<PAGE>
Filed with the Securities and Exchange Commission on April 23, 1999
Registration No. 333-
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
---------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
THE IT GROUP, INC.
(Exact name of registrant as specified in its charter)
---------------
<TABLE>
<S> <C> <C>
Delaware 4955 33-0001212
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification No.)
</TABLE>
---------------
Co-Registrants
---------------
See Next Page
2790 Mosside Boulevard
Monroeville, Pennsylvania 15146-2792
(412) 372-7701
(Address, including Zip Code, and Telephone Number, including Area Code, of
Registrant's Principal Executive Offices)
---------------
<TABLE>
<S> <C>
Anthony J. DeLuca With a copy to:
Chief Executive Officer and President Peter F. Ziegler, Esq.
2790 Mosside Boulevard Gibson, Dunn & Crutcher LLP
Monroeville, Pennsylvania 15146-2792 333 South Grand Avenue
(412) 372-7701 Los Angeles, California 90071
(Name, Address, including Zip Code, and (213) 229-7000
Telephone Number,
Process)
</TABLE>
---------------
Approximate date of commencement of proposed sale to the public: As soon as
practicable following the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box. [_]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]____________
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]_________________
CALCULATION OF REGISTRATION FEE
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Proposed Proposed
Amount Maximum Maximum Amount of
Title of Each Class of to be Offering Price Aggregate Registration
Securities to be Registered Registered Per Note Offering Price(1) Fee
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
11 1/4% Series B Senior Subordinated
Notes due 2009...................... $225,000,000 100% $225,000,000 $62,550
- --------------------------------------------------------------------------------------------------------
Guarantees of 11 1/4% Series B Senior
Subordinated Notes due 2009......... None(2)
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
</TABLE>
(1) Estimated solely for purposes of computing the registration fee pursuant
to Rule 457(f).
(2) Pursuant to Rule 457(n), no separate filing fee is required for the
guarantees.
---------------
The registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933, as amended, or until the
Registration Statement shall become effective on such date as the Commission,
acting pursuant to such Section 8(a), may determine.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
Co-Registrants
<TABLE>
<CAPTION>
Exact Name of
Co-Registrant as
Specified in its State or Other Jurisdiction of Primary Standard Industrial I.R.S. Employer
Charter Incorporation or Organization Classification Code Number Identification No.
- ------------------- ------------------------------ ---------------------------- ------------------
<S> <C> <C> <C>
Alaska Remediation
Services Corp. Alaska 1629 92-0161467
IT Corporation California 1629, 4953, 8711, 8784, 8748 94-1259053
Fluor Daniel
Environmental
Services, Inc. California 8711 33-0437335
Pacific Environmental
Group, Inc. California 8711, 8748 94-3027373
Kato Road LLC California 6552 84-1417566
Jellinek, Schwartz &
Connolly, Inc. District of Columbia 8748 52-1139905
JSC International, Inc. District of Columbia 8748 52-1862081
Empire State I, LLC Delaware 6552 84-1479218
Empire State II, LLC Delaware 6552 84-1479217
GCAP Services, Inc. Delaware 8748 52-2077368
Groundwater Technology,
Inc. Delaware 8711 02-0324047
IT C & V Operations, Inc. Delaware 6719 23-2946547
IT E & C Operations, Inc. Delaware 6719 23-2946696
IT Environmental and
Facilities, Inc. Delaware 8711 25-1833796
IT International
Holdings, Inc. Delaware 6719 51-0386873
IT International
Investments, Inc. Delaware 6719 04-2944746
IT International
Operations, Inc. Delaware 8748 93-1018025
IT Investment Holdings,
Inc. Delaware 6719 33-0721650
IT Japan Services Inc. Delaware 8711 25-1832096
IT Korea Services Inc. Delaware 8711 25-1832097
LandBank Environmental
Properties LLC Delaware 6552 84-1417843
LandBank, Inc. Delaware 6552 77-0391324
LandBank Remediation
Corp. Delaware 6552 94-3223144
Northeast Restoration
Company, LLC Delaware 6552 84-1479222
PHR Environmental
Consultants, Inc. Delaware 8748 33-0754921
The Dorchester Group,
LLC Delaware 6552 84-1479214
37-02 College Point
Boulevard, LLC Delaware 6552 84-1479216
Gradient Corporation Massachusetts 8748 04-2857447
IT Corporation of North
Carolina, Inc. North Carolina 8711 56-1231308
OHM Corporation Ohio 1629 34-1503050
OHM Remediation Services
Corp. Ohio 1629 34-1275607
IT-Tulsa Holdings, Inc. Oklahoma 6719 73-1004178
Sielken, Inc. Texas 8748 76-0143090
Beneco Enterprises, Inc. Utah 1629 87-0349697
</TABLE>
<PAGE>
SUBJECT TO COMPLETION, DATED APRIL 23, 1999
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Prospectus
[LOGO OF IT GROUP (SM)]
$225,000,000
Offer to Exchange
All Outstanding 11 1/4% Series A Senior Subordinated Notes due 2009
for 11 1/4% Series B Senior Subordinated Notes due 2009
of
The IT Group, Inc.
