall specify the Employer
or Employers liable for the Participant's benefits hereunder and the
magnitude or extent of such liability. The Plan Agreement bearing the
latest date of acceptance by the Committee shall govern such
entitlement and each Employer's liability. Upon the complete payment of
a Participant's Account Balance, each individual's Plan Agreement and
his or her status as a Participant shall terminate.
1.21 "Plan Year" shall, for the first Plan Year, begin on January 1, 1996
and end on December 31, 1996. For each Plan Year thereafter, the Plan
Year shall begin on January 1 of each year and continue through
December 31.
1.22 "Pre-Retirement Survivor Benefit" shall mean the benefit set forth in
Article 6.
1.23 "Retirement," "Retire," "Retires," or "Retired" shall mean (a) in the
case of a Participant that is an employee, severance from employment
with all Employers for any reason other than a leave of absence on or
after the attainment of (i) the date on which the sum of a
Participant's age and Years of Service is equal to seventy (70), or
(ii) age sixty-five (65), whichever is earlier; and (b) in the case of
a Participant that is a non-employee director,
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<PAGE> 7
severance from service with all Employers for any reason other than a
leave of absence on or after the attainment of (i) age 70 with at least
five Years of Service, or (ii) ten Years of Service (in which case the
Participant shall be deemed to Retire at age 65, or, if later, his or
her actual age at Retirement. If a Participant has been both an
employee and a nonemployee director, his or her Retirement shall occur
at the later of whichever of clauses (a) or (b) applies.
1.24 "Retirement Benefit" shall mean the benefit set forth in Article 5.
1.25 "Short-Term Payout" shall mean the payout set forth in Section 4.1.
1.26 "Termination Benefit" shall mean the benefit set forth in Article 5.
1.27 "Termination of Employment" shall mean the ceasing of employment or
service with all Employers, voluntarily or involuntarily, for any
reason other than Retirement, death or an authorized leave of absence.
1.28 "Trust" shall mean the one or more trusts established pursuant to that
certain trust agreement between the Employers and the trustee named
therein, as amended from time to time.
1.29 "Unforeseeable Financial Emergency" shall mean an unanticipated
emergency that is caused by an event beyond the control of the
Participant that would result in severe financial hardship to the
Participant resulting from (i) a sudden and unexpected illness or
accident of the Participant or a dependent of the Participant, (ii) a
loss of the Participant's property due to casualty, or (iii) such other
extraordinary and unforeseeable circumstances arising as a result of
events beyond the control of the Participant, all as determined in the
sole and absolute discretion of the Committee.
1.30 "Years of Service" shall mean, with respect to a Participant, the total
number of such years recognized and taken into account under the IT
Corporation Retirement Plan, except that in the case of non-employee
directors, "Years of Service" shall mean the total number of years and
portions thereof served as a non-employee director.
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<PAGE> 8
ARTICLE 2
SELECTION, ENROLLMENT, ELIGIBILITY
2.1 SELECTION BY COMMITTEE. Participation in the Plan shall be limited to
non-employee directors and to employees of an Employer who are part of
a a select group of management or highly compensated employees.
Generally, in the case of employees, such group shall be limited to
employees eligible to participate in the Company's bonus incentive plan
and with a Base Annual Salary of at least $100,000. From the foregoing,
the Committee shall select, in its sole and absolute discretion,
employees to participate in the Plan.
2.2 ENROLLMENT REQUIREMENTS. As a condition to participation, each selected
person shall complete, execute and return to the Committee within 30
days of selection a Plan Agreement, an Election Form and a Beneficiary
Designation Form. In addition, the Committee shall establish from time
to time such other enrollment requirements as it determines in its sole
and absolute discretion are necessary.
2.3 ELIGIBILITY; COMMENCEMENT OF PARTICIPATION. Provided a person selected
to participate herein has met all enrollment requirements set forth
herein and required by the Committee, including returning all required
documents to the Committee within 30 days of selection, that person
shall commence participation in the Plan upon the timely completion of
those requirements and the Committee's acceptance of all submitted
documents. If a person fails to meet all such requirements within the
required 30 day period, he or she shall not be eligible to participate
in the Plan until the first day of the Plan Year following the delivery
to and acceptance by the Committee of the required documents.
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<PAGE> 9
ARTICLE 3
DEFERRAL COMMITMENTS/INTEREST CREDITING
3.1 MINIMUM DEFERRAL.
(a) MINIMUM. For each Plan Year, a Participant may elect to defer
Base Annual Salary and/or Annual Bonus paid during such Plan
Year in the minimum amount of $2,000 in the aggregate. If no
election is made, the amount deferred shall be zero.
(b) SHORT PLAN YEAR. If a Participant first becomes a Participant
after the first day of a Plan Year, or, in the case of the
first Plan Year of the Plan itself, the minimum deferral shall
be an amount equal to the minimum set forth above, multiplied
by a fraction, the numerator of which is the number of
complete months remaining in the Plan Year and the denominator
of which is 12.
3.2 MAXIMUM DEFERRAL. For each Plan Year, a Participant may elect to defer
Base Annual Salary and/or Annual Bonus up to 100% of his or her Base
Annual Salary and Annual Bonus.
3.3 ELECTION TO DEFER; EFFECT OF ELECTION FORM. In connection with a
Participant's commencement of participation in the Plan, the
Participant shall make a deferral election by delivering to the
Committee a completed and signed Election Form, which election and form
must be accepted by the Committee for a valid election to exist. For
each succeeding Plan Year, a new Election Form must be delivered to the
Committee, in accordance with its rules and procedures, before the end
of the Plan Year preceding the Plan Year for which the election is
made. If no Election Form is timely delivered for a Plan Year, no
Annual Deferral Amount shall be withheld for that Plan Year.
3.4 WITHHOLDING OF DEFERRAL AMOUNTS. For each Plan Year, the Base Annual
Salary portion of the Annual Deferral Amount shall be withheld each
payroll period in equal amounts from the Participant's Base Annual
Salary. The Annual Bonus portion of the Annual Deferral Amount shall be
withheld at the time the Annual Bonus is or otherwise would be paid to
the Participant.
3.5 INTEREST CREDITING PRIOR TO DISTRIBUTION. Prior to any distributions of
benefits under Articles 4, 5, or 6, interest at the Crediting Rate
shall be credited and compounded annually on a Participant's Account
Balance as of the date the portion of the Annual Deferral Amount was
actually withheld from the compensation the Participant would otherwise
receive. In the event of Retirement, death or a Termination of
Employment prior to the end of a Plan Year, the basis for that year's
interest crediting will be a fraction of the full year's interest,
based on the number of full months that the Participant was employed
with the Employer during the Plan Year prior to the occurrence of such
event. If a distribution is made under this Plan, for purposes of
crediting interest, the Account Balance shall be reduced as of the
first day of the month in which the distribution is
6
<PAGE> 10
made. A Participant shall receive credit for a full month of interest
if he or she was a Participant for at least 15 days of a particular
month.
3.6 INTEREST CREDITING FOR INSTALLMENT DISTRIBUTIONS. In the event a
benefit is paid in installments under Articles 5 or 6 interest shall be
credited and compounded on the undistributed portion of the
Participant's Account Balance commencing on the first day of the month
in which the Participant terminates employment, using a fixed interest
rate that is determined by averaging the Crediting Rates for the Plan
Year in which installment payments commence and the four (4) preceding
Plan Years. If a participant has completed fewer than five (5) full
years of Plan participation years, this average shall be determined
using the Crediting Rates for the Plan Years during which the
Participant participated in the Plan.
3.7 FICA TAXES. For each Plan Year, the Participant's Employer(s) shall
ratably withhold from that portion of the Participant's Base Annual
Salary and/or Annual Bonus that is not being deferred, the
Participant's share, if any, of FICA taxes on deferred amounts (or
earnings thereon). If necessary, the Committee shall reduce the Annual
Deferral Amount in order to comply with this Section.
3.8 VESTING. A Participant shall have at all times a fully vested and
nonforfeitable interest in his or her Account Balance.
3.9 DISABILITY WAIVER.
(a) WAIVER OF DEFERRAL; CREDIT FOR PLAN YEAR OF DISABILITY. A
Participant who is determined by the Committee to be suffering
from a Disability shall be excused from fulfilling that
portion of the Annual Deferral Amount commitment that would
otherwise have been withheld from a Participant's Base Annual
Salary and/or Annual Bonus for the Plan Year during which the
Participant first suffers a Disability. During the period of
Disability, the Participant shall not be allowed to make any
additional deferral elections.
(b) RETURN TO WORK. If a Participant returns to employment or
service with an Employer after a Disability ceases, the
Participant may elect to defer an Annual Deferral Amount for
the Plan Year following his or her return to employment and
for every Plan Year thereafter while a Participant in the
Plan; provided such deferral elections are otherwise allowed
and an Election Form is delivered to and accepted by the
Committee for each such election in accordance with Section
3.3 above.
3.10 STATEMENT. Each Employer shall provide no less frequently than annually
to each Participant a statement of the Participant's total Account
Balance including earnings credited thereto.
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<PAGE> 11
ARTICLE 4
SHORT-TERM PAYOUT; UNFORESEEABLE FINANCIAL EMERGENCIES;
WITHDRAWAL ELECTION
4.1 SHORT-TERM PAYOUT. In connection with each election to defer an Annual
Deferral Amount, a Participant may elect to receive a future
"Short-Term Payout" from the Plan with respect to that Annual Deferral
Amount. The Short-Term Payout shall be a lump sum payment in an amount
that is equal to the Annual Deferral Amount plus interest credited at
the Crediting Rate on that amount. Subject to the other terms and
conditions of this Plan, each Short-Term payout elected shall be paid
within 60 days of the first day of the Plan Year that is 5 or more
years after the first day of the Plan Year in which the Annual Deferral
Amount is actually deferred.
4.2 WITHDRAWAL PAYOUT/SUSPENSIONS FOR UNFORESEEABLE FINANCIAL EMERGENCIES.
If the Participant experiences an Unforeseeable Financial Emergency,
the Participant may petition the Committee to (i) suspend any deferrals
required to be made by a Participant and/or (ii) receive a partial or
full payout from the Plan. The payout shall not exceed the lesser of
the Participant's Account Balance, calculated as if such Participant
were receiving a Termination Benefit, or the amount reasonably needed
to satisfy the Unforeseeable Financial Emergency. If subject to the
sole and absolute discretion of the Committee, the petition for a
suspension and/or payout is approved, suspension shall take effect upon
the date of approval and any payout shall be made within 60 days of the
date of approval.
4.3 WITHDRAWAL ELECTION. A Participant may elect, at any time, to withdraw
all of his or her Account Balance, calculated as if such Participant
were receiving a Termination Benefit, less a withdrawal penalty (the
net amount shall be referred to as the "Withdrawal Amount"). No partial
withdrawals of that balance shall be allowed. The Participant shall
make this election by giving the Committee advance written notice of
the election in a form determined from time to time by the Committee.
The withdrawal penalty shall be equal to 15% of the Participant's
Account Balance determined immediately prior to the date of his or her
election. Once the Withdrawal Amount is paid, the Participant's
participation in the Plan shall terminate and the Participant shall not
be eligible to participate in the Plan in the future.
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ARTICLE 5
RETIREMENT AND TERMINATION BENEFITS
5.1 RETIREMENT BENEFIT. A Participant who Retires shall receive, as a
Retirement Benefit, his or her Account Balance. A Participant, in
connection with his or her commencement of participation in the Plan,
shall elect on his or her initial Election Form to receive the
Retirement Benefit in a lump sum or in equal monthly payments over a
period of 60, 120, or 180 months. The lump sum payment shall be made,
or installment payments shall commence, on the date at or after his or
her Retirement specified on the Election Form. The Participant may
change these elections to an allowable alternative payout format by
submitting a new Election Form to the Committee, provided that any such
new Election Form is submitted at least 3 years prior to the
Participant's Retirement. The Election Form most recently accepted by
the Committee shall govern the payout of the Retirement Benefit.
5.2 TERMINATION BENEFIT. If a Participant experiences a Termination of
Employment prior to his or her Retirement, the Participant shall
receive a Termination Benefit, which shall be equal to the vested
portion of the Participant's Account Balance. Such Benefit shall be
payable in either a lump sum or in equal monthly payments over a period
of 60, 120, or 180 months, as selected by the Participant, in
connection with his or her commencement of participation in the Plan,
on the initial Election Form. The lump sum payment shall be made, or
installment payments shall commence, on the date at or after his or her
Termination of Employment specified on the Election Form. The
Participant may change these elections to an allowable alternative
payout format by submitting a new Election Form to the Committee,
provided that any such new Election Form is submitted at least 3 years
prior to the Participant's Termination of Employment. The Election Form
most recently accepted by the Committee shall govern the payout of the
Termination Benefit.
5.3 DEATH PRIOR TO COMPLETION OF BENEFITS. If a Participant dies after
Retirement or Termination of Employment but before the applicable
benefit is paid in full, the Participant's unpaid benefits shall
continue and shall be paid to the Participant's Beneficiary (a) over
the remaining number of months and in the same amounts as that benefit
would have been paid to the Participant had the Participant survived,
or (b) in a lump sum, if requested by the beneficiary and allowed at
the sole and absolute discretion of the Committee. The lump sum payment
will be the Participant's Account Balance at the time of his or her
death.
5.4 DISABILITY. A Participant suffering a Disability shall continue to be
considered employed or in service and shall be eligible for the
benefits provided for in Articles 4, 5, and 6 in accordance with the
provisions of those Articles, unless the Committee determines during
such Disability, in its sole and absolute discretion, that the
Participant shall, for purposes of the Plan, be deemed to have
experienced a Termination of Employment.
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ARTICLE 6
PRE-TERMINATION SURVIVOR BENEFIT
6.1 PRE-TERMINATION SURVIVOR BENEFIT. If a Participant dies before he or
she Retires or has a Termination of Employment, the Participant's
Beneficiary shall receive a Pre-Termination Survivor Benefit equal to
the Participant's Account Balance.
6.2 PAYMENT OF PRE-TERMINATION SURVIVOR BENEFITS. The Pre-Termination
Survivor Benefit shall be paid in the payment period previously elected
by the Participant for the payment of the Termination Benefit, or, if
the Participant was eligible to Retire at the time of his or her death,
the Retirement Benefit. However, the Pre-Termination Survivor Benefit
payment may be made as a lump sum at the request of the Beneficiary and
with the consent of the Committee, in its sole and absolute discretion.
The first (or only payment, if made in lump sum) shall be made within
60 days of the Committee's receiving proof of the Participant's death.
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<PAGE> 14
ARTICLE 7
BENEFICIARY DESIGNATION
7.1 BENEFICIARY. Each Participant shall have the right, at any time, to
designate his or her Beneficiary (both primary as well as contingent)
to receive any benefits payable under the Plan to a Beneficiary upon
the death of a Participant. The Beneficiary designated under this Plan
may be the same as or different from the beneficiary designation under
any other plan of an Employer in which the Participant participates.
7.2 BENEFICIARY DESIGNATION; CHANGE; SPOUSAL CONSENT. A Participant shall
designate his or her Beneficiary by completing and signing the
Beneficiary Designation Form, and returning it to the Committee or its
designated agent. A Participant shall have the right to change a
Beneficiary by completing, signing and otherwise complying with the
terms of the Beneficiary Designation Form and the Committee's rules and
procedures, as in effect from time to time. Where required by law or by
the Committee, in its sole and absolute discretion, if the Participant
names someone other than his or her spouse as a Beneficiary, a spousal
consent, in the form designated by the Committee, must be signed by
that Participant's spouse and returned to the Committee. Upon the
acceptance by the Committee of a new Beneficiary Designation Form, all
Beneficiary designations previously filed shall be canceled. The
Committee shall be entitled to rely on the last Beneficiary Designation
Form filed by the Participant and accepted by the Committee prior to
his or her death.
7.3 ACKNOWLEDGMENT. No designation or change in designation of a
Beneficiary shall be effective until received, accepted and
acknowledged in writing by the Committee or its designated agent.
7.4 NO BENEFICIARY DESIGNATION. If a Participant fails to designate a
Beneficiary as provided in Sections 7.1, 7.2 and 7.3 above, or, if all
designated Beneficiaries predecease the Participant or die prior to
complete distribution of the Participant's benefits, then the
Participant's designated Beneficiary shall be his or her surviving
spouse. If the Participant has no surviving spouse, the benefits
remaining under the Plan shall be paid to the Participant's estate.
7.5 DOUBT AS TO BENEFICIARY. If the Committee has any doubt as to the
proper Beneficiary to receive payments pursuant to this Plan, the
Committee shall have the right, exercisable in its sole and absolute
discretion, to cause the Participant's Employer to withhold such
payments until this matter is resolved to the Committee's satisfaction.
7.6 DISCHARGE OF OBLIGATIONS. The payment of benefits under the Plan to a
Beneficiary shall fully and completely discharge all Employers and the
Committee from all further obligations under this Plan with respect to
the Participant, and that Participant's Plan Agreement shall terminate
upon such full payment of benefits.
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<PAGE> 15
ARTICLE 8
LEAVE OF ABSENCE
8.1 PAID LEAVE OF ABSENCE. If a Participant is authorized by the
Participant's Employer for any reason to take a paid leave of absence
from the employment or service of the Employer, the Participant shall
continue to be considered actively employed by, or in the service of,
the Employer and the Annual Deferral Amount shall continue to be
withheld during such paid leave of absence in accordance with Section
3.3.
8.2 UNPAID LEAVE OF ABSENCE. If a Participant is authorized by the
Participant's Employer for any reason to take an unpaid leave of
absence from the employment or service of the Employer, the Participant
shall be excused from making deferrals until the earlier of the date
the leave of absence expires or the date the Participant returns to
paid employment status. Upon such expiration or return, deferrals shall
resume for the remaining portion of the Plan Year in which the
expiration or return occurs, based on the deferral election, if any,
made for that Plan Year. If no election was made for that Plan Year, no
deferral shall be withheld.
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ARTICLE 9
TERMINATION, AMENDMENT OR MODIFICATION
9.1 TERMINATION. Any Employer reserves the right to terminate the Plan at
any time with respect to Participants employed by, or in the service
of, the Employer. Upon the termination of the Plan, a Participant's
Account Balance shall be paid out as though the Participant had
experienced a Termination of Employment on the date of Plan
termination, or, if Plan termination occurs after the date upon which
the Participant was eligible to Retire, the Participant had Retired on
the date of Plan termination, or, if Plan termination occurs after the
Participant Retired and commenced (but not completed) distribution
hereunder, benefits shall continue to the Participant pursuant to the
terms hereof without regard to the termination. Prior to a Change in
Control, an Employer shall have the right, in its sole and absolute
discretion, and notwithstanding any elections made by the Participant,
to pay all such benefits in a lump sum.
9.2 AMENDMENT. Any Employer may, at any time, amend or modify the Plan in
whole or in part with respect to that Employer; provided, however, that
no amendment or modification shall be effective to decrease a
Participant's Account Balance, calculated as though the Participant had
experienced a Termination of Employment as of the effective date of the
amendment or modification, or, if the amendment or modification occurs
after the date upon which the Participant was eligible to Retire, the
Participant had Retired as of the effective date of the amendment or
modification. In addition, no amendment or modification of the Plan
shall affect the right of any Participant or Beneficiary who was
eligible to or did Retire on or before the effective date of such
amendment or modification to receive benefits in the manner he or she
elected.
9.3 EFFECT OF PAYMENT. The full payment of the applicable benefit under
Articles 4, 5, 6, or 9 of the Plan shall completely discharge all
obligations to a Participant under this Plan and the Participant's Plan
Agreement shall terminate.
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<PAGE> 17
ARTICLE 10
ADMINISTRATION
10.1 COMMITTEE DUTIES. This Plan shall be administered by a Committee which
shall consist of individuals selected by the President and Chief
Executive Officer of the Company. Members of the Committee may be
Participants under this Plan. The Committee shall also have the
discretion and authority to make, amend, interpret, and enforce all
appropriate rules and regulations for the administration of this Plan
and decide or resolve any and all questions including interpretations
of this Plan, as may arise in connection with the Plan. Any Committee
member must recuse himself or herself on any matter of personal
interest to such member that comes before the Committee.
10.2 AGENTS. In the administration of this Plan, the Committee may, from
time to time, employ agents and delegate to them such administrative
duties as it sees fit and may from time to time consult with counsel
who may be counsel to any Employer.
10.3 BINDING EFFECT OF DECISIONS. The decision or action of the Committee
with respect to any question arising out of or in connection with the
administration, interpretation and application of the Plan and the
rules and regulations promulgated hereunder shall be final and
conclusive and binding upon all persons having any interest in the
Plan.
10.4 INDEMNITY OF COMMITTEE. All Employers shall indemnify and hold harmless
the members of the Committee against any and all claims, losses,
damages, expenses or liabilities arising from any action or failure to
act with respect to this Plan, except in the case of willful misconduct
by the Committee or any of its members.
10.5 EMPLOYER INFORMATION. To enable the Committee to perform its functions,
each Employer shall supply full and timely information to the Committee
on all matters relating to the compensation of its Participants, the
date and circumstances of the Retirement, Disability, death or
Termination of Employment of its Participants, and such other pertinent
information as the Committee may reasonably require.
14
<PAGE> 18
ARTICLE 11
CLAIMS PROCEDURES
11.1 PRESENTATION OF CLAIM. Any Participant or Beneficiary of a deceased
Participant (such Participant or Beneficiary being referred to below as
a "Claimant") may deliver to the Committee a written claim for a
determination with respect to the amounts distributable to such
Claimant from the Plan. If such a claim relates to the contents of a
notice received by the Claimant, the claim must be made within 60 days
after such notice was received by the Claimant. All other claims must
be made within 180 days of the date on which the event that caused the
claim to arise occurred. The claim must state with particularity the
determination desired by the Claimant.
11.2 NOTIFICATION OF DECISION. The Committee shall consider a Claimant's
claim within 60 days of the making of the claim, and shall notify the
Claimant in writing:
(a) that the Claimant's requested determination has been made,
and that the claim has been allowed in full; or
(b) that the Committee has reached a conclusion contrary, in whole
or in part, to the Claimant's requested determination, and
such notice must set forth in a manner calculated to be
understood by the Claimant:
(i) the specific reason(s) for the denial of the claim,
or any part of it;
(ii) specific reference(s) to pertinent provisions of the
Plan upon which such denial was based;
(iii) a description of any additional material or
information necessary for the Claimant to perfect the
claim, and an explanation of why such material or
information is necessary; and
(iv) an explanation of the claim review procedure set
forth in Section 11.3 below.
11.3 REVIEW OF A DENIED CLAIM. Within 60 days after receiving a notice from
the Committee that a claim has been denied, in whole or in part, a
Claimant (or the Claimant's duly authorized representative) may file
with the Committee a written request for a review of the denial of the
claim. Thereafter, but not later than 30 days after the review
procedure begins, the Claimant (or the Claimant's duly authorized
representative):
(a) may review pertinent documents;
(b) may submit written comments or other documents; and/or
(c) may request a hearing, which the Committee, in its sole
discretion, may grant.
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11.4 DECISION ON REVIEW. The Committee shall render its decision on review
promptly, and not later than 60 days after the filing of a written
request for review of the denial, unless a hearing is held or other
special circumstances require additional time, in which case the
Committee's decision must be rendered within 120 days after such date.
Such decision must be written in a manner calculated to be understood
by the Claimant, and it must contain:
(a) specific reasons for the decision;
(b) specific reference(s) to the pertinent Plan provisions upon
which the decision was based; and
(c) such other matters as the Committee deems relevant.
11.5 LEGAL ACTION. A Claimant's compliance with the foregoing provisions of
this Article 11 is a mandatory prerequisite to a Claimant's right to
commence any legal action with respect to any claim for benefits under
this Plan.
16
<PAGE> 20
ARTICLE 12
TRUST
12.1 ESTABLISHMENT OF TRUST. The Employers shall establish the Trust and
shall transfer over to the Trust such assets, if any, as the Committee
determines from time to time and in its sole discretion, are
appropriate.
12.2 INTERRELATIONSHIP OF THE PLAN AND THE TRUST. The provisions of the Plan
shall govern the rights of a Participant to receive distributions
pursuant to the Plan. The provisions of the Trust shall govern the
rights of the Participant and the creditors of the Employers to the
assets transferred to the Trust. The Employers shall at all times
remain liable to carry out their obligations under the Plan. The
Employers' obligations under the Plan may be satisfied with Trust
assets distributed pursuant to the terms of the Trust.
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<PAGE> 21
ARTICLE 13
MISCELLANEOUS
13.1 UNSECURED GENERAL CREDITOR. Participants and their Beneficiaries,
heirs, successors and assigns shall have no legal or equitable right,
interest or claim in any property or assets of an Employer. Any and all
of an Employer's assets shall be, and remain, the general, unpledged
and unrestricted assets of the Employer. An Employer's obligation under
the Plan shall be merely that of an unfunded and unsecured promise to
pay money in the future.
13.2 EMPLOYER'S LIABILITY. An Employer's liability for the payment of
benefits shall be defined only by the Plan. An Employer shall have no
obligation to a Participant under the Plan except as expressly provided
in the Plan.
13.3 NONASSIGNABILITY. Neither a Participant nor any other person shall have
any fight to commute, sell, assign, transfer, pledge, anticipate,
mortgage, or otherwise encumber, transfer, hypothecate or convey in
advance of actual receipt, the amounts, if any, payable hereunder, or
any part thereof, which are, and all rights to which are expressly
declared to be unassignable and non-transferable. No part of the
amounts payable shall, prior to actual payment, be subject to seizure
or sequestration for the payment of any debts, judgments, alimony or
separate maintenance owed by a Participant or any other person, nor be
transferable by operation of law in the event of a Participant's or any
other person's bankruptcy or insolvency.
13.4 COORDINATION WITH OTHER BENEFITS. The benefits provided for a
Participant and Participant's Beneficiary under the Plan are in
addition to any other benefits available to such Participant under any
other plan or program for employees of the Participant's Employer. The
Plan shall supplement and shall not supersede, modify or amend any
other such plan or program except as may otherwise be expressly
provided.
13.5 NOT A CONTRACT OF EMPLOYMENT. The terms and conditions of this Plan
shall not be deemed to constitute a contract of employment between any
Employer and the Participant. Such employment is hereby acknowledged to
be an "at will" employment relationship that can be terminated at any
time for any reason, with or without cause, unless expressly provided
in a written employment agreement. Nothing in this Plan shall be deemed
to give a Participant the right to be retained in the service of any
Employer, either as an employee or a director, or to interfere with the
right of any Employer to discipline or discharge the Participant at any
time.
13.6 FURNISHING INFORMATION. A Participant or his or her Beneficiary will
cooperate with the Committee by furnishing any and all information
requested by the Committee and take such other actions as may be
requested in order to facilitate the administration of the Plan and the
payments of benefits hereunder.
13.7 TERMS. Whenever any words are used herein in the singular or in the
plural, they shall be construed as though they were used in the plural
or the singular, as the case may be, in all
18
<PAGE> 22
cases where they would so apply. The masculine pronoun shall be deemed
to include the feminine and vice versa, unless the context clearly
indicates otherwise.
13.8 CAPTIONS. The captions of the articles, sections and paragraphs of this
Plan are for convenience only and shall not control or affect the
meaning or construction of any of its provisions.
13.9 GOVERNING LAW. Subject to ERISA, the provisions of this Plan shall be
construed and interpreted according to the laws of the State of
California.
13.10 NOTICE. Any notice or filing required or permitted to be given to the
Committee under this Plan shall be sufficient if in writing and
hand-delivered, or sent by registered or certified mail, to:
Human Resources Department
IT Corporation
2790 Mosside Boulevard
Monroeville, Pennsylvania 15146-2792
Such notice shall be deemed given as of the date of delivery or, if
delivery is made by mail, as of the date shown on the postmark on the
receipt for registration or certification.
Any notice or filing required or permitted to be given to a Participant
under this Plan shall be sufficient if in writing and hand-delivered,
or sent by mail, to the last known address of the Participant.
13.11 SUCCESSORS. The provisions of this Plan shall bind and inure to the
benefit of the Participant's Employer and its successors and assigns
and the Participant, the Participant's Beneficiaries, and their
permitted successors and assigns.
13.12 SPOUSE'S INTEREST. The interest in the benefits hereunder of a spouse
of a Participant who has predeceased the Participant shall
automatically pass to the Participant and shall not be transferable by
such spouse in any manner, including but not limited to such spouse's
will, nor shall such interest pass under the laws of intestate
succession.
13.13 VALIDITY. In case any provision of this Plan shall be illegal or
invalid for any reason, said illegality or invalidity shall not affect
the remaining parts hereof, but this Plan shall be construed and
enforced as if such illegal or invalid provision had never been
inserted herein.
13.14 INCOMPETENT. If the Committee determines in its discretion that a
benefit under this Plan is to be paid to a minor, a person declared
incompetent or to a person incapable of handling the disposition of
that person's property, the Committee may direct payment of such
benefit to the guardian, legal representative or person having the care
and custody of such minor, incompetent or incapable person. The
Committee may require proof of minority, incompetency, incapacity or
guardianship, as it may deem appropriate prior to
19
<PAGE> 23
distribution of the benefit. Any payment of a benefit shall be a
payment for the account of the Participant and the Participant's
Beneficiary, as the case may be, and shall be a complete discharge of
any liability under the Plan for such payment amount.
13.15 DISTRIBUTION IN THE EVENT OF TAXATION. If, for any reason, all or any
portion of a Participant's benefit under this plan becomes taxable to
the Participant prior to receipt, a Participant may petition the
Committee for a distribution of assets sufficient to meet the
Participant's tax liability (including additions to tax, penalties and
interest). Upon the grant of such a petition, which grant shall not be
unreasonably withheld, a Participant's Employer shall distribute to the
Participant immediately available funds in an amount equal to that
Participant's federal, state and local tax liability associated with
such taxation (which amount shall not exceed the Participant's vested
Account Balance), which liability shall be measured by using that
Participant's then current highest federal, state and local marginal
tax rate, plus the rates or amounts for the applicable additions to
tax, penalties and interest. If the petition is granted, the tax
liability distribution shall be made within 90 days of the date when
the Participant's petition is granted. Such a distribution shall reduce
the benefits to be paid under this Plan.
13.16 LEGAL FEES TO ENFORCE RIGHTS AFTER CHANGE IN CONTROL. The Company is
aware that upon the occurrence of a Change in Control with respect to
an Employer, the board of directors of such Employer (which might then
be composed of new members) or a shareholder of such Employer, or of
any successor corporation might then cause or attempt to cause the
Employer or such successor to refuse to comply with its obligations
under the Plan and might cause or attempt to cause the Employer to
institute, or may institute, litigation seeking to deny Participants
the benefits intended under the Plan. In these circumstances, the
purpose of the Plan could be frustrated. Accordingly, if, following a
Change in Control, it should appear to any Participant that an Employer
or the Committee has failed to comply with any of its obligations under
the Plan or any agreement thereunder or, if an Employer or any other
person takes any action to declare the Plan void or unenforceable or
institutes any litigation or other legal action designed to deny,
diminish or to recover from any Participant or Beneficiary the benefits
intended to be provided, then all Employers irrevocably authorize such
person to retain counsel of his or her choice at the expense of the
Employers to represent such person in connection with the initiation or
defense of any litigation or other legal action, whether by or against
an Employer, the Committee, or any director, officer, shareholder or
other person affiliated with any of them or any successor thereto in
any jurisdiction.
13.17 COUNTERPARTS. This instrument may be executed in one or more
counterparts each of which shall be legally binding and enforceable.
13.18 SMALL PAYMENTS. Notwithstanding any other provision hereof, in the
event that any Participant's or Beneficiary's Account hereunder is less
than $5,000, the Committee may, in its discretion, automatically pay
such amount in one lump sum, rather than installments, but in all other
respects in accordance with the terms of the Plan or an applicable
Election Form.
20
<PAGE> 24
IN WITNESS WHEREOF, the Company has signed this Plan document
on behalf of all Employers as of January 1, 1998.
IT CORPORATION
a California Corporation
By: /s/ Anthony J. DeLuca
---------------------------------
Anthony J. DeLuca
Its: President
--------------------------------
21
<PAGE> 1
Exhibit 10(iii).29
IT CORPORATION
RESTORATION PLAN
AMENDED AND RESTATED EFFECTIVE JANUARY 1, 1998
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
ARTICLE 1 Definitions............................................................................. 1
ARTICLE 2 Selection, Enrollment, Eligibility...................................................... 4
2.1 Selection by Committee.................................................................. 4
2.2 Enrollment Requirements................................................................. 4
2.3 Eligibility; Commencement of Participation.............................................. 4
ARTICLE 3 Contribution and Interest Crediting..................................................... 5
3.1 Company Contribution.................................................................... 5
3.2 Effect of Election Form................................................................. 5
3.3 Interest Crediting Prior to Distribution................................................ 5
3.4 Interest Crediting for Installment Distributions........................................ 5
3.5 FICA Taxes.............................................................................. 5
3.6 Vesting................................................................................. 5
3.7 Statements.............................................................................. 6
ARTICLE 4 Unforeseeable Financial Emergencies; Withdrawal Election................................ 7
4.1 Withdrawal Payout/Suspensions for Unforeseeable Financial Emergencies................... 7
4.2 Withdrawal Election..................................................................... 7
ARTICLE 5 Retirement Termination Benefits......................................................... 8
5.1 Retirement Benefit...................................................................... 8
5.2 Payment of Retirement Benefits.......................................................... 8
5.3 Death Prior to Completion of Retirement Benefits........................................ 8
5.4 Termination Benefit..................................................................... 8
5.5 Disability.............................................................................. 8
ARTICLE 6 Pre-Retirement Survivor Benefit......................................................... 9
6.1 Pre-Retirement Survivor Benefit......................................................... 9
6.2 Payment of Pre-Retirement Survivor Benefits............................................. 9
ARTICLE 7 Beneficiary Designation................................................................. 10
7.1 Beneficiary............................................................................. 10
7.2 Beneficiary Designation; Change; Spousal Consent........................................ 10
7.3 Acknowledgment.......................................................................... 10
7.4 No Beneficiary Designation.............................................................. 10
7.5 Doubt as to Beneficiary................................................................. 10
7.6 Discharge of Obligations................................................................ 10
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C> <C>
ARTICLE 8 Termination, Amendment or Modification.................................................. 11
8.1 Termination............................................................................. 11
8.2 Amendment............................................................................... 11
8.3 Effect of Payment....................................................................... 11
ARTICLE 9 Administration.......................................................................... 12
9.1 Committee Duties........................................................................ 12
9.2 Agents.................................................................................. 12
9.3 Binding Effect of Decisions............................................................. 12
9.4 Indemnity of Committee.................................................................. 12
9.5 Employer Information.................................................................... 12
ARTICLE 10 Claims Procedures....................................................................... 13
10.1 Presentation of Claim................................................................... 13
10.2 Notification of Decision................................................................ 13
10.3 Review of a Denied Claim................................................................ 13
10.4 Decision on Review...................................................................... 13
10.5 Legal Action............................................................................ 14
ARTICLE 11 Trust ................................................................................. 15
11.1 Establishment of Trust.................................................................. 15
11.2 Interrelationship of the Plan and the Trust............................................. 15
ARTICLE 12 Miscellaneous........................................................................... 16
12.1 Unsecured General Creditor.............................................................. 16
12.2 Employer's Liability.................................................................... 16
12.3 Nonassignability........................................................................ 16
12.4 Coordination with Other Benefits........................................................ 16
12.5 Not a Contract of Employment............................................................ 16
12.6 Furnishing Information.................................................................. 16
12.7 Terms ................................................................................. 16
12.8 Captions................................................................................ 17
12.9 Governing Law........................................................................... 17
12.10 Notice ................................................................................. 17
12.11 Successors.............................................................................. 17
12.12 Spouse's Interest....................................................................... 17
12.13 Validity................................................................................ 17
12.14 Incompetent............................................................................. 17
12.15 Distribution in the Event of Taxation................................................... 17
12.16 Legal Fees to Enforce Rights After Change in Control.................................... 18
12.17 Counterparts............................................................................ 18
</TABLE>
ii
<PAGE> 4
IT CORPORATION
RESTORATION PLAN
AMENDED AND RESTATED EFFECTIVE JANUARY 1, 1998
PURPOSE
The purpose of this Plan is to provide specified benefits to a
select group of management or highly compensated employees who contribute
materially to the continued growth, development and future business success of
IT Corporation, a California corporation, and its affiliates. The Plan
constitutes an unfunded plan that is not qualified under Code Section 401(a).
The Plan was originally adopted effective July 1, 1995, but is hereby amended
and restated effective January 1, 1998.
ARTICLE 1
DEFINITIONS
For purposes hereof, unless otherwise clearly apparent from
the context, the following phrases or terms shall have the following indicated
meanings:
1.1 "Account Balance" or "Account" shall mean, with respect to a
Participant, the sum of (i) the Participant's share of Company
Contributions plus (ii) interest thereon credited in accordance with
the applicable interest crediting provisions of the Plan, net of all
distributions from such account . This account shall be a bookkeeping
entry only and shall be utilized solely as a device for the
measurement and determination of the amounts to be paid to or in
respect of a Participant pursuant to the Plan.
1.2 "Annual Bonus" shall mean any compensation, in addition to Base Annual
Salary, paid annually during a Plan Year, either in cash or stock, to
a Participant as an employee under any Employer's annual bonus and
incentive plans without regard to any limits under Code Section
401(a)(17). Notwithstanding the foregoing, the Annual Bonus shall not
include any stock option awards or stock received upon the exercise of
an option.
1.3 "Base Annual Salary" shall mean the annual compensation and
commissions (but excluding bonuses, overtime, incentive payments,
non-monetary awards, directors fees, and other fees) paid to a
Participant for services rendered to any Employer, before reduction
for compensation deferred pursuant to all qualified, non-qualified and
Code Section 125 plans of any Employer without regard to any limits
under Code Section 401(a)(17).
1.4 "Beneficiary" shall mean one or more persons, trusts, estates or other
entities, designated in accordance with Article 7, that are entitled
to receive benefits under the Plan upon the death of a Participant.
1.5 "Beneficiary Designation Form" shall mean the form established from
time to time by the Committee that a Participant completes, signs and
returns to the Committee to designate one or more Beneficiaries.
1.6 "Board" shall mean the board of directors of the Company.
1
<PAGE> 5
1.7 "Change in Control" shall mean with respect to an Employer the first
to occur of any of the following events:
(a) Any "person" (as that term is used in Section 13 and
14(d)(2) of the Securities Exchange Act of 1934 ("Exchange
Act")), after the date hereof becomes the beneficial owner
(as that term is used in Section 13(d) of the Exchange Act),
directly or indirectly, of 50% or more of the Employer's
capital stock entitled to vote in the election of directors;
(b) During any period of two consecutive years, individuals who
at the beginning of such period constitute the board of
directors of the Employer cease for any reason to constitute
at least a majority thereof, unless the election or the
nomination for election by the Employer's shareholders of
each new director was approved by a vote of at least
three-quarters of the directors then still in office who
were directors at the beginning of the period;
(c) Any consolidation or merger of the Employer, other than a
consolidation or merger of the Employer in which the holders
of the common stock of the Employer immediately prior to the
consolidation or merger hold more than 50% of the common
stock of the surviving corporation immediately after the
consolidation or merger;
(d) The shareholders of the Employer approve any plan or
proposal for the liquidation or dissolution of the Employer;
or
(e) Substantially all of the assets of the Employer are sold or
otherwise transferred to parties that are not within a
"controlled group of corporations" (as defined in Section
1563 of the Code) in which the Employer is a member.
1.8 "Claimant" shall have the meaning set forth in Section 11.1.
1.9 "Code" shall mean the Internal Revenue Code of 1986, as amended.
1.10 "Committee" shall mean the administrative committee appointed to
manage and administer the Plan in accordance with its provisions
pursuant to Article 10.
1.11 "Company" shall mean IT Corporation, a Delaware corporation.
1.12 "Company Contribution" shall mean any contribution made and credited
to Participants' Accounts by the Company in accordance with Section
3.1 below.
1.13 "Crediting Rate" shall mean, for a particular Plan Year, an interest
rate determined by the compensation committee of the Board, in its
sole and absolute discretion.
1.14 "Disability" shall mean a period of disability during which a
Participant qualifies for benefits under the Participant's Employer's
long-term disability plan (or would qualify if he were a participant
in such a plan).
1.15 "Election Form" shall mean the form established from time to time by
the Committee that a Participant completes, signs and returns to the
Committee upon the commencement of his participation hereunder to make
a distribution election under the Plan.
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<PAGE> 6
1.16 "Employer" shall mean the Company or any affiliate authorized by the
Board to participate in the Plan.
1.17 "Participant" shall mean any employee of an Employer (i) who is
selected to participate in the Plan, (ii) who signs a Plan Agreement,
an Election Form and a Beneficiary Designation Form, (iii) whose
signed Plan Agreement, Election Form and Beneficiary Designation Form
are accepted by the Committee, (iv) who commences participation in the
Plan, and (v) whose Account Balance has not been paid in full.
1.18 "Plan" shall mean the IT Corporation Restoration Plan, which shall be
evidenced by this instrument, as it may be constituted from time to
time.
1.19 "Plan Agreement" shall mean a written agreement, as may be amended
from time to time, which is entered into by and between one or more
Employers and a Participant. Each Plan Agreement executed by a
Participant shall provide for the entire benefit to which such
Participant is entitled under the Plan, and shall specify the Employer
or Employers liable for the Participant's benefits hereunder and the
magnitude or extent of such liability. The Plan Agreement bearing the
latest date of acceptance by the Committee shall govern such
entitlement and each Employer's liability. Upon the complete payment
of a Participant's Account Balance, each individual's Plan Agreement
and his or her status as a Participant shall terminate.
1.20 "Plan Year" shall, for the first Plan Year, begin on July 1, 1995, and
end on December 31, 1995. For each Plan Year thereafter, the Plan Year
shall begin on January 1 of each year and continue through December
31.
1.21 "Pre-Retirement Survivor Benefit" shall mean the benefit set forth in
Article 6.
1.22 "Retirement," "Retire," "Retires," or "Retired" shall mean severance
from employment with all Employers for any reason other than a leave
of absence on or after the attainment of (a) the date on which the sum
of a Participant's age and Years of Service is equal to seventy (70),
or (b) age sixty-five (65), whichever is earlier.
1.23 "Retirement Benefit" shall mean the benefit set forth in Article 5.
1.24 "Termination Benefit" shall mean the benefit set forth in Article 5.
1.25 "Termination of Employment" shall mean the ceasing of employment with
all Employers, voluntarily or involuntarily, for any reason other than
Retirement, death or an authorized leave of absence.
1.26 "Trust" shall mean the one or more trusts established pursuant to that
certain trust agreement between the Employers and the trustee named
therein, as amended from time to time.
1.27 "Unforeseeable Financial Emergency" shall mean an unanticipated
emergency that is caused by an event beyond the control of the
Participant that would result in severe financial hardship to the
Participant resulting from (i) a sudden and unexpected illness or
accident of the Participant or a dependent of the Participant, (ii) a
loss of the Participant's property due to casualty, or (iii) such
other extraordinary and unforeseeable circumstances arising as a
result of events beyond the control of the Participant, all as
determined in the sole and absolute discretion of the Committee.
3
<PAGE> 7
1.28 "Years of Service" shall mean, with respect to a Participant, the
total number of such years recognized and taken into account under the
IT Corporation Retirement Plan.
4
<PAGE> 8
ARTICLE 2
SELECTION, ENROLLMENT, ELIGIBILITY
2.1 SELECTION BY COMMITTEE. Participation in the Plan shall be limited to
employees of an Employer who are part of a select group of management
or highly compensated employees. Generally, such group shall be
limited to employees whose Base Annual Salary for a year is at least
$150,000. From the foregoing, the Committee shall select, in its sole
and absolute discretion, employees to participate in the Plan.
2.2 ENROLLMENT REQUIREMENTS. As a condition to participation, each
selected employee shall complete, execute and return to the Committee
within 30 days of selection a Plan Agreement, an Election Form and a
Beneficiary Designation Form. In addition, the Committee shall
establish from time to time such other enrollment requirements as it
determines in its sole and absolute discretion are necessary.
2.3 ELIGIBILITY; COMMENCEMENT OF PARTICIPATION. Provided an employee
selected to participate herein has met all enrollment requirements set
forth herein and required by the Committee, including returning all
required documents to the Committee within 30 days of selection, that
employee shall commence participation in the Plan upon the timely
completion of those requirements and the Committee's acceptance of all
submitted documents. If an employee fails to meet all such
requirements within the required 30 day period, that employee shall
not be eligible to participate in the Plan until the first day of the
Plan Year following the delivery to and acceptance by the Committee of
the required documents.
5
<PAGE> 9
ARTICLE 3
CONTRIBUTIONS AND INTEREST CREDITING
3.1 COMPANY CONTRIBUTION. For each Plan Year, each Employer shall make a
Company Contribution on behalf of each Participant equal to the sum of
(a)(i) four percent (4%) of the sum of Participant's Base Annual
Salary and Annual Bonus less (ii) the amount actually contributed on
behalf of the Participant under the fixed company contribution portion
of the IT Corporation Retirement Plan for such Plan Year plus (b)(i)
the percentage designated for such Plan Year for the company
discretionary profit sharing contribution under the IT Corporation
Retirement Plan multiplied by the sum of the Participant's Base Annual
Salary and Annual Bonus less (ii) the amount actually contributed on
behalf of the Participant under the company discretionary profit
sharing contribution under the IT Corporation Retirement Plan.
3.2 EFFECT OF ELECTION FORM. In connection with a Participant's
commencement of participation in the Plan, the Participant shall
deliver to the Committee a completed and signed Election Form, which
election and form must be accepted by the Committee for a valid
election to exist. In such Election Form, the Participant shall
specify the commencement time and format of distributions where such
matters are elective hereunder.
3.3 INTEREST CREDITING PRIOR TO DISTRIBUTION. Prior to any distributions
of benefits under Articles 4, 5, or 6, interest at the Crediting Rate
shall be credited and compounded annually on a Participant's Account
Balance as of the date the Company Contribution for that Plan Year was
actually credited. In the event of Retirement, death or a Termination
of Employment prior to the end of a Plan Year, the basis for that
year's interest crediting will be a fraction of the full year's
interest, based on the number of full months that the Participant was
employed with the Employer during the Plan Year prior to the
occurrence of such event. If a distribution is made under this Plan,
for purposes of crediting interest, the Account Balance shall be
reduced as of the first day of the month in which the distribution is
made. A Participant shall receive credit for a full month of interest
if he or she was a Participant for at least 15 days of a particular
month.
3.4 INTEREST CREDITING FOR INSTALLMENT DISTRIBUTIONS. In the event a
benefit is paid in installments under Articles 5 or 6, interest shall
be credited and compounded on the undistributed portion of the
Participant's Account Balance commencing on the first day of the month
in which the Participant terminates employment, using a fixed interest
rate that is determined by averaging the Crediting Rates for the Plan
Year in which installment payments commence and the four (4) preceding
Plan Years. If a participant has completed fewer than five (5) full
years of Plan participation, this average shall be determined using
the Crediting Rates for the Plan Years during which the Participant
participated in the Plan.
3.5 FICA TAXES. For each Plan Year, the Participant's Employer(s) shall
ratably withhold from that portion of the Participant's Base Annual
Salary and/or Annual Bonus, the Participant's share, if any, of FICA
taxes on contributions (or earnings thereon).
3.6 VESTING. A Participant shall have at all times a vested and
nonforfeitable interest in his Account Balance hereunder that is
coextensive with his vested and nonforfeitable
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<PAGE> 10
interest in the fixed company contribution portion of the IT
Corporation Retirement Plan, except that a Participant's interest
shall become fully vested and nonforfeitable upon the onset of a
Disability. Notwithstanding the foregoing, all Account Balances
hereunder shall become fully vested and nonforfeitable upon the
occurrence of a Change in Control.
3.7 STATEMENTS. The Company shall provide no less frequently than annually
to each Participant a statement of the Participant's total Account
Balance including earnings credited thereto.
7
<PAGE> 11
ARTICLE 4
UNFORESEEABLE FINANCIAL EMERGENCIES;
WITHDRAWAL ELECTION
4.1 WITHDRAWAL PAYOUT/SUSPENSIONS FOR UNFORESEEABLE FINANCIAL EMERGENCIES.
If the Participant experiences an Unforeseeable Financial Emergency,
the Participant may petition the Committee to receive a partial or
full payout from the Plan. The payout shall not exceed the lesser of
the vested portion of the Participant's Account Balance, calculated as
if such Participant were receiving a Termination Benefit, or the
amount reasonably needed to satisfy the Unforeseeable Financial
Emergency. If, subject to the sole and absolute discretion of the
Committee, the petition for a suspension and/or payout is approved,
suspension shall take effect upon the date of approval and any payout
shall be made within 60 days of the date of approval.
4.2 WITHDRAWAL ELECTION. A Participant may elect, at any time, to withdraw
all of the vested portion of his or her Account Balance, calculated as
if such Participant were receiving a Termination Benefit, less a 15%
withdrawal penalty (the net amount shall be referred to as the
"Withdrawal Amount"). No partial withdrawals of that balance shall be
allowed. The Participant shall make this election by giving the
Committee advance written notice of the election in a form determined
from time to time by the Committee. The penalty shall be equal to 15%
of the vested portion of the Participant's Account Balance determined
immediately prior to the date of his or her election. Once the
Withdrawal Amount is paid, the Participant's participation in the Plan
shall terminate and the Participant shall not be eligible to
participate in the Plan in the future.
8
<PAGE> 12
ARTICLE 5
RETIREMENT AND TERMINATION BENEFITS
5.1 RETIREMENT BENEFIT. A Participant who Retires shall receive, as a
Retirement Benefit, his or her Account Balance.
5.2 PAYMENT OF RETIREMENT BENEFITS. A Participant, in connection with his
or her commencement of participation in the Plan, shall elect on the
Election Form to receive the Retirement Benefit in a lump sum or in
equal monthly payments over a period of 60, 120, or 180 months. The
lump sum payment shall be made, or installment payments shall
commence, on the date at or after his or her Retirement specified on
the Election Form. The Participant may change these elections to an
allowable alternative payout format by submitting a new Election Form
to the Committee, provided that any such new Election Form is
submitted at least 3 years prior to the Participant's Retirement. The
Election Form most recently accepted by the Committee shall govern the
payout of the Retirement Benefit.
5.3 DEATH PRIOR TO COMPLETION OF RETIREMENT BENEFITS. If a Participant
dies after Retirement but before the Retirement Benefit is paid in
full, the Participant's unpaid Retirement Benefit payments shall
continue and shall be paid to the Participant's Beneficiary (a) over
the remaining number of months and in the same amounts as that benefit
would have been paid to the Participant had the Participant survived,
or (b) in a lump sum, if requested by the beneficiary and allowed at
the sole and absolute discretion of the Committee. The lump sum
payment will be the Participant's Account Balance at the time of his
or her death.
5.4 TERMINATION BENEFIT. If a Participant experiences a Termination of
Employment prior to his or her Retirement, the Participant shall
receive a Termination Benefit, which shall be equal to the vested
portion of the Participant's Account Balance. Such Benefit shall be
payable in either a lump sum or in equal monthly payments over a
period of 60, 120, or 180 months, as selected by the Participant, in
connection with his or her commencement of participation in the Plan,
on the Election Form. The lump sum payment shall be made, or
installment payments shall commence, on the date at or after his or
her Termination of Employment specified on the Election Form. The
Participant may change these elections to an allowable alternative
payout format by submitting a new Election Form to the Committee,
provided that any such new Election Form is submitted at least 3 years
prior to the Participant's Termination of Employment. The Election
Form most recently accepted by the Committee shall govern the payout
of the Termination Benefit.
5.5 DISABILITY. A Participant suffering a Disability shall continue to be
considered employed and shall be eligible for the benefits provided
for in Articles 4, 5, and 6 in accordance with the provisions of those
Articles, unless the Committee determines during such Disability, in
its sole and absolute discretion, that the Participant shall, for
purposes of the Plan, be deemed to have experienced a Termination of
Employment.
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<PAGE> 13
ARTICLE 6
PRE-RETIREMENT SURVIVOR BENEFIT
6.1 PRE-RETIREMENT SURVIVOR BENEFIT. If a Participant dies before he or
she Retires, the Participant's Beneficiary shall receive a
Pre-Retirement Survivor Benefit equal to the Participant's Account
Balance.
6.2 PAYMENT OF PRE-RETIREMENT SURVIVOR BENEFITS. The Pre-Retirement
Survivor Benefit shall be paid in the payment period previously
elected by the Participant for the payment of the Termination Benefit,
or, if the Participant was eligible to Retire at the time of his or
her death, the Retirement Benefit. However, the Pre-Retirement
Survivor Benefit payment may be made as a lump sum at the request of
the Beneficiary and at the sole and absolute discretion of the
Committee. The first (or only payment, if made in lump sum) shall be
made within 60 days of the Committee's receiving proof of the
Participant's death.
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<PAGE> 14
ARTICLE 7
BENEFICIARY DESIGNATION
7.1 BENEFICIARY. Each Participant shall have the right, at any time, to
designate his or her Beneficiary (both primary as well as contingent)
to receive any benefits payable under the Plan to a Beneficiary upon
the death of a Participant. The Beneficiary designated under this Plan
may be the same as or different from the beneficiary designation under
any other plan of an Employer in which the Participant participates.
7.2 BENEFICIARY DESIGNATION; CHANGE; SPOUSAL CONSENT. A Participant shall
designate his or her Beneficiary by completing and signing the
Beneficiary Designation Form, and returning it to the Committee or its
designated agent. A Participant shall have the right to change a
Beneficiary by completing, signing and otherwise complying with the
terms of the Beneficiary Designation Form and the Committee's rules
and procedures, as in effect from time to time. Where required by law
or by the Committee, in its sole and absolute discretion, if the
Participant names someone other than his or her spouse as a
Beneficiary, a spousal consent, in the form designated by the
Committee, must be signed by that Participant's spouse and returned to
the Committee. Upon the acceptance by the Committee of a new
Beneficiary Designation Form, all Beneficiary designations previously
filed shall be canceled. The Committee shall be entitled to rely on
the last Beneficiary Designation Form filed by the Participant and
accepted by the Committee prior to his or her death.
7.3 ACKNOWLEDGMENT. No designation or change in designation of a
Beneficiary shall be effective until received, accepted and
acknowledged in writing by the Committee or its designated agent.
7.4 NO BENEFICIARY DESIGNATION. If a Participant fails to designate a
Beneficiary as provided in Sections 7.1, 7.2 and 7.3 above, or, if all
designated Beneficiaries predecease the Participant or die prior to
complete distribution of the Participant's benefits, then the
Participant's designated Beneficiary shall be his or her surviving
spouse. If the Participant has no surviving spouse, the benefits
remaining under the Plan shall be paid to the Participant's estate.
7.5 DOUBT AS TO BENEFICIARY. If the Committee has any doubt as to the
proper Beneficiary to receive payments pursuant to this Plan, the
Committee shall have the right, exercisable in its sole and absolute
discretion, to cause the Participant's Employer to withhold such
payments until this matter is resolved to the Committee's
satisfaction.
7.6 DISCHARGE OF OBLIGATIONS. The payment of benefits under the Plan to a
Beneficiary shall fully and completely discharge all Employers and the
Committee from all further obligations under this Plan with respect to
the Participant, and that Participant's Plan Agreement shall terminate
upon such full payment of benefits.
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<PAGE> 15
ARTICLE 8
TERMINATION, AMENDMENT OR MODIFICATION
8.1 TERMINATION. Any Employer reserves the right to terminate the Plan at
any time with respect to Participants employed by the Employer. Upon
the termination of the Plan, the vested portion of a Participant's
Account Balance shall be paid out as though the Participant had
experienced a Termination of Employment on the date of Plan
termination, or, if Plan termination occurs after the date upon which
the Participant was eligible to Retire, the Participant had Retired on
the date of Plan termination, or, if Plan termination occurs after the
Participant Retired and commenced (but not completed) distribution
hereunder, benefits shall continue to the Participant pursuant to the
terms hereof without regard to the termination. Prior to a Change in
Control, an Employer shall have the right, in its sole and absolute
discretion, and notwithstanding any elections made by the Participant,
to pay all such benefits in a lump sum.
8.2 AMENDMENT. Any Employer may, at any time, amend or modify the Plan in
whole or in part with respect to that Employer; provided, however,
that no amendment or modification shall be effective to decrease the
vested portion of a Participant's Account Balance, calculated as
though the Participant had experienced a Termination of Employment as
of the effective date of the amendment or modification, or, if the
amendment or modification occurs after the date upon which the
Participant was eligible to Retire, the Participant had Retired as of
the effective date of the amendment or modification. In addition, no
amendment or modification of the Plan shall affect the right of any
Participant or Beneficiary who was eligible to or did Retire on or
before the effective date of such amendment or modification to receive
benefits in the manner he or she elected.
8.3 EFFECT OF PAYMENT. The full payment of the applicable benefit under
Articles 4, 5, 6, or 8 of the Plan shall completely discharge all
obligations to a Participant under this Plan and the Participant's
Plan Agreement shall terminate.
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ARTICLE 9
ADMINISTRATION
9.1 COMMITTEE DUTIES. This Plan shall be administered by a Committee which
shall consist of individuals selected by the President and Chief
Executive Officer of the Company. Members of the Committee may be
Participants under this Plan. The Committee shall also have the
discretion and authority to make, amend, interpret, and enforce all
appropriate rules and regulations for the administration of this Plan
and decide or resolve any and all questions including interpretations
of this Plan, as may arise in connection with the Plan. Any Committee
member must recuse himself or herself on any matter of personal
interest to such member that comes before the Committee.
9.2 AGENTS. In the administration of this Plan, the Committee may, from
time to time, employ agents and delegate to them such administrative
duties as it sees fit and may from time to time consult with counsel
who may be counsel to any Employer.
9.3 BINDING EFFECT OF DECISIONS. The decision or action of the Committee
with respect to any question arising out of or in connection with the
administration, interpretation and application of the Plan and the
rules and regulations promulgated hereunder shall be final and
conclusive and binding upon all persons having any interest in the
Plan.
9.4 INDEMNITY OF COMMITTEE. All Employers shall indemnify and hold
harmless the members of the Committee against any and all claims,
losses, damages, expenses or liabilities arising from any action or
failure to act with respect to this Plan, except in the case of
willful misconduct by the Committee or any of its members.
9.5 EMPLOYER INFORMATION. To enable the Committee to perform its
functions, each Employer shall supply full and timely information to
the Committee on all matters relating to the compensation of its
Participants, the date and circumstances of the Retirement,
Disability, death or Termination of Employment of its Participants,
and such other pertinent information as the Committee may reasonably
require.
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<PAGE> 17
ARTICLE 10
CLAIMS PROCEDURES
10.1 PRESENTATION OF CLAIM. Any Participant or Beneficiary of a deceased
Participant (such Participant or Beneficiary being referred to below
as a "Claimant") may deliver to the Committee a written claim for a
determination with respect to the amounts distributable to such
Claimant from the Plan. If such a claim relates to the contents of a
notice received by the Claimant, the claim must be made within 60 days
after such notice was received by the Claimant. All other claims must
be made within 180 days of the date on which the event that caused the
claim to arise occurred. The claim must state with particularity the
determination desired by the Claimant.
10.2 NOTIFICATION OF DECISION. The Committee shall consider a Claimant's
claim within 60 days of the making of the claim, and shall notify the
Claimant in writing:
(a) that the Claimant's requested determination has been made,
and that the claim has been allowed in full; or
(b) that the Committee has reached a conclusion contrary, in
whole or in part, to the Claimant's requested determination,
and such notice must set forth in a manner calculated to be
understood by the Claimant:
(i) the specific reason(s) for the denial of the claim,
or any part of it;
(ii) specific reference(s) to pertinent provisions of
the Plan upon which such denial was based;
(iii) a description of any additional material or
information necessary for the Claimant to perfect
the claim, and an explanation of why such material
or information is necessary; and
(iv) an explanation of the claim review procedure set
forth in Section 10.3 below.
10.3 REVIEW OF A DENIED CLAIM. Within 60 days after receiving a notice from
the Committee that a claim has been denied, in whole or in part, a
Claimant (or the Claimant's duly authorized representative) may file
with the Committee a written request for a review of the denial of the
claim. Thereafter, but not later than 30 days after the review
procedure begins, the Claimant (or the Claimant's duly authorized
representative):
(a) may review pertinent documents;
(b) may submit written comments or other documents; and/or
(c) may request a hearing, which the Committee, in its sole
discretion, may grant.
10.4 DECISION ON REVIEW. The Committee shall render its decision on review
promptly, and not later than 60 days after the filing of a written
request for review of the denial, unless a hearing is held or other
special circumstances require additional time, in which case the
Committee's decision must be rendered within 120 days after such
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<PAGE> 18
date. Such decision must be written in a manner calculated to be
understood by the Claimant, and it must contain:
(a) specific reasons for the decision;
(b) specific reference(s) to the pertinent Plan provisions upon
which the decision was based; and
(c) such other matters as the Committee deems relevant.
10.5 LEGAL ACTION. A Claimant's compliance with the foregoing provisions of
this Article 10 is a mandatory prerequisite to a Claimant's right to
commence any legal action with respect to any claim for benefits under
this Plan.
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<PAGE> 19
ARTICLE 11
TRUST
11.1 ESTABLISHMENT OF TRUST. The Employers shall establish the Trust and
shall transfer over to the Trust such assets, if any, as the Committee
determines, from time to time and in its sole discretion, are
appropriate.
11.2 INTERRELATIONSHIP OF THE PLAN AND THE TRUST. The provisions of the
Plan shall govern the rights of a Participant to receive distributions
pursuant to the Plan. The provisions of the Trust shall govern the
rights of the Participant and the creditors of the Employers to the
assets transferred to the Trust. The Employers shall at all times
remain liable to carry out their obligations under the Plan. The
Employers' obligations under the Plan may be satisfied with Trust
assets distributed pursuant to the terms of the Trust.
16
<PAGE> 20
ARTICLE 12
MISCELLANEOUS
12.1 UNSECURED GENERAL CREDITOR. Participants and their Beneficiaries,
heirs, successors and assigns shall have no legal or equitable right,
interest or claim in any property or assets of an Employer. Any and
all of an Employer's assets shall be, and remain, the general,
unpledged and unrestricted assets of the Employer. An Employer's
obligation under the Plan shall be merely that of an unfunded and
unsecured promise to pay money in the future.
12.2 EMPLOYER'S LIABILITY. An Employer's liability for the payment of
benefits shall be defined only by the Plan. An Employer shall have no
obligation to a Participant under the Plan except as expressly
provided in the Plan.
12.3 NONASSIGNABILITY. Neither a Participant nor any other person shall
have any right to commute, sell, assign, transfer, pledge, anticipate,
mortgage, or otherwise encumber, transfer, hypothecate or convey in
advance of actual receipt, the amounts, if any, payable hereunder, or
any part thereof, which are, and all rights to which are expressly
declared to be unassignable and non-transferable. No part of the
amounts payable shall, prior to actual payment, be subject to seizure
or sequestration for the payment of any debts, judgments, alimony or
separate maintenance owed by a Participant or any other person, nor be
transferable by operation of law in the event of a Participant's or
any other person's bankruptcy or insolvency.
12.4 COORDINATION WITH OTHER BENEFITS. The benefits provided for a
Participant and Participant's Beneficiary under the Plan are in
addition to any other benefits available to such Participant under any
other plan or program for employees of the Participant's Employer. The
Plan shall supplement and shall not supersede, modify or amend any
other such plan or program except as may otherwise be expressly
provided.
12.5 NOT A CONTRACT OF EMPLOYMENT. The terms and conditions of this Plan
shall not be deemed to constitute a contract of employment between any
Employer and the Participant. Such employment is hereby acknowledged
to be an "at will" employment relationship that can be terminated at
any time for any reason, with or without cause, unless expressly
provided in a written employment agreement. Nothing in this Plan shall
be deemed to give a Participant the right to be retained in the
service of any Employer, either as an employee or a director, or to
interfere with the right of any Employer to discipline or discharge
the Participant at any time.
12.6 FURNISHING INFORMATION. A Participant or his or her Beneficiary will
cooperate with the Committee by furnishing any and all information
requested by the Committee and take such other actions as may be
requested in order to facilitate the administration of the Plan and
the payments of benefits hereunder.
12.7 TERMS. Whenever any words are used herein in the singular or in the
plural, they shall be construed as though they were used in the plural
or the singular, as the case may be, in all cases where they would so
apply. The masculine pronoun shall be deemed to include the feminine
and vice versa, unless the context clearly indicates otherwise.
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<PAGE> 21
12.8 CAPTIONS. The captions of the articles, sections and paragraphs of
this Plan are for convenience only and shall not control or affect the
meaning or construction of any of its provisions.
12.9 GOVERNING LAW. Subject to ERISA, the provisions of this Plan shall be
construed and interpreted according to the laws of the State of
California.
12.10 NOTICE. Any notice or filing required or permitted to be given to the
Committee under this Plan shall be sufficient if in writing and
hand-delivered, or sent by registered or certified mail, to:
Human Resources Department
IT Corporation
2790 Mosside Boulevard
Monroeville, Pennsylvania 15146-2792
Such notice shall be deemed given as of the date of delivery or, if
delivery is made by mail, as of the date shown on the postmark on the
receipt for registration or certification.
Any notice or filing required or permitted to be given to a
Participant under this Plan shall be sufficient if in writing and
hand-delivered, or sent by mail, to the last known address of the
Participant.
12.12 SUCCESSORS. The provisions of this Plan shall bind and inure to the
benefit of the Participant's Employer and its successors and assigns
and the Participant, the Participant's Beneficiaries, and their
permitted successors and assigns.
12.12 SPOUSE'S INTEREST. The interest in the benefits hereunder of a spouse
of a Participant who has predeceased the Participant shall
automatically pass to the Participant and shall not be transferable by
such spouse in any manner, including but not limited to such spouse's
will, nor shall such interest pass under the laws of intestate
succession.
12.13 VALIDITY. In case any provision of this Plan shall be illegal or
invalid for any reason, said illegality or invalidity shall not affect
the remaining parts hereof, but this Plan shall be construed and
enforced as if such illegal or invalid provision had never been
inserted herein.
12.14 INCOMPETENT. If the Committee determines in its discretion that a
benefit under this Plan is to be paid to a minor, a person declared
incompetent or to a person incapable of handling the disposition of
that person's property, the Committee may direct payment of such
benefit to the guardian, legal representative or person having the
care and custody of such minor, incompetent or incapable person. The
Committee may require proof of minority, incompetency, incapacity or
guardianship, as it may deem appropriate prior to distribution of the
benefit. Any payment of a benefit shall be a payment for the account
of the Participant and the Participant's Beneficiary, as the case may
be, and shall be a complete discharge of any liability under the Plan
for such payment amount.
12.15 DISTRIBUTION IN THE EVENT OF TAXATION. If, for any reason, all or any
portion of a Participant's benefit under this Plan becomes taxable to
the Participant prior to receipt, a Participant may petition the
Committee for a distribution of assets sufficient to meet the
Participant's tax liability (including additions to tax, penalties and
interest). Upon the grant of such a petition, which grant shall not be
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<PAGE> 22
unreasonably withheld, a Participant's Employer shall distribute to
the Participant immediately available funds in an amount equal to that
Participant's federal, state and local tax liability associated with
such taxation (which amount shall not exceed the Participant's vested
Account Balance), which liability shall be measured by using that
Participant's then current highest federal, state and local marginal
tax rate, plus the rates or amounts for the applicable additions to
tax, penalties and interest. If the petition is granted, the tax
liability distribution shall be made within 90 days of the date when
the Participant's petition is granted. Such a distribution shall
reduce the benefits to be paid under this Plan.
12.16 LEGAL FEES TO ENFORCE RIGHTS AFTER CHANGE IN CONTROL. The Company is
aware that upon the occurrence of a Change in Control with respect to
an Employer, the board of directors of such Employer (which might then
be composed of new members) or a shareholder of such Employer, or of
any successor corporation might then cause or attempt to cause the
Employer or such successor to refuse to comply with its obligations
under the Plan and might cause or attempt to cause the Employer to
institute, or may institute, litigation seeking to deny Participants
the benefits intended under the Plan. In these circumstances, the
purpose of the Plan could be frustrated. Accordingly, if, following a
Change in Control, it should appear to any Participant that an
Employer or the Committee has failed to comply with any of its
obligations under the Plan or any agreement thereunder or, if an
Employer or any other person takes any action to declare the Plan void
or unenforceable or institutes any litigation or other legal action
designed to deny, diminish or to recover from any Participant or
Beneficiary the benefits intended to be provided, then all Employers
irrevocably authorize such person to retain counsel of his or her
choice at the expense of the Employers to represent such person in
connection with the initiation or defense of any litigation or other
legal action, whether by or against an Employer, the Committee, or any
director, officer, shareholder or other person affiliated with any of
them or any successor thereto in any jurisdiction.
12.17 COUNTERPARTS. This instrument may be executed in one or more
counterparts each of which shall be legally binding and enforceable.
12.18 SMALL PAYMENTS. Notwithstanding any other provision hereof, in the
event that any Participant's or Beneficiary's Account hereunder is
less than $5,000, the Committee may, in its discretion, automatically
pay such amount in one lump sum, rather than installments, but in all
other respects in accordance with the terms of the Plan or an
applicable Election Form.