This Exchange Offer Will Expire at 5:00 P.M.
New York City Time, on , 1999
- -------------------------------------------------------------------------------
The Company: The Senior Subordinated Notes:
. Interest: Fixed annual rate
. We are a leading provider of of 11 1/4%. Paid every six
diversified, value-added months in cash on April 1 and
services in the areas of October 1, commencing on
environmental consulting, October 1, 1999.
engineering and construction
and remediation. . Subsidiary Guarantees: Each
guarantor is our wholly owned
. The IT Group, Inc. subsidiary. If we cannot make
2790 Mosside Boulevard payments on the series B
Monroeville, PA 15146-2792 notes when they are due, the
(412) 372-7701 subsidiary guarantors must
make them instead.
Material Terms of the Exchange . Redemption: The series B
Offer: notes will be redeemable on
or after 2004. Up to 35% of
. Expires at 5:00 p.m., New the series B notes will be
York City time on redeemable prior to April 1,
, 1999, unless 2002, with the net proceeds
extended. from sales of common equity.
Holders of the series B notes
. This exchange offer is not may also require us to redeem
subject to any condition all or part of their series B
other than that it must not notes upon a change of
violate applicable law or any control.
applicable interpretation of
the staff of the Securities
and Exchange Commission. . Ranking: The series B notes
and the subsidiary guarantees
. All outstanding series A are general, unsecured
notes that are validly obligations and:
tendered and not validly . are subordinated to
withdrawn will be exchanged indebtedness under our senior
for an equal principal amount credit facility,
of series B notes, which are . are subordinated to our and
registered under the the subsidiary guarantors'
Securities Act of 1933. other senior indebtedness,
and
. Tenders of outstanding series
A notes may be withdrawn at . are equal in right of payment
any time prior to the to our and the subsidiary
expiration of this exchange guarantors' other existing
offer. and future senior
subordinated indebtedness.
. We will not receive any cash
proceeds from this exchange
offer.
Please consider carefully the "Risk Factors" beginning on page 11 of this
prospectus.
- -------------------------------------------------------------------------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved these securities, or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
- -------------------------------------------------------------------------------
The date of this prospectus is April , 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
Special Note Regarding Forward-Looking Statements........................... i
Summary..................................................................... 1
Risk Factors................................................................ 12
The Exchange Offer.......................................................... 22
Capitalization.............................................................. 30
Selected Consolidated Financial and Other Data.............................. 31
Unaudited Pro Forma Consolidated Financial Data............................. 33
Management's Discussion and Analysis of
Results of Operations and Financial Condition.............................. 41
Business.................................................................... 56
Management.................................................................. 69
Principal Stockholders...................................................... 72
</TABLE>
<TABLE>
<S> <C>
Material Relationships and Related Transactions............................. 76
Description of Other Indebtedness........................................... 76
Description of Notes........................................................ 79
Description of Capital Stock................................................ 114
Material Federal Income Tax Considerations
of the Exchange Offer...................................................... 116
Federal Income Tax Considerations for
Non-U.S. Holders........................................................... 116
Plan of Distribution........................................................ 120
Legal Matters............................................................... 120
Experts..................................................................... 120
Available Information....................................................... 121
Incorporation by Reference.................................................. 121
Index to Financial Statements .............................................. F-1
</TABLE>
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Statements of our intentions, beliefs, expectations or predictions for the
future, denoted by the words "anticipate," "believe," "estimate," "expect,"
"project," "imply," "intend," "foresee" and similar expressions are forward-
looking statements that reflect our current views about future events and are
subject to risks, uncertainties and assumptions. Such risks, uncertainties and
assumptions include those identified in the "Risk Factors" and "Business"
sections of this prospectus and the following:
. changes in laws or regulations affecting our operations, as well as
competitive factors and pricing pressures,
. bidding opportunities and successes,
. project results, including success in pursuing claims and change orders,
. management of our cash resources, particularly in light of our
substantial leverage,
. funding of our backlog,
. matters affecting contracting and engineering businesses generally, such
as the seasonality of work, the impact of weather and clients' timing of
projects,
. our ability to generate a sufficient level of future earnings to utilize
our deferred tax assets,
. the ultimate closure costs of our discontinued operations,
. the success of our acquisition strategy, including the effects of the
integration of our recent acquisitions and any future acquisitions, and
achievement of expected cost savings and other synergies from these
acquisitions, and
. industry-wide market factors and other general economic and business
conditions.