IN WITNESS WHEREOF, the Company has signed this amended and
restated Plan document on behalf of all Employers as of January 1, 1998.
IT CORPORATION,
a California Corporation
By: /s/ Anthony J. DeLuca
---------------------------------
Anthony J. DeLuca
Its: President
--------------------------------
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<PAGE> 1
Exhibit 10(iii).32
SEPARATION AGREEMENT
This Separation Agreement (hereinafter the "Agreement") is
entered into by Franklin E. Coffman (hereafter "Coffman"), an individual, and
International Technology Corporation, a Delaware corporation, and its
subsidiaries and affiliates (collectively referred to as the "Company").
RECITALS
A. WHEREAS, Coffman has been employed by the Company, and has held the
position of Sr. Vice President of IT Corporation and of International Technology
Corporation; and
B. WHEREAS, Coffman and the Company wish to finally and forever resolve
all matters between them relative to Coffman's employment and his entitlement to
severance pay and other additional forms of compensation and benefits, and to
provide for the termination of the employment relationship;
C. NOW, THEREFORE, in consideration of the aforementioned recitals and
the mutual covenants and conditions set forth below and in full settlement of
any and all claims for allegedly lost compensation including, without
limitation, all claims for back pay, severance pay, accrued vacation pay,
continuation of health or other benefits or any other payment in the nature of
compensation allegedly attributable to Coffman's employment by the Company, and
any and all other claims which were or could have been raised by either party
prior to the date of this Agreement, the sufficiency of which consideration is
hereby acknowledged, Coffman and the Company hereby agree as follows:
AGREEMENT
1. Resignation and Termination of Employment. Effective as of April 17,
1998, Coffman resigns as an officer of the Company. The Company accepts
Coffman's resignation. Coffman shall perform no further duties for the Company
after April 17, 1998 except such duties as may arise under the terms of this
Agreement.
2. Salary. Effective as of April 17, 1998, the Company will pay Coffman
the rate of his annual salary, less payroll deductions for taxes, in equal
biweekly payments, until the sooner of April 30, 1998 or the date that this
Agreement has been accepted and signed by Coffman and Company. All sums paid
biweekly after the resignation date shall be credited against the severance
payment described in Paragraph 3.
3. Severance Pay. The Company shall pay to Coffman a severance payment
of $275,000.00, less payroll deductions, in a lump sum, which shall be payable
seven (7) days' after the signature and acceptance of this Agreement by both
Coffman and Company. This severance payment is in lieu of and extinguishes all
rights to any other salary, severance, option right, or Paid Time Off ("PTO").
<PAGE> 2
4. Benefits Coffman's eligibility to participate in the Company's
benefits Programs shall terminate effective April 17, 1998. The parties
acknowledge that Coffman will be eligible to continue to elect continuation of
his group medical coverage in accordance with the Consolidated Omnibus budget
Reconciliation Act of 1985 (COBRA) for himself and any covered dependents upon
his resignation from the Company. Coffman will receive notice from Company of
such rights and the cost to him of such continued coverage.
5. Paid Time Off. The Company will pay Coffman for all PTO accrued by
him prior to April 17, 1998. That payment is included in the lump sum described
in Paragraph 3 hereof.
6. Bonus. The Company shall pay to Coffman a sum equivalent to the
amount which he would have received, if any, as an Incentive Award or bonus
under the terms of the FY 1998 Management Incentive Plan (MIP). Such payment
will be made at the same time as payments under such plan are made to the
participants in such MIP. Coffman shall not be entitled any incentive awards for
any period of time after March 27, 1998.
7. Retirement Plans. Coffman shall cease to participate in Company's
qualified and non-qualified retirement plans on April 17, 1998, in accordance
with the terms of those plans.
8. Stock Options. The parties acknowledge that Coffman has unexercised
options of the Company which will vest as of April 17, 1998, except for options
granted on May 7, 1992 which must still satisfy stock price increase
requirements before fully vesting. Coffman shall have the right to exercise the
vested options during a two-year period. All options will expire on the earlier
of their scheduled expiration date or April 17, 2000, whichever is earlier.
9. Restricted Stock. The parties acknowledge that Coffman has 8,971
shares of Restricted Stock. In consideration for the promises and releases
contained herein, the Company agrees to lift the restrictions on these shares of
stock.
10. Expenses Related to Seeking Employment. In further consideration of
the promises and releases contained herein, Company agrees to provide to Coffman
six months of Individual Career Transition Program provided by the firm of Lee
Hecht Harrison (or a similar firm in the Knoxville area). Arrangements for this
program will be made at Coffman's request by the Knoxville Human Resources
Department.
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Coffman will be entitled to reimbursement for costs associated with up
to six interview trips if the hiring company will not reimburse such costs.
Costs will be reimbursed according to the terms of IT's Travel policy. Maximum
reimbursement for combined six trips will not exceed $10,000. Coffman shall
endeavor to obtain reimbursement for travel expenses from potential employers
and shall not advise any such employer of the existence of this benefit. This
benefit shall expire on the earlier of one year or when Coffman obtains
employment.
11. Other Expenses. Coffman agrees to reimburse the Company for any
personal expenses charged to the company and the Company agrees to reimburse
Coffman for any reasonable expenses incurred by Coffman at the Company's request
in accordance with Company policy.
12. Car Allowance. No car allowance shall be granted by Company to
Coffman after April 17, 1998.
13. Sole Entitlement. Coffman agrees that his sole entitlement to
compensation, payments of any kind, monetary and/or nonmonetary benefits and/or
perquisites with respect to his employment with, his services rendered to, and
all other matters between Coffman and the Company, is as expressly set forth in
this Agreement.
Coffman and the Company expressly agree that the Employment Agreement
dated November 20, 1996 between Coffman and the Company is hereby terminated and
is of no force and effect whatsoever. Any provisions of such Employment
Agreement, including but not limited to Paragraphs 5(a)(I)(vii) and Paragraph 17
thereof, which are or may be claimed to be inconsistent with this termination or
Coffman's resignation, are hereby waived by both parties.
14. Releases by Coffman. Coffman does hereby and forever release and
discharge the Company and the past and present parent, subsidiary and affiliated
corporations of the Company as well as the successors, shareholders, officers
and directors of corporate shareholders, officers, directors, heirs,
predecessors, assigns, agents, employees, attorneys and representatives of each
of them, past or present, from any and all cause or causes of action, actions,
judgments, liens, indebtedness, damage, losses, claims, liabilities, and demands
of whatsoever kind or character, known or unknown, suspected to exist or not
suspected to exist, anticipated or not anticipated, whether or not heretofore
brought before any state or federal court or before any state or federal agency
or other governmental entity, whether statutory or common law, including without
limitation on the generality of the foregoing, any and all claims, demands or
causes of action attributable to, connected with, or incidental to the
employment of Coffman by the Company, the separation of that employment and any
dealings between the partes concerning Coffman's employment or any other matter
existing prior to the date of execution of this Agreement, excepting only those
obligations to be performed hereunder. This release is intended to apply to any
claims arising from federal, state or local laws which prohibit discrimination
on the basis of race, national origin, sex, religion, age,
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marital status, pregnancy, handicap, disability, ancestry, sexual orientation,
family or personal leave or any other form of discrimination, or to laws such as
workers' compensation laws, which provide rights and remedies for injuries
sustained in the workplace or any common law claims of any kind, including, but
not limited to, breach of privacy, misrepresentation, defamation, wrongful
termination, tortious infliction of emotional distress, loss of consortium and
breach of fiduciary duty, violation of public policy and any other common law
claim of any kind whatever, any claims for severance pay, sick leave, family
leave, vacation, life insurance, bonuses (including, but not limited to, bonuses
payable under the FY 1998 Management Incentive Plan), health insurance,
disability or medical insurance or any other fringe benefit or compensation, and
all rights and claims arising under the Employee Retirement Income Security Act
of 1974 ("ERISA"), or pertaining to ERISA regulated benefits.
15. Unknown Claims. Coffman specifically acknowledges that his release
includes any unknown, unsuspected, and/or unanticipated claims that he may have,
whether or not they may be material to this Separation Agreement and the
releases it contains. To the maximum extent permitted by law, Coffman waives any
and all state and federal laws to the contrary.
16. Continuing Fiduciary Obligations and Unfair Competition.
(a) Coffman acknowledges that he is obligated by contract and by
operation of law to maintain the confidentiality of the Company's trade secrets
and other confidential information not publicly known, and covenants and agrees
that he shall not use or divulge, disclose, or communicate to any other person,
firm, or corporation, any of the Company's trade secrets or confidential
information except as disclosure shall be compelled by judicial process. Nothing
contained in this paragraph is intended to preclude Coffman from working for a
competitor or from using non-trade secrets and/or non-confidential information
learned by him in the course of his employment with the Company.
(b) Coffman agrees that he shall not, for a period of one year from
April 17, 1998, directly or indirectly (i) recruit, solicit or induce, or
attempt to induce any officer or employee (other than employees engaged in
secretarial or purely ministerial functions) of Company or any of its
affiliates, to terminate or fail to renew their employment or contract with, or
otherwise cease their relationship with, the Company or any of its affiliates or
(ii) hire any such person recruited in violation of (i) immediately above.
(c) Coffman agrees that he has promptly delivered to Company all
correspondence, drawings, manuals, letters, notes, notebooks, reports, programs,
plans, proposals, financial documents, or any other documents concerning the
Company's customers, business plans, marketing strategies, products or processes
which are Company property, or which are non-public or which contain proprietary
information or trade secrets.
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17. Prohibition Against Defamation and Willful Disparagement. The
Company and Coffman agree that they will not orally or in writing defame,
criticize, or willfully disparage, or in any manner undermine the reputation of
the other, or in the case of the Company, any subsidiary or affiliated
corporation of the company, the Company itself, or any employee, officer or
director of the Company or any subsidiary or affiliate of the Company, except as
required by compulsion of law to truthfully testify. It is the intention of the
parties that any inquiries from potential employers of Coffman as to Coffman's
job performance, his interpersonal and other management skills and the reason
for his departure from employment at the Company be responded to by the Human
Resources Department of Company in accordance with Company policies. In any such
communication to a prospective employer of Coffman, the reason for Coffman's
departure shall be given as a reduction in force and consolidation of management
functions. If any director or officer or agent or employee of Company fails in
any manner to follow this procedure or any other provision of this paragraph,
Coffman's sole and exclusive remedy will be to request in writing that Company
correct the failure by means of a letter which shall retract or disclaim, as
appropriate, any information inconsistent with the provisions of this paragraph
provided by any director, officer, agent, or employee of the Company.
18. Cooperation. Coffman agrees to cooperate with the company in
connection with any future or currently pending litigation, including without
limitation, by making himself available to testify in actions as reasonably
requested by the Company. In the event that Coffman is required to spend a
significant amount of time in any such activities, he shall be compensated at an
hourly rate of $150 per hour. In the event Coffman is named as a defendant in
any litigation or other proceeding involving the Company where Coffman is
required to defend himself with respect to events which relate to or occurred
during his employment with the Company, to the extent that Coffman is not
otherwise covered by any insurance policy maintained by the Company, the Company
shall be responsible for providing a defense to, and indemnify, Coffman, to the
same extent and under the same conditions as if he were an officer of the
Company.
19. Legal Advice. Each party has received independent legal advice from
his or its attorneys with respect to the advisability of making the settlement
provided for herein, with respect to the advisability of executing this
Agreement and with respect to its meaning.
20. Factual Investigation. Each party to this Agreement has made such
investigation of the facts pertaining to the matters resolved by this Agreement
and of all the matters pertaining thereto as he or it deems necessary.
21. Later Discovered Facts. Each party hereto is aware that he or it
may hereafter discover claims or facts in addition to or different from those he
or it now knows or believes to be true with respect to the matters resolved
herein. Nevertheless, it is the intention of each
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party to fully, finally and forever settle and release all such matters and all
claims relative thereto which may exist or may heretofore have existed between
them.
22. Confidentiality. This Agreement and its provisions are intended to
be confidential. Accordingly, except as may be required to satisfy the Company's
public disclosure or financial or accounting requirements or as may be compelled
by court order, neither the Company nor Coffman shall disclose or publicize to
any person, firm or corporation, the terms of this Agreement without the consent
of the other party. As reasonably necessary, Coffman may discuss this Agreement
with his wife, attorney, financial advisor, tax advisor, benefit advisor or
compensation advisor and Company may discuss this Agreement with its attorneys,
officers, directors and managers provided, however, that each agrees to be bound
by the terms of this paragraph to keep the information confidential. Coffman may
also discuss this Agreement with James G. Kirk, Ron Conway and Ann Harris, so
long as in each instance they are Company employees at the time of Coffman's
discussions. It shall not be a breach of this confidentiality provision for
Coffman to advise any employer or prospective employer of the limitations set
forth in paragraph 15 above.
23. Assignment. Each of the parties represents and warrants that he or
it has not heretofore assigned, transferred or granted or purported to assign,
transfer or grant any claims, matters, demands or causes of action herein
released, disclaimed, discharged or terminated, and agrees to indemnify and hold
harmless any other party from and against any and all costs, expense, loss or
liability incurred as a consequence of any such assignment.
24. Recitals and Paragraph Headings. Each term of this Agreement is
contractual and not merely a recital. All recitals are incorporated by reference
into this Agreement. Captions and paragraph headings are used herein for
convenience only, are no part of this Agreement and shall not be used in
interpreting or construing it.
25. Additional Documents. The parties will execute all such further and
additional documents and undertake all such other actions as shall be
reasonable, convenient, necessary or desirable to carry out the provisions of
this Agreement.
26. No Admissions. This Agreement effects the settlement of claims
which are denied, disputed and/or contested and nothing contained herein shall
be construed as an admission by any party hereto of any liability of any kind to
any other party. Each of the parties hereto denies any liability in connection
with any claim and intends merely to avoid the uncertainties and costs of
litigation and buy his or its peace.
27. Pennsylvania Law. This Agreement was negotiated, and delivered
within the State of Pennsylvania, and the rights and obligation so the parties
hereto shall be construed and enforced in accordance with and governed by the
laws of the State of Pennsylvania. Should
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any litigation arise concerning this Agreement, it will be filed only in a court
in Allegheny County, State of Pennsylvania, and then only if consistent with the
parties' obligations under paragraph 34 hereof with regard to arbitration.
28. Entire Agreement. This Agreement constitutes a single integrated
contract expressing the entire agreement of the partes with respect to the
subject matter hereof and supersedes all prior and contemporaneous oral and
written agreements and discussions with respect to the subject matter hereof.
There are no other agreements, written or oral, express or implied, between the
parties hereto, concerning the subject matter hereof, except as set forth
herein. This Agreement may be amended only by an agreement in writing.
29. Binding Effect. This Agreement is binding upon and shall inure to
the benefit of the parties hereto, their heirs, assignees and successors in
interest (including successors in any reorganization or merger with any other
entity).
30. Construction of Agreement. Each party has cooperated in the
drafting and preparation of this Agreement, and, accordingly, in any
construction or interpretation of this Agreement, the same shall not be
construed against any party by reason of the source of drafting.
31. Costs and Attorneys' Fees. Each party is to bear its own costs and
attorneys' fees incurred in connection with the matters resolved by this
Agreement and in connection with the negotiation and the preparation of this
Agreement. However, in the event of litigation or arbitration relating to or for
the enforcement of this Agreement, the prevailing party shall be entitled to
reasonable attorneys' fees and costs actually incurred.
32. Taxes. Coffman acknowledges his responsibility for any and all
taxes due with respect to the sums paid to him under this Agreement, represents
that he has received independent advice concerning his tax obligations, and
states that he has not relied upon representations or advice, if any, of the
Company or their counsel concerning the taxable or nontaxable nature of the sums
payable hereunder. Coffman agrees that he will indemnify and hold the company
harmless from any and all claims for taxes, penalties and/or interest based upon
the payments to be made under this Agreement.
33. Counterparts. This Agreement may be executed in counterparts. When
each party has signed and delivered at least one such counterpart, each
counterpart shall be deemed an original, and, when taken together with other
signed counterparts, shall constitute one Agreement which shall be binding upon
and effective as to all parties. No counterpart shall be effective until all
parties hereto have executed and exchanged an executed counterpart hereof.
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34. No Waiver. The failure to enforce at any time any of the provisions
of this Agreement, or to require at any time performance by the other party of
any of the provisions hereof, shall in no way be construed to be a waiver of
such provisions or to affect either the validity of this Agreement or any part
hereof or the right of either party thereafter to enforce each and every
provision in accordance with the terms of this Agreement.
35. Arbitration. Except in connection with an action by the Company for
injunctive or other equitable relief, any controversy, dispute, or claim between
the parties of this Agreement or any party released pursuant to it, including
any claim arising out of, in connection with, or in relation to the
interpretation, performance or breach of this Agreement shall be resolved
exclusively by arbitration conducted in Pittsburgh, Pennsylvania, in accordance
with the then most applicable rules of the American Arbitration Association. In
the event the parties are unable to agree upon an arbitrator, the parties shall
select a single arbitrator from a list designated by the American Arbitration
Association of seven arbitrators. Two of the seven panel members proposed by the
American Arbitration Association shall be retired judges and five shall be
arbitrators, all of whom meet the qualifications set forth below. If the parties
are unable to select an arbitrator from the list provided by the American
Arbitration Association, then the parties shall each strike names alternatively
from the list, with the first strike being determined by lot. After each party
has used three strikes, the remaining name on the list shall be the arbitrator.
This agreement to resolve any disputes by binding arbitration shall extend to
claims against any shareholder of the Company, any brother-sister company,
subsidiary or affiliates of the company, any officers, directors, employees, or
agents of the company or any of the above and shall apply as well to claims
arising out of state and federal statutes and local ordinances as well as to
claims arising under the common law. In the event the parties are unable to
agree upon a location for the arbitration, the location (within Allegheny
County) shall be determined by the arbitrator. The parties intend that this
Agreement to arbitrate be valid, enforceable and irrevocable and that it provide
the exclusive remedy with respect to all disputes within its scope.
36. Coffman's Understanding. Coffman states that he has carefully read
this Agreement, that it has been fully explained to him by his attorney, that he
fully understands its final and binding effect and understands that he is
releasing certain rights and entitlements, that the only promises made to him to
sign the Agreement are those stated above, and that he is signing this Agreement
voluntarily.
37. Age Discrimination in Employment Act Waiver. The waiver given below
is given only in exchange for consideration in addition to anything of value to
which Coffman is already entitled. The waiver set forth below does not waive
rights or claims which may arise after the date of execution of this Agreement.
Coffman acknowledges that (I) this entire Agreement is written in a manner
calculated to be understood by Coffman; (ii) that by reviewing this Agreement or
drafts thereof he has been advised in writing to consult with an attorney before
executing this Agreement, and (iii) he was given a period of 21 days within
which to consider the Agreement, and (iv) to the extent he executes this
Agreement before the
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expiration of the 21-day period, he does so knowingly and voluntarily and only
after consulting with an attorney. Coffman shall have the right to cancel and
revoke this Agreement during a period of 7 days following his execution of the
Agreement and this Agreement shall not become effective, and no money shall be
paid hereunder until the expiration of such 7-day period. Coffman or his counsel
shall notify the Company's counsel in writing of the date of the execution of
this Agreement and shall send by fax ((412)858-3997) to Company's counsel a
signed and dated copy of the signature page signed by Coffman. The 7-day period
of revocation shall commence upon the date of Coffman's execution of this
agreement. Within the 7-day revocation period, Coffman or his counsel shall
forward to the Company and Company's counsel a copy of this Agreement fully
executed by Coffman. In order to revoke this Agreement, Coffman shall deliver to
the Company, prior to the expiration of said 7-day period, a written notice of
cancellation.
In addition to the release set forth at Paragraph 13 hereof, Coffman
hereby voluntarily and knowingly waives all rights or claims arising under the
Federal Age Discrimination in Employment Act.
38. Obligations of Company Which Survive Coffman's Death. The following
obligations of the company, and no others, shall survive Coffman's death.
Payments pursuant to the obligations set forth in the following paragraphs shall
be made to Coffman's wife, or to his estate in the event she shall no longer be
living: paragraph 2, paragraph 3, paragraph 5, paragraph 6, paragraph 8 and
paragraph 11.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the dates and years written below.
EXECUTION AND ACKNOWLEDGMENT BY FRANKLIN E. COFFMAN
I received this Separation Agreement on April 7, 1998. I understand that
I have twenty-one (21) days thereafter within which to consider this Agreement
with my legal counsel. I freely choose to sign this separation of April 17,
1998. I understand that I will have seven (7) days thereafter within which to
revoke my acceptance of this Separation Agreement and that the Separation
Agreement shall not be effective under the expiration of that seven (7) day
period. Executed at Knoxville, TN, this 10th day of April, 1998.
/s/ Franklin E. Coffman
-------------------------------------
FRANKLIN E. COFFMAN
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EXECUTION AND ACKNOWLEDGMENT BY INTERNATIONAL TECHNOLOGY
CORPORATION
Dated: April 13, 1998
----------
At: Monroeville, Pennsylvania
INTERNATIONAL TECHNOLOGY CORPORATION
By: /s/ Ann P. Harris
-------------------------
Duly Authorized
ADDITIONAL CONSIDERATION
In order to induce International Technology Corporation (the "Company")
to enter into the foregoing Separation Agreement, I agree to forever release and
discharge the Company and the past and present parent, subsidiary, and related
corporations of the Company as well as the successors, shareholders, officers
and directors of corporate shareholders, officers, directors, heirs,
predecessors, assigns, agents, employees, attorneys and representatives of each
of them, past or present, from any and all cause or causes of action, actions,
judgments, liens, indebtedness, damages, loss, claims, liabilities, and demand
of whatsoever kind or character, known or unknown, suspected to exist or not
suspected to exist, anticipated or not anticipated, whether or not heretofore
brought before any state or federal court or before any state or federal agency
or other governmental entity, including without limitation on the generality of
the foregoing, any and all claims, demands or causes of action attributable to,
connected with, or incidental to the employment of my husband by the Company,
the separation of that employment, and any dealings between the parties
concerning my husband's employment or any other matter existing prior to the
date of execution of this Agreement, excepting only those obligations to be
performed hereunder. This release is intended to apply to any and all claims
whether based on common law contract or tort theories or state or federal
statutory or constitutional law theories.
Executed this 10th day of April, 1998.
/s/ Elaine H. Coffman
-------------------------
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Exhibit 10(iii).35
Draft of June 11, 1997
----------------------
EXECUTIVE EMPLOYMENT AGREEMENT
------------------------------
This Employment Continuation, Non-competition and
Confidentiality Agreement (this "Agreement"), is made this 17th day of June,
1997, by and between Beneco Enterprises, Inc., a Utah corporation (the
"Company"), OHM Corporation, an Ohio corporation ("OHM"), and Scott Doxey
("Executive").
W I T N E S S E T H:
--------------------
WHEREAS, concurrently with the execution of this Agreement,
OHM, the Company, the Executive, Robert Newberry and Bennie Smith, Jr.
(collectively, the "Shareholders") are entering into a certain Stock Purchase
Agreement (the "Stock Purchase Agreement"), pursuant to which OHM is purchasing
from the Executive and the other Shareholders all of the issued and outstanding
shares of capital stock of the Company;
WHEREAS, in order to induce OHM to enter into the Stock
Purchase Agreement and the other agreements contemplated thereby, Executive has
agreed to continue to serve in an executive capacity with the Company pursuant
to the terms and provisions of this Agreement;
NOW, THEREFORE, in consideration of the foregoing and the
mutual representations, warranties, covenants and agreements contained in this
Agreement and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged,, and subject to the terms and conditions set
forth below, the Company, OHM and Executive agree as follows:
<PAGE> 2
Section 1. Term of Employment. The Company hereby employs
Executive, and Executive hereby accepts employment by the Company, upon the
terms and conditions set forth in this Agreement, for a period of three years
commencing on June 1, 1997 (the "Effective Date") and ending on the third
anniversary of the Effective Date (the "Term of Employment"), unless earlier
terminated pursuant to Section 8 of this Agreement.
Section 2. Position, Duties, Responsibilities and Authority.
(a) Executive will assume and perform such , reasonable executive and managerial
responsibilities and duties in connection with the business activities of the
Company (the "Services") as the Executive has performed in connection with the
company prior to the date of this Agreement and consistent with the duties and
responsibilities performed by other executives holding similar positions in
other government contracting companies. Executive shall be appointed and serve
as Controller of the Company during the term of this Agreement. Executive shall
perform the Services in accordance with such procedures and policies as the
Company may adopt from time to time. During the Term of Employment, Executive
will be employed as an employee of the Company or any affiliate thereof in, or
in the vicinity of, Salt Lake City, Utah, or such other place as Executive may
agree in writing. Notwithstanding the foregoing, Executive will be required to
undertake regular and extended travel to such locations and for such duration as
may be required to fulfill his obligations and duties in connection with the
business activities of the Company and such travel shall be undertaken in a
reasonable and customary
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manner and the amount of such travel shall be consistent with past
practice.
(b) During the Term of Employment, Executive will devote his
entire time, attention, skill and energy to the business of the Company during
business hours customary for executives holding similar positions with other
government contracting companies, will use his best efforts to promote the
success of the business of the Company and cooperate fully, with the Board of
Directors of the Company in the advancement of the best interests of the
Company. If Executive is elected as a director of the Company or as director or
officer of any of its affiliates, Executive will fulfill his duties as such
director or officer without additional compensation.
Section 3. Compensation During Term of Employment
3.1. Salary and Bonuses: As compensation for the Services
to be rendered during the Term of Employment, and for the other obligations
undertaken by Executive under this Agreement, Executive will be entitled to the
following:
(a) Salary. The Company will pay to Executive an annual salary
(the "Salary") of $110,000 (which is equivalent to $9,167 per month), which
shall be payable in equal periodic installments according to the Company's
customary payroll practices, but no less frequently than monthly.
(b) Bonus. Executive will be entitled to receive, with respect
to each fiscal year during the Term of Employment an annual bonus (the "Target
Bonus") equal to up to 20% of his annual Salary. The Target Bonus will be
determined in accordance with the terms and conditions
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established pursuant to the Management Incentive Bonus Plan of OHM (the "OHM
Bonus Plan") in effect as of the date hereof, as may be amended by OHM, in its
sole discretion, from time to time.
3.2 Benefits. (a) The Company will, during the Term of
Employment, permit Executive to participate in such retirement savings plan,
life insurance, health insurance and other employee benefit plans of the Company
that may be in effect from time to time, to the extent Executive is eligible
under the terms of those plans in accordance with the policies of OHM.
(b) During the Term of Employment, Executive will be entitled
to a vehicle allowance of $750 a month. Executive shall not be entitled to
reimbursement by the Company for any automobile-related expenses, except for
fuel expense.
(c) Executive will be entitled to vacation in accordance with
the vacation policies in affect for employees of OHM and its
subsidiaries in similar positions to Executive. Executive will also be
entitled to the paid holidays set forth in OHM's policies. Vacation
days and holidays during any fiscal year that are not used by the
Executive during such fiscal year may not be used in any subsequent
fiscal year. In scheduling his vacation, Executive shall give
sufficient notice to his immediate supervisor regarding such vacation
and shall give due regard to the reasonable needs of the Company in
scheduling such vacation.
(d) All reasonable and documented out-of-pocket expenses
incurred by Executive on behalf of the Company in the ordinary and
normal course of business and in accordance with OHM's travel
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and business expense policies in effect from time to time shall be
reimbursed by the company in accordance with the Company's normal
procedures for expense reimbursement.
(e) Executive's accumulated time with the Company prior to the
Effective Date shall be included in calculating his employment time
with the Company to the extent such accumulated time is considered in
determining the amount of benefits provided to the Executive under
Section 3.2(a) and (c).
Section 4. Earnout Consideration.
4.1 Earnout Consideration, (a) If one of the financial
performance levels provided in Section 4.1(b)(i), (ii) or (iii) is achieved, OHM
shall make certain payments (the "Earnout Consideration") to the Executive and
the other Shareholders as provided therein.
(b) The Earnout Consideration, if any, shall be based on the
Average Operating Income (as defined in Section 4.5) for the three-year period
following the Effective Date and shall consist of the following:
(i) If the Average operating Income for the
three-year period following the Effective Date is equal to or greater than
$6,000,000, the Executive and the other Shareholders shall receive an aggregate
of $10,000,000 in cash or, in the sole discretion of OHM, shares of OHM Common
Stock (as defined in Section 4.5) with an aggregate market value (as determined
pursuant to Section 4.4(c)) of $10,000,000, or any combination of cash and OHM
common Stock, as determined by OHM.
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(ii) if the Average Operating Income for the
three-year period following the Effective Date is equal to or greater than
$5,500,000, but less than $6,000,000, the Executive and the other Shareholders
shall receive an aggregate of $7,000,000 in cash or, in the sole discretion of
OHM, shares of OHM Common Stock with an aggregate market value of $7,000,000, or
any combination of cash and OHM Common Stock, as determined by OHM.
(iii) if the Average Operating Income for the
three-year period following the Effective Date is equal to or greater than
$5,000,000, but less than $5,500,000, the Executive and the other Shareholders
shall receive an aggregate of $4,000,000 in cash or, in the sole discretion of
OHM, shares of OHM Common Stock with an aggregate market value of $4,000,000, or
any combination of cash and OHM Common Stock, as determined by OHM.
(iv) If the Average Operating Income for the
three-year period following the Effective Date is less than $5,000,000, no
Earnout Consideration shall be paid.
4.2 Adjustments to Average Operating Income; Accounting
Considerations.
Accounting Considerations. (a) In computing the Average Operating Income,
(i) intercompany accounting charges that relate to general overhead allocations
by OHM to the Company shall be excluded from such computation, (ii) intercompany
accounting charges that relate to services actually provided by or caused to be
provided by OHM to or for the direct benefit of the Company shall be included in
such computation, including, without limitation, charges relating to
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employee benefits provided to employees of the Company, insurance, professional
services and bonding fees and (iii) the financial impact of acquisitions which
result in a business combination with the Company shall be excluded from such
computation, unless (A) it is agreed upon in advance by OHM and Bennie Smith,
Jr. if he is employed an an executive of the Company at the time of such
acquisition (or Robert Newberry, if Bennie Smith, Jr. is not employed as an
executive of the Company at such time and Newberry is employed as an executive
of the Company at such time, or Executive, if Bennie Smith, Jr., and Robert
Newberry are not employed as executives of the Company at such time and
Executive is employed as an executive of the Company at such time) (the
"Shareholder Representative"), that such acquisition will be included in
computing the Average Operating Income and (B) the financial performance levels
set forth in section 4.1(b) are adjusted to take into account the effect of such
acquisition, with such adjustments agreed to by OHM and the Shareholder
Representative. Notwithstanding the foregoing, OHM agrees that it shall not
cause the Company to engage in any acquisitions until after the third
anniversary of the Effective Date if (i) none of Executive, Robert Newberry or
Bennie Smith, Jr. are employed by the Company and (ii) one or more of Executive,
Newberry or Smith are entitled to the Earnout Consideration.
(b) For purposes of determining the Average operating Income,
(i) the adequacy of any contingency or reserve reflected on the Company's
financial statements or accounting records shall be determined in accordance
with United States generally accepted
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<PAGE> 8
accounting principles ("GAAP") as applied to the company on a stand-alone basis
by OHM and reviewed by the certified public accounting firm regularly engaged by
OHM ("OHM's Accountants"); and (ii) notwithstanding the Company's past
practices, any and all costs incurred by the Company in seeking or retaining
customers, including the costs associated with bid proposals, shall be expensed
on a current basis and not amortized.
4.3 Allocation of Earnout consideration. (a) Except as
otherwise provided in this Section 4.3 and subject to the setoff rights provided
in Section 7.6 of the Stock Purchase Agreement, the Earnout Consideration, if
any, shall be allocated among the Executive and the other Shareholders as
follows:
Earnout Consideration
(dollars in millions)
$10.0 $7.0 $4.0
----- ---- ----
Bennie Smith $ 7.8 $5.3 $2.8
Robert Newberry 1.2 1.0 .7
Scott Doxey 1.0 .7 .5
(b) (i) Notwithstanding anything to the contrary in Section
4.3(a) and except as otherwise provided in Section 4.3(b)(ii) or (iii), if a
Shareholder is not employed by the Company (except by reason of termination by
the Company without cause pursuant to the Employment Agreement of such
Shareholder) as of the third anniversary of the Effective Date, the Earnout
Consideration allocated to such Shareholder shall not be payable by OHM.
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<PAGE> 9
(ii) Notwithstanding Section 4.3(b)(i), in the event that
Scott Doxey is not employed by the Company as of the third anniversary
of the Effective Date (except by reason of his termination by the
Company without cause or because of his death or disability (as defined
in the Employment Agreement of Doxey)), the Earnout Consideration that
would have been payable to Doxey shall be allocated on a pro rata basis
to the other Shareholders, provided such Shareholders are otherwise
entitled to receive their respective portion of the Earnout
Consideration.
(iii) If (A) a Shareholder is no longer employed by the
Company by reason of his death or disability, (B) the Average Operating
Income, on an annualized basis, for the period from the Effective Date
through and including the date of death or date of disability of such
Shareholder (each, a "Determination Date") is $5,000,000 or more, and
(C) the Earnout Consideration is determined to be payable under the
terms of this Agreement after the expiration of the three-year period
after the Effective Date, then such Shareholder or his estate or
guardian, in the case of disability, in accordance with the procedures
and within the period described in Section 4.4 shall be entitled to
receive an amount (the "Pro Rata Earnout Amount") equal to (A) the
Earnout Consideration that such Shareholder would have been entitled to
receive if he had remained employed by the Company until the third
anniversary of the Effective Date multiplied by (B) a fraction, the
numerator of which is the number of full months that shall have elapsed
from the Effective Date through and
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<PAGE> 10
including the Determination Date and the denominator of which is 36
months. If the Shareholder who dies or becomes disabled is Scott Doxey,
then the amount of the Earnout Consideration not paid to Scott Doxey or
his estate, as the case may be, as a result of the determination of the
Pro Rata Earnout Amount, shall be allocated on a pro rata basis to the
other Shareholders, provided such Shareholders are otherwise entitled
to receive their respective portion of the Earnout Consideration. If
any other Shareholder dies or becomes disabled, any Earnout
Consideration in excess of the Pro Rata Earnout Amount with respect to
such Shareholder shall not be payable by OHM.
(c) OHM shall provide the Executive and the other shareholders
on a periodic basis not less than once each calendar year with an
interim update regarding the computation of the Average Operating
Income.
4.4 Payment of Earnout Consideration. (a) (i) Within ninety
days after the third anniversary of the Effective Date, OHM shall
determine the Average Operating Income, subject to review by OHM's
accountants (the "Average Operating Income Calculation"). Within three
business days after OHM's receipt of the Average Operating Income
Calculation, OHM shall deliver such calculation to each of the
Shareholders for review.