Our actual results could differ materially from those projected in these
forward-looking statements as a result of these factors, many of which are
beyond our control.
i
<PAGE>
SUMMARY
The following is a summary of the more detailed information appearing
elsewhere in this prospectus and in the documents we incorporate in this
prospectus by reference. This summary is not complete and does not contain all
the information you should consider. You should read the entire prospectus
carefully, including the "Risk Factors," the financial statements and the
related notes. Unless the context otherwise requires, "we," "us," "our" and
similar terms, as well as references to the "Company" and the "IT Group,"
include all of our consolidated subsidiaries. Also, unless the context
otherwise requires, the information contained in this prospectus gives pro
forma effect to the acquisition by us of OHM Corporation, Fluor Daniel GTI,
Inc., specified assets and specified liabilities of ICF Kaiser International,
Inc.'s Environment and Facilities Management Group and Roche Limited,
Consulting Group as of the beginning of the period stated for income statement
data and at the date stated for balance sheet data. We obtained the industry
data used throughout this prospectus from industry publications that we believe
to be reliable, but we have not independently verified this information.
The Company
Overview
We are a leading provider of diversified, value-added services in the areas
of environmental consulting, engineering and construction and remediation. In
addition, we are leveraging our core project management competencies to offer
our clients a variety of outsourcing services such as facilities management. We
have a strong reputation for both the high quality of our work and the breadth
of the services we provide.
Our clients are federal, state and local governments in the U.S. and
commercial businesses worldwide. We obtained 60% of our pro forma revenues for
the twelve months ended December 25, 1998 from the federal government under
more than 120 contracts that range in length from one to ten years. In
addition, we serve more than 1,600 commercial clients on projects that range in
length from one month to more than one year. As of December 25, 1998, we
employed more than 6,000 persons in a network of more than 80 domestic and ten
international offices. For the twelve months ended December 25, 1998, our pro
forma revenues were $1.3 billion and our adjusted EBITDA was $130.2 million. As
of December 25, 1998, our pro forma backlog was $4.0 billion. Ninety percent of
our backlog is related to federal government programs and approximately 84% is
expected to be charged to our clients on a cost-reimbursable basis. Many of our
commercial contracts are evergreen contracts that are typically not part of our
backlog.
Industry sources estimate that the total domestic environmental services
industry in 1997 had approximately $186.0 billion in revenues. We believe that
the market we serve was approximately $26.5 billion in 1997 revenues. A
significant portion of our market consists of projects for the Department of
Defense, the Department of Energy and the Environmental Protection Agency.
According to federal government publications, the DOD's budget for remediation
will be approximately $2.5 billion annually for the next five years, and the
DOE's budget will be approximately $5.7 billion annually for the same period.
From 1991 to 1998, our industry experienced substantial consolidation.
According to industry sources, the top ten firms in the environmental services
industry accounted for approximately 46% of the industry measured by 1998
revenue, up from approximately one third in 1991. This consolidation has been
driven by:
. the benefits of economies of scale, including reduced overhead as a
percentage of sales; and
. growing demand for full-service, business-oriented solutions.
We are actively involved in this consolidation. Since March 1996, we have
acquired ten firms, including EFM and Roche, representing an aggregate $0.9
billion in revenue at the time of acquisition.
Our common stock is traded on the New York Stock Exchange and the Pacific
Exchange under the symbol "ITX." On April 22, 1999, the closing sales price for
our common stock as reported on the NYSE composite transaction reporting system
was $14 1/4 per share, and there were 29,427,795 shares outstanding on a
diluted basis
1
<PAGE>
Services
We provide services through four business platforms: engineering &
construction, consulting ventures, outsourced services and international. We do
not own or operate facilities involved in the ongoing commercial disposal of
hazardous waste.
<TABLE>
<CAPTION>
Percentage of
Pro Forma Pro Forma
Revenue for Revenue for
the Twelve the Twelve
Months Ended Months Ended
December 25, December 25,
Platform 1998 1998 Clients Primary Services Provided
- --------------------------------------------------------------------------------------------------------------------
($ in millions)
<S> <C> <C> <C> <C>
Engineering & $894 70.5% DOD . Hazardous waste design and remediation
Construction DOE . Decontamination and
EPA decommissioning
State and local agencies . Civil construction
Private sector clients
- --------------------------------------------------------------------------------------------------------------------
Consulting & $230 18.1% Federal government . Environmental permitting
Ventures Private sector clients . Facility siting and design
. Environmental compliance auditing
. Risk assessment/management
. Health and safety program design
- --------------------------------------------------------------------------------------------------------------------
Outsourced $85 6.7% DOD . Facilities operation, maintenance and
Services State and local agencies construction
Private sector clients . Construction management services
- --------------------------------------------------------------------------------------------------------------------
International $59 4.7% U.S. and international . Engineering, remediation and consulting
governments . Wastewater treatment/design
Private sector clients . Infrastructure engineering and construction
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
Competitive Strengths
We believe that we benefit from the following competitive strengths:
Leading Market Position. We believe that we have developed a reputation for
delivering cost-effective, high-quality services. During the last five years,
we have managed in excess of $5.0 billion of contracts, and we have been cited
as a high-quality provider by many of our clients for completing work on time
and on budget, including consistent level one award fee designations by the
U.S. Navy for work performed on complex projects. We are the largest provider
of environmental engineering and construction services to the DOD.
Significant Backlog. Our total pro forma backlog at December 25, 1998 was
approximately $4.0 billion, including approximately $0.9 billion of funded
backlog of which $0.7 billion is scheduled to be completed during 1999. Many of
our commercial contracts are evergreen contracts and are typically not part of
our backlog. We believe that the predictability and stability of our backlog
permits us to manage efficiently our overhead and marketing costs by bidding
selectively on new work. As of March 1999, we had approximately $1.4 billion of
pending proposals, and we expect to consider more than $5.0 billion of
additional bidding opportunities in 1999.
Low-Cost Matrix Organization Structure. In mid-1996, we implemented our
matrix organization structure and completed a significant investment in our
comprehensive management information system to manage both the operating and
financial aspects of our business. The key to this structure is our shared
services group, which is responsible for supplying our four business platforms
with technical expertise and administrative support functions, such as project
management and contract administration. Approximately 70% of our employees are
part of this group. As a result of this structure, we believe we are
particularly
2
<PAGE>
effective in competing for the larger federal and private sector contracts,
where significant personnel resources, strong management systems and cost
control are important competitive factors. We believe that our matrix
organization allows us to maximize the utilization of our employees through the
sharing of technical resources across business platforms. In addition, our
management information system helps us track the utilization of our personnel
and minimize non-billable time per employee. Employee utilization is a
significant determinant of operating management compensation. Since we
implemented our matrix organization structure, employee utilization, defined as
total dollars billed to a client project divided by total dollars paid to
employees, has increased meaningfully. In addition, as a percentage of
revenues, selling, general and administrative expenses declined from 9.5% for
the twelve months ended March 29, 1996 to 5.5% for the nine months ended
December 25, 1998, on an actual basis.
Full Range of High-Quality Services. Many of our clients, both government
and commercial, require full-service, business-oriented solutions to
environmental issues, in which a single service provider manages the entire
process from identification and assessment through remediation. Successful
remediation of environmentally impacted sites requires a multidisciplinary
approach, since these sites typically involve air, soil and/or water
contamination. Depending on the circumstances, the skills required to address
these problems may include:
. risk assessment,
. process and design engineering,
. computer modeling,
. ambient air monitoring,
. land-use planning, and
. construction/remediation.
We believe we have the breadth and depth of operational knowledge, technical
capabilities and track record of experience to service our client base
effectively.
Proven, Experienced Management Team. Our management team, led by our Chief
Executive Officer Anthony J. DeLuca, has significant experience in the
industry. In 1996, in connection with an investment by The Carlyle Group, a
private investment firm based in Washington, D.C. which owns approximately 21%
of our common stock, Mr. DeLuca assumed the role of President and CEO. Mr.
DeLuca joined us in 1990 as Chief Financial Officer and his financial
discipline helped to improve our competitive position. Since his promotion to
CEO, we have increased our adjusted EBITDA margins from 5.3% for the twelve
months ended March 28, 1997 to 9.1% for the nine months ended December 25,
1998. In 1998, as a result of our merger with OHM, Philip O. Strawbridge joined
our management team as Senior Vice President and Chief Administrative Officer
after fifteen years of industry experience with OHM and Fluor Corporation. In
addition, our senior vice presidents have significant experience in the
industry with each having over 30 years of relevant industry experience.
3
<PAGE>
Business Strategy
Our goal is to maintain and enhance our position as a leading provider of
environmental and infrastructure solutions to governments and private industry
on a global basis, and to leverage our core competencies into growth markets,
principally through our existing clients. Our strategies to achieve this goal
are outlined below:
Achieve Cost Savings. We believe that our matrix organization and our
comprehensive management information system allow us to:
. efficiently integrate acquired operations,
. eliminate duplicative costs,
. centralize common functions,
. consolidate locations that serve the same areas, and
. use our low cost structure to bid successfully on new projects.
In connection with the OHM acquisition, we implemented a cost reduction program
that eliminated approximately $32.0 million in costs on an annualized basis
within six months of acquiring the business, principally through elimination of
duplicative management overhead, bidding costs and facilities. In connection
with the GTI acquisition, we executed a similar plan that has resulted in
approximately $18.7 million of annualized cost savings being realized. We have
devised a similar plan with respect to the EFM acquisition that we believe will
produce approximately $9.6 million in annualized cost savings. See "Unaudited
Pro Forma Consolidated Financial Data."
Increase Market Share. We plan to continue to improve our market position in
existing markets by:
. offering our clients new services gained through our acquisitions;
. providing our clients with full-service, business-oriented solutions;
. leveraging our matrix organization structure to be a low-cost provider;
and
. aggressively pursuing large scale government and private sector
programs.
Execute Disciplined Acquisition Program. We acquire companies of varying
sizes, including relatively large companies to enhance our qualifications and
areas of expertise and leverage our matrix organization, as well as smaller
companies to broaden the services we offer our clients. The following table
presents data on our most recent acquisitions.