(ii) Unless a majority of the Shareholders (one of which must
be Executive unless he is no longer employed by the Company or
otherwise entitled to the Earnout Consideration), which for purposes of
this Section 4,4 shall include such Shareholder's
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<PAGE> 11
estate, if any, or guardian, in the case of disability, gives the
Company written notice of their objection to the Average Operating
Income Calculation, which notice shall include the basis of the
Shareholders' objection in reasonable detail ("Notice of objection"),
within 30 calendar days after receiving the Average Operating Income
Calculation (the "Objection Period"), the Average Operating Income
Calculation shall be final, conclusive and binding on OHM and each of
the Shareholders,
(iii) If a majority of the Shareholders (one of which must be
Executive unless he is no longer employed by the Company or otherwise
entitled to the Earnout Consideration) deliver a Notice of Objection
within the Objection Period, OHM and the Shareholders shall use
reasonable efforts to resolve all disputes regarding objections set
forth in the Notice of Objection, If OHM and the Shareholders are not
able to resolve all disputes regarding the Shareholders' objections set
forth in the Notice of Objection within 14 calendar days after delivery
to OHM of the Notice of Objection, the remaining disputed items shall
be submitted for final resolution to an independent certified public
accounting firm selected by mutual agreement of OHM, on the one hand,
and the Shareholders, on the other hand, or if OHM and the Shareholders
are unable to agree upon such accounting firm within 20 calendar days
after the delivery of a Notice of Objection, OHM, on the one hand, and
the Shareholders, on the other hand, shall promptly instruct their
respective firms of independent
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<PAGE> 12
certified public accountants to select, within five business days
thereafter, a third independent certified public accounting firm and
only the disputed items shall be submitted to such independent
certified public accounting firm (the "Independent Accountants"), After
offering OHM and OHM's representatives and the Shareholders and the
Shareholders' representatives the opportunity to present their
positions as to the disputed items, which opportunity shall not extend
for more than 10 calendar days after the Independent Accountants have
been selected, the Independent Accountants shall deliver a written
report resolving the disputed items submitted for resolution and
setting forth the basis for such resolution within 30 calendar days
after OHM and the Shareholders have presented their positions as to the
disputed items. The resolution of the Independent Accountants shall be
final, conclusive and binding upon OHM and each of the Shareholders and
shall be reflected in any necessary revisions to the Average Operating
Income Calculation. Notwithstanding anything in this Agreement to the
contrary, the scope of the Independent Accountants' review of any
dispute between OHM and the Shareholders regarding the Average
Operating Income Calculation shall be limited solely to the resolution
of the Shareholders' objections that are not resolved prior to
selection of the Independent Accountants and as are set forth in the
Notice of Objection.
(iv) One-half of the fees, costs and expenses of the
Independent Accountants for services rendered pursuant to Section
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<PAGE> 13
4.4(a) shall be paid by the Shareholders and one-half of such fees,
costs and expenses shall be paid by OHM.
(b) If no Notice of Objection is timely delivered by the
Shareholders, OHM shall pay to the Shareholders, subject to Section
4.4(c), their respective portion of the Earnout Consideration, if any,
five business days after the earlier of (i) the expiration of the
Objection Period and (ii) the date of delivery by a majority of the
Shareholders to OHM of written notice that the Average Operating Income
Calculation will be accepted by the Shareholders without objection
(which notice shall be binding on each of the Shareholders, including
any Shareholder that is not a party to such notice), If a Notice of
Objection with respect to the Average Operating Income calculation is
timely delivered by a majority of the shareholders (one of which must
be Executive unless he is no longer employed by the Company or
otherwise entitled to the Earnout Consideration), OHM shall pay to the
Shareholders, subject to Section 4.4(c), their respective portion of
the Earnout Consideration, if any, five business days after the date
all disputed items are fully resolved pursuant to Sections 4.4(a)(ii)
or 4.4(a)(iii). All cash payments constituting the Earnout
Consideration shall be made by wire transfer of immediately available
funds to the respective accounts designated by the Shareholders. All
the OHM Common Stock constituting the Earnout Consideration, when
issued and delivered by OHM to the Shareholders as provided in this
Agreement, will be validly
13
<PAGE> 14
issued, fully paid and nonassessable.
(c) The value of the OHM Common Stock delivered in payment of
the Earnout Consideration shall be determined using the average of the
closing prices of such stock on the national securities exchange or
over-the-counter market in which such stock is then currently listed or
designated for trading for each business day commencing on the day 30
calendar days prior to the date of issuance to the Shareholders and
ending on the day immediately preceding the date of issuance to the
Shareholders. The OHM Common Stock, if any, issued in payment of the
Earnout Consideration shall be freely transferable upon receipt of such
common stock by the Shareholders. Subject to Section 4.1 of this
Agreement, if OHM is unable to issue freely transferable OHM Common
Stock to the Shareholders within 60 days of the date the amount of the
Earnout Consideration is finally determined pursuant to Section 4.4(b),
OHM shall pay to the Shareholders their respective portion of the
Earnout Consideration in cash by wire transfer of immediately available
funds to the respective accounts designated by the Shareholders.
4.5 Definitions. For purposes of this Agreement, (a) "Average Operating
Income" means (i) the operating income (loss) of the company for the three-year
period following the Effective Date (subject to the adjustments set forth in
Section 4.2(a)) determined in accordance with GAAP (but excluding all items of
gain or loss classified as extraordinary in accordance with GAAP and subject to
the accounting considerations set forth in Section 4.2(b)), divided by (ii)
three.
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<PAGE> 15
Notwithstanding the foregoing, the operating income of the Company shall not
include any of the following: interest expense; income tax expense;
amortization, if any, attributable to the transactions contemplated by the Stock
Purchase Agreement; interest income; and other items of non-operating income and
expense; and (b) "OHM Common Stock" means shares of Common Stock, par value $.10
per share, of OHM or any successor thereto provided the shares of such successor
are listed or designated for trading on a national securities exchange or
over-the-counter market.
Section 5. Trade Secrets, Proprietary Information and Return of
Materials.
5.l Trade Secrets. Executive acknowledges that, by reason of
Executive's duties, Executive will have access to and become informed of
proprietary, non-public information relating to the Company as well as other
confidential business and technical information and trade secrets ("Proprietary
Information"), including, without limitation:
(a) With respect to the Company and its affiliates,
(i) service specifications, schematics, designs, procedures,
practices, testing methods, concepts for new or improved services and other
service data; (ii) sources of supply and potential sources of supply, for
capital equipment, components, products and services; (iii) all technical
information relating to the invention, patenting, technological advancement,
formulation, development, design, specifications, testing, manufacture and use
of services, methods, processes, machinery and equipment (iv) customer
information, such as customer lists, purchasing and servicing habits and credit
15
<PAGE> 16
information; (v) cost and pricing information; (vi) selling and marketing
information, such as selling methods, strategies, catalogues, order books and
instructional and promotional materials; (vii) training and recruiting methods
and materials; (viii) corporate planning data; (ix) financial results and
business conditions; and (x) any information that otherwise may be defined as a
"trade secret" under the Uniform Trade Secrets Act; and
(b) With respect to any other person or entity, any of the foregoing
types of information which belong to such person or entity but to which
Executive has had access by reason of his employment with the Company
(including, without limitation, information delivered to the Company or to any
of its affiliates in confidence by persons or entities for whom the Company is
performing services).
5.2 Ownership-of-Company Proprietary Information.
Executive specifically acknowledges (a) that all of the Proprietary
Information set forth in section 5.1(a) of this Agreement, whether reduced to
writing, maintained on any form of electronic media, or maintained in the mind
or memory of Executive, and whether compiled by the Company or Executive,
derives independent economic value from not being readily known to or
ascertainable by proper means by others who can obtain economic value from the
disclosure or use of such Proprietary Information, or any part of it; (b) that
reasonable efforts have been and will be taken by the Company and Executive to
maintain the secrecy of such Proprietary information; (c) that such Proprietary
Information is the sole property of the
16
<PAGE> 17
Company; and (d) that any retention in violation of Section 5.4 of this
Agreement or use of such Proprietary Information during or after the Term of
Employment (except in the course of the performance of Executive's duties under
the terms of this Agreement) shall constitute a misappropriation of the trade
secrets of the Company.
5.3 Non-disclosure of Trade Secrets. Executive will keep in strict
confidence and will not, directly or indirectly, at any time during or after
Executive's employment by the Company, disclose, furnish, disseminate, make
available or use (except in the course of the performance of Executive's duties
under the terms of this Agreement) any of the Proprietary Information.
5.4 Return of Documents and Records. Executive agrees that upon
termination of Executive's employment with the Company, for any reason, or
expiration of the Term of Employment (unless Executive remains employed by the
Company), Executive shall return to the Company, in good condition, all property
of the Company, including, without limitation, any document or record
(including, without limitation, computerized records) containing any Proprietary
Information, and Executive shall promptly deliver to the Company all documents
and records (including, without limitation, computerized records) of the Company
in Executive's possession, custody or control. If such items are not so
returned, the Company will have the right to charge Executive for all reasonable
damages, costs, attorneys' fees and other expenses incurred in searching for,
taking and/or recovering such property.
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<PAGE> 18
Section 6. Restrictive Covenants.
6.1 During Term of Employment. During the Term of Employment, Executive
will not compete with the Company anywhere within the United States. In
accordance with this restriction, but without limiting its terms, during the
Term of Employment, Executive will not:
(a) enter into or engage in any business which competes
with the business of the Company; or
(b) solicit customers, business, patronage or orders for, or
sell, any products or services in competition with, or for any business that
competes with, the business of the Company; or
(c) divert, entice, or take away any customers, business,
patronage or orders of the Company; or
(d) promote or assist, financially or otherwise, any person,
firm, association, partnership, corporation or other entity engaged in any
business which competes with the business of the Company.
6.2. After Termination of Employment. For the earlier of five years
after the Effective Date, or three years from and after termination of this
Agreement for any reason other than a termination without cause under Section
8.4, or for a period of two years from the date of such termination without
cause under Section 8.4, Executive will not:
(a) enter into or engage in any business which competes with
the Company's business within the Restricted Territory (as defined in Section
6.4(c)); or
18
<PAGE> 19
(b) solicit customers, business, patronage or orders for, or
sell, any products or services in competition with, or for any business,
wherever located, that competes with, the Company's business within the
Restricted Territory; or
(c) divert, entice or otherwise take away any customers,
business, patronage or orders of the Company within the Restricted Territory; or
(d) promote or assist, financially or otherwise, any person,
firm, association, partnership, corporation or other entity engaged in any
business which competes with the Company's business within the Restricted
Territory.
6.3. Related Parties. For the purposes of Sections 6.1 and 6.2,
inclusive, but without limitation thereof, Executive will be in violation
thereof if he engages in any or all of the activities set forth therein directly
as an individual on his own account, or indirectly as a partner, joint venturer,
employee, agent, salesperson, consultant, officer and/or director of any firm,
association, partnership, corporation or other entity, or as a stockholder of
any corporation in which Executive or Executive's spouse, child or parent owns,
directly or indirectly, individually or in the aggregate, more than one percent
of the outstanding stock.
6.4. Certain Definitions. (a) For the purposes of this Agreement, the
term "Company" shall include any and all direct and indirect subsidiaries,
divisions or business units of the Company for which Executive worked or had
responsibility at the time of termination of his employment and at any time
during the two year period prior to
19
<PAGE> 20
such termination.
(b) For the purposes of Sections 6.1 and 6.2, inclusive, the
company's business is defined to be commercial, residential and government
general contracting, construction management, and base and facilities
maintenance, and the provision of related services described in any and all
marketing materials as the same may be altered, amended, supplemented or
otherwise changed from time to time or other services substantially similar to
any such described services. For purposes of Section 6.2. insofar as it extends
for a two-year or three-year period, as the case may be, following termination
of Executive's employment or following expiration of the Term of Employment, the
Company's business is defined to be commercial, residential and government
general contracting, construction management and base and facilities
maintenance, and the provision of related services described in any and all
marketing materials in existence as of the date of termination of Executive's
employment with the Company or expiration of the Term of Employment or other
services substantially similar to any such described services.
(c) For the purposes of Section 6.2, the Restricted Territory
shall be defined as and limited to:
(i) the geographic area(s) within a one-hundred-mile radius of any and
all Company locations) (including, without limitation, Salt Lake City, Utah and
Washington, D.C.) in, to or for which Executive worked, was assigned or had any
responsibility (either direct or supervisory) at the time of termination of his
employment and at any time during his Term of Employment; and
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<PAGE> 21
(ii) all of the specific customer accounts, whether within or outside
of the geographic area described in (i) above, with which Executive had any
contact or for which Executive had any responsibility (either direct or
supervisory) at the time of termination of his employment and at any time during
his Term of Employment.
6.5. Extension of Period. If it shall be judicially determined that
Executive has violated any of his obligations under Section 6.2, then the period
applicable to each obligation that Executive shall have been determined to have
violated shall automatically be extended by a period of time equal in length to
the period during which such violation(s) occurred.
6.6. Adequate Consideration. Executive acknowledges that his
obligations under this Agreement are reasonable in the context of the nature of
the Company's business and the competitive injuries likely to be sustained by
the Company if Executive were to violate such obligations. Executive further
acknowledges that this Agreement is made in consideration of, and is adequately
supported by, the agreement of the Company to employ or to grant compensation or
benefits to the Executive pursuant to the terms of this Agreement, which
Executive acknowledges constitutes new and/or good, valuable and sufficient
consideration.
6.7. Covenant Not to Solicit. Executive will not directly or indirectly
at any time solicit or induce or attempt to solicit or induce any employees or
any sales representatives, agent(s) or consultants of the Company to terminate
their employment,
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<PAGE> 22
representation or other association with the Company, Executive's obligations
under this Section 6.7 shall survive the termination of this Agreement and shall
remain in full force and effect for ten years from the Effective Date.
6.8. Communication of Contents of Agreement. During the Term of
Employment and during any additional period in which the covenants contained in
Sections 6.1 and 6.2 of this Agreement remain in effect Executive will
communicate the contents of this Agreement to any person, firm, association,
partnership, corporation or other entity which he intends to represent, be
employed by, be associated with, and which is engaged in a business that
competes with the business of the Company.
Section 7. Remedies. In the event of any breach by Executive of the
provisions of Sections 5 or 6 of this Agreement, the parties hereby recognize
and acknowledge that a remedy at law may be inadequate, and the Company may
suffer irreparable injury. Accordingly, Executive consents to injunctive and
other appropriate equitable relief upon the institution of appropriate
proceedings by the Company in order to protect the rights of the Company under
Sections 5 and 6 of this Agreement. Executive, OHM and the Company agree that if
the Company determines that it in necessary to seek such equitable relief, the
Company shall file a notice of arbitration (an "Arbitration Demand") with
Executive and the American Arbitration Association ("AAA") seeking arbitration
under the Expedited Procedure Rules of the Commercial Arbitration Rules of the
AAA, supplemented as follows: (i) within twenty-four hours after Executive's
receipt of an
22
<PAGE> 23
Arbitration Demand, the Company and Executive shall select an arbitrator; (ii)
if Executive fails to cooperate in selecting an arbitrator within such
twenty-four-hour period, the company may proceed with obtaining injunctive
relief from a court of competent jurisdiction; (iii) the parties agree that any
hearing by the arbitrator shall be held as soon as possible, but no later than
seven days after the date the arbitrator in selected; and (iv) that the
arbitrator's decision shall be rendered as soon as possible, but no later than
seven days after the date of the closing of the hearing referred to in clause
(iii) above. Such relief will be in addition to any other relief to which the
Company may be entitled at law or in equity Resort to any remedy provided for
under this Section 7 or provided for by law will not prevent the concurrent or
subsequent employment of any other appropriate remedy or remedies or preclude
the recovery by the Company of monetary damages.
Section 8. Termination.
8.1. Termination Upon Death or Disability. This Agreement and
Executive's employment with the Company will terminate automatically upon the
death or disability (as defined below) of Executive and in such event the
Company will have no further obligation to Executive under this Agreement except
to pay Executive or his estate or guardian, in the case of disability, the
unpaid portion, if any, of the Salary payable to Executive under Section 3.1(a)
for the period through the date of his death or disability and, to the extent
provided in this Agreement, a portion of his Earnout Consideration. For purposes
of this Agreement, "disability" means an
23
<PAGE> 24
illness or incapacity (mental or physical or both) of a character, nature,
degree or effect that renders Executive incapable of performing his duties
hereunder for a period of more than 90 consecutive days, or more than 120 days
in any 180-day period. The determination of "disability" will be made by
physicians acceptable to the Company, and Executive consents to examination by
such physicians and to the disclosure by any physicians of any and all
diagnoses, test results, opinions and other information obtained by such
physicians during or as a result of such examinations.
8.2. Termination by Executive. If Executive terminates his employment
with the Company, the Company will have no further obligation to Executive under
this Agreement except to pay Executive the unpaid portion, if any, of the Salary
payable to Executive under Section 3.1(a) for the period through the date of
termination.
8.3. Termination for Cause. (a) In the event that the Company
terminates Executive's employment with the Company for "cause" (as defined
below) at any time by delivering notice of termination to Executive, the Company
will have no further obligation to Executive under this Agreement, except to pay
Executive the unpaid portion, if any, of the Salary payable to Executive
pursuant to Section 3.1(a) for the period through the date of termination.
(b) For purposes of this Agreement, "cause", means willful
misconduct by Executive resulting in material harm to the Company and its
affiliates (including harm to the Company and its affiliates' public
reputation), (ii) the breach by Executive of any of his covenants contained in
this Agreement, (iii) Executive's conviction
24
<PAGE> 25
of, or Executive's entering of a guilty plea with respect to, a felony or (iv)
Executive's misappropriation of corporate funds. Termination pursuant to this
Section 8.3 shall not be in limitation of any other right or remedy the Company
may have against Executive, and following termination of this Agreement pursuant
to this Section 8.3, Executive shall remain liable to the Company for any
damages caused by any of the foregoing.
8.4. Termination Other Than For Cause. In the event that the Company
terminates Executive's employment with the Company without "cause", the company
will have no further obligation to Executive under this Agreement, except to
provide Executive with the Salary, the Target Bonus, if any, and benefits to
which Executive would have been entitled pursuant to Sections 3.1 and 3.2 for
the period through the six-month anniversary of the date of such termination
and, to the extent provided in this Agreement, his Earnout Consideration, if
any, payable pursuant to Section 4. Amounts payable in respect of the Target
Bonus shall be payable on a pro rata basis in accordance with the OHM Bonus
Plan, except that the requirement under the OHM Bonus Plan that Executive remain
employed by the Company or its subsidiaries in order to be eligible to receive
such bonus shall be deemed waived for purposes of this Section 8.4.
8.5. Continuance of Covenants. Notwithstanding any other provision of
this Agreement to the contrary, if this Agreement is terminated for any reason,
Sections 5 and 6 will survive and continue to bind Executive to the extent set
forth therein.
Section 9. Miscellaneous. (a) Amendment. This Agreement may be
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<PAGE> 26
amended only by a writing executed by each of the parties to this
Agreement.
(b) Entire Agreement. This Agreement, the Stock Purchase
Agreement and the documents executed in connection with the Stock Purchase
Agreement contain the entire agreement between the parties and supersede all
prior understandings, agreements or representations by or between the parties,
written or oral, to the extent they have related in any way to the subject
matter hereof, provided, however, that (i) the obligations of the Company and
Executive under this Agreement are expressly conditioned upon the closing of the
transactions contemplated in the Stock Purchase Agreement and (ii) this
Agreement shall be null and void in the event that the transactions contemplated
in the Stock Purchase Agreement are not consummated.
(c) Notices. Any notice, request, consent and other
communication required or permitted under this Agreement must be in writing and
will be deemed to have been duly given (i) when received if personally
delivered, (ii) within one day after being sent by recognized overnight delivery
service, or (iii) within five days after being sent by registered or certified
mail return receipt requested, postage prepaid, to the parties (and to the
persons to whom copies shall be sent) at their respective addresses set forth
below.
If to the Company:
Beneco Enterprises, Inc.
c/o OHM Corporation
5445 Triangle Parkway, Suite 400
Norcross, Georgia 30092
Attention: Steven E. Harbour, Esq.
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If to Executive:
Scott Doxey
76 E. 6790 South
Midvale, Utah 84047
Any party may change the address or the persons to whom notice shall be
directed by notifying the other party as provided in this Section.
(d) Assignability. This Agreement shall be assignable by the Company,
in its sole discretion, to any one or more of the Company's direct or indirect
wholly owned subsidiaries, and to its successors and assigns, including any
entity with which the Company may merge or consolidate or to which all or
substantially all of its assets may be transferred. Executive may not assign,
pledge or encumber any interest in this Agreement or any part of this Agreement
(this Agreement being personal to Executive).
(e) Governing Law. This Agreement shall be governed by and construed
and interpreted in accordance with the internal, substantive laws of the State
of Ohio, without regard to its principles of conflicts of laws.
(f) Construction. Each section and subsection of this Agreement
constitutes a separate and distinct provision of this Agreement. It is the
intent of the parties to this Agreement that the provisions of this Agreement be
enforced to the fullest extent permissible under the laws and public policies
applicable in each jurisdiction in which enforcement is sought. Accordingly, if
any provision of this Agreement shall be adjudicated to be invalid, ineffective
or unenforceable, the remaining provisions shall not be affected thereby.
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<PAGE> 28
The invalid, ineffective or unenforceable provision shall, without further
action by the parties, be automatically amended to effect the original purpose
and intent of such provision to the fullest extent legally permissible,
provided, that such amendment shall apply only with respect to the operation of
such provision in the particular jurisdiction with respect to which such
adjudication is made.
(g) Essential Covenants. Executive acknowledges that: (i) the covenants
by Executive in Sections 5 and 6 are essential elements of this Agreement, and
without Executive's agreement to comply with such covenants, the Company would
not have a ired all of the outstanding shares of capital stock of the Company
pursuant to the Stock Purchase Agreement nor entered into this Agreement or
employed the Executive, (ii) Executive has independently consulted its counsel
and has been advised in all respects concerning the reasonableness and propriety
of such covenants, with specific regard to the nature of the business conducted
by the Company, (iii) the covenants by Executive in Sections 5 and 6 are
independent covenants and the existence of any claim by Executive against the
Company under this Agreement or otherwise will not excuse the Executive's breach
of any covenant in Section 5 or 6. and (iv) if Executive's employment hereunder
expires or is terminated, this Agreement will continue in full force and affect
as is necessary or appropriate to enforce the covenants and agreements of
Executive in Sections 5 and 6.
(h) Waivers. Any waiver by any party or any violation of, breach of, or
default under, any provision of this Agreement by the other party shall not be
construed as, or constitute a continuing
28
<PAGE> 29
waiver of such provision, or waiver of any other violation of, breach of or
default under any other provision of this Agreement.
(i) Headings. The headings in this Agreement are solely for convenience
and shall not be given any effect in the construction or interpretation of this
Agreement.
(j) Third Parties. Nothing expressed or implied in this Agreement is
intended, or shall be construed, to confer upon or give to any person or entity
other than the Company and its affiliates, Executive, his estate and any
permitted assignees, any rights or remedies under, or by reason of, this
Agreement.
(k) Withholding of Taxes. The Company may withhold from any amounts
payable under this Agreement all federal, state, city or other taxes as shall be
required to be withheld pursuant to any law or government regulation or ruling.
(1) Survival of Certain Obligations. The obligations of the Company and
Executive set forth in this Agreement which by their terms extend beyond or
survive the termination of the Term of Employment shall not be affected or
diminished in any way by the termination of this Agreement.
(m) No Violations. Executive represents and warrants that neither the
execution and delivery of this Agreement nor Executive's performance of his
duties and obligations under this Agreement will conflict with, violate or
result in a breach of any of the terms, conditions or provisions of, or
constitute a default under or (with or without the giving of notice or the
passage of time or both) entitle any party to terminate or declare a default
under any contract,
29
<PAGE> 30
agreement, lease, license or instrument to which Executive or the Company is a
party or by which Executive or the Company may be bound.
(n) Succession Planning. Executive agrees that he shall assist the
Company and OHM, in the manner and to the extent reasonably requested by the
Company and OHM, in preparing a succession plan for the Company and in
identifying, assisting and training a successor to Executive and/or successors
to Executive's management team.
(o) Arbitration. Except as provided in Sections 4 (solely with respect
to the matters set forth in Section 4, which shall be governed by the procedures
set forth therein) and 7 of this Agreement, any dispute relating to this
Agreement or the performance by the parties of their respective obligations
hereunder, which is not promptly resolved by mutual agreement of the parties,
shall be finally settled by arbitration administered by the American Arbitration
Association under its Commercial Arbitration Rules. Such arbitration shall be
conducted by a single arbitrator appointed in accordance with such rules. The
arbitrator's award resulting from such arbitration may be confirmed and entered
an a final judgment in any court of competent jurisdiction and enforced
accordingly. The parties hereto agree that any dispute relating to this
Agreement or the performance by the parties of their respective obligations
hereunder shall not in any event be subject to the American Arbitration
Association's National Rules for the Resolution of Employment Disputes.
(p) Earnout Provisions. Executive acknowledges and agrees that (i)
Section 4 of this Agreement is intended to benefit Executive and the other
Shareholders, (ii) each of the Shareholders shall have
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<PAGE> 31
identical provisions in their respective employment agreements and (iii) the
parties may enforce the provisions of Section 4 as if such provisions were
contained in a single agreement to which OHM, the Company, Executive and the
other Shareholders were a party.
(q) Confidentiality. Each of Executive, OHM and the Company will not,
and will direct their representatives and agents not to, disclose to any person
or entity the existence or terms of this Agreement except to the extent required
by law or court order.
IN WITNESS WHEREOF, Executive has duly executed and delivered this
Agreement, and the Company has caused this Agreement to be duly executed and
delivered by its duly authorized officer, as of the date first written above.
/s/ Scott Doxey
---------------------------
Scott Doxey
Accepted as of such date at Findlay, Ohio.
BENECO ENTERPRISES, INC.
By: /s/ Bennie Smith, Jr.
------------------------
Name: Bennie Smith, Jr.
----------------------
Title: President
---------------------
OHM CORPORATION
By: /s/ Kris E. Hansel
------------------------
Name: Kris E. Hansel
----------------------
Title: Vice President &
---------------------
Controller
---------------------
31
<PAGE> 1
Exhibit 10(iii).36
Draft of June 11, 1997
EXECUTIVE EMPLOYMENT AGREEMENT
This Employment Continuation, Non-competition and
Confidentiality Agreement (this "Agreement"), is made this 17th day of June,
1997, by and between Beneco Enterprises, Inc., a Utah corporation (the
"Company"), OHM Corporation, an Ohio corporation ("OHM"), and Robert Newberry
("Executive").
W I T N E S S E T H:
WHEREAS, concurrently with the execution of this Agreement,
OHM, the Company, the Executive, Bennie Smith, Jr. and Scott Doxey
(collectively, the "Shareholders") are entering into a certain Stock Purchase
Agreement (the "Stock Purchase Agreement"), pursuant to which OHM is purchasing
from the Executive and the other Shareholders all of the issued and outstanding
shares of capital stock of the Company;
WHEREAS, in order to induce OHM to enter into the Stock
Purchase Agreement and the other agreements contemplated thereby, Executive has
agreed to continue to serve in an executive capacity with the Company pursuant
to the terms and provisions of this Agreement;
NOW, THEREFORE, in consideration of the foregoing and the
mutual representations, warranties, covenants and agreements contained in this
Agreement and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged,, and subject to the terms and conditions set
forth below, the Company, OHM and Executive agree as follows:
<PAGE> 2
Section 1. Term of Employment. The Company hereby employs
Executive, and Executive hereby accepts employment by the Company, upon the
terms and conditions set forth in this Agreement, for a period of three years
commencing on June 1, 1997 (the "Effective Date") and ending on the third
anniversary of the Effective Date (the "Term of Employment"), unless earlier
terminated pursuant to Section 8 of this Agreement.
Section 2. Position, Duties, Responsibilities and Authority.
(a) Executive will assume and perform such , reasonable executive and managerial
responsibilities and duties in connection with the business activities of the
Company (the "Services") as the Executive has performed in connection with the
company prior to the date of this Agreement and consistent with the duties and
responsibilities performed by other executives holding similar positions in
other government contracting companies. Executive shall be appointed and serve
as Controller of the Company during the term of this Agreement. Executive shall
perform the Services in accordance with such procedures and policies as the
Company may adopt from time to time. During the Term of Employment, Executive
will be employed as an employee of the Company or any affiliate thereof in, or
in the vicinity of, Salt Lake City, Utah, or such other place as Executive may
agree in writing. Notwithstanding the foregoing, Executive will be required to
undertake regular and extended travel to such locations and for such duration as
may be required to fulfill his obligations and duties in connection with the
business activities of the Company and such travel shall be undertaken in a
reasonable and customary
2
<PAGE> 3
manner and the amount of such travel shall be consistent with past
practice.
(b) During the Term of Employment, Executive will devote his
entire time, attention, skill and energy to the business of the Company during
business hours customary for executives holding similar positions with other
government contracting companies, will use his best efforts to promote the
success of the business of the Company and cooperate fully, with the Board of
Directors of the Company in the advancement of the best interests of the
Company. If Executive is elected as a director of the Company or as director or
officer of any of its affiliates, Executive will fulfill his duties as such
director or officer without additional compensation.
Section -3. Compensation During Term of Employment
3.1. Salary and Bonuses: As compensation for the Services
to be rendered during the Term of Employment, and for the other obligations
undertaken by Executive under this Agreement, Executive will be entitled to the
following:
(a) Salary. The Company will pay to Executive an annual salary
(the "Salary") of $180,000 (which is equivalent to $15,000 per month), which
shall be payable in equal periodic installments according to the Company's
customary payroll practices, but no less frequently than monthly.
(b) Bonus. Executive will be entitled to receive, with respect to each
fiscal year during the Term of Employment an annual bonus (the "Target Bonus")
equal to up to 30% of his annual Salary. The Target Bonus will be determined in
accordance with the terms and conditions
3
<PAGE> 4
established pursuant to the Management Incentive Bonus Plan of OHM (the "OHM
Bonus Plan") in effect as of the date hereof, as may be amended by OHM, in its
sole discretion, from time to time.
3.2 Benefits. (a) The Company will, during the Term of
Employment, permit Executive to participate in such retirement savings plan,
life insurance, health insurance and other employee benefit plans of the Company
that may be in effect from time to time, to the extent Executive is eligible
under the terms of those plans in accordance with the policies of OHM.
(b) During the Term of Employment, Executive will be entitled
to a vehicle allowance of $750 a month. Executive shall not be entitled to
reimbursement by the Company for any automobile-related expenses, except for
fuel expense.
(c) Executive will be entitled to vacation in accordance with
the vacation policies in affect for employees of OHM and its
subsidiaries in similar positions to Executive. Executive will also be
entitled to the paid holidays set forth in OHM's policies. Vacation
days and holidays during any fiscal year that are not used by the
Executive during such fiscal year may not be used in any subsequent
fiscal year. In scheduling his vacation, Executive shall give
sufficient notice to his immediate supervisor regarding such vacation
and shall give due regard to the reasonable needs of the Company in
scheduling such vacation.
(d) All reasonable and documented out-of-pocket expenses
incurred by Executive on behalf of the Company in the ordinary and
normal course of business and in accordance with OHM's travel
4
<PAGE> 5
and business expense policies in effect from time to time shall be
reimbursed by the company in accordance with the Company's normal
procedures for expense reimbursement.
(e) Executive's accumulated time with the Company prior to the
Effective Date shall be included in calculating his employment time
with the Company to the extent such accumulated time is considered in
determining the amount of benefits provided to the Executive under
Section 3.2(a) and (c).
Section 4. Earnout Consideration.
4.1 Earnout Consideration, (a) If one of the financial
performance levels provided in Section 4.1(b)(i), (ii) or (iii) is achieved, OHM
shall make certain payments (the "Earnout Consideration") to the Executive and
the other Shareholders as provided therein.
(b) The Earnout Consideration, if any, shall be based on the
Average Operating Income (as defined in Section 4.5) for the three-year period
following the Effective Date and shall consist of the following:
(i) If the Average operating Income for the three-year
period following the Effective Date is equal to or greater than $6,000,000, the
Executive and the other Shareholders shall receive an aggregate of $10,000,000
in cash or, in the sole discretion of OHM, shares of OHM Common Stock (as
defined in Section 4.5) with an aggregate market value (as determined pursuant
to Section 4.4(c)) of $10,000,000, or any combination of cash and OHM common
Stock, as determined by OHM.
5
<PAGE> 6
(ii) if the Average Operating Income for the three-year period
following the Effective Date is equal to or greater than $5,500,000, but less
than $6,000,000, the Executive and the other Shareholders shall receive an
aggregate of $7,000,000 in cash or, in the sole discretion of OHM, shares of OHM
Common Stock with an aggregate market value of $7,000,000, or any combination of
cash and OHM Common Stock, as determined by OHM.
(iii) if the Average Operating Income for the three-year
period following the Effective Date is equal to or greater than $5,000,000, but
less than $5,500,000, the Executive and the other Shareholders shall receive an
aggregate of $4,000,000 in cash or, in the sole discretion of OHM, shares of OHM
Common Stock with an aggregate market value of $4,000,000, or any combination of
cash and OHM Common Stock, as determined by OHM.
(iv) If the Average Operating Income for the three-year period
following the Effective Date is less than $5,000,000, no Earnout Consideration
shall be paid.
4.2 Adjustments to Average Operating Income; Accounting
Considerations.
Accounting Considerations. (a) In computing the Average Operating Income, (i)
intercompany accounting charges that relate to general overhead allocations by
OHM to the Company shall be excluded from such computation, (ii) intercompany
accounting charges that relate to services actually provided by or caused to be
provided by OHM to or for the direct benefit of the Company shall be included in
such computation, including, without limitation, charges relating to
6
<PAGE> 7
employee benefits provided to employees of the Company, insurance, professional
services and bonding fees and (iii) the financial impact of acquisitions which
result in a business combination with the Company shall be excluded from such
computation, unless (A) it is agreed upon in advance by OHM and Bennie Smith,
Jr. if he is employed as an executive of the Company at the time of such
acquisition (or Executive, if Bennie Smith, Jr. is not employed as an executive
of the Company at such time and Executive is employed as an executive of the
Company at such time, or Scott Doxey,if Bennie Smith, Jr. and Executive are not
employed as executives of the Company at such time and Doxey is employed as an
executive of the Company at such time) (the "Shareholder Representative"), that
such acquisition will be included in computing the Average Operating Income and
(B) the financial performance levels set forth in section 4.1(b) are adjusted to
take into account the effect of such acquisition, with such adjustments agreed
to by OHM and the Shareholder Representative. Notwithstanding the foregoing, OHM
agrees that it shall not cause the Company to engage in any acquisitions until
after the third anniversary of the Effective Date if (i) none of Executive,
Bennie Smith, Jr. or Scott Doxey are employed by the Company and (ii) one or
more of Executive, Smith or Doxey are entitled to the Earnout Consideration.
(b) For purposes of determining the Average operating Income,
(i) the adequacy of any contingency or reserve reflected on the Company's
financial statements or accounting records shall be determined in accordance
with United States generally accepted
7
<PAGE> 8
accounting principles ("GAAP") as applied to the company on a stand-alone basis
by OHM and reviewed by the certified public accounting firm regularly engaged by
OHM ("OHM's Accountants"); and (ii) notwithstanding the Company's past
practices, any and all costs incurred by the Company in seeking or retaining
customers, including the costs associated with bid proposals, shall be expensed
on a current basis and not amortized.
4.3 Allocation of Earnout consideration. (a) Except as
otherwise provided in this Section 4.3 and subject to the setoff rights provided
in Section 7.6 of the Stock Purchase Agreement, the Earnout Consideration, if
any, shall be allocated among the Executive and the other Shareholders as
follows:
Earnout Consideration
---------------------
(dollars in millions)
$10.0 $7.0 $4.0
----- ---- ----
Bennie Smith $7.8 $5.3 $2.8
Robert Newberry 1.2 1.0 .7
Scott Doxey 1.0 .7 .5
(b) (i) Notwithstanding anything to the contrary in Section
4.3(a) and except as otherwise provided in Section 4.3(b)(ii) or (iii), if a
Shareholder is not employed by the Company (except by reason of termination by
the Company without cause pursuant to the Employment Agreement of such
Shareholder) as of the third anniversary of the Effective Date, the Earnout
Consideration allocated to such Shareholder shall not be payable by OHM.
8
<PAGE> 9
(ii) Notwithstanding Section 4.3(b)(i), in the event that
Scott Doxey is not employed by the Company as of the third anniversary
of the Effective Date (except by reason of his termination by the
Company without cause or because of his death or disability (as defined
in the Employment Agreement of Doxey)), the Earnout Consideration that
would have been payable to Doxey shall be allocated on a pro rata basis
to the other Shareholders, provided such Shareholders are otherwise
entitled to receive their respective portion of the Earnout
Consideration.
(iii) If (A) a Shareholder is no longer employed by the
Company by reason of his death or disability, (B) the Average Operating
Income, on an annualized basis, for the period from the Effective Date
through and including the date of death or date of disability of such
Shareholder (each, a "Determination Date") is $5,000,000 or more, and
(C) the Earnout Consideration is determined to be payable under the
terms of this Agreement after the expiration of the three-year period
after the Effective Date, then such Shareholder or his estate or
guardian, in the case of disability, in accordance with the procedures
and within the period described in Section 4.4 shall be entitled to
receive an amount (the "Pro Rata Earnout Amount") equal to (A) the
Earnout Consideration that such Shareholder would have been entitled to
receive if he had remained employed by the Company until the third
anniversary of the Effective Date multiplied by (B) a fraction, the
numerator of which is the number of full months that shall have elapsed
from the Effective Date through and
9
<PAGE> 10
including the Determination Date and the denominator of which is 36
months. If the Shareholder who dies or becomes disabled is Scott Doxey,
then the amount of the Earnout Consideration not paid to Scott Doxey or
his estate, as the case may be, as a result of the determination of the
Pro Rata Earnout Amount, shall be allocated on a pro rata basis to the
other Shareholders, provided such Shareholders are otherwise entitled
to receive their respective portion of the Earnout Consideration. If
any other Shareholder dies or becomes disabled, any Earnout
Consideration in excess of the Pro Rata Earnout Amount with respect to
such Shareholder shall not be payable by OHM.
(c) OHM shall provide the Executive and the other shareholders
on a periodic basis not less than once each calendar year with an
interim update regarding the computation of the Average Operating
Income.
4.4 Payment of Earnout Consideration. (a) (i) Within ninety
days after the third anniversary of the Effective Date, OHM shall
determine the Average Operating Income, subject to review by OHM's
accountants (the "Average Operating Income Calculation"). Within three
business days after OHM's receipt of the Average Operating Income
Calculation, OHM shall deliver such calculation to each of the
Shareholders for review.
(ii) Unless a majority of the Shareholders (one of which must
be Executive unless he is no longer employed by the Company or
otherwise entitled to the Earnout Consideration), which for purposes of
this Section 4.4 shall include such Shareholder's
10
<PAGE> 11
estate, if any, or guardian, in the case of disability, gives the
Company written notice of their objection to the Average Operating
Income Calculation, which notice shall include the basis of the
Shareholders' objection in reasonable detail ("Notice of Objection"),
within 30 calendar days after receiving the Average Operating Income
Calculation (the "Objection Period"), the Average Operating Income
Calculation shall be final, conclusive and binding on OHM and each of
the Shareholders.
(iii) If a majority of the Shareholders (one of which must be
Executive unless he is no longer employed by the Company or otherwise
entitled to the Earnout Consideration) deliver a Notice of Objection
within the Objection Period, OHM and the Shareholders shall use
reasonable efforts to resolve all disputes regarding objections set
forth in the Notice of Objection, If OHM and the Shareholders are not
able to resolve all disputes regarding the Shareholders' objections set
forth in the Notice of Objection within 14 calendar days after delivery
to OHM of the Notice of Objection, the remaining disputed items shall
be submitted for final resolution to an independent certified public
accounting firm selected by mutual agreement of OHM, on the one hand,
and the Shareholders, on the other hand, or if OHM and the Shareholders
are unable to agree upon such accounting firm within 20 calendar days
after the delivery of a Notice of Objection, OHM, on the one hand, and
the Shareholders, on the other hand, shall promptly instruct their
respective firms of independent
11
<PAGE> 12
certified public accountants to select, within five business days
thereafter, a third independent certified public accounting firm and
only the disputed items shall be submitted to such independent
certified public accounting firm (the "Independent Accountants"), After
offering OHM and OHM's representatives and the Shareholders and the
Shareholders' representatives the opportunity to present their
positions as to the disputed items, which opportunity shall not extend
for more than 10 calendar days after the Independent Accountants have
been selected, the Independent Accountants shall deliver a written
report resolving the disputed items submitted for resolution and
setting forth the basis for such resolution within 30 calendar days
after OHM and the Shareholders have presented their positions as to the
disputed items. The resolution of the Independent Accountants shall be
final, conclusive and binding upon OHM and each of the Shareholders and
shall be reflected in any necessary revisions to the Average Operating
Income Calculation. Notwithstanding anything in this Agreement to the
contrary, the scope of the Independent Accountants' review of any
dispute between OHM and the Shareholders regarding the Average
Operating Income Calculation shall be limited solely to the resolution
of the Shareholders' objections that are not resolved prior to
selection of the Independent Accountants and as are set forth in the
Notice of Objection.
(iv) One-half of the fees, costs and expenses of the
Independent Accountants for services rendered pursuant to Section
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<PAGE> 13
4.4(a) shall be paid by the Shareholders and one-half of such fees,
costs and expenses shall be paid by OHM.
(b) If no Notice of Objection is timely delivered by the
Shareholders, OHM shall pay to the Shareholders, subject to Section
4.4(c), their respective portion of the Earnout Consideration, if any,
five business days after the earlier of (i) the expiration of the
Objection Period and (ii) the date of delivery by a majority of the
Shareholders to OHM of written notice that the Average Operating Income
Calculation will be accepted by the Shareholders without objection
(which notice shall be binding on each of the Shareholders, including
any Shareholder that is not a party to such notice). If a Notice of
Objection with respect to the Average Operating Income calculation is
timely delivered by a majority of the shareholders (one of which must
be Executive unless he is no longer employed by the Company or
otherwise entitled to the Earnout Consideration), OHM shall pay to the
Shareholders, subject to Section 4.4(c), their respective portion of
the Earnout Consideration, if any, five business days after the date
all disputed items are fully resolved pursuant to Sections 4.4(a)(ii)
or 4.4(a)(iii). All cash payments constituting the Earnout
Consideration shall be made by wire transfer of immediately available
funds to the respective accounts designated by the Shareholders. All
the OHM Common Stock constituting the Earnout Consideration, when
issued and delivered by OHM to the Shareholders as provided in this
Agreement, will be validly issued, fully paid and nonassessable.
13
<PAGE> 14
(c) The value of the OHM Common Stock delivered in payment of
the Earnout Consideration shall be determined using the average of the
closing prices of such stock on the national securities exchange or
over-the-counter market in which such stock is then currently listed or
designated for trading for each business day commencing on the day 30
calendar days prior to the date of issuance to the Shareholders and
ending on the day immediately preceding the date of issuance to the
Shareholders. The OHM Common Stock, if any, issued in payment of the
Earnout Consideration shall be freely transferable upon receipt of such
common stock by the Shareholders. Subject to Section 4.1 of this
Agreement, if OHM is unable to issue freely transferable OHM Common
Stock to the Shareholders within 60 days of the date the amount of the
Earnout Consideration is finally determined pursuant to Section 4.4(b),
OHM shall pay to the Shareholders their respective portion of the
Earnout Consideration in cash by wire transfer of immediately available
funds to the respective accounts designated by the Shareholders.
4.5 Definitions. For purposes of this Agreement, (a) "Average Operating
Income" means (i) the operating income (loss) of the company for the three-year
period following the Effective Date (subject to the adjustments set forth in
Section 4.2(a)) determined in accordance with GAAP (but excluding all items of
gain or loss classified as extraordinary in accordance with GAAP and subject to
the accounting considerations set forth in Section 4.2(b)), divided by (ii)
three.
14
<PAGE> 15
Notwithstanding the foregoing, the operating income of the Company shall not
include any of the following: interest expense; income tax expense;
amortization, if any, attributable to the transactions contemplated by the Stock
Purchase Agreement; interest income; and other items of non-operating income and
expense; and (b) "OHM Common Stock" means shares of Common Stock, par value $.10
per share, of OHM or any successor thereto provided the shares of such successor
are listed or designated for trading on a national securities exchange or
over-the-counter market.
Section 5. Trade Secrets, Proprietary Information and Return of
Materials.
5.l Trade Secrets. Executive acknowledges that, by reason of
Executive's duties, Executive will have access to and become informed of
proprietary, non-public information relating to the Company as well as other
confidential business and technical information and trade secrets ("Proprietary
Information"), including, without limitation:
(a) With respect to the Company and its affiliates,
(i) service specifications, schematics, designs, procedures,
practices, testing methods, concepts for new or improved services and other
service data; (ii) sources of supply and potential sources of supply, for
capital equipment, components, products and services; (iii) all technical
information relating to the invention, patenting, technological advancement,
formulation, development, design, specifications, testing, manufacture and use
of services, methods, processes, machinery and equipment (iv) customer
information, such as customer lists, purchasing and servicing habits and credit
15
<PAGE> 16
information; (v) cost and pricing information; (vi) selling and marketing
information, such as selling methods, strategies, catalogues, order books and
instructional and promotional materials; (vii) training and recruiting methods
and materials; (viii) corporate planning data; (ix) financial results and
business conditions; and (x) any information that otherwise may be defined as a
"trade secret" under the Uniform Trade Secrets Act; and
(b) With respect to any other person or entity, any of the foregoing
types of information which belong to such person or entity but to which
Executive has had access by reason of his employment with the Company
(including, without limitation, information delivered to the Company or to any
of its affiliates in confidence by persons or entities for whom the Company is
performing services).
5.2 Ownership-of-Company Proprietary Information.
Executive specifically acknowledges (a) that all of the
Proprietary Information set forth in section 5.1(a) of this Agreement, whether
reduced to writing, maintained on any form of electronic media, or maintained in
the mind or memory of Executive, and whether compiled by the Company or
Executive, derives independent economic value from not being readily known to or
ascertainable by proper means by others who can obtain economic value from the
disclosure or use of such Proprietary Information, or any part of it; (b) that
reasonable efforts have been and will be taken by the Company and Executive to
maintain the secrecy of such Proprietary information; (c) that such Proprietary
Information is the sole property of the
16
<PAGE> 17
Company; and (d) that any retention in violation of Section 5.4 of this
Agreement or use of such Proprietary Information during or after the Term of
Employment (except in the course of the performance of Executive's duties under
the terms of this Agreement) shall constitute a misappropriation of the trade
secrets of the Company.
5.3 Non-disclosure of Trade Secrets. Executive will keep in strict
confidence and will not, directly or indirectly, at any time during or after
Executive's employment by the Company, disclose, furnish, disseminate, make
available or use (except in the course of the performance of Executive's duties
under the terms of this Agreement) any of the Proprietary Information.
5.4 Return of Documents and Records. Executive agrees that upon
termination of Executive's employment with the Company, for any reason, or
expiration of the Term of Employment (unless Executive remains employed by the
Company), Executive shall return to the Company, in good condition, all property
of the Company, including, without limitation, any document or record
(including, without limitation, computerized records) containing any Proprietary
Information, and Executive shall promptly deliver to the Company all documents
and records (including, without limitation, computerized records) of the Company
in Executive's possession, custody or control. If such items are not so
returned, the Company will have the right to charge Executive for all reasonable
damages, costs, attorneys' fees and other expenses incurred in searching for,
taking and/or recovering such property.
17
<PAGE> 18
Section 6. Restrictive Covenants.
6.1 During Term of Employment. During the Term of Employment, Executive
will not compete with the Company anywhere within the United States. In
accordance with this restriction, but without limiting its terms, during the
Term of Employment, Executive will not:
(a) enter into or engage in any business which competes with
the business of the Company; or
(b) solicit customers, business, patronage or orders for, or
sell, any products or services in competition with, or for any business that
competes with, the business of the Company; or
(c) divert, entice, or take away any customers, business,
patronage or orders of the Company; or
(d) promote or assist, financially or otherwise, any person,
firm, association, partnership, corporation or other entity engaged in any
business which competes with the business of the Company.
6.2. After Termination of Employment. For the earlier of five years
after the Effective Date, or three years from and after termination of this
Agreement for any reason other than a termination without cause under Section
8.4, or for a period of two years from the date of such termination without
cause under Section 8.4, Executive will not:
(a) enter into or engage in any business which competes with
the Company's business within the Restricted Territory (as defined in Section
6.4(c)); or
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<PAGE> 19
(b) solicit customers, business, patronage or orders for, or
sell, any products or services in competition with, or for any business,
wherever located, that competes with, the Company's business within the
Restricted Territory; or
(c) divert, entice or otherwise take away any customers,
business, patronage or orders of the Company within the Restricted Territory; or
(d) promote or assist, financially or otherwise, any person,
firm, association, partnership, corporation or other entity engaged in any
business which competes with the Company's business within the Restricted
Territory.
6.3. Related Parties. For the purposes of Sections 6.1 and 6.2,
inclusive, but without limitation thereof, Executive will be in violation
thereof if he engages in any or all of the activities set forth therein directly
as an individual on his own account, or indirectly as a partner, joint venturer,
employee, agent, salesperson, consultant, officer and/or director of any firm,
association, partnership, corporation or other entity, or as a stockholder of
any corporation in which Executive or Executive's spouse, child or parent owns,
directly or indirectly, individually or in the aggregate, more than one percent
of the outstanding stock.
6.4. Certain Definitions. (a) For the purposes of this Agreement, the
term "Company" shall include any and all direct and indirect subsidiaries,
divisions or business units of the Company for which Executive worked or had
responsibility at the time of termination of his employment and at any time
during the two year period prior to such termination.
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<PAGE> 20
(b) For the purposes of Sections 6.1 and 6.2, ,inclusive, the
company's business is defined to be commercial, residential and government
general contracting, construction management, and base and facilities
maintenance, and the provision of related services described in any and all
marketing materials as the same may be altered, amended, supplemented or
otherwise changed from time to time or other services substantially similar to
any such described services. For purposes of Section 6.2. insofar as it extends
for a two-year or three-year period, as the case may be, following termination
of Executive's employment or following expiration of the Term of Employment, the
Company's business is defined to be commercial, residential and government
general contracting, construction management and base and facilities
maintenance, and the provision of related services described in any and all
marketing materials in existence as of the date of termination of Executive's
employment with the Company or expiration of the Term of Employment or other
services substantially similar to any such described services.
(c) For the purposes of Section 6.2, the Restricted Territory
shall be defined as and limited to:
(i) the geographic area(s) within a one-hundred-mile radius of any and
all Company locations) (including, without limitation, Salt Lake City, Utah and
Washington, D.C.) in, to or for which Executive worked, was assigned or had any
responsibility (either direct or supervisory) at the time of termination of his
employment and at any time during his Term of Employment; and
20
<PAGE> 21
(ii) all of the specific customer accounts, whether within or outside
of the geographic area described in (i) above, with which Executive had any
contact or for which Executive had any responsibility (either direct or
supervisory) at the time of termination of his employment and at any time during
his Term of Employment.
6.5. Extension of Period. If it shall be judicially determined that
Executive has violated any of his obligations under Section 6.2, then the period
applicable to each obligation that Executive shall have been determined to have
violated shall automatically be extended by a period of time equal in length to
the period during which such violation(s) occurred.
6.6. Adequate Consideration. Executive acknowledges that his
obligations under this Agreement are reasonable in the context of the nature of
the Company's business and the competitive injuries likely to be sustained by
the Company if Executive were to violate such obligations. Executive further
acknowledges that this Agreement is made in consideration of, and is adequately
supported by, the agreement of the Company to employ or to grant compensation or
benefits to the Executive pursuant to the terms of this Agreement, which
Executive acknowledges constitutes new and/or good, valuable and sufficient
consideration.
6.7. Covenant Not to Solicit. Executive will not directly or
indirectly at any time solicit or induce or attempt to solicit or induce any
employees or any sales representatives, agent(s) or consultants of the Company
to terminate their employment,
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<PAGE> 22
representation or other association with the Company, Executive's obligations
under this Section 6.7 shall survive the termination of this Agreement and shall
remain in full force and effect for ten years from the Effective Date.
6.8. Communication of Contents of Agreement. During the Term
of Employment and during any additional period in which the covenants contained
in Sections 6.1 and 6.2 of this Agreement remain in effect, Executive will
communicate the contents of this Agreement to any person, firm, association,
partnership, corporation or other entity which he intends to represent, be
employed by, be associated with, and which is engaged in a business that
competes with the business of the Company.
Section 7. Remedies. In the event of any breach by Executive of the
provisions of Sections 5 or 6 of this Agreement, the parties hereby recognize
and acknowledge that a remedy at law may be inadequate, and the Company may
suffer irreparable injury. Accordingly, Executive consents to injunctive and
other appropriate equitable relief upon the institution of appropriate
proceedings by the Company in order to protect the rights of the Company under
Sections 5 and 6 of this Agreement. Executive, OHM and the Company agree that if
the Company determines that it is necessary to seek such equitable relief, the
Company shall file a notice of arbitration (an "Arbitration Demand") with
Executive and the American Arbitration Association ("AAA") seeking arbitration
under the Expedited Procedure Rules of the Commercial Arbitration Rules of the
AAA, supplemented as follows: (i) within twenty-four hours after Executive's
receipt of an
22
<PAGE> 23
Arbitration Demand, the Company and Executive shall select an arbitrator; (ii)
if Executive fails to cooperate in selecting an arbitrator within such
twenty-four-hour period, the company may proceed with obtaining injunctive
relief from a court of competent jurisdiction; (iii) the parties agree that any
hearing by the arbitrator shall be held as soon as possible, but no later than
seven days after the date the arbitrator in selected; and (iv) that the
arbitrator's decision shall be rendered as soon as possible, but no later than
seven days after the date of the closing of the hearing referred to in clause
(iii) above. Such relief will be in addition to any other relief to which the
Company may be entitled at law or in equity Resort to any remedy provided for
under this Section 7 or provided for by law will not prevent the concurrent or
subsequent employment of any other appropriate remedy or remedies or preclude
the recovery by the Company of monetary damages.
Section 8. Termination.
8.1. Termination Upon Death or Disability. This Agreement and
Executive's employment with the Company will terminate automatically upon the
death or disability (as defined below) of Executive and in such event the
Company will have no further obligation to Executive under this Agreement except
to pay Executive or his estate or guardian, in the case of disability, the
unpaid portion, if any, of the Salary payable to Executive under Section 3.1(a)
for the period through the date of his death or disability and, to the extent
provided in this Agreement, a portion of his Earnout Consideration. For purposes
of this Agreement, "disability" means an
23
<PAGE> 24
illness or incapacity (mental or physical or both) of a character, nature,
degree or effect that renders Executive incapable of performing his duties
hereunder for a period of more than 90 consecutive days, or more than 120 days
in any 180-day period. The determination of "disability" will be made by
physicians acceptable to the Company, and Executive consents to examination by
such physicians and to the disclosure by any physicians of any and all
diagnoses, test results, opinions and other information obtained by such
physicians during or as a result of such examinations.
8.2. Termination by Executive. If Executive terminates his employment
with the Company, the Company will have no further obligation to Executive under
this Agreement except to pay Executive the unpaid portion, if any, of the Salary
payable to Executive under Section 3.1(a) for the period through the date of
termination.
8.3. Termination for Cause. (a) In the event that the Company
terminates Executive's employment with the Company for "cause" (as defined
below) at any time by delivering notice of termination to Executive, the Company
will have no further obligation to Executive under this Agreement, except to pay
Executive the unpaid portion, if any, of the Salary payable to Executive
pursuant to Section 3.1(a) for the period through the date of termination.
(b) For purposes of this Agreement, "cause", means willful
misconduct by Executive resulting in material harm to the Company and its
affiliates (including harm to the Company and its affiliates' public
reputation), (ii) the breach by Executive of any of his covenants contained in
this Agreement, (iii) Executive's conviction
24
<PAGE> 25
of, or Executive's entering of a guilty plea with respect to, a felony or (iv)
Executive's misappropriation of corporate funds. Termination pursuant to this
Section 8.3 shall not be in limitation of any other right or remedy the Company
may have against Executive, and following termination of this Agreement pursuant
to this Section 8.3, Executive shall remain liable to the Company for any
damages caused by any of the foregoing.
8.4. Termination Other Than For Cause. In the event that the Company
terminates Executive's employment with the Company without "cause", the company
will have no further obligation to Executive under this Agreement, except to
provide Executive with the Salary, the Target Bonus, if any, and benefits to
which Executive would have been entitled pursuant to Sections 3.1 and 3.2 for
the period through the six-month anniversary of the date of such termination
and, to the extent provided in this Agreement, his Earnout Consideration, if
any, payable pursuant to Section 4. Amounts payable in respect of the Target
Bonus shall be payable on a pro rata basis in accordance with the OHM Bonus
Plan, except that the requirement under the OHM Bonus Plan that Executive remain
employed by the Company or its subsidiaries in order to be eligible to receive
such bonus shall be deemed waived for purposes of this Section 8.4.
8.5. Continuance of Covenants. Notwithstanding any other provision of
this Agreement to the contrary, if this Agreement is terminated for any reason,
Sections 5 and 6 will survive and continue to bind Executive to the extent set
forth therein.
Section 9. Miscellaneous. (a) Amendment. This Agreement may be amended
only by a writing executed by each of the parties to this Agreement.
25
<PAGE> 26
(b) Entire Agreement. This Agreement, the Stock Purchase
Agreement and the documents executed in connection with the Stock Purchase
Agreement contain the entire agreement between the parties and supersede all
prior understandings, agreements or representations by or between the parties,
written or oral, to the extent they have related in any way to the subject
matter hereof, provided, however, that (i) the obligations of the Company and
Executive under this Agreement are expressly conditioned upon the closing of the
transactions contemplated in the Stock Purchase Agreement and (ii) this
Agreement shall be null and void in the event that the transactions contemplated
in the Stock Purchase Agreement are not consummated.
(c) Notices. Any notice, request, consent and other
communication required or permitted under this Agreement must be in writing and
will be deemed to have been duly given (i) when received if personally
delivered, (ii) within one day after being sent by recognized overnight delivery
service, or (iii) within five days after being sent by registered or certified
mail return receipt requested, postage prepaid, to the parties (and to the
persons to whom copies shall be sent) at their respective addresses set forth
below.
If to the Company:
Beneco Enterprises, Inc.
c/o OHM Corporation
5445 Triangle Parkway, Suite 400
Norcross, Georgia 30092
Attention: Steven E. Harbour, Esq.
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<PAGE> 27
If to Executive:
Robert Newberry
76 E. 6790 South
Midvale, Utah 84047
Any party may change the address or the persons to whom notice shall be
directed by notifying the other party as provided in this Section.
(d) Assignability. This Agreement shall be assignable by the Company,
in its sole discretion, to any one or more of the Company's direct or indirect
wholly owned subsidiaries, and to its successors and assigns, including any
entity with which the Company may merge or consolidate or to which all or
substantially all of its assets may be transferred. Executive may not assign,
pledge or encumber any interest in this Agreement or any part of this Agreement
(this Agreement being personal to Executive).
(e) Governing Law. This Agreement shall be governed by and construed
and interpreted in accordance with the internal, substantive laws of the State
of Ohio, without regard to its principles of conflicts of laws.
(f) Construction. Each section and subsection of this Agreement
constitutes a separate and distinct provision of this Agreement. It is the
intent of the parties to this Agreement that the provisions of this Agreement be
enforced to the fullest extent permissible under the laws and public policies
applicable in each jurisdiction in which enforcement is sought. Accordingly, if
any provision of this Agreement shall be adjudicated to be invalid, ineffective
or unenforceable, the remaining provisions shall not be affected thereby.
27
<PAGE> 28
The invalid, ineffective or unenforceable provision shall, without further
action by the parties, be automatically amended to effect the original purpose
and intent of such provision to the fullest extent legally permissible,
provided, that such amendment shall apply only with respect to the operation of
such provision in the particular jurisdiction with respect to which such
adjudication is made.
(g) Essential Covenants. Executive acknowledges that: (i) the covenants
by Executive in Sections 5 and 6 are essential elements of this Agreement, and
without Executive's agreement to comply with such covenants, the Company would
not have a ired all of the outstanding shares of capital stock of the Company
pursuant to the Stock Purchase Agreement nor entered into this Agreement or
employed the Executive, (ii) Executive has independently consulted its counsel
and has been advised in all respects concerning the reasonableness and propriety
of such covenants, with specific regard to the nature of the business conducted
by the Company, (iii) the covenants by Executive in Sections 5 and 6 are
independent covenants and the existence of any claim by Executive against the
Company under this Agreement or otherwise will not excuse the Executive's breach
of any covenant in Section 5 or 6, and (iv) if Executive's employment hereunder
expires or is terminated, this Agreement will continue in full force and affect
as is necessary or appropriate to enforce the covenants and agreements of
Executive in Sections 5 and 6.
(h) Waivers. Any waiver by any party or any violation of, breach of, or
default under, any provision of this Agreement by the other party shall not be
construed as, or constitute a continuing
28
<PAGE> 29
waiver of such provision, or waiver of any other violation of, breach of or
default under any other provision of this Agreement.
(i) Headings. The headings in this Agreement are solely for convenience
and shall not be given any effect in the construction or interpretation of this
Agreement.
(j) Third Parties. Nothing expressed or implied in this Agreement is
intended, or shall be construed, to confer upon or give to any person or entity
other than the Company and its affiliates, Executive, his estate and any
permitted assignees, any rights or remedies under, or by reason of, this
Agreement.
(k) Withholding of Taxes. The Company may withhold from any amounts
payable under this Agreement all federal, state, city or other taxes as shall be
required to be withheld pursuant to any law or government regulation or ruling.
(l) Survival of Certain Obligations. The obligations of the Company and
Executive set forth in this Agreement which by their terms extend beyond or
survive the termination of the Term of Employment shall not be affected or
diminished in any way by the termination of this Agreement.
(m) No Violations. Executive represents and warrants that neither the
execution and delivery of this Agreement nor Executive's performance of his
duties and obligations under this Agreement will conflict with, violate or
result in a breach of any of the terms, conditions or provisions of, or
constitute a default under or (with or without the giving of notice or the
passage of time or both) entitle any party to terminate or declare a default
under any contract,
29
<PAGE> 30
agreement, lease, license or instrument to which Executive or the Company is a
party or by which Executive or the Company may be bound.
(n) Succession Planning. Executive agrees that he shall assist the
Company and OHM, in the manner and to the extent reasonably requested by the
Company and OHM, in preparing a succession plan for the Company and in
identifying, assisting and training a successor to Executive and/or successors
to Executive's management team.
(o) Arbitration. Except as provided in Sections 4 (solely with respect
to the matters set forth in Section 4, which shall be governed by the procedures
set forth therein) and 7 of this Agreement, any dispute relating to this
Agreement or the performance by the parties of their respective obligations
hereunder, which is not promptly resolved by mutual agreement of the parties,
shall be finally settled by arbitration administered by the American Arbitration
Association under its Commercial Arbitration Rules. Such arbitration shall be
conducted by a single arbitrator appointed in accordance with such rules. The
arbitrator's award resulting from such arbitration may be confirmed and entered
an a final judgment in any court of competent jurisdiction and enforced
accordingly. The parties hereto agree that any dispute relating to this
Agreement or the performance by the parties of their respective obligations
hereunder shall not in any event be subject to the American Arbitration
Association's National Rules for the Resolution of Employment Disputes.
(p) Earnout Provisions. Executive acknowledges and agrees that (i)
Section 4 of this Agreement is intended to benefit Executive and the other
Shareholders, (ii) each of the Shareholders shall have
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<PAGE> 31
identical provisions in their respective employment agreements and (iii) the
parties may enforce the provisions of Section 4 as if such provisions were
contained in a single agreement to which OHM, the Company, Executive and the
other Shareholders were a party.
(q) Confidentiality. Each of Executive, OHM and the Company will not,
and will direct their representatives and agents not to, disclose to any person
or entity the existence or terms of this Agreement except to the extent required
by law or court order.
IN WITNESS WHEREOF, Executive has duly executed and delivered this
Agreement, and the Company has caused this Agreement to be duly executed and
delivered by its duly authorized officer, as of the date first written above.
/s/ ROBERT NEWBERRY
------------------------------------
Robert Newberry
Accepted as of such date at Findlay, Ohio.
BENECO ENTERPRISES, INC.
By: /s/ BENNIE SMITH, JR.
--------------------------------
Name: Bennie Smith, Jr.
------------------------------
Title: President
-----------------------------
OHM CORPORATION
By: /s/ KRIS E. HANSEL
--------------------------------
Name: Kris E. Hansel
------------------------------
Title: Vice President and Controller
-----------------------------
31
<PAGE> 1
Exhibit 10(iii).37
Draft of June 11, 1997
EXECUTIVE EMPLOYMENT AGREEMENT
This Employment Continuation, Non-competition and
Confidentiality Agreement (this "Agreement"), is made this 17th day of June,
1997, by and between Beneco Enterprises, Inc., a Utah corporation (the
"Company"), OHM Corporation, an Ohio corporation ("OHM"), and Bennie Smith, Jr.
("Executive").
W I T N E S S E T H:
WHEREAS, concurrently with the execution of this Agreement,
OHM, the Company, the Executive, Robert Newberry and Scott Doxey (collectively,
the "Shareholders") are entering into a certain Stock Purchase Agreement (the
"Stock Purchase Agreement"), pursuant to which OHM is purchasing from the
Executive and the other Shareholders all of the issued and outstanding shares of
capital stock of the Company;
WHEREAS, in order to induce OHM to enter into the Stock
Purchase Agreement and the other agreements contemplated thereby, Executive has
agreed to continue to serve in an executive capacity with the Company pursuant
to the terms and provisions of this Agreement;
NOW, THEREFORE, in consideration of the foregoing and the
mutual representations, warranties, covenants and agreements contained in this
Agreement and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged,, and subject to the terms and conditions set
forth below, the Company, OHM and Executive agree as follows:
<PAGE> 2
Section 1. Term of Employment. The Company hereby employs
Executive, and Executive hereby accepts employment by the Company, upon the
terms and conditions set forth in this Agreement, for a period of three years
commencing on June 1, 1997 (the "Effective Date") and ending on the third
anniversary of the Effective Date (the "Term of Employment"), unless earlier
terminated pursuant to Section 8 of this Agreement.
Section 2. Position, Duties, Responsibilities and Authority.
(a) Executive will assume and perform such, reasonable executive and managerial
responsibilities and duties in connection with the business activities of the
Company (the "Services") as the Executive has performed in connection with the
company prior to the date of this Agreement and consistent with the duties and
responsibilities performed by other executives holding similar positions in
other government contracting companies. Executive shall be appointed and serve
as Controller of the Company during the term of this Agreement. Executive shall
perform the Services in accordance with such procedures and policies as the
Company may adopt from time to time. During the Term of Employment, Executive
will be employed as an employee of the Company or any affiliate thereof in, or
in the vicinity of, Salt Lake City, Utah, or such other place as Executive may
agree in writing. Notwithstanding the foregoing, Executive will be required to
undertake regular and extended travel to such locations and for such duration as
may be required to fulfill his obligations and duties in connection with the
business activities of the Company and such travel shall be undertaken in a
reasonable and customary
2
<PAGE> 3
manner and the amount of such travel shall be consistent with past
practice.
(b) During the Term of Employment, Executive will devote his
entire time, attention, skill and energy to the business of the Company during
business hours customary for executives holding similar positions with other
government contracting companies, will use his best efforts to promote the
success of the business of the Company and cooperate fully, with the Board of
Directors of the Company in the advancement of the best interests of the
Company. If Executive is elected as a director of the Company or as director or
officer of any of its affiliates, Executive will fulfill his duties as such
director or officer without additional compensation.
Section -3. Compensation During Term of Employment
3.1. Salary and Bonuses: As compensation for the Services
to be rendered during the Term of Employment, and for the other obligations
undertaken by Executive under this Agreement, Executive will be entitled to the
following:
(a) Salary. The Company will pay to Executive an annual salary
(the "Salary") of $275,000 (which is equivalent to $22,917 per month), which
shall be payable in equal periodic installments according to the Company's
customary payroll practices, but no less frequently than monthly.
(b) Bonus. Executive will be entitled to receive, with respect to each
fiscal year during the Term of Employment an annual bonus (the "Target Bonus")
equal to up to 40% of his annual Salary. The Target Bonus will be determined in
accordance with the terms and conditions
3
<PAGE> 4
established pursuant to the Management Incentive Bonus Plan of OHM (the "OHM
Bonus Plan") in effect as of the date hereof, as may be amended by OHM, in its
sole discretion, from time to time.
3.2 Benefits. (a) The Company will, during the Term of
Employment, permit Executive to participate in such retirement savings plan,
life insurance, health insurance and other employee benefit plans of the Company
that may be in effect from time to time, to the extent Executive is eligible
under the terms of those plans in accordance with the policies of OHM.
(b) During the Term of Employment, Executive will be entitled
to a vehicle allowance of $1,300 a month. Executive shall not be entitled to
reimbursement by the Company for any automobile-related expenses, except for
fuel expense.