<TABLE>
<CAPTION>
Most Recent
Fiscal Year Revenues
Acquisition Prior to Acquisition Date Strategic Benefit
- ----------------------------------------------------------------------------------------------------------------
($ in millions)
<S> <C> <C> <C>
OHM $527 June 1998 . Expanded and diversified our government backlog
. Established Outsourced Services platform
. $32 million of annual cost savings achieved
- ----------------------------------------------------------------------------------------------------------------
GTI $200 December 1998 . Enhanced our consulting and engineering skills
. Added a number of Fortune 500 clients
. $19 million of annual cost savings achieved
- ----------------------------------------------------------------------------------------------------------------
EFM $106 April 1999 . Adds new skills that qualify us for additional work for
government and commercial clients including non-environmental
facilities management services
. Approximately $10 million of planned annual cost savings
- ----------------------------------------------------------------------------------------------------------------
Roche $28 April 1999 . Adds strategic consulting capabilities in the wastewater area
. Adds infrastructure project capabilities
. Enhances international expertise
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
4
<PAGE>
Continue to Diversify into New Service Areas. We believe that our project
management skills can be leveraged into a number of different areas. There is a
general trend towards outsourcing in the U.S., where the federal government has
announced plans to outsource a variety of operations and maintenance services,
including housing, at many of its facilities. We believe that we can provide
additional project management services to our government clients by utilizing
our track record of success in environmental project management for these same
clients. Currently, we are focusing on providing full-service facility
infrastructure services, including repair and maintenance, at government
facilities. For example, through EFM, we have a 23% participation in a joint
venture led by Northrop Grumman Corporation to provide all non-launch related
services including project, environmental and information management, public
works, logistics and protective and other services at the Kennedy Space Center.
We estimate that this contract will provide an aggregate $2.2 billion in
revenues to the joint venture over the next ten years.
Expand Service Offerings Internationally. According to industry sources, the
size of the total environmental services market outside the U.S. was
approximately $450.0 billion in 1996 revenues. We have had limited exposure to
this market to date, but we intend to grow internationally by offering our
clients the "one-stop-shopping" service they require as they conduct their
business globally. We intend to manage this growth in a disciplined manner by
gradually increasing our international exposure and selectively taking
advantage of the opportunities presented through:
. assisting our federal government and U.S. multinational clients with
their international environmental services and infrastructure needs; and
. leveraging the international expertise we acquired in the GTI and Roche
acquisitions.
Recent Acquisitions
We have recently acquired two companies that will help us execute our
business strategy and enhance our competitive strengths.
EFM. On April 9, 1999 we purchased specified assets and assumed specified
liabilities of EFM for a purchase price of $82.0 million reduced by $8.0
million representing working capital retained by ICF Kaiser.
EFM primarily oversees major program management and technical support
contracts for federal agencies, particularly the DOE and DOD. EFM provides two
principal services: environmental consulting and remediation and facilities
management. EFM also conducts cleanups under two large contracts for the Army
Corps of Engineers, and is a member of a joint venture that provides
outsourcing services to NASA. For the twelve months ended December 31, 1998,
EFM had revenues of $105.9 million and adjusted EBITDA of $6.2 million. In
addition, we have devised a plan that we believe will result in approximately
$9.6 million in annualized savings. See "Unaudited Pro Forma Consolidated
Financial Data" for more details on this plan.
Roche. On March 31, 1999 we purchased all of the issued and outstanding
capital stock of Roche for an initial payment of $10.0 million in cash, plus
two potential earnout payments.
Roche, an engineering, construction and consulting company based in Canada,
is primarily focused on infrastructure development including transportation and
water/wastewater treatment facilities. Roche operates exclusively outside the
U.S. We expect Roche to provide us with access to international clients as well
as a mobile workforce to respond to our U.S.-based, multinational clients'
needs on a global basis. For the twelve months ended December 31, 1998, Roche
had revenues of $28.3 million and adjusted EBITDA of $0.5 million.
A portion of the net proceeds of our offering of series A notes was used to
fund these two acquisitions.
5
<PAGE>
The Exchange Offer
<TABLE>
<C> <S>
Securities Offered....................... Up to $225,000,000 principal amount
of 11 1/4% Series B Senior
Subordinated Notes due April 1,
2009.
The Exchange Offer....................... The series B notes are being offered
in exchange for a like principal
amount of our series A notes. Series
A notes may be exchanged only in
integral multiples of $1,000. We are
issuing the series B notes to
satisfy our obligations under the
terms of the registration rights
agreement among us, the subsidiary
guarantors, Donaldson, Lufkin &
Jenrette Securities Corporation and
Salomon Smith Barney.
Tenders; Expiration Date; Withdrawal..... This exchange offer will expire at
5:00 P.M. New York City time on
, 1999, or such later date
and time to which it is extended.