(c) Executive will be entitled to vacation in accordance with
the vacation policies in affect for employees of OHM and its
subsidiaries in similar positions to Executive. Executive will also be
entitled to the paid holidays set forth in OHM's policies. Vacation
days and holidays during any fiscal year that are not used by the
Executive during such fiscal year may not be used in any subsequent
fiscal year. In scheduling his vacation, Executive shall give
sufficient notice to his immediate supervisor regarding such vacation
and shall give due regard to the reasonable needs of the Company in
scheduling such vacation.
(d) All reasonable and documented out-of-pocket expenses
incurred by Executive on behalf of the Company in the ordinary and
normal course of business and in accordance with OHM's travel
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<PAGE> 5
and business expense policies in effect from time to time shall be
reimbursed by the company in accordance with the Company's normal
procedures for expense reimbursement.
(e) Executive's accumulated time with the Company prior to the
Effective Date shall be included in calculating his employment time
with the Company to the extent such accumulated time is considered in
determining the amount of benefits provided to the Executive under
Section 3.2(a) and (c).
Section 4. Earnout Consideration.
4.1 Earnout Consideration, (a) If one of the financial
performance levels provided in Section 4.1(b)(i), (ii) or (iii) is achieved, OHM
shall make certain payments (the "Earnout Consideration") to the Executive and
the other Shareholders as provided therein.
(b) The Earnout Consideration, if any, shall be based on the
Average Operating Income (as defined in Section 4.5) for the three-year period
following the Effective Date and shall consist of the following:
(i) If the Average operating Income for the three-year
period following the Effective Date is equal to or greater than $6,000,000, the
Executive and the other Shareholders shall receive an aggregate of $10,000,000
in cash or, in the sole discretion of OHM, shares of OHM Common Stock (as
defined in Section 4.5) with an aggregate market value (as determined pursuant
to Section 4.4(c)) of $10,000,000, or any combination of cash and OHM common
Stock, as determined by OHM.
5
<PAGE> 6
(ii) if the Average Operating Income for the three-year period
following the Effective Date is equal to or greater than $5,500,000, but less
than $6,000,000, the Executive and the other Shareholders shall receive an
aggregate of $7,000,000 in cash or, in the sole discretion of OHM, shares of OHM
Common Stock with an aggregate market value of $7,000,000, or any combination of
cash and OHM Common Stock, as determined by OHM.
(iii) if the Average Operating Income for the three-year
period following the Effective Date is equal to or greater than $5,000,000, but
less than $5,500,000, the Executive and the other Shareholders shall receive an
aggregate of $4,000,000 in cash or, in the sole discretion of OHM, shares of OHM
Common Stock with an aggregate market value of $4,000,000, or any combination of
cash and OHM Common Stock, as determined by OHM.
(iv) If the Average Operating Income for the three-year period
following the Effective Date is less than $5,000,000, no Earnout Consideration
shall be paid.
4.2 Adjustments to Average Operating Income; Accounting
Considerations.
Accounting Considerations. (a) In computing the Average Operating Income, (i)
intercompany accounting charges that relate to general overhead allocations by
OHM to the Company shall be excluded from such computation, (ii) intercompany
accounting charges that relate to services actually provided by or caused to be
provided by OHM to or for the direct benefit of the Company shall be included in
such computation, including, without limitation, charges relating to
6
<PAGE> 7
employee benefits provided to employees of the Company, insurance, professional
services and bonding fees and (iii) the financial impact of acquisitions which
result in a business combination with the Company shall be excluded from such
computation, unless (A) it is agreed upon in advance by OHM and Executive if he
is employed an an executive of the Company at the time of such acquisition (or
Robert Newberry, if Executive is not employed as an executive of the Company at
such time and Newberry is employed as an executive of the Company at such time,
or Scott Doxey,if Executive and Robert Newberry are not employed as executives
of the Company at such time and Doxey is employed as an executive of the Company
at such time) (the "Shareholder Representative"), that such acquisition will be
included in computing the Average Operating Income and (B) the financial
performance levels set forth in section 4.1(b) are adjusted to take into account
the effect of such acquisition, with such adjustments agreed to by OHM and the
Shareholder Representative. Notwithstanding the foregoing, OHM agrees that it
shall not cause the Company to engage in any acquisitions until after the third
anniversary of the Effective Date if (i) none of Executive, Robert Newberry or
Scott Doxey are employed by the Company and (ii) one or more of Executive,
Newberry or Doxey are entitled to the Earnout Consideration.
(b) For purposes of determining the Average operating Income,
(i) the adequacy of any contingency or reserve reflected on the Company's
financial statements or accounting records shall be determined in accordance
with United States generally accepted accounting principles ("GAAP') as applied
to the company on a stand-
7
<PAGE> 8
alone basis by OHM and reviewed by the certified public accounting firm
regularly engaged by OHM ("OHM's Accountants"); and (ii) notwithstanding the
Company's past practices, any and all costs incurred by the Company in seeking
or retaining customers, including the costs associated with bid proposals, shall
be expensed on a current basis and not amortized.
4.3 Allocation of Earnout consideration. (a) Except as
otherwise provided in this Section 4.3 and subject to the setoff rights provided
in Section 7.6 of the Stock Purchase Agreement, the Earnout Consideration, if
any, shall be allocated among the Executive and the other Shareholders as
follows:
Earnout Consideration
---------------------
(dollars in millions)
$10.0 $7.0 $4.0
----- ---- ----
Bennie Smith $7.8 $5.3 $2.8
Robert Newberry 1.2 1.0 .7
Scott Doxey 1.0 .7 .5
(b) (i) Notwithstanding anything to the contrary in Section
4.3(a) and except as otherwise provided in Section 4.3(b)(ii) or (iii), if a
Shareholder is not employed by the Company (except by reason of termination by
the Company without cause pursuant to the Employment Agreement of such
Shareholder) as of the third anniversary of the Effective Date, the Earnout
Consideration allocated to such Shareholder shall not be payable by OHM.
8
<PAGE> 9
(ii) Notwithstanding Section 4.3(b)(i), in the event that
Scott Doxey is not employed by the Company as of the third anniversary
of the Effective Date (except by reason of his termination by the
Company without cause or because of his death or disability (as defined
in the Employment Agreement of Doxey)), the Earnout Consideration that
would have been payable to Doxey shall be allocated on a pro rata basis
to the other Shareholders, provided such Shareholders are otherwise
entitled to receive their respective portion of the Earnout
Consideration.
(iii) If (A) a Shareholder is no longer employed by the
Company by reason of his death or disability, (B) the Average Operating
Income, on an annualized basis, for the period from the Effective Date
through and including the date of death or date of disability of such
Shareholder (each, a "Determination Date") is $5,000,000 or more, and
(C) the Earnout Consideration is determined to be payable under the
terms of this Agreement after the expiration of the three-year period
after the Effective Date, then such Shareholder or his estate or
guardian, in the case of disability, in accordance with the procedures
and within the period described in Section 4.4 shall be entitled to
receive an amount (the "Pro Rata Earnout Amount") equal to (A) the
Earnout Consideration that such Shareholder would have been entitled to
receive if he had remained employed by the Company until the third
anniversary of the Effective Date multiplied by (B) a fraction, the
numerator of which is the number of full months that shall have elapsed
from the Effective Date through and including the Determination Date
and the denominator of which is
9
<PAGE> 10
36 months. If the Shareholder who dies or becomes disabled is Scott
Doxey, then the amount of the Earnout Consideration not paid to Scott
Doxey or his estate, as the case may be, as a result of the
determination of the Pro Rata Earnout Amount, shall be allocated on a
pro rata basis to the other Shareholders, provided such Shareholders
are otherwise entitled to receive their respective portion of the
Earnout Consideration. If any other Shareholder dies or becomes
disabled, any Earnout Consideration in excess of the Pro Rata Earnout
Amount with respect to such Shareholder shall not be payable by OHM.
(c) OHM shall provide the Executive and the other shareholders
on a periodic basis not less than once each calendar year with an
interim update regarding the computation of the Average Operating
Income.
4.4 Payment of Earnout Consideration. (a) (i) Within ninety
days after the third anniversary of the Effective Date, OHM shall
determine the Average Operating Income, subject to review by OHM's
accountants (the "Average Operating Income Calculation"). Within three
business days after OHM's receipt of the Average Operating Income
Calculation, OHM shall deliver such calculation to each of the
Shareholders for review.
(ii) Unless a majority of the Shareholders (one of which must
be Executive unless he is no longer employed by the Company or
otherwise entitled to the Earnout Consideration), which for purposes of
this Section 4.4 shall include such Shareholder's estate, if any, or
guardian, in the case of disability, gives the
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Company written notice of their objection to the Average Operating
Income Calculation, which notice shall include the basis of the
Shareholders' objection in reasonable detail ("Notice of Objection"),
within 30 calendar days after receiving the Average Operating Income
Calculation (the "Objection Period"), the Average Operating Income
Calculation shall be final, conclusive and binding on OHM and each of
the Shareholders.
(iii) If a majority of the Shareholders (one of which must be
Executive unless he is no longer employed by the Company or otherwise
entitled to the Earnout Consideration) deliver a Notice of Objection
within the Objection Period, OHM and the Shareholders shall use
reasonable efforts to resolve all disputes regarding objections set
forth in the Notice of Objection, If OHM and the Shareholders are not
able to resolve all disputes regarding the Shareholders' objections set
forth in the Notice of Objection within 14 calendar days after delivery
to OHM of the Notice of Objection, the remaining disputed items shall
be submitted for final resolution to an independent certified public
accounting firm selected by mutual agreement of OHM, on the one hand,
and the Shareholders, on the other hand, or if OHM and the Shareholders
are unable to agree upon such accounting firm within 20 calendar days
after the delivery of a Notice of Objection, OHM, on the one hand, and
the Shareholders, on the other hand, shall promptly instruct their
respective firms of independent certified public accountants to select,
within five business days
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thereafter, a third independent certified public accounting firm and
only the disputed items shall be submitted to such independent
certified public accounting firm (the "Independent Accountants"), After
offering OHM and OHM's representatives and the Shareholders and the
Shareholders' representatives the opportunity to present their
positions as to the disputed items, which opportunity shall not extend
for more than 10 calendar days after the Independent Accountants have
been selected, the Independent Accountants shall deliver a written
report resolving the disputed items submitted for resolution and
setting forth the basis for such resolution within 30 calendar days
after OHM and the Shareholders have presented their positions as to the
disputed items. The resolution of the Independent Accountants shall be
final, conclusive and binding upon OHM and each of the Shareholders and
shall be reflected in any necessary revisions to the Average Operating
Income Calculation. Notwithstanding anything in this Agreement to the
contrary, the scope of the Independent Accountants' review of any
dispute between OHM and the Shareholders regarding the Average
Operating Income Calculation shall be limited solely to the resolution
of the Shareholders' objections that are not resolved prior to
selection of the Independent Accountants and as are set forth in the
Notice of Objection.
(iv) One-half of the fees, costs and expenses of the
Independent Accountants for services rendered pursuant to Section
4.4(a) shall be paid by the Shareholders and one-half of such
fees, costs and expenses shall be paid by OHM.
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<PAGE> 13
(b) If no Notice of Objection is timely delivered by the
Shareholders, OHM shall pay to the Shareholders, subject to Section
4.4(c), their respective portion of the Earnout Consideration, if any,
five business days after the earlier of (i) the expiration of the
Objection Period and (ii) the date of delivery by a majority of the
Shareholders to OHM of written notice that the Average Operating Income
Calculation will be accepted by the Shareholders without objection
(which notice shall be binding on each of the Shareholders, including
any Shareholder that is not a party to such notice). If a Notice of
Objection with respect to the Average Operating Income calculation is
timely delivered by a majority of the shareholders (one of which must
be Executive unless he is no longer employed by the Company or
otherwise entitled to the Earnout Consideration), OHM shall pay to the
Shareholders, subject to Section 4.4(c), their respective portion of
the Earnout Consideration, if any, five business days after the date
all disputed items are fully resolved pursuant to Sections 4.4(a)(ii)
or 4.4(a)(iii). All cash payments constituting the Earnout
Consideration shall be made by wire transfer of immediately available
funds to the respective accounts designated by the Shareholders. All
the OHM Common Stock constituting the Earnout Consideration, when
issued and delivered by OHM to the Shareholders as provided in this
Agreement, will be validly issued, fully paid and nonassessable.
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<PAGE> 14
(c) The value of the OHM Common Stock delivered in payment of
the Earnout Consideration shall be determined using the average of the
closing prices of such stock on the national securities exchange or
over-the-counter market in which such stock is then currently listed or
designated for trading for each business day commencing on the day 30
calendar days prior to the date of issuance to the Shareholders and
ending on the day immediately preceding the date of issuance to the
Shareholders. The OHM Common Stock, if any, issued in payment of the
Earnout Consideration shall be freely transferable upon receipt of such
common stock by the Shareholders. Subject to Section 4.1 of this
Agreement, if OHM is unable to issue freely transferable OHM Common
Stock to the Shareholders within 60 days of the date the amount of the
Earnout Consideration is finally determined pursuant to Section 4.4(b),
OHM shall pay to the Shareholders their respective portion of the
Earnout Consideration in cash by wire transfer of immediately available
funds to the respective accounts designated by the Shareholders.
4.5 Definitions. For purposes of this Agreement, (a) "Average
Operating Income" means (i) the operating income (loss) of the company for the
three-year period following the Effective Date (subject to the adjustments set
forth in Section 4.2(a)) determined in accordance with GAAP (but excluding all
items of gain or loss classified as extraordinary in accordance with GAAP and
subject to the accounting considerations set forth in Section 4.2(b)), divided
by (ii) three. Notwithstanding the foregoing, the operating income of the
Company
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<PAGE> 15
shall not include any of the following: interest expense; income tax expense;
amortization, if any, attributable to the transactions contemplated by the Stock
Purchase Agreement; interest income; and other items of non-operating income and
expense; and (b) "OHM Common Stock" means shares of Common Stock, par value $.10
per share, of OHM or any successor thereto provided the shares of such successor
are listed or designated for trading on a national securities exchange or
over-the-counter market.
Section 5. Trade Secrets, Proprietary Information and Return of
Materials.
5.l Trade Secrets. Executive acknowledges that, by reason of
Executive's duties, Executive will have access to and become informed of
proprietary, non-public information relating to the Company as well as other
confidential business and technical information and trade secrets ("Proprietary
Information"), including, without limitation:
(a) With respect to the Company and its affiliates,
(i) service specifications, schematics, designs, procedures,
practices, testing methods, concepts for new or improved services and other
service data; (ii) sources of supply and potential sources of supply, for
capital equipment, components, products and services; (iii) all technical
information relating to the invention, patenting, technological advancement,
formulation, development, design, specifications, testing, manufacture and use
of services, methods, processes, machinery and equipment (iv) customer
information, such as customer lists, purchasing and servicing habits and credit
information; (v) cost and pricing information; (vi) selling and
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<PAGE> 16
marketing information, such as selling methods, strategies, catalogues, order
books and instructional and promotional materials; (vii) training and recruiting
methods and materials; (viii) corporate planning data; (ix) financial results
and business conditions; and (x) any information that otherwise may be defined
as a "trade secret" under the Uniform Trade Secrets Act; and
(b) With respect to any other person or entity, any of the foregoing
types of information which belong to such person or entity but to which
Executive has had access by reason of his employment with the Company
(including, without limitation, information delivered to the Company or to any
of its affiliates in confidence by persons or entities for whom the Company is
performing services).
5.2 Ownership-of-Company Proprietary Information.
Executive specifically acknowledges (a) that all of the
Proprietary Information set forth in section 5.1(a) of this Agreement, whether
reduced to writing, maintained on any form of electronic media, or maintained in
the mind or memory of Executive, and whether compiled by the Company or
Executive, derives independent economic value from not being readily known to or
ascertainable by proper means by others who can obtain economic value from the
disclosure or use of such Proprietary Information, or any part of it; (b) that
reasonable efforts have been and will be taken by the Company and Executive to
maintain the secrecy of such Proprietary information; (c) that such Proprietary
Information is the sole property of the Company; and (d) that any retention in
violation of Section 5.4 of
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<PAGE> 17
this Agreement or use of such Proprietary Information during or after the Term
of Employment (except in the course of the performance of Executive's duties
under the terms of this Agreement) shall constitute a misappropriation of the
trade secrets of the Company.
5.3 Non-disclosure of Trade Secrets. Executive will keep in strict
confidence and will not, directly or indirectly, at any time during or after
Executive's employment by the Company, disclose, furnish, disseminate, make
available or use (except in the course of the performance of Executive's duties
under the terms of this Agreement) any of the Proprietary Information.
5.4 Return of Documents and Records. Executive agrees that upon
termination of Executive's employment with the Company, for any reason, or
expiration of the Term of Employment (unless Executive remains employed by the
Company), Executive shall return to the Company, in good condition, all property
of the Company, including, without limitation, any document or record
(including, without limitation, computerized records) containing any Proprietary
Information, and Executive shall promptly deliver to the Company all documents
and records (including, without limitation, computerized records) of the Company
in Executive's possession, custody or control. If such items are not so
returned, the Company will have the right to charge Executive for all reasonable
damages, costs, attorneys' fees and other expenses incurred in searching for,
taking and/or recovering such property.
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Section 6. Restrictive Covenants.
6.1 During Term of Employment. During the Term of Employment, Executive
will not compete with the Company anywhere within the United States. In
accordance with this restriction, but without limiting its terms, during the
Term of Employment, Executive will not:
(a) enter into or engage in any business which competes with
the business of the Company; or
(b) solicit customers, business, patronage or orders for, or
sell, any products or services in competition with, or for any business that
competes with, the business of the Company; or
(c) divert, entice, or take away any customers, business,
patronage or orders of the Company; or
(d) promote or assist, financially or otherwise, any person,
firm, association, partnership, corporation or other entity engaged in any
business which competes with the business of the Company.
6.2. After Termination of Employment. For the earlier of five years
after the Effective Date, or three years from and after termination of this
Agreement for any reason other than a termination without cause under Section
8.4, or for a period of two years from the date of such termination without
cause under Section 8.4, Executive will not:
(a) enter into or engage in any business which competes
with the Company's business within the Restricted Territory (as defined in
Section 6.4(c)); or
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<PAGE> 19
(b) solicit customers, business, patronage or orders for, or
sell, any products or services in competition with, or for any business,
wherever located, that competes with, the Company's business within the
Restricted Territory; or
(c) divert, entice or otherwise take away any customers,
business, patronage or orders of the Company within the Restricted Territory; or
(d) promote or assist, financially or otherwise, any person,
firm, association, partnership, corporation or other entity engaged in any
business which competes with the Company's business within the Restricted
Territory.
6.3. Related Parties. For the purposes of Sections 6.1 and 6.2,
inclusive, but without limitation thereof, Executive will be in violation
thereof if he engages in any or all of the activities set forth therein directly
as an individual on his own account, or indirectly as a partner, joint venturer,
employee, agent, salesperson, consultant, officer and/or director of any firm,
association, partnership, corporation or other entity, or as a stockholder of
any corporation in which Executive or Executive's spouse, child or parent owns,
directly or indirectly, individually or in the aggregate, more than one percent
of the outstanding stock.
6.4. Certain Definitions. (a) For the purposes of this Agreement, the
term "Company" shall include any and all direct and indirect subsidiaries,
divisions or business units of the Company for which Executive worked or had
responsibility at the time of termination of his employment and at any time
during the two year period prior to such termination.
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<PAGE> 20
(b) For the purposes of Sections 6.1 and 6.2, ,inclusive, the
company's business is defined to be commercial, residential and government
general contracting, construction management, and base and facilities
maintenance, and the provision of related services described in any and all
marketing materials as the same may be altered, amended, supplemented or
otherwise changed from time to time or other services substantially similar to
any such described services. For purposes of Section 6.2. insofar as it extends
for a two-year or three-year period, as the case may be, following termination
of Executive's employment or following expiration of the Term of Employment, the
Company's business is defined to be commercial, residential and government
general contracting, construction management and base and facilities
maintenance, and the provision of related services described in any and all
marketing materials in existence as of the date of termination of Executive's
employment with the Company or expiration of the Term of Employment or other
services substantially similar to any such described services.
(c) For the purposes of Section 6.2, the Restricted Territory
shall be defined as and limited to:
(i) the geographic area(s) within a one-hundred-mile radius of any and
all Company locations) (including, without limitation, Salt Lake City, Utah and
Washington, D.C.) in, to or for which Executive worked, was assigned or had any
responsibility (either direct or supervisory) at the time of termination of his
employment and at any time during his Term of Employment; and
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(ii) all of the specific customer accounts, whether within or outside
of the geographic area described in (i) above, with which Executive had any
contact or for which Executive had any responsibility (either direct or
supervisory) at the time of termination of his employment and at any time during
his Term of Employment.
6.5. Extension of Period. If it shall be judicially determined that
Executive has violated any of his obligations under Section 6.2, then the period
applicable to each obligation that Executive shall have been determined to have
violated shall automatically be extended by a period of time equal in length to
the period during which such violation(s) occurred.
6.6. Adequate Consideration. Executive acknowledges that
his obligations under this Agreement are reasonable in the context of
the nature of the Company's business and the competitive injuries likely to be
sustained by the Company if Executive were to violate such obligations.
Executive further acknowledges that this Agreement is made in consideration of,
and is adequately supported by, the agreement of the Company to employ or to
grant compensation or benefits to the Executive pursuant to the terms of this
Agreement, which Executive acknowledges constitutes new and/or good, valuable
and sufficient consideration.
6.7. Covenant Not to Solicit. Executive will not directly or
indirectly at any time solicit or induce or attempt to solicit or induce any
employees or any sales representatives, agent(s) or consultants of the Company
to terminate their employment,
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representation or other association with the Company, Executive's obligations
under this Section 6.7 shall survive the termination of this Agreement and shall
remain in full force and effect for ten years from the Effective Date.
6.8. Communication of Contents of Agreement. During the Term
of Employment and during any additional period in which the covenants contained
in Sections 6.1 and 6.2 of this Agreement remain in effect, Executive will
communicate the contents of this Agreement to any person, firm, association,
partnership, corporation or other entity which he intends to represent, be
employed by, be associated with, and which is engaged in a business that
competes with the business of the Company.
Section 7. Remedies. In the event of any breach by Executive of the
provisions of Sections 5 or 6 of this Agreement, the parties hereby recognize
and acknowledge that a remedy at law may be inadequate, and the Company may
suffer irreparable injury. Accordingly, Executive consents to injunctive and
other appropriate equitable relief upon the institution of appropriate
proceedings by the Company in order to protect the rights of the Company under
Sections 5 and 6 of this Agreement. Executive, OHM and the Company agree that if
the Company determines that it in necessary to seek such equitable relief, the
Company shall file a notice of arbitration (an "Arbitration Demand") with
Executive and the American Arbitration Association ("AAA") seeking arbitration
under the Expedited Procedure Rules of the Commercial Arbitration Rules of the
AAA, supplemented as follows: (i) within twenty-four hours after Executive's
receipt of an
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Arbitration Demand, the Company and Executive shall select an arbitrator; (ii)
if Executive fails to cooperate in selecting an arbitrator within such
twenty-four-hour period, the company may proceed with obtaining injunctive
relief from a court of competent jurisdiction; (iii) the parties agree that any
hearing by the arbitrator shall be held as soon as possible, but no later than
seven days after the date the arbitrator in selected; and (iv) that the
arbitrator's decision shall be rendered as soon as possible, but no later than
seven days after the date of the closing of the hearing referred to in clause
(iii) above. Such relief will be in addition to any other relief to which the
Company may be entitled at law or in equity Resort to any remedy provided for
under this Section 7 or provided for by law will not prevent the concurrent or
subsequent employment of any other appropriate remedy or remedies or preclude
the recovery by the Company of monetary damages.
Section 8. Termination.
8.1. Termination Upon Death or Disability. This Agreement and
Executive's employment with the Company will terminate automatically upon the
death or disability (as defined below) of Executive and in such event the
Company will have no further obligation to Executive under this Agreement except
to pay Executive or his estate or guardian, in the case of disability, the
unpaid portion, if any, of the Salary payable to Executive under Section 3.1(a)
for the period through the date of his death or disability and, to the extent
provided in this Agreement, a portion of his Earnout Consideration. For purposes
of this Agreement, "disability" means an
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<PAGE> 24
illness or incapacity (mental or physical or both) of a character, nature,
degree or effect that renders Executive incapable of performing his duties
hereunder for a period of more than 90 consecutive days, or more than 120 days
in any 180-day period. The determination of "disability" will be made by
physicians acceptable to the Company, and Executive consents to examination by
such physicians and to the disclosure by any physicians of any and all
diagnoses, test results, opinions and other information obtained by such
physicians during or as a result of such examinations.
8.2. Termination by Executive. If Executive terminates his employment
with the Company, the Company will have no further obligation to Executive under
this Agreement except to pay Executive the unpaid portion, if any, of the Salary
payable to Executive under Section 3.1(a) for the period through the date of
termination.
8.3. Termination for Cause. (a) In the event that the Company
terminates Executive's employment with the Company for "cause" (as defined
below) at any time by delivering notice of termination to Executive, the Company
will have no further obligation to Executive under this Agreement, except to pay
Executive the unpaid portion, if any, of the Salary payable to Executive
pursuant to Section 3.1(a) for the period through the date of termination.
(b) For purposes of this Agreement, "cause", means willful
misconduct by Executive resulting in material harm to the Company and its
affiliates (including harm to the Company and its affiliates' public
reputation), (ii) the breach by Executive of any of his covenants contained in
this Agreement, (iii) Executive's conviction
24
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of, or Executive's entering of a guilty plea with respect to, a felony or (iv)
Executive's misappropriation of corporate funds. Termination pursuant to this
Section 8.3 shall not be in limitation of any other right or remedy the Company
may have against Executive, and following termination of this Agreement pursuant
to this Section 8.3, Executive shall remain liable to the Company for any
damages caused by any of the foregoing.
8.4. Termination Other Than For Cause. In the event that the Company
terminates Executive's employment with the Company without "cause", the company
will have no further obligation to Executive under this Agreement, except to
provide Executive with the Salary, the Target Bonus, if any, and benefits to
which Executive would have been entitled pursuant to Sections 3.1 and 3.2 for
the period through the six-month anniversary of the date of such termination
and, to the extent provided in this Agreement, his Earnout Consideration, if
any, payable pursuant to Section 4. Amounts payable in respect of the Target
Bonus shall be payable on a pro rata basis in accordance with the OHM Bonus
Plan, except that the requirement under the OHM Bonus Plan that Executive remain
employed by the Company or its subsidiaries in order to be eligible to receive
such bonus shall be deemed waived for purposes of this Section 8.4.
8.5. Continuance of Covenants. Notwithstanding any other provision of
this Agreement to the contrary, if this Agreement is terminated for any reason,
Sections 5 and 6 will survive and continue to bind Executive to the extent set
forth therein.
Section 9. Miscellaneous. (a) Amendment. This Agreement may be
amended only by a writing executed by each of the parties to this
Agreement.
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(b) Entire Agreement. This Agreement, the Stock Purchase
Agreement and the documents executed in connection with the Stock Purchase
Agreement contain the entire agreement between the parties and supersede all
prior understandings, agreements or representations by or between the parties,
written or oral, to the extent they have related in any way to the subject
matter hereof, provided, however, that (i) the obligations of the Company and
Executive under this Agreement are expressly conditioned upon the closing of the
transactions contemplated in the Stock Purchase Agreement and (ii) this
Agreement shall be null and void in the event that the transactions contemplated
in the Stock Purchase Agreement are not consummated.
(c) Notices. Any notice, request, consent and other
communication required or permitted under this Agreement must be in writing and
will be deemed to have been duly given (i) when received if personally
delivered, (ii) within one day after being sent by recognized overnight delivery
service, or (iii) within five days after being sent by registered or certified
mail return receipt requested, postage prepaid, to the parties (and to the
persons to whom copies shall be sent) at their respective addresses set forth
below.
If to the Company:
Beneco Enterprises, Inc.
c/o OHM Corporation
5445 Triangle Parkway, Suite 400
Norcross, Georgia 30092
Attention: Steven E. Harbour, Esq.
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If to Executive:
Bennie Smith, Jr.
76 E. 6790 South
Midvale, Utah 84047
Any party may change the address or the persons to whom notice shall be
directed by notifying the other party as provided in this Section.
(d) Assignability. This Agreement shall be assignable by the Company,
in its sole discretion, to any one or more of the Company's direct or indirect
wholly owned subsidiaries, and to its successors and assigns, including any
entity with which the Company may merge or consolidate or to which all or
substantially all of its assets may be transferred. Executive may not assign,
pledge or encumber any interest in this Agreement or any part of this Agreement
(this Agreement being personal to Executive).
(e) Governing Law. This Agreement shall be governed by and construed
and interpreted in accordance with the internal, substantive laws of the State
of Ohio, without regard to its principles of conflicts of laws.
(f) Construction. Each section and subsection of this Agreement
constitutes a separate and distinct provision of this Agreement. It is the
intent of the parties to this Agreement that the provisions of this Agreement be
enforced to the fullest extent permissible under the laws and public policies
applicable in each jurisdiction in which enforcement is sought. Accordingly, if
any provision of this Agreement shall be adjudicated to be invalid, ineffective
or unenforceable, the remaining provisions shall not be affected thereby.
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The invalid, ineffective or unenforceable provision shall, without further
action by the parties, be automatically amended to effect the original purpose
and intent of such provision to the fullest extent legally permissible,
provided, that such amendment shall apply only with respect to the operation of
such provision in the particular jurisdiction with respect to which such
adjudication is made.
(g) Essential Covenants. Executive acknowledges that: (i) the covenants
by Executive in Sections 5 and 6 are essential elements of this Agreement, and
without Executive's agreement to comply with such covenants, the Company would
not have acquired all of the outstanding shares of capital stock of the Company
pursuant to the Stock Purchase Agreement nor entered into this Agreement or
employed the Executive, (ii) Executive has independently consulted its counsel
and has been advised in all respects concerning the reasonableness and propriety
of such covenants, with specific regard to the nature of the business conducted
by the Company, (iii) the covenants by Executive in Sections 5 and 6 are
independent covenants and the existence of any claim by Executive against the
Company under this Agreement or otherwise will not excuse the Executive's breach
of any covenant in Section 5 or 6. and (iv) if Executive's employment hereunder
expires or is terminated, this Agreement will continue in full force and affect
as is necessary or appropriate to enforce the covenants and agreements of
Executive in Sections 5 and 6.
(h) Waivers. Any waiver by any party or any violation of, breach of, or
default under, any provision of this Agreement by the other party shall not be
construed as, or constitute a continuing
28
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waiver of such provision, or waiver of any other violation of, breach of or
default under any other provision of this Agreement.
(i) Headings. The headings in this Agreement are solely for convenience
and shall not be given any effect in the construction or interpretation of this
Agreement.
(j) Third Parties. Nothing expressed or implied in this Agreement is
intended, or shall be construed, to confer upon or give to any person or entity
other than the Company and its affiliates, Executive, his estate and any
permitted assignees, any rights or remedies under, or by reason of, this
Agreement.
(k) Withholding of Taxes. The Company may withhold from any amounts
payable under this Agreement all federal, state, city or other taxes as shall be
required to be withheld pursuant to any law or government regulation or ruling.
(l) Survival of Certain Obligations. The obligations of the Company and
Executive set forth in this Agreement which by their terms extend beyond or
survive the termination of the Term of Employment shall not be affected or
diminished in any way by the termination of this Agreement.
(m) No Violations. Executive represents and warrants that neither the
execution and delivery of this Agreement nor Executive's performance of his
duties and obligations under this Agreement will conflict with, violate or
result in a breach of any of the terms, conditions or provisions of, or
constitute a default under or (with or without the giving of notice or the
passage of time or both) entitle any party to terminate or declare a default
under any contract,
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agreement, lease, license or instrument to which Executive or the Company is a
party or by which Executive or the Company may be bound.
(n) Succession Planning. Executive agrees that he shall assist the
Company and OHM, in the manner and to the extent reasonably requested by the
Company and OHM, in preparing a succession plan for the Company and in
identifying, assisting and training a successor to Executive and/or successors
to Executive's management team.
(o) Arbitration. Except as provided in Sections 4 (solely with respect
to the matters set forth in Section 4, which shall be governed by the procedures
set forth therein) and 7 of this Agreement, any dispute relating to this
Agreement or the performance by the parties of their respective obligations
hereunder, which is not promptly resolved by mutual agreement of the parties,
shall be finally settled by arbitration administered by the American Arbitration
Association under its Commercial Arbitration Rules. Such arbitration shall be
conducted by a single arbitrator appointed in accordance with such rules. The
arbitrator's award resulting from such arbitration may be confirmed and entered
an a final judgment in any court of competent jurisdiction and enforced
accordingly. The parties hereto agree that any dispute relating to this
Agreement or the performance by the parties of their respective obligations
hereunder shall not in any event be subject to the American Arbitration
Association's National Rules for the Resolution of Employment Disputes.
(p) Earnout Provisions. Executive acknowledges and agrees that (i)
Section 4 of this Agreement is intended to benefit Executive and the other
Shareholders, (ii) each of the Shareholders shall have
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identical provisions in their respective employment agreements and (iii) the
parties may enforce the provisions of Section 4 as if such provisions were
contained in a single agreement to which OHM, the Company, Executive and the
other Shareholders were a party.
(q) Confidentiality. Each of Executive, OHM and the Company will not,
and will direct their representatives and agents not to, disclose to any person
or entity the existence or terms of this Agreement except to the extent required
by law or court order.
IN WITNESS WHEREOF, Executive has duly executed and delivered this
Agreement, and the Company has caused this Agreement to be duly executed and
delivered by its duly authorized officer, as of the date first written above.
/s/ BENNIE SMITH, JR.
------------------------------------
Bennie Smith, Jr.
Accepted as of such date at Findlay, Ohio.
BENECO ENTERPRISES, INC.
By: /s/ BENNIE SMITH, JR.
--------------------------------
Name: Bennie Smith, Jr.
------------------------------
Title: President
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OHM CORPORATION
By: /s/ KRIS E. HANSEL
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Name: Kris E. Hansel
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Title: Vice President and Controller
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EXHIBIT 10(iii).38
FORM OF EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (("Agreement"), entered into as of this 10th
day of March, 1996, by and between OHM Corporation, an Ohio corporation, (the
"Company"), and ______________ (the "Executive");
WITNESSETH:
WHEREAS, the Executive is a senior executive of the Company and has
made and is expected to continue to make major contributions to the
administration, profitability, growth and financial strength of the Company;
WHEREAS, the Company recognizes that, as is the case for most publicly
held companies, the possibility of a Change in Control (as that term is
hereafter defined) exists;
WHEREAS, the Company desires to assure itself of both present and
future continuity of management in the event of a Change in Control and desires
to establish certain minimum compensation rights of its key senior executive
officers, including the Executive, applicable in the event of a Change in
Control;
WHEREAS, the Company wishes to ensure that its senior executives are
not practically disabled from discharging their duties upon a Change in Control;
WHEREAS, this Agreement is not intended to alter materially the
compensation and benefits which the Executive could reasonably expect to receive
from the Company absent a Change in Control and, accordingly, although effective
and binding as of the date hereof, this Agreement shall become operative only
upon the occurrence of a Change in Control;
WHEREAS, the Executive is willing to render services to the Company on
the terms and subject to the conditions set forth in this Agreement;
NOW, THEREFORE, the Company and the Executive agree as follows:
1. Operation of Agreement:
(a) This Agreement shall be effective and binding immediately upon its
execution, but, anything in this Agreement to the contrary notwithstanding, this
Agreement shall not be operative unless and until there shall have occurred a
Change in Control. For purposes of this Agreement, a "Change in Control" shall
have occurred if at any time during the Term (as that term is hereafter defined)
any of the following events shall occur:
(i) The Company is merged, or consolidated or reorganized into
or with another corporation or other legal person, and as
a result of such merger, consolidation or reorganization
less than a majority of the combined voting power of the
then-outstanding securities of such corporation or person
immediately after such on are held in the aggregate by the
holders of Voting Stock (as that term is hereinafter
defined) of the Company immediately prior to such
transaction;
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(ii) The Company sells all or substantially all of its assets
to any other corporation or other legal person, and less
than a majority of the combined voting power of the
then-outstanding securities of such corporation or person
immediately after such transaction are held in the
aggregate by the holders of Voting Stock of the Company
immediately prior to such sale;
(iii) There is a report filed on Schedule 13D or Schedule 14D-1
(or any successor schedule, form or report), each as
promulgated pursuant to the Securities Exchange Act of
1934, as amended (the "Exchange Act"), disclosing that any
person (as the term "person" is used in Section 13(d)(3)
or Section 14(d)(2) of the Exchange Act) has become the
beneficial owner (as the term "beneficial owner" is
defined under Rule 13d-3 or any successor rule or
regulation promulgated under the Exchange Act) of
securities representing 25% or more of the combined voting
power of the then-outstanding securities entitled to vote
generally in the election of directors of the Company
("Voting Stock");
(iv) The Company files a report or proxy statement with the
Securities and Exchange Commission pursuant to the
Exchange Act disclosing in response to Form 8-K or
Schedule 14A (or any successor schedule, form or report or
item therein) that a change in control of the Company has
or may have occurred or will or may occur in the future
pursuant to any then-existing contract or transaction; or
(v) If during any period of two consecutive years, individuals
who at the beginning of any such period constitute the
Directors of the Company cease for any reason to
constitute at least a majority thereof, unless the
election, or the nomination for election by the Company's
stockholders, of each Director of the Company first
elected during such period was approved by a vote of at
least two-thirds of the Directors of the Company then
still in office who were Directors of the Company at the
beginning of any such period.
Notwithstanding the foregoing provisions of Section 1 (a)(iii) or 1 (a)(iv)
hereof, a "Change in Control" shall not be deemed to have occurred for purposes
of this Agreement solely because (i) the Company, (ii) an entity in which the
Company directly or indirectly beneficially owns 50% or more of the voting
securities of such entity, or (iii) any Company-sponsored employee stock
ownership plan or any other employee benefit plan of the Company, either files
or becomes obligated to file a report or a proxy statement under or in response
to Schedule 13D, Schedule 14D-1, Form 8-K or Schedule 14A (or any successor
schedule, form or report or item therein) under the Exchange act, disclosing
beneficial ownership by it of shares of Voting Stock, whether in excess of 25%
or otherwise, or because the Company reports that a change in control of the
Company has or may have occurred or will or may occur in the future by reason of
such beneficial ownership.
(b) Upon the occurrence of a Change in Control at any time during the
Term, this Agreement shall become immediately operative.
(c) The period during which this Agreement shall be in effect (the
"Term") shall commence as of the date hereof and shall expire as of the
expiration of the Period of Employment (as that term is hereinafter defined),
provided, however, that unless the Company has commenced discussions with a
third party that ultimately results in a Change in Control, the term of this
Agreement shall be
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terminated as of January 1 of any year if (i) the Company or the Executive shall
have given notice on or prior to December 31 of the prior year that it or he, as
the case may be, does not wish to have the Term extended, or (ii) prior to a
Change in Control, the Executive ceases for any reason to be an officer of the
Company, thereupon the Term shall be deemed to have expired and this Agreement
shall immediately terminate and be of no further effect.
(d) Notwithstanding any other provision of this Agreement to the
contrary, a Change in Control described in subparagraphs 1(a)(iii) or l(a)(iv)
(describing an event under subparagraph l(a)(iii)) shall not be deemed to have
occurred and this Agreement shall be of no force or effect with respect to such
event of Change in Control if the Board of Directors of the Company (the
"Board'), by vote of three-quarters of the members of the Board, specifically
determines, prior to any such Change in Control, that such event shall not
constitute a Change in Control for purposes of this Agreement.
2. Employment: Period of Employment:
(a) Subject to the terms and conditions of this Agreement, upon the
occurrence of a Change in Control, the Company shall continue the Executive in
its employ and the Executive shall remain in the employ of the Company for the
period set forth in Section 2(b) hereof (the "Period of Employment"), in the
position and with substantially the same duties and responsibilities that he had
immediately prior to the Change in Control, or to which the Company and the
Executive may hereafter mutually agree in writing. Throughout the Period of
Employment, the Executive shall devote substantially all of his time during
normal business hours (subject to vacations, sick leave and other absences in
accordance with the policies of the Company as in effect for senior executives
immediately prior to the Change in Control) to the business and affairs of the
Company, but nothing in this Agreement shall preclude the Executive from
devoting reasonable periods of time during normal business hours to (i) serving
as a director, trustee or member of or participant in any organization or
business so long as such activity would not constitute Competitive Activity (as
that term is hereafter defined) if conducted by the Executive after the
Executive's Termination Date (as that term is hereafter defined), (ii) engaging
in charitable and community activities, or (iii) managing his personal
investments.
(b) The Period of Employment shall commence on the date of an
occurrence of a Change in Control, and subject only to the provisions of Section
4 hereof, shall continue until the earlier of (i) the expiration of the third
anniversary of the occurrence of the Change in Control, (ii) the Executive's
death, or (iii) the Executive's attainment of age 65; provided, however, that
commencing on each anniversary of the Change of Control, the Period of
Employment shall automatically be extended for an additional year unless, not
later than 90 calendar days prior to such anniversary date, either the Company
or the Executive shall have given written notice to the other that the Term
shall not be so extended.
3. Compensation During Period of Employment:
(a) Upon the occurrence of a Change in Control, the Executive shall
receive during the Period of Employment (i) annual base salary at a rate not
less than the Executive's annual fixed or base compensation (payable monthly or
otherwise as in effect for senior executives of the Company immediately prior to
the occurrence of a Change in Control) or such higher rate as may be determined
from time to time by the Board or the Compensation Committee thereof (the
"Committee") (which base salary at such rate is herein referred to as "Base
Pay") and (ii) an annual amount equal to not less
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than the highest aggregate annual bonus, incentive or other payments of cash
compensation in addition to the amounts referred to in clause (i) above made or
to be made in regard to services rendered in any calendar year during the three
calendar years immediately preceding the year in which the Change in Control
occurred pursuant to any bonus, incentive, profit-sharing performance,
discretionary pay or similar policy, plan, program or arrangement of the Company
or any successor thereto providing benefits at least as great as the benefits
payable thereunder prior to a Change in Control ("Incentive Pay"), provided,
however, that with the prior written consent of the Executive, nothing herein
shall preclude a change in the mix between Base Pay and Incentive Pay so long as
the aggregate cash compensation received by the Executive in any one calendar
year is not reduced in connection therewith or as a result thereof and, provided
further, however, that in no event shall any increase in the Executive's
aggregate cash compensation or any portion thereof in any way diminish any other
obligation of the Company under this Agreement.
(b) For his services pursuant to Section 2(a) hereof, during the Period
of Employment the Executive shall be a full participant in, and shall be
entitled to the perquisites, benefits and services credit for benefits as
provided under, any and all employee retirement income and welfare benefit
policies, plans, programs or arrangements in which senior executives of the
Company participate, including, without limitation any stock option, stock
purchase, stock appreciation, savings, pension, supplemental executive
retirement or other income or welfare benefit, deferred compensation, incentive
compensation, group and/or executive life, health, medical/hospital or other
insurance (whether funded by actual insurance or self-insured by the Company),
disability, salary continuation, expense reimbursement and other employee
benefit policies, plans, programs or arrangements that may now exist or any
equivalent successor policies, plans, programs or arrangements that may be
adopted hereafter by the Company providing perquisites, benefits and service
credit for benefits at least as great as are payable thereunder prior to a
Change in Control (collectively, "Employee Benefits"), provided, however, that
the Executive's rights thereunder shall be governed by the terms thereof and
shall not be enlarged hereunder or otherwise affected hereby. Subject to the
proviso in the immediately preceding sentence if and to the extent such
perquisites, benefits or service credit for benefits are not payable or provided
under any such policy, plan, program or arrangement as a result of the amendment
or termination thereof, then the Company shall itself pay or provide therefor.
Nothing in this Agreement shall preclude improvement or enhancement of any such
Employee Benefits, provided that no such improvement shall in any way diminish
any other obligation of the Company under this Agreement.
(c) The Company has determined that the amounts payable pursuant to
this Section 3 constitute reasonable compensation. Accordingly, notwithstanding
any other provision hereof unless such action would be expressly prohibited by
applicable law, if any amount paid or payable pursuant to this Section 3 is
subject to the excise tax imposed by Section 4999 of the Internal Revenue Code
of 1986, as amended (the "Code"), the Company will pay to the Executive an
additional amount in cash equal to the amount necessary to cause the aggregate
remuneration received by the Executive under this Section 3, including such
additional cash payment (net of all federal, state and local income taxes and
all taxes payable as the result of the application of Sections 280G and 4999 of
the Code) to be equal to the aggregate remuneration the Executive would have
received under this Section 3, excluding such additional payment (net of all
federal, state and local income taxes), as if Sections 280G and 4999 of the Code
(and any successor provisions thereto) had not been enacted into law.
4. Termination Following a Change in Control:
(a) In the event of the occurrence of a Change in Control, this
Agreement may be terminated
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by the Company during the Period of Employment only upon the occurrence of one
or more of the following events:
(i) The Executive's death;
(ii) If the Executive shall become permanently disabled within
the meaning of and begins actually to receive disability
benefits pursuant to, the long-term disability plan in
effect for senior executives of the Company immediately
prior to the Change in Control; or
(iii) For "Cause", which for purposes of this Agreement shall
mean that, prior to any termination pursuant to Section
4(b) hereof the Executive shall have committed:
(A) an intentional act of fraud, embezzlement or
theft in connection with his duties or in the
course of his employment with the Company;
(B) intentional wrongful damage to property of the
Company;
(C) intentional wrongful disclosure of secret
processes or confidential information of the
Company; or
(D) intentional wrongful engagement in any
Competitive Activity; and any such act shall
have been materially and demonstrably harmful
to the Company. For purposes of this Agreement,
no act, or failure to act, on the part of the
Executive shall be deemed "intentional" if it
was due primarily to an error in judgment or
negligence, but shall be deemed 'intentional"
only if done, or omitted to be done, by the
Executive not in good faith and without
reasonable belief that this action or omission
was in the best interest of the Company.
Notwithstanding the foregoing, the Executive
shall not be deemed to have been terminated for
"Cause" hereunder unless and until there shall
have been delivered to the Executive a copy of
a resolution duly adopted by the affirmative
vote of not less than three-quarters of the
Board then in office at a meeting of the Board
called and held for such purpose (after
reasonable notice to the Executive and an
opportunity for the Executive, together with
his counsel, to be heard before the Board),
finding the in the good faith opinion of the
Board, the Executive had committed an act set
forth above in this Section 4(a)(iii) and
specifying the particulars thereof in detail.
Nothing herein shall limit the right of the
Executive or his beneficiaries to contest the
validity or propriety of any such
determination.
(b) In the event of the occurrence of a Change in Control, this
Agreement may be terminated by the Executive during the Period of Employment,
and the Executive shall be entitled to have the right to benefits as provided in
Section 5 hereof, upon the occurrence of one or more of the following events:
(i) Any termination by the Company of the employment of the
Executive prior to the date upon which the Executive shall
have attained age 65, which termination shall be for any
reason other than for Cause or as a result of the death of the
Executive or by reason of the Executive's disability and the
actual receipt of disability benefits in
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accordance with Section 4(a)(i) hereof, or
(ii) Termination by the Executive of his employment with the
Company within three years after the Change in Control upon
the occurrence of any of the following events:
(A) Failure to elect or re-elect the Executive to the
office of the Company which the Executive held
immediately prior to a Change in Control, or the
removal of the Executive as a Director of the Company
(or any successor thereto), if the Executive shall
have been a Director of the Company immediately prior
to the Change in Control;
(B) A significant adverse change in the nature or scope
of the authorities, powers, functions,
responsibilities or duties attached to the position
with the Company which the Executive held immediately
prior to the Change in Control, a reduction in the
aggregate of the Executive's Base Pay and Incentive
Pay received from the Company, or the termination of
the Executive's rights to any Employee Benefits to
which he was entitled immediately prior to the Change
in Control or a reduction in scope or value thereof
without the prior written consent of the Executive,
any of which is not remedied within 10 calendar days
after receipt by the Company of written notice from
the Executive of such change, reduction or
termination, as the case may be;
(C) A determination by the Executive made in good faith
that as a result of a Change in Control and a change
in circumstances thereafter significantly affecting
his position, including, without limitation, a change
in the scope of the business or other activities for
which he was responsible immediately prior to a
Change in Control, that he has been rendered
substantially unable to carry out, has been
substantially hindered in the performance of, or has
suffered a substantial reduction in, any of the
authorities, powers, functions, responsibilities or
duties attached to the position held by the Executive
immediately prior to the Change in Control, which
situation is not remedied within 10 calendar days
after written notice to the Company from the
Executive of such determination;
(D) The liquidation, dissolution, merger, consolidation
or reorganization of the Company or transfer of all
or a significant portion of its business and/or
assets, unless the successor or successors (by
liquidation, merger, consolidation, reorganization or
otherwise) to which all or a significant portion of
its business and/or assets have been transferred
(directly or by operation of law) shall have assumed
all duties and obligations of the Company under this
Agreement pursuant to Section 11 hereof;
(E) The Company shall relocate its principal executive
offices, or require the Executive to have his
principal location of work changed to any location
which is in excess of 25 miles from the location
thereof immediately prior to the Change of Control or
to travel away from his office in the course of
discharging his responsibilities or duties hereunder
significantly more (in terms of either consecutive
days or aggregate days in any consecutive days or
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aggregate days in any calendar year) than was
required of him prior to the Change of Control
without, in either case, his prior consent; or
(F) Any material breach of this Agreement by the Company
or any successor thereto.
(c) A termination by the Company pursuant to Section 4(a) hereof or by
the Executive pursuant to Section 4(b) hereof shall not affect any rights which
the Executive may have pursuant to any agreement policy, plan, program or
arrangement of the Company providing Employee Benefits, which rights shall be
governed by the terms thereof. If this Agreement or the employment of the
Executive is terminated under circumstances in which the Executive is not
entitled to any payments under Sections 3 or 5 hereof, the Executive shall, have
no further obligation or liability to the Company hereunder with respect to his
prior or to any future employment by the Company.
5. Contract Payment:
(a) If, following the occurrence of a Change in Control, the Company
shall terminate the Executive's employment during the Period of Employment other
than pursuant to Section 4(a) hereof or if the Executive shall terminate his
employment pursuant to Section 4(b) hereof, the Company shall pay to the
Executive the amount specified in Section 5(a)(i) hereof within five business
days after the date (the "Termination Date") that the Executive's employment is
terminated (the effective date of which shall be the date of termination, or
such other date that may be specified by the Executive if the termination is
pursuant to Section 4(b) hereof):
(i) In lieu of any farther payments to the Executive for periods
subsequent to the Termination Date, but without affecting the
rights of the Executive referred to in Section 5(b) hereof, a
lump sum payment (the "Contract Payment") in an amount equal
to the present value (using a discount rate required to be
utilized for purposes of computations under Section 280G of
the Code or any successor provision thereto, or if no such
rate is so required to be used, a rate equal to the
then-applicable interest rate prescribed by the Pension
Benefit Guarantee Corporation for benefit valuations in
connection with non-multiemployer pension plan terminations
assuming the immediate commencement of benefit payments (the
"Discount Rate")) of the sum of (A) the aggregate Base Pay (at
the highest rate in effect for any year prior to the
Termination Date) for each remaining year or fraction of the
Period of Employment which the Executive would have received
had such termination or breach not occurred, plus (B) the
aggregate Incentive Pay (based upon the greatest amount of
Incentive Pay paid or payable to the Executive for any year
prior to the Termination Date), which the Executive would have
received pursuant to this Agreement during the remainder of
the Period of Employment had his employment continued for the
remainder of the Period of Employment; provided, however, that
in no event will the "present value" (as determined under
Section 280G of the Code or any successor provision thereto)
of the amount otherwise payable hereunder, when added to the
"present value" (as determined under Section 280G of the Code
or any successor provision thereto) of any other "parachute
payments" (as that term is defined in Section 280G of the Code
or. any successor provision thereto) from the Company, exceed
an amount (the "299% Amount") equal to 299% of the Executive's
"base amount" (as that term is defined in Section 280G of the
Code (without regard to Section 280G(b)(2)(A)(ii) thereof) or
any successor provision thereto) and if the amount otherwise
payable hereunder would exceed the 299% Amount, the Contract
Payment shall be reduced to the extent necessary so that the
aggregate present value
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determined in the previous clause does not exceed the 299%
Amount.
(ii) The determination of whether payments pursuant to this
Agreement constitute "parachute payments" (as that term is
defined in Section 280G of the Code or any successor
provisions thereto), and the determination of whether any
amount otherwise payable under Section 5(a)(i) causes the 299%
Amount to be exceeded (an "Excess Parachute Payment") shall be
made, if requested by the Executive or the Company, by tax
counsel selected by the Company, provided that the Executive
consents to the selection of such tax counsel which consent
shall not be unreasonably withheld. Upon the selection of such
tax counsel as provided herein, the opinion of such tax
counsel shall be binding upon the Company and the Executive.
The fact that the Executive shall have his right to the
Contract Payment reduced as a result of the existence of the
limitations contained in this Section 5(a) shall not limit or
otherwise affect any rights of the Executive to any Employee
Benefit, or other right arising other than pursuant to this
Agreement.
(iii) Except to the extent that the payments or benefits pursuant to
this Section 5(a)(iii) would result in a reduction of the
amount of the Contract Payment because they would cause the
299% Amount to be exceeded, (A) for the remainder of the
Period of Employment the Company shall arrange to provide the
Executive with Employee Benefits substantially similar to
those which the Executive was receiving or entitled to receive
immediately prior to the Termination Date (and if and to the
extent that such benefits shall not or cannot be paid or
provided under any policy, plan, program or arrangement of the
Company solely due to the fact that the Executive is no longer
an officer or employee of the Company, then the Company shall
itself pay or provide for the payment to the Executive, his
dependents and beneficiaries, such Employee Benefits) and (B)
without limiting the generality of the foregoing, the
remainder of the Period of Employment shall be considered
service with the Company for the purpose of service credits
under the Company's retirement income, supplemental executive
retirement and other benefit plans of the Company applicable
to the Executive or his beneficiaries immediately prior to the
Termination Date. Without otherwise limiting the purposes or
effect of Section 6 hereof, Employee Benefits payable to the
Executive pursuant to this Section 5(a)(iii) by reason of any
"welfare benefit plan" of the Company (as the term "welfare
benefit plan" is defined in Section 3(l) of the Employee
Retirement Income Act of 1974, as amended) shall be reduced to
the extent comparable welfare benefits are actually received
by the Executive from another employer during such period
following the Executive's Termination Date until the
expiration of the Period of Employment.
(iv) Notwithstanding any provision of this Section 5(a) to the
contrary, in the event the benefits intended to be provided to
the Executive pursuant to Section 5(a)(iii) hereof are
required to be reduced in whole or in part because the value
of such Employee Benefits, when added to the amount of the
Contract Payment under Section 5(a)(i), would exceed the 299%
Amount, the Executive shall have the option to elect to
receive, in lieu of all or a portion of the Contract Payment
provided in Section 5(a)(i) hereof, one or more Employee
Benefits, provided, that (A) prior to the receipt of any
payment under Section 5(a)(i) hereof, the Executive gives the
Company notice of such election specifying the Employee
Benefit or Employee Benefits so elected to be received, and
(B) in no event shall the "aggregate present value of the
payments in the
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nature of compensation" (as that phrase is used in Section
280G of the Code) received by the Executive as a result of the
receipt of such Employee Benefits, when added to the remaining
portion of the Contract Payment, if any, to be received by the
Executive, exceed the 299% Amount.
(b) Upon written notice given by the Executive to the Company prior to
the receipt of any payment pursuant to Section 5(a) hereof, the Executive, at
his sole option, without reduction to reflect the present value of such amounts
as aforesaid, may elect to have all or any of the Contract Payment payable
pursuant to Section 5(a)(i) hereof paid to him on a quarterly or monthly basis
during the remainder of the Period of Employment
(c) Except as otherwise specifically provided herein, there shall be no
right of set-off or counterclaim in respect of any claim, debt or obligation
against any payment to or benefit for the Executive provided for in this
Agreement.
(d) Without limiting the rights of the Executive at law or in equity,
if the Company fails to make any payment required to be made hereunder on a
timely basis, the Company shall pay interest on the amount thereof at an
annualized rate of interest equal to the then-applicable Discount Rate.
6. No Mitigation Obligation. The Company hereby acknowledges that it
will be difficult, and may be impossible, for the Executive to find reasonably
comparable employment following the Termination Date and that the noncompetition
covenant contained in Section 7 hereof will further limit the employment
opportunities for the Executive. In addition, the Company acknowledges that its
severance pay plans applicable in general to its salaried employees do not
provide for mitigation, offset or reduction of any severance payment received
thereunder. Accordingly, the parties hereto expressly agree that the payment of
the severance compensation by the Company to the Executive in accordance with
the terms of this Agreement will be liquidated damages, and that the Executive
shall not be required to mitigate the amount of any payment provided for in this
Agreement by seeking other employment or otherwise, nor shall any profits,
income, earnings or other benefits from any source whatsoever create any
mitigation, offset, reduction or any other obligation on the part of the
Executive hereunder or otherwise, except as expressly provided in Section
5(a)(iii) hereof.
7. Competitive Activity: During a period following the later of the
expiration of the Period of Employment or the period ending one year after the
Termination date, if the Executive shall have received or shall be receiving
benefits under Section 5(a) hereof, the Executive shall not, without the prior
consent of the Company, engage in any Competitive Activity (as defined below).
For purposes of this Agreement, the term "Competitive Activity" means the
Participant's employment or the Participant's engagement, directly or
indirectly, whether as an officer, employee, agent, consultant, partner,
financier, or otherwise, in any business activity in competition with any
business activity of the Company or its affiliates or subsidiaries in any
geographic area in which the Participant provided or attempted to provide any
products or services for the Company. "Competitive Activity" shall not include
the mere ownership of not more than 2% of the securities in any such
publicly-traded enterprise. If requested by the Participant, the Compensation
Committee shall inform the Participant whether any prospective employment or
engagement shall constitute "Competitive Activity."
8. Legal Fees and Expenses:
(a) It is the intent of the Company that the Executive not be required
to incur the expenses associated with the enforcement of his rights under this
Agreement by litigation or other legal action
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because the cost and expense thereof would substantially detract from the
benefits intended to be extended to the Executive hereunder. Accordingly, if it
should appear to the Executive that the Company has failed to comply with any of
its obligations under this Agreement or in the event that the Company or any
other person takes any action to declare this Agreement void or unenforceable,
or institutes any litigation designed to deny, or to recover from, the Executive
the benefits intended to be provided to the Executive hereunder, the Company
irrevocably authorizes the Executive from time to time to retain counsel of his
choice, at the expense of the Company as hereafter provided, to represent the
Executive in connection with the initiation or defense of any litigation or
other legal action, whether by or against the Executive, the Company or any
Director, officer, stockholder or other person affiliated with the Company, in
any jurisdiction. Notwithstanding any existing or prior attorney-client
relationship between the Company and such counsel, the Company irrevocably
consents to the Executive's entering into an attorney-client relationship with
such counsel, and in that connection the Company and the Executive agree that a
confidential relationship shall exist between the Executive and such counsel.
The Company shall pay or cause to be paid and shall be solely responsible for
any and all attorneys' and related fees and expenses incurred by the Executive
as a result of the Company's failure to perform this Agreement or any provision
thereof or as a result of the Company or any person contesting the validity or
enforceability of this Agreement or any provision thereof as aforesaid.
(b) In order to ensure the benefits intended to be provided to the
Executive under Section g(a) hereof the Company hereby agrees, upon the
occurrence of a Change in Control, to establish an irrevocable standby letter of
credit, substantially in the form attached hereto as Exhibit A and incorporated
herein by reference (the "Letter of Credit"), to be issued by a national banking
association with a capital and surplus of not less than $1 00,000,000 (the
"Bank") for the benefit of the Executive and certain other of the officers of
the Company and providing that the fees and expenses of counsel selected from
time to time by the Executive pursuant to this Section 8 shall be paid, or
reimbursed to the Executive if paid by the Executive, on a regular, periodic
basis upon presentation by the Executive to the Bank of a statement or
statements prepared by such counsel in accordance with its customary practices.
The Company shall pay all amounts and take all action necessary to maintain the
Letter of Credit during the Period of Employment and for two years thereafter
and if, notwithstanding the Company's complete discharge of such obligations,
such Letter of Credit shall be terminated or not renewed, the Company shall
obtain a replacement irrevocable clean letter of credit drawn upon a commercial
bank selected by the Company and acceptable to the Executive, upon substantially
the same terms and conditions as contained in the Letter of Credit or any
similar arrangement acceptable to the Executive which, in any case, assures the
Executives of the benefits of this Agreement without incurring any cost or
expense for enforcement against the Company or the defense thereof.
9. Employment Rights: Nothing expressed or implied in this Agreement
shall create any right or duty on the part of the Company or the Executive to
have the Executive remain in the employment of the Company prior to any Change
in Control, provided, however, that any termination of employment of the
Executive or removal of the Executive as an elected officer of the Company or
termination of this Agreement following the commencement of any discussion with
a third person that ultimately results in a Change in Control shall be deemed to
be a termination or removal of the Executive after a Change in Control for
purposes of this Agreement.
10. Withholding of Taxes: The Company may withhold from any amounts
payable under this Agreement all federal, state, city or other taxes as shall be
required pursuant to any law or government regulation or ruling.
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11. Successors and Binding Agreement:
(a) The Company shall require any successor (whether direct or
indirect, by purchase, merger, consolidation, reorganization or otherwise) to
all or substantially all of the business and/or assets of the Company, by
agreement in form and substance satisfactory to the Executive, expressly to
assume and agree to perform this Agreement in the same manner and to the same
extent the Company would be required to perform if no such succession had taken
place. This Agreement shall be binding upon and inure to the benefit of the
Company and any successor to the Company, including, without limitation any
persons acquiring directly or indirectly all or substantially all of the
business and/or assets of the Company whether by purchase, merger,
consolidation, reorganization or otherwise (and such successor shall thereafter
be deemed the "Company" for the purposes of this Agreement), but shall not
otherwise be assignable, transferable or delegable by the Company.
(b) This Agreement shall inure to the benefit of and be enforceable by
the Executive's personal or legal representatives, executors, administrators,
successors, heirs, distributees and/or legatees.
(c) This Agreement is personal in nature and neither of the parties
hereto shall, without the consent of the other, assign, transfer or delegate
this Agreement or any rights or obligations hereunder except as expressly
provided in Section 11I (a) hereof. Without limiting the generality of the
foregoing, the Executive's right to receive payments hereunder shall not be
assignable, transferable or delegable, whether by pledge, creation of a security
interest or otherwise, other than by a transfer by his will or by the laws of
descent and distribution and, in the event of any attempted assignment or
transfer contrary to this Section 11 (c), the Company shall have no liability to
pay any amount so attempted to be assigned, transferred or delegated.
(d) The Company and the Executive recognize that each party will have
no adequate remedy at law for breach by the other of any of the agreements
contained herein and, in the event of any such broach, the Company and the
Executive hereby agree and consent that the other shall be entitled to a decree
of specific performance, mandamus or other appropriate remedy to enforce
performance of this Agreement.
12. Notice: For all purposes of this Agreement, all communications
including, without limitation notices, consents, requests or approvals, provided
for herein shall be in writing and shall be deemed to have been duly given when
delivered or five business days after having been mailed by United States
registered or certified mail, return receipt requested, postage prepaid,
addressed to the Company (to the attention of the Secretary of the Company) at
its principal executive office and to the Executive at his principal residence,
or to such other address as any party may have furnished to the other in writing
and in accordance herewith, except that notices of change of address shall be
effective only upon receipt.
13. Governing Law: The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the State of
Delaware, without giving effect to the principles of conflict of laws of such
State.
14. Validity. If any provision of this Agreement or the application of
any provision hereof to any person or circumstances is held invalid,
unenforceable or otherwise illegal, the remainder of this Agreement and the
application of such provision to any other person or circumstances shall not be
affected, and the provision so held to be invalid, unenforceable or otherwise
illegal shall be
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reformed to the extent (and only to the extent) necessary to make it
enforceable, valid and legal.
15. Miscellaneous: No provisions of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing signed by the Executive and the Company. No waiver by either party
hereto at any time of any breach by the other party hereto or compliance with
any condition or provision of this Agreement to be performed by such other party
shall be deemed a waiver of similar or dissimilar provisions or conditions at
the same or at any prior or subsequent time. No agreements or representations,
oral or otherwise, expressed or implied with respect to the subject matter
hereof have been made by either party which are not set forth expressly in this
Agreement.
16. Counterparts: This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same agreement.
17. Prior Agreements: This Agreement supersedes in its entirety any
prior agreement between the Executive and the Company, its affiliates or their
predecessors or successors relating to the subject matter contained herein.
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IN WITNESS OF, the parties have caused this Agreement to be duly
executed and delivered as of the date first above written.
OHM CORPORATION
By: _____________________________________
James L. Kirk, Chairman of the Board,
President and Chief Executive Officer
_____________________________________
Executive
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<PAGE> 14
IRREVOCABLE LETTER OF CREDIT
Total Credit Not to Exceed $1,200,000
To: The Beneficiaries Named on Annex A Hereto
Gentlemen and Ladies:
At the request of OHM Corporation, 16406 U.S. Route 224 East, Findlay, Ohio
45840, we hereby authorize each of you to draw on us up to an aggregate amount
of One Hundred Fifty Thousand and 00/100 Dollars ($150,000.00) each, payable
upon presentation at this office of your draft or drafts at sight from time to
time, accompanied by a written statement signed by you to the effect that such
draft represents an amount equal to the fees and expenses of your counsel
selected by you which are pursuant to the provisions of a certain Employment
Agreement with said Corporation dated as of January 1, 1996 and certifying that
the fees and expenses of such counsel, a copy of which shall be attached, were
incurred pursuant to the terms of such letter agreement. Each draft shall be
marked: "Drawn under Mellon Bank, N.A., Letter of Credit No. ________________ ."
This letter of credit shall be valid for a period of five (5) years from the
date hereof. The aggregate amount which each Beneficiary may draw under this
Letter of Credit is subject to increase, so long as the aggregate amount of the
total credit available to all Beneficiaries does not exceed $1,200,000. Each
draft for an amount in excess of $150,000.00 aggregate for any one Beneficiary
shall be accompanied by a copy of a writing approving such increase, signed by
any two officers of OHM Corporation.
Very truly yours,
Dated:____________________ ____________________________
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ANNEX A
TO
IRREVOCABLE LETTER OF CREDIT
Pamela K. M. Beall
Robert J. Blackwell
Kris E. Hansel
James L. Kirk
Joseph R. Kirk
Philip V. Petrocelli
Philip O. Strawbridge
Michael A. Szomjassy
John J. Ray III
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AMENDMENT NO. 1
TO EMPLOYMENT AGREEMENT
THIS AGREEMENT is entered into as of the ____ day of _________, 1998
between the OHM Corporation (the "Company") and ____________ (the "Executive").
WITNESSETH:
WHEREAS, the Company and the Executive have entered into an
employment agreement dated as of _____________ (the "Employment Agreement"); and
WHEREAS, the Employment Agreement may be amended by the
written consent of the Company and the Executive; and
WHEREAS, the Company and the Executive wish to amend the
Employment Agreement in order to clarify certain rights and obligations of the
parties thereunder.
NOW THEREFORE, in consideration of the mutual covenants
contained herein, the Employment Agreement is hereby amended in the manner set
forth below.
1. Effective as of the date hereof, Section 5(a) of the Employment
Agreement is hereby amended by the addition of the following paragraph at the
end thereof:
(v) As a result of the uncertainty in the application of Sections 280G
and 4999 of the Code, it is possible that Contract Payments will be
made to Executive by the Company that will constitute "excess parachute
payments." If it is established pursuant to a final determination of a
court or an Internal Revenue Service proceeding which has been finally
and conclusively resolved, that Contract Payments have been made to, or
provided for the benefit of, Executive by the Company which are in
excess of the limitations set forth in this Section 5(a) (an "Excess
Payment"), such Excess Payment shall be deemed for all purposes to be a
loan to Executive made on the date Executive received the Excess
Payment, and Executive shall repay the Excess Payment at the applicable
federal rate (as defined in Section 1274(d) of the Code from the date
of Executive's receipt of such Excess Payment until the date of such
repayment.
2. In all other respects, the Employment Agreement shall remain in full
force and effect.
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IN WITNESS WHEREOF, the parties to the Employment Agreement have
executed this Agreement as of the day and year first written above.
OHM Corporation
By:____________________________
_______________________________
(Name of Executive)
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AMENDMENT NO. 2
TO EMPLOYMENT AGREEMENT
THIS AGREEMENT is entered into as of the ________ day of February, 1998
between the OHM Corporation (the "Company") and ___________________________ (the
"Executive").
W I T N E S S E T H:
WHEREAS, the Company and the Executive have entered into an employment
agreement dated as of _________________ (the "Employment Agreement"); and
WHEREAS, the Company and the Executive entered into an Amendment No. 1
to the Employment Agreement dated as of _______ February, 1998;
WHEREAS, the Employment Agreement may be amended by the written consent
of the Company and the Executive; and
WHEREAS, the Company and the Executive wish to amend further the
Employment Agreement in order to clarify certain rights and obligations of the
parties thereunder.