You may withdraw your tender of
series A notes pursuant to this
exchange offer at any time prior to
its expiration. In the event we
terminate this exchange offer and do
not accept for exchange any series A
notes, we will promptly return
tendered series A notes to their
holders.
Accrued Interest on the Notes............ The series B notes will bear
interest from and including the date
of issuance of the series A notes.
Accordingly, if you receive series B
notes in exchange for series A
notes, you will forego accrued but
unpaid interest on your exchanged
series A notes for the period from
and including the date of issuance
of your series A notes to the date
of exchange, but you will be
entitled to such interest under the
series B notes.
Conditions to the Exchange Offer......... This exchange offer is subject to
certain customary conditions, any or
all of which may be waived by us. We
currently expect that each of the
conditions will be satisfied and
that no waivers will be necessary.
See "The Exchange Offer--Conditions
to the Exchange Offer."
Procedures for Tendering Series A Notes.. Each holder wishing to tender their
series A notes in this exchange
offer must complete and sign the
letter of transmittal, in accordance
with the instructions contained
therein, and submit the letter of
transmittal to the exchange agent
identified below. See "The Exchange
Offer--Procedures for Tendering."
Guaranteed Delivery Procedures........... If you wish to tender your series A
notes and your series A notes are
not immediately available or you
cannot deliver your series A notes
and letter of transmittal and any
other documents required by the
letter of transmittal to the
exchange agent prior to the
expiration of this exchange offer,
you must tender your series A notes
according to the guaranteed delivery
procedures set forth in "The
Exchange Offer--Guaranteed Delivery
Procedures."
Acceptance of Series A Notes and
Delivery of Series B Notes.............. We will accept for exchange any and
all series A notes that are properly
tendered in this exchange offer
prior to 5:00 P.M.
</TABLE>
6
<PAGE>
<TABLE>
<C> <S>
New York City time on , 1999. See "The
Exchange Offer--Acceptance of Series A Notes
for Exchange; Delivery of Series B Notes."
Material Federal Income Tax
Considerations................ The exchange of series A notes for the series B
notes to be issued under this prospectus will
not be a taxable event for federal income tax
purposes. See "The Exchange Offer--Material
Federal Income Tax Consequences."
Rights of Dissenting Holders.. As a holder of series A notes you do not have
any appraisal or dissenters' rights under the
Delaware General Corporation Law in connection
with this exchange offer.
Exchange Agent................ The Bank of New York. See "The Exchange Offer--
Exchange Agent."
Use of Proceeds............... We will receive no cash proceeds from exchanges
made pursuant to this exchange offer.
</TABLE>
Consequences of Exchanging Series A Notes Pursuant to the Exchange Offer
Based on certain interpretive letters issued by the Commission staff to
third parties in unrelated transactions, unless you are our "affiliate" within
the meaning of Rule 405 under the Securities Act, if you exchange your series A
notes for series B notes pursuant to this exchange offer you generally may
offer for resale, resell or otherwise transfer your series B notes without
compliance with the registration and prospectus delivery provisions of the
Securities Act; provided that you acquired your series B notes in the ordinary
course of your business and you have no arrangement with any person to
participate in a distribution of series B notes. Each broker-dealer that
receives series B notes for its own account in exchange for series A notes must
acknowledge that it will deliver a prospectus in connection with any resale of
such series B notes. See "Plan of Distribution." In addition, to comply with
the securities laws of certain jurisdictions, if applicable, the series B notes
may not be offered or sold unless they have been registered or qualified for
sale in such jurisdiction or an exemption from registration or qualification is
available and the conditions thereto have been met.
We have agreed, under the registration rights agreement, subject to certain
specified limitations, to register or qualify the series B notes for offer or
sale under the securities or blue sky laws of the jurisdictions in which any
holder of series A or series B notes reasonably requests in writing. If you do
not exchange your series A notes for series B notes pursuant to this exchange
offer, your series A notes will continue to be subject to the restrictions on
transfer contained in the legend set forth on your series A notes. In general,
the series A notes may not be offered or sold, unless registered under the
Securities Act, except pursuant to an exemption from, or in a transaction not
subject to, the Securities Act and applicable state securities laws. See "The
Exchange Offer--Purposes of the Exchange Offer" and "--Resales of Notes."
Terms of the Series B Notes
<TABLE>
<C> <S>
Issuer........................ The IT Group, Inc.
Securities Offered............ $225.0 million aggregate principal amount of
Series B Senior Subordinated Notes due 2009.
Maturity Date................. April 1, 2009.
Interest Rate; Payment Dates.. Interest on the series B notes will accrue at
the rate of 11% per year, payable every six
months in cash in arrears on April 1 and
October 1 of each year, commencing October 1,
1999.
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Optional Redemption.... We can redeem the series B notes, in whole or in part,
on or after April 1, 2004, at the redemption prices
set forth in this prospectus, plus accrued and unpaid
interest. In addition, before April 1, 2002, we can
redeem up to 35% of the series B notes at 111.250% of
the principal amount thereof, plus accrued and unpaid
interest, with the net proceeds of specified sales of
common equity. See "Description of Notes--Optional
Redemption."