NOW THEREFORE, in consideration of the mutual covenants contained
herein, the Employment Agreement is hereby amended in the manner set forth
below.
1. Effective as of the date hereof, Section 5(a)(v) of the Employment Agreement
is hereby amended in its entirety to read as follows:
(v) The parties intend that payments otherwise payable to Executive pursuant to
this Section 5 shall be reduced so that no portion of any such payment shall be
an "excess parachute payment" within the meaning of Section 280G(b)(1) of the
Code. As a result of the uncertainty in the application of Sections 280G and
4999 of the Code, it is possible that contract Payments will be made to
Executive by the company that will be found to constitute "excess parachute
payments." If it is established pursuant to a final determination of a court or
an Internal Revenue Service proceeding which has been finally and conclusively
resolved, that Contract Payments have been made to, or provided for the benefit
of, Executive by the company which are in excess of the limitations set forth in
this Section 5 (a) the, to the extent of the smallest amount (an "Excess
Payment") that will cause Executive to have received no excess parachute
payment, such Excess Payment shall be deemed for all purposes to be a loan to
Executive made on the date Executive received the Excess Payment, and Executive
shall repay the Excess Payment to the Company on demand, together with interest
on the Excess Payment at the applicable federal rate (as defined in Section
1274(d) of the Code) from the date of Executive's receipt of such Excess Payment
until the date of such repayment.
2. In all other respects, the Employment Agreement shall remain in full force
and effect.
IN WITNESS WHEREOF, the parties to the Employment Agreement have
executed this
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Agreement as of the day and year first written above.
OHM CORPORATION
By:_________________________________________
Steven E. Harbour, Vice President, Legal
____________________________________________
(Name of Executive)
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<PAGE> 1
Exhibit 10(iii).39
(IT AND OHM COMBINED)
INTERNATIONAL TECHNOLOGY CORPORATION
2790 Mosside Boulevard
Monroeville, PA 15146
March 5, 1998
To: OHM and IT Corporation Employees
From: Anthony J. DeLuca
Subject: Severance and Retention Bonus Plan
International Technology Corporation (the "Company"), together with its
subsidiaries, has adopted the severance and retention bonus plan set forth below
(the "Plan"), contingent on the acquisition by the Company or an affiliate of a
controlling interest in OHM Corporation ("OHM") on or about February 25, 1998.
The Plan is intended to constitute a welfare benefit plan subject to ERISA to
provide severance and retention bonus benefits to certain Employees in
connection with the contemplated acquisition of OHM.
ARTICLE I.
DEFINITIONS
1.1 DEFINITIONS
Whenever used in this Plan, the following capitalized terms shall have
the meanings set forth in this Section 1.1. Certain other capitalized terms are
defined in context elsewhere in this Plan;
(a) "Board of Directors" means the Board of Directors of
the Company.
<PAGE> 2
(b) "Compensation" means and includes all of an
Employee's base salary attributable to his or her employment with the
Company (including, but not limited to, any amounts excludable from
gross income for federal income tax purposes pursuant to Section 125 or
Section 401(k) of the Internal Revenue Code of 1986, as amended (the
"Code")), in effect immediately prior to the termination of the
Employee's employment. "Compensation" shall not include overtime
payments, paid-time-off cash outs, bonuses or other cash or non-cash
compensation or reimbursements, if any (e.g., the grant or vesting of
restricted stock, the grant, vesting, or exercise of stock options,
automobile allowance and gasoline reimbursement).
(c) "Disability" means a physical or mental infirmity which
substantially impairs an Employee's ability to perform his or her
material duties for a period of at least one hundred eighty (180)
consecutive calendar days, and, as a result of such Disability, the
Employee has not returned to full-time regular employment prior to
termination.
(d) "Eligible Employee" means any Employee actively employed
on February 25, 1998 (the "Eligibility Date") by IT Corporation ("ITC")
or OHM, who is not an officer of either ITC or OHM or who does not have
an individual agreement with either ITC or OHM calling for payment of
severance benefits in the event of termination of employment. If an
Employee was so employed but was on short term disability leave on the
Eligibility Date, he or she will be considered to have been actively
employed by ITC or OHM if he or she is available to return to his or
her employment immediately after his or her physician of record
certifies
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<PAGE> 3
that he or she is no longer disabled. If the Employee was on
long term disability leave on the day he or she is scheduled to be
terminated, he or she will generally not be an Eligible Employee, but
the Company may, in its discretion, treat him or her as an Eligible
Employee.
(e) "ERISA" means the Employee Retirement Income Security Act
of 1974, as amended.
(f) "Just Cause" means fraud, misappropriation of or
intentional and material damage to the property or business of the
Company (including its Subsidiaries), conviction of a felony, violation
of a rule or policy of the Company (or any of its Subsidiaries),
failure to comply substantially with a reasonable direction of any
supervisor, misconduct in the performance of all reasonably assigned
responsibilities, or failure to perform one's job as required to meet
the objectives of the Company or its Subsidiaries.
(g) "Person" means any person, firm, corporation or entity.
(h) "Release" means the Separation and General Release
Agreement in the form attached hereof as Exhibit "A".
(i) "Severance Payment" and "Retention Bonus" mean the payment
of compensation as provided in Article II.
(j) "Subsidiary" means any corporation or other Person, a
majority of the voting power, equity securities or equity interest of
which is owned, directly or indirectly, by the Company.
(k) "WARN" means the Worker Adjustment and Retraining
Notification Act, 29 U.S.C. Section 2101 et seq.
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<PAGE> 4
ARTICLE II.
SEVERANCE AND RETENTION BENEFIT PAYMENTS
2.1 RIGHT TO SEVERANCE PAYMENT; RELEASE
Conditioned on the execution and delivery of the Release, an Eligible
Employee shall be entitled to receive a Severance Payment from the Company in
the amounts provided in Section 2.2 if (a) after February 26, 1998, but before
April 15, 1999, his or her employment is involuntarily terminated by the Company
or any of its Subsidiaries in connection with the acquisition by the Company of
a controlling interest in OHM for any reason other than Just Cause, death, or
Disability and (b) a Stay Date (as defined in Section 2.3) has been identified
for such Eligible Employee. Notwithstanding the foregoing, an otherwise Eligible
Employee will not be entitled to receive a Severance Payment (a) to the extent
he or she receives payments that the Company or its Subsidiaries are required to
make under WARN, (b) if he or she voluntarily terminates employment with the
Company or any of its Subsidiaries for any reason, except as provided in Section
2.8 hereof, or (c) his or her employment with the Company or any Subsidiary is
not, in fact, terminated.
2.2 AMOUNT OF SEVERANCE PAYMENT
(a) If an Employee becomes entitled to a Severance Payment under this
Plan pursuant to Section 2.1, the amount of his or her Severance Payment, net of
any payments which the Company or its Subsidiaries are required to make under
WARN, shall equal:
(i) one (1) week's Compensation for Employees with more than
six months but less than one (1) year of service;
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<PAGE> 5
(ii) two (2) week's Compensation for Employees with more than
one (1) year but less than three (3) years of service;
(iii) one (1) week's Compensation per year of service for
Employees with three (3) or more years of service;
(b) If an Employee has three or more years of service, a partial year
of service will be prorated based upon number of full months completed.
(c) For purposes of determining Severance Pay entitlement , Employees
will be credited with pre-acquisition years of service earned while an employee
of OHM but will not be credited with years of service with any Person other than
OHM prior to its acquisition by the Company or a Subsidiary.
2.3 RIGHT TO RETENTION BONUS; RELEASE
Conditioned upon the execution and delivery of the Release, an
otherwise Eligible Employee shall be entitled to receive a Retention Bonus from
the Company in the amount provided in Section 2.4 if (a) he or she continues to
work through the "Stay Date" designated by the Company, (b) is involuntarily
terminated by the Company for any reason other than Just Cause, death, or
Disability, and (c) is only absent from active employment between the
Eligibility Date and his or her Stay Date by reason of illness or pre-approved
paid or unpaid leave of absence. No Eligible Employee will be entitled to
receive a Retention Bonus if he or she voluntarily terminates employment with
the Company for any reason prior to his or her Stay Date.
2.4 AMOUNT OF RETENTION BONUS
(a) The level of the Retention Bonus for each Eligible Employee is
determined by the Company based upon a determination, made in the Company's sole
discretion of, among other
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<PAGE> 6
factors, the importance of the function being performed and the Company's
assessment of the Employee's likely ability to find reemployment quickly.
(b) If the Company requests an Employee to work beyond the Employee's
originally identified Stay Date, and the Employee so agrees, he or she shall get
one half of the originally agreed upon Retention Bonus on attaining such
original Stay Date and the balance upon attaining his or her extended Stay Date,
provided such extended Stay Date occurs before April 16, 1999. The Employee will
receive salary for the additional time worked but no additional Retention
Bonuses will be earned or paid.
(c) If the Company offers an Eligible Employee continued employment and
the Employee so accepts, the Employee will receive one-half of the originally
agreed upon Retention Bonus as provided in Section 2.4(b), but no additional
Retention Bonuses will be earned or paid.
(d) The payment of a Retention Bonus shall be in addition to the
Severance Payment, if any, as provided in Sections 2.1 and 2.2
2.5 NO DUTY OF MITIGATION
The Company acknowledges and agrees that an Eligible Employee shall be
entitled to receive his or her entire Severance Payment or Retention Bonus
regardless of any income which he or she may receive from other sources
following termination.
2.6 PAYMENT OF SEVERANCE PAYMENT AND RETENTION BONUS
(a) Severance and Retention Bonus Payments, if any, shall be paid to an
Employee upon the designated Stay Date but no salary will be paid for time not
worked.
(b) If the Company shortens an Employee's Stay Date, Retention Bonus
and Severance Payment will be paid based upon the original Stay Date but no
salary will be paid to the Employee for time not worked.
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2.7 WITHHOLDING OF TAXES
The Company shall withhold from any amounts payable under this Plan all
federal, state, city or other taxes required by applicable law to be withheld by
the Company.
2.8 EMPLOYEES WHO DECLINE TRANSFER OR CONTINUED EMPLOYMENT
(a) Notwithstanding any other provision of this Plan, an Employee who
is offered and formally accepts, but later rescinds such acceptance and
declines, the opportunity to transfer to a position at another Company or
Subsidiary location or another position with OHM or ITC shall not be eligible to
receive a Retention Bonus or Severance Payment, except in the Company's sole and
absolute discretion, since such rescission of a previously accepted transfer
would be considered a voluntary termination.
(b) Notwithstanding any other provision of this Agreement, an Employee
who is offered, but declines, the opportunity to transfer to a position
including employment at the Company or any of its Subsidiaries shall, in the
Company's discretion, be eligible to receive Severance Payment as provided in
Sections 2.1 and 2.2, and a Retention Bonus as provided in Sections 2.3 and 2.4
of this Plan.
ARTICLE III.
OTHER RIGHTS AND BENEFITS NOT AFFECTED
3.1 OTHER BENEFITS
This Plan does not provide pension benefits, nor shall any payment
hereunder be characterized as deferred compensation. Except as set forth in
Section 3.2, neither the provisions of this Plan nor the Severance or Retention
Bonus Payments provided for hereunder shall reduce any amounts otherwise
payable, or in any way diminish an Employee's rights as an employee, whether
existing now or hereafter, under any written benefit, incentive, retirement,
stock option,
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<PAGE> 8
stock bonus or stock purchase plan or any written employment agreement or other
written plan or arrangement not related to severance.
3.2 EXTENT TO WHICH OTHER SEVERANCE PLANS SUPERSEDED
For all Eligible Employees, this Plan supersedes any and all other
severance plans or related agreements of the Company or any Subsidiary,
including the severance provisions set forth in any policy of the Company or any
Subsidiary.
3.3 EMPLOYMENT STATUS
This Plan does not constitute a contract of employment or impose on an
Employee any obligation to remain in the employ of the Company or any
Subsidiary, nor does it impose on the Company or any of its Subsidiaries any
obligation to retain any Employee in his or her present or any other position,
nor does it change the status of an Employee's employment as employment at will.
ARTICLE IV.
CONFIDENTIALITY
4.1 NONDISCLOSURE OF CONFIDENTIAL MATERIAL
In the performance of duties, an Employee has had, and may in the
future have, access to confidential records and information, including, but not
limited to, development, marketing, purchasing, organizational, strategic,
financial, managerial, administrative, manufacturing, production, distribution
and sales information, data, specifications and processes presently owned or at
any time hereafter developed by the Company or its Subsidiaries or its agents or
consultants or used presently or at any time hereafter in the course of its
business, that are not otherwise part of the public domain (collectively, the
"Confidential Material"). Included in Confidential Material is the level of any
Employee's Retention Bonus. All such Confidential Material is considered
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<PAGE> 9
secret and has been and/or will be disclosed to an Employee in confidence. The
Confidential Material constitutes proprietary information of the Company and the
Subsidiaries which draws independent economic value, actual or potential, from
not being generally known to the public or to the other persons who could obtain
economic value from its disclosure or use. By acceptance of a Severance Payment
under this Plan, an Employee shall be deemed to have acknowledged that the
Company and the Subsidiaries have taken efforts reasonable under the
circumstances, of which this Section 4.1 is an example, to maintain its secrecy.
Except in the performance of duties to the Company or a Subsidiary, an Employee
shall not, directly or indirectly for any reason whatsoever, either during
employment or thereafter, disclose or use any such Confidential Material except
that the foregoing disclosure prohibition shall not apply to Confidential
Material that (i) has been publicly disclosed or was within his or her
possession prior to its being furnished to him or her by the Company or becomes
available to him or her on a nonconfidential basis from a third party (in any
such case, not due to a breach by the Employee of his or her obligations to the
Company or by breach of any other person of a confidential, fiduciary or
confidential obligation, the breach of which he or she know or reasonably should
know), (ii) is required to be disclosed by the Employee pursuant to applicable
law, and he or she provides notice to the Company of such requirement as
promptly as possible, or (iii) was independently acquired or developed by the
Employee without violating any of the obligations under this Plan and without
relying on Confidential Material of the Company. All records, files, drawings,
documents, equipment and other tangible items, wherever located, relating in any
way to the Confidential Material or otherwise to the Company's business, which
the Employee has prepared, used or encountered or shall in the future prepare,
use or encounter, shall be and remain the Company's sole and exclusive property
and shall be included in the Confidential Material. Upon the
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<PAGE> 10
Employee's termination of employment with the Company, or whenever requested by
the Company, he or she shall promptly deliver to the Company any and all of the
Confidential Material and copies thereof, not previously delivered to the
Company, that may be, or at any previous time has been, in his or her possession
or under his or her control.
4.2 EQUITABLE RELIEF
By acceptance of a Severance Payment under this Plan, an Employee shall
be deemed to have acknowledged that violation of Section 4.1 would cause the
Company irreparable damage for which the Company cannot be reasonably
compensated in damages in an action at law, and that, therefore, in the event of
any breach by the Employee of Section 4.1, the Company shall be entitled to make
application to a court of competent jurisdiction for equitable relief by way of
injunction or otherwise (without being required to post a bond). This provision
shall not, however, be construed as a waiver of any of the rights which the
Company may have for damages under this Plan or otherwise, and, except as
limited in Article VI, all of the Company's rights and remedies shall be
unrestricted.
ARTICLE V.
ARBITRATION
In any dispute regarding the application, interpretation or validity of
this Plan, an Employee may invoke this arbitration procedure either in lieu of
or following the claims procedure set forth in Section 6.8. If the parties are
unable to agree upon an arbitrator, they shall select a single arbitrator from a
list of seven arbitrators designated by the American Arbitration Association
(AAA) office in the Arbitration Location, all of whom shall be retired judges
who are actively involved in hearing private cases or members of the National
Academy of Arbitrators. If the parties are unable to agree upon an arbitrator
from such list, they shall each strike names
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alternatively from the list, with the first to strike being determined by lot.
After each party has used three strikes, the remaining name on the list shall be
the arbitrator. The fees and expenses of the arbitrator shall be borne equally
by the parties, provided the Company shall be responsible for all fees and
expenses of the arbitrator in excess of One Thousand Dollars so that the
Employee's maximum contribution shall be no more than $500.00. Each party shall
be responsible for the fees and expenses of its own representatives and
witnesses. Unless mutually agreed otherwise by the parties, any arbitration
shall be conducted in the city in which the Employee's employment was based as
of February 17, 1998 (the "Arbitration Location") or, in case there is no AAA
office in that city, in the closest city in which the AAA maintains an office.
If the parties cannot agree upon the precise location for the arbitration, the
arbitrator shall determine the location. Judgment may be entered on the award of
the arbitrator in any court having jurisdiction. The prevailing party in the
arbitration proceeding, as determined by the arbitrator, and in any enforcement
or other court proceedings, shall be entitled to the extent provided by law to
reimbursement from the other party for all of the prevailing party's costs,
expenses and reasonable attorney's fees.
ARTICLE VI.
MISCELLANEOUS
6.1 APPLICABLE LAW
To the extent not preempted by the laws of the United States, the laws
of Pennsylvania shall be controlling law in all matters relating to this Plan,
regardless of the choice-of-law rules of Pennsylvania or any other jurisdiction.
6.2 CONSTRUCTION
No term or provision of this Plan shall be construed so as to require
the commission of any act contrary to law, and wherever there is any conflict
between any provision of this Plan and
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any present or future statute, law, ordinance, or regulation, the latter shall
prevail, but in such event the affected provision of this Plan shall be
curtailed and limited only to the extent necessary to bring such provision
within the requirements of the law.
6.3 SEVERABILITY
If a provision of this Plan shall be held illegal or invalid, the
illegality or invalidity shall not, affect the remaining parts of this Plan and
this Plan shall be construed and enforced as if the illegal or invalid provision
had not been included.
6.4 HEADINGS AND GENDER
The Section headings in this Plan are inserted only as a matter of
convenience, and in no way define, limit, or extend or interpret the scope of
this Plan or of any particular Section. The masculine pronoun shall include the
feminine and vice versa, unless the context clearly indicates otherwise.
6.5 ASSIGNABILITY
An Employee's rights or interests under this Plan shall not be
assignable or transferable (whether by pledge, grant of a security interest, or
otherwise) by him or her, his or her beneficiaries or legal representatives,
except by will or by the bylaws of descent and distribution.
6.6 AMENDMENT AND TERMINATION
This Plan may be terminated or amended in any respect by resolution
adopted by the Board of Directors provided no vested benefits shall be reduced
by any such amendment. Notwithstanding the foregoing, unless expressly extended
by resolution of the Board of Directors, the Plan shall terminate automatically
on April 15, 1999, and no benefits shall be paid hereunder after that date.
12
<PAGE> 13
6.7 ADMINISTRATION
This Plan constitutes a welfare benefit plan within the meaning of
Section 3(1) of ERISA. This letter constitutes the "Summary Plan Description"
required under ERISA, as well as the governing document of the Plan. The
Administrator of the Plan, within the meaning of Section 3(16) of ERISA, and the
Named Fiduciary thereof, within the meaning of Section 402 of ERISA, is the
Company. The Administrator will have full power and discretion to administer and
interpret the Plan in all of its details, subject to applicable requirements of
law. Attached hereto as Exhibit "B" is a statement of participants' rights under
ERISA.
6.8 CLAIMS
If an Employee believes he or she is entitled to a benefit under this
Plan, he or she may, subject to Article V hereof, make a claim for such benefit
by filing with the Company a written statement setting forth the amount and type
of payment so claimed. The statement shall also set forth the facts supporting
the claim. The claim may be filed by mailing or delivery it to the Secretary of
the Company.
Within sixty (60) calendar days after receipt of such a claim, the
Company shall notify the claimant in writing of its action on such claim and if
such claim is not allowed in full, shall state the following in a manner
calculated to be understood by the claimant:
(a) The specific reason or reasons for the denial;
(b) Specific reference to pertinent provisions of this Plan on which
the denial is based;
(c) A description of any additional material or information necessary
for the claimant to be entitled to the benefits that have been denied
and an explanation of why such material or information is necessary;
and
13
<PAGE> 14
(d) An explanation of this Plan's claim review procedure.
If the claimant disagrees with the action taken by the Company, he or
she or his or her duly authorized representative may apply to the Company for a
review of such actions. Such application shall be made within one hundred twenty
(120) calendar days after receipt by the claimant of the notice of the Company's
action on his or her claim. The application for review shall be filed in the
same manner as the claim for benefits. In connection with such review, the
claimant may inspect any documents or records pertinent to the matter and may
submit issues and comments in writing to the Company. A decision by the Company
shall be communicated to you within the sixty (60) calendar days after receipt
of the application. The decision on review shall be in writing and shall include
specific reasons for the decision, written in a manner calculated to be
understood by the claimant, and specific references to the pertinent provisions
of this Plan on which the decision is based.
6.9 SURVIVAL OF OBLIGATION
The obligations of this Plan shall survive the fulfillment of the
Plan's obligations to each Employee and/or the termination of any Employee's
employment.
Sincerely,
INTERNATIONAL TECHNOLOGY CORPORATION
By: /s/ Anthony J. DeLuca
---------------------------------
Anthony J. DeLuca
Chief Executive Officer and President
Acknowledged and Accepted
- ----------------------------
Employee
Dated:
----------------------
14
<PAGE> 15
EXHIBIT A
SEPARATION AND GENERAL RELEASE AGREEMENT AND
CONFIDENTIALITY AGREEMENT
1. WHEREAS SEVERANCE AND RETENTION BONUS PAYMENTS ARE CONDITIONED UPON
EXECUTION OF A RELEASE, AND EMPLOYEE DESIRES TO RECEIVE ANY SEVERANCE PAY AND
RETENTION BONUS TO WHICH EMPLOYEE IS OTHERWISE ELIGIBLE AND AGREES TO ENTER INTO
SAID AGREEMENT, NOW THEREFORE, in consideration of the payment of the amounts
described below, from which taxes will be withheld, to be paid upon the
execution of this Agreement, Employee agrees to the following:
2. SEVERANCE AND BONUS RETENTION PAYMENTS. Employee shall receive
Severance and Retention Bonus Payments as follows pursuant to that certain
letter setting forth the terms and conditions of a severance and retention bonus
plan (the "Plan"). Severance Pay in the gross amount of _____. Retention Bonus
Pay in the gross amount of __________.
3. RELEASE. In consideration of the terms and provisions of this
Agreement, Employee hereby knowingly and voluntarily on behalf of Employee and
Employee's spouse and dependents, if any, as well as Employee's descendants,
ancestors, representatives, heirs, executors, administrators, grantees, assigns
and successors-in-interest, and each of them, forever relieves, releases and
discharges International Technology Corporation, IT Corporation, and OHM
Corporation (each, a "Company") and their respective subsidiaries, predecessors,
successors, heirs, assignees, owners, members, attorneys, representatives,
affiliates, officers, directors, agents, employees, servants, executors,
administrators, accountants, shareholders, investigators, employee benefit plans
and trustees and any and all other related individuals and entities, from any
<PAGE> 16
and all claims, debts, liabilities, demands, obligations, liens, promises, acts,
agreements, costs and expenses (including, but not limited to, attorney's fees),
damages, actions and causes of action, of whatever kind or nature, including,
without limitation, any statutory, civil or administrative claim, or any claim,
arising out of acts, whether known or unknown, suspected or unsuspected, fixed
or contingent, apparent or not, including, but not limited to, any claims based
on, arising out of, related to or connected with Employee's employment with, or
termination of employment from, a Company or any Subsidiary (as defined in the
Plan), including, but not limited to, any claims arising from federal, state or
local laws which prohibit discrimination on the basis of race, national origin,
religion, age, sex, material status, pregnancy, disability, perceived
disability, ancestry, sexual orientation, family or personal leave, or any other
form of discrimination, or from laws such as worker's compensation laws which
provide rights and remedies for injuries sustained in the workplace (but not
including worker's compensation claims arising from physical injuries sustained
in performing duties before the date provided in Paragraph 9 of this Agreement),
or from any common law claims of any kind, including, but not limited to,
contract, tort, or property rights, including, but not limited to, breach of
contract, breach of the implied covenant of good faith and fair dealing,
tortuous interference with contract or current or prospective economic
advantage, fraud, deceit, breach of privacy, misrepresentation, defamation,
wrongful termination, tortuous infliction of emotional distress, loss of
consortium and breach of fiduciary duty, violation of public policy and any
other common law claim of any kind whatever, any claims for severance pay, sick
leave, family leave, vacation, life insurance, bonuses, health insurance,
disability or medical insurance or any other fringe benefit or compensation, or
from any and all rights or claims arising under the Worker Adjustment and
Retraining Notification Act, 29 U.S.C. Section 2101 et seq. ("WARN"), the
Employee Retirement Income Security Act of 1974 ("ERISA"), and the Ohio
Take-Over Act (Sections 1707.041, 1707.042, 1707.23, and 1707.26 of the Ohio
Revised Code);
2
<PAGE> 17
provided, however, that the foregoing Release shall not extend to amounts to be
paid or benefits to be provided to Employee under the express terms of the Plan.
4. ADEA Release.
(a) This paragraph 4 shall apply only with regard to an
employee who is 40 years of age or older on the date of the employee's
separation from employment.
(b) Employee agrees and expressly acknowledges that this
Agreement includes a waiver and release of all claims which Employee has or may
have under the Age Discrimination in Employment Act of 1967, as amended, 29
U.S.C. Section 621, et seq. ("ADEA"). The following terms and conditions apply
to and are part of the waiver and release of ADEA claims under this Agreement:
(i) The waiver and release of claims under the ADEA
contained in this Agreement do not cover rights or claims that may
arise after the date on which Employee signs this Agreement.
(ii) This Agreement involves consideration in
addition to anything of value to which Employee is already entitled.
(iii) Employee acknowledges that by being given this
Release for review, Employee has been advised in writing to consult
with counsel prior to executing this Release.
(iv) If Employee executes this Agreement prior to the
expiration of the period specified in paragraph 4(b)(v) below, Employee
does so voluntarily and after having had the opportunity to consult
with an attorney.
(v) Employee is granted twenty-one (21) days after
the Employee is presented with this Agreement to decide whether or not
to sign this Agreement.
3
<PAGE> 18
(vi) Employee will have the right to revoke the
waiver and release of claims under the ADEA within seven (7) days of
signing this Release Agreement. This Agreement shall not become
effective or enforceable until that revocation period has expired. Any
notice of revocation, to be effective, must be in writing and received
by International Technology Corporation (the "Corporation"), together
with the return of any Severance and Retention Bonus paid pursuant to
paragraph 2, prior to the close of business on the seventh day
following the execution of this Agreement at the Corporation's office
at Monroeville, Pennsylvania (2790 Mosside Boulevard, Monroeville,
Pennsylvania 15146-2792, Attention: James Kirk, General Counsel,
Telephone No.: 412-372-7701).
5. This Agreement contains the entire agreement and understanding
concerning the subject matters between the parties and supersedes and replaces
all prior agreements, whether written or oral, express or implied, concerning
the subject matter hereof but excluding any claim for benefits which may be due
Employee in the normal course under any employee benefit plan of a Company which
provides benefits (other than severance benefits) after termination of
employment.
6. Employee represents and agrees that Employee fully understands the
right to discuss all aspects of this Agreement with the Employee's private
attorney, that to the extent desired, Employee has availed himself or herself of
this right, and that Employee is voluntarily entering into this Agreement.
7. Employee hereby agrees to return to each Company all Company
property, and to comply with, and be bound by, the confidentiality provisions of
Article IV of the Plan.
4
<PAGE> 19
8. Employee understands this Agreement is not an admission of liability
by any party.
9. Employee acknowledges that the effective date of termination of
employment is
- --------------------.
EMPLOYEE ACKNOWLEDGES THAT EMPLOYEE HAS READ THIS AGREEMENT,
UNDERSTANDS IT AND IS VOLUNTARILY ENTERING INTO IT. PLEASE READ THIS
AGREEMENT CAREFULLY. IT CONTAINS A RELEASE OF ALL KNOWN AND UNKNOWN
CLAIMS.
- -------------------------------------- ---------------------------------------
Signature of Employee Dated
- -------------------------------------- ---------------------------------------
Printed Name of Employee Address of Employee
- -------------------------------------- ---------------------------------------
Signature and Title of Dated
Corporation Representative
5
<PAGE> 20
EXHIBIT B
Information Provided Under ERISA. This Plan is an unfunded severance
plan, maintained on a calendar year basis. The Company is the Plan sponsor, Plan
Administrator, and agent for service of legal process. The Company bears the
costs of all benefits under the Plan.
The "Company" is International Technology Corporation whose address,
telephone number, and employer identification number are as follows:
International Technology Corporation
2790 Mosside Boulevard
Monroeville, Pennsylvania 15146-2792
Attention: James Kirk, General Counsel
Telephone No.: 412-372-7701
E.I.N. No.: 33-0001212
Statement of ERISA Rights. A Participant in this Plan is entitled to
certain rights and protections under a federal law known as "ERISA." ERISA
provides that all Plan Participants shall be entitled to examine, without
charge, at the Plan Administrator's office, all Plan documents and the Plan's
annual report. Copies of these documents and other Plan information may also be
obtained upon written request to the Plan Administrator.
A reasonable charge may be made for copies.
In addition to creating rights for Plan Participants, ERISA imposes
duties upon the people who are responsible for the operation of this Plan. The
people who operate this Plan, called "fiduciaries" of the Plan, have a duty to
do so prudently and in the interest of you and other Plan Participants. No one,
including your employer or any other person, may fire you or otherwise
discriminate against you in any way to prevent you from obtaining benefits or
exercising your
<PAGE> 21
rights under ERISA. If your claim for benefits is denied in whole or in part,
you must receive a written explanation of the reason for this denial. You have
the right to have the Plan Administrator review and reconsider your claim, as
described in the letter to which this Exhibit is attached.
Under ERISA, there are steps you can take to enforce the above rights.
For instance, if you request materials from the Plan and do not receive them
within 30 days, you may file a claim for arbitration as provided in the Plan. In
such a case, the arbitrator may require the Plan Administrator to provide the
materials and pay to you $100 a day until you receive the materials, unless the
materials were not sent because of reasons beyond the control of the Plan
Administrator. If you have a claim for benefits which is denied or ignored, in
whole or in part, you may file a claim for arbitration' as provided in the Plan,
or file suit in a state or federal court. If you are discriminated against for
asserting your rights, you may seek assistance from the U.S. Department of
Labor, or you may file a claim for arbitration as provided in the Plan, or file
suit in a state or federal court. The arbitrator or court will decide who should
pay the costs and legal fees of the arbitration. If you are successful, the
arbitrator or court may order the person you have sued to pay these costs and
fees. If you lose, the arbitrator or court may order you to pay these costs and
fees, for example, if he or she finds your claim is frivolous.
If you have any questions about your Plan, you should contact the Plan
Administrator. If you have any questions about this statement or about your
rights under ERISA, you should contact the nearest Area Office of the U.S.
Labor-Management Services Administration, Department of Labor.
2
<PAGE> 1
Exhibit 21.1
INTERNATIONAL TECHNOLOGY CORPORATION
LIST OF SUBSIDIARY COMPANIES
Beneco Enterprises, Inc.
Capital National Insurance Company
Chi Mei Entech, Ltd.
Chi Mei International Technology, Ltd.
Gradient Corporation
IT Corporation
IT Tulsa Holdings, Inc. (formerly IT-McGill Pollution Control Systems, Inc.)
International Technology Europe Ltd.
IT Brownfields Services Corporation
IT Corporation de Mexico, S.A. de C.V.
IT Corporation of North Carolina
IT Corporation Limited (formerly IT-McGill Limited)
IT Europe Pollution Control Engineering, Ltd. (formerly IT-McGill Pollution
Control Systems, Ltd.)
IT International Holdings, Inc.
IT Investment Holdings, Inc.
Jellinek, Schwartz & Connolly, Inc.
LandBank, Inc.
OHM Corporation
OHM Remediation Services Corporation
OHM Energy Services, Inc.
Pacific Environmental Group, Inc.
PHR Environmental Consultants, Inc.
Universal Professional Insurance Company
<PAGE> 1
Exhibit 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statements
(Form S-8; No. 2-95647 and No. 33-11486) and in the related Prospectuses
pertaining to the International Technology Corporation 1983 Stock Incentive
Plan, in the Registration Statement (Form S-8; No. 33-52974) and in the related
Prospectus pertaining to the International Technology Corporation 1991 Stock
Option Plan, in the Registration Statement (Form S-8; No. 33-60861) relating to
the shares of restricted stock to be issued under the Special Turnaround Plan,
in the Registration Statement (Form S-8; No. 33-60881) relating to the
additional shares under the 1991 Stock Incentive Plan, in the Registration
Statement (Form S-8; No. 333-00651) relating to the shares issued under the IT
Corporation Retirement Plan, in the Registration Statement (Form S-8; No.
333-27821) and in the related Prospectus pertaining to the 1996 Stock Incentive
Plan, and in the Registration Statements (Form S-8; No. 333-26143 and No.
333-57065), and in the related Prospectus pertaining to the 1997 International
Technology Corporation Non-Employee Director Stock Plan Director Fees, of our
report dated May 15, 1998, except for the subsequent events disclosures related
to: a) HTTS and Quanterra, and; b) completion of the OHM merger, as to which the
dates are May 27,1998 and June 11,1998 respectively with respect to the
consolidated financial statements of International Technology Corporation
included in this Annual Report (Form 10-K) for the year ended March 27, 1998.
ERNST & YOUNG LLP
Pittsburgh, Pennsylvania
June 25, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S CONSOLIDATED BALANCE SHEET AS 0F MARCH 27, 1998 AND ITS CONSOLIDATED
STATEMENT OF OPERATIONS FOR THE YEAR ENDED MARCH 27, 1998 FILED JUNE 25, 1998 ON
FORM 10-K AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-27-1998
<PERIOD-START> MAR-29-1997
<PERIOD-END> MAR-27-1998
<CASH> 24,765
<SECURITIES> 0
<RECEIVABLES> 229,656
<ALLOWANCES> 19,026
<INVENTORY> 0
<CURRENT-ASSETS> 273,668
<PP&E> 178,501
<DEPRECIATION> 102,480
<TOTAL-ASSETS> 709,217
<CURRENT-LIABILITIES> 198,744
<BONDS> 284,697
0
6,507
<COMMON> 97
<OTHER-SE> 141,546
<TOTAL-LIABILITY-AND-EQUITY> 709,217
<SALES> 0
<TOTAL-REVENUES> 442,216
<CGS> 0
<TOTAL-COSTS> 391,126
<OTHER-EXPENSES> 14,248
<LOSS-PROVISION> 206
<INTEREST-EXPENSE> 7,969
<INCOME-PRETAX> (2,185)
<INCOME-TAX> 4,175
<INCOME-CONTINUING> (6,360)
<DISCONTINUED> (4,960)
<EXTRAORDINARY> (5,706)
<CHANGES> 0
<NET-INCOME> (17,026)
<EPS-PRIMARY> (2.38)
<EPS-DILUTED> (2.38)
</TABLE>