Subsidiary Guarantees.. The series B notes will be unconditionally guaranteed
by our existing and future wholly owned domestic
subsidiaries, except for Universal Professional
Insurance Company, a Vermont corporation. The
subsidiary guarantees will be subordinate in right of
payment to all existing and future senior indebtedness
of the subsidiary guarantors. The subsidiary
guarantees will rank equal in right of payment to
other existing and future senior subordinated
indebtedness of the subsidiary guarantors and senior
in right of payment to all of the existing and future
obligations of the subsidiary guarantors that are
expressly subordinated in right of payment to the
subsidiary guarantees. See "Description of Notes--
Subsidiary Guarantees."
Change of Control.... Upon the occurrence of change of control events, you
may require us to repurchase all or a portion of your
series B notes at 101% of the principal amount
thereof, plus accrued and unpaid interest. See
"Description of Notes--Repurchase at Option of
Holders--Change of Control."
Ranking.............. The series B notes will be our general unsecured
obligations and will rank equal in right of payment to
all of our other existing and future senior
subordinated indebtedness and senior in right of
payment to existing and future obligations that are
expressly subordinated in right of payment to the
series B notes. The notes will rank junior to all
existing and future senior debt, as defined in the
indenture governing the series B notes. See
"Description of Notes--Subordination."
Anti-Layering........ We will not incur any indebtedness that is subordinate
in right of payment to any of our senior debt and
senior in any respect in right of payment to the
series B notes. No subsidiary guarantor will incur any
indebtedness that is subordinate in right of payment
to any senior debt of such subsidiary guarantor and
senior in any respect in right of payment to its
subsidiary guarantee.
Covenants............ The indenture governing the series B notes contains
covenants that, among other things, limit our ability
and the ability of our subsidiaries to:
. pay or permit payment of certain dividends on,
redeem or repurchase capital stock;
. make certain investments;
. incur additional indebtedness;
. allow the imposition of dividend restrictions on
subsidiaries;
. sell assets;
. guarantee indebtedness;
. issue capital stock;
. create certain liens;
. engage in certain transactions with affiliates; and
. consolidate or merge or sell all or substantially
all our assets and the assets of our subsidiaries.
</TABLE>
8
<PAGE>
<TABLE>
<S> <C>
All of these limitations are subject to
important exceptions and qualifications
described under "Description of Notes--Certain
Covenants."
Absence of a Public Market for There has been no public market for the series
the Notes.................... A notes and no active public market for the
series B notes is currently anticipated. We
currently do not intend to apply for the
listing of the series B notes on any securities
exchange or to seek approval for quotation
through any automated quotation system.
Donaldson, Lufkin & Jenrette Securities
Corporation and Salomon Smith Barney, acting as
the initial purchasers in the offering of the
series A notes, have advised us that each of
them currently intends to make a market in the
series B notes; however, neither of the initial
purchasers is obligated to do so and any market
making may be discontinued by either of them at
any time without notice. Accordingly, no
assurance can be given as to the liquidity or
the trading market for the series B notes.
</TABLE>
Risk Factors
See "Risk Factors" beginning on page 11 for a discussion of factors you
should consider carefully before deciding to invest in the series B notes.
9
<PAGE>
Summary Historical and Unaudited Pro Forma Financial Data
(In thousands, except ratios)
The following table presents our summary historical and unaudited pro forma
financial data as of and for the periods shown below. In June 1998, we changed
our fiscal year-end from the last Friday in March to the last Friday in
December of each year, effective with the nine months ended December 25, 1998.
This data is derived from our audited consolidated financial statements and
unaudited pro forma financial data contained in this prospectus. Because the
information in this table is only a summary, you should read our historical
financial statements and the related notes, the unaudited pro forma
consolidated financial data and the related notes and "Management's Discussion
and Analysis of Results of Operations and Financial Condition" contained in
this prospectus.
<TABLE>
<CAPTION>
Fiscal Year Ended Nine Months
-------------------- Ended Unaudited Pro Forma
March 28, March 27, December 25, Twelve Months Ended
1997 1998 1998 December 25, 1998 (1)
<S> <C> <C> <C> <C>
Income Statement Data:
Revenues ............... $ 362,131 $ 442,216 $ 757,435 $1,269,321
Gross margin ........... 38,138 51,090 90,961 187,960
Special charges (2) .... (8,403) (14,248) (24,971) (30,665)
Operating income
(loss) ................ (3,696) 5,068 24,162 65,416
Interest expense ....... (7,168) (10,720) (25,876) (52,752)
Interest income ........ 1,908 2,751 981 2,543
Net income (loss) ...... (8,777) (17,026) (7,427) 1,134
Preferred stock
dividends ............. (4,916) (6,167) (4,664) (6,222)
Net loss applicable to
common stock .......... (13,693) (23,193) (12,091) (5,088)
Other Data:
Adjusted EBITDA (3) .... $ 19,070 $ 32,474 $ 69,227 $ 130,172
Depreciation and
amortization .......... 14,363 13,158 20,094 34,091
Capital expenditures
(4) ................... 3,361 4,766 6,860 15,689
End of period
backlog ............... 1,198,000 3,451,000 3,476,000 4,000,000
Pro Forma Data:
Cash interest expense (5)................................ $ 51,319
Ratio of adjusted EBITDA to cash interest expense........ 2.5x
Ratio of net total debt to adjusted EBITDA (6)........... 3.8
</TABLE>
<TABLE>
<CAPTION>
As of December 25, 1998
------------------------
Actual Pro Forma (7)
<S> <C> <C>
Balance Sheet Data:
Cash and cash equivalents ............................ $ 21,265 $ 21,852
Working capital ...................................... 120,260 116,821
Total assets ......................................... 948,606 1,058,759
Long-term debt, including current portion ............ 422,662 518,862
Stockholders' equity ................................. 238,168 238,168
</TABLE>
- --------
(1) Pro forma data assume the following events occurred as of the beginning of
the period shown: (a) the OHM acquisition; (b) the GTI acquisition; (c) the
EFM acquisition; (d) the Roche acquisition; and (e) the offering of the
series A notes and the application of its net proceeds.
(2) For a description of our special charges, see "Selected Consolidated
Financial and Other Data" and "Management's Discussion and Analysis of
Results of Operations and Financial Condition--Special Charges."
10
<PAGE>
(3) Adjusted EBITDA represents earnings from continuing operations before
interest expense, net, income taxes and depreciation and amortization
expenses and excludes special charges and other income, net. Adjusted
EBITDA is presented because we believe it is frequently used by securities
analysts, investors and other interested parties in the evaluation of
companies in our industry. However, other companies in our industry may
calculate adjusted EBITDA differently than we do. Adjusted EBITDA is not a
measurement of financial performance under generally accepted accounting
principles and should not be considered as an alternative to cash flow from
operating activities or as a measure of liquidity or an alternative to net
income as indicators of our operating performance or any other measures of
performance derived in accordance with generally accepted accounting
principles. See the Statements of Cash Flows included in our financial
statements.
(4) Excludes acquisition-related capital expenditures.
(5) Cash interest expense excludes noncash amortization of financing fees.
(6) Represents pro forma long-term debt, including current portion, net of pro
forma cash and cash equivalents as of December 25, 1998.
(7) Pro forma data assume the following events occurred at the date shown: (a)
the EFM acquisition; (b) the Roche acquisition; and (c) the offering of the
series A notes and the application of its net proceeds.
11
<PAGE>
RISK FACTORS
Before you invest in the series B notes, you should consider carefully the
following factors, in addition to the other information contained in this
prospectus.
Substantial Leverage--Our substantial indebtedness could adversely affect our
financial condition and prevent us from fulfilling our obligations under the
series B notes.
We have now and, after this exchange offer, will continue to have a
substantial amount of indebtedness. The following table shows important credit
statistics and assumes we had completed the offering of the series A notes, the
EFM and Roche acquisitions and applied the net proceeds of the offering of the
series A notes to fund the EFM and Roche acquisitions and refinance our
existing indebtedness as of the dates or at the beginning of the periods
specified below:
<TABLE>
<CAPTION>
Pro Forma
At December 25, 1998
($ in thousands)
<S> <C>
Total indebtedness ........................................ $518,862
Stockholders' equity ...................................... $238,168
Debt to equity ratio ...................................... 2.18x
<CAPTION>
Unaudited Pro Forma
Twelve Months
Ended
December 25, 1998
<S> <C>
Ratio of earnings to fixed charges ........................ 1.2x
</TABLE>
Our substantial indebtedness could have important consequences to you. For
example, it could:
. make it more difficult for us to satisfy our obligations under the
series B notes;
. increase our vulnerability to general adverse economic conditions;
. limit our ability to pursue our acquisition business strategy;
. limit our ability to obtain necessary financing or bonding, and to fund
future working capital, capital expenditures and other general corporate
requirements;
. require us to dedicate a substantial portion of our cash flow from
operations to payments on our indebtedness, thereby reducing the
availability of our cash flow to fund working capital, capital
expenditures and other general corporate purposes;
. limit our flexibility in planning for, or reacting to, changes in our
business and the environmental services industry;
. place us at a competitive disadvantage compared to our competitors that
have less debt; and
. limit, along with the financial and other restrictive covenants in our
indebtedness, our ability to borrow additional funds, and failing to
comply with those covenants could result in an event of default which,
if not cured or waived, could have a material adverse effect on us.
For more information on our indebtedness, see "Description of Other
Indebtedness" and "Description of Notes--Repurchase at Option of Holders--
Change of Control."
Additional Borrowings Available--Despite our substantial indebtedness, we may
still be able to incur significantly more debt. This could intensify the risks
described above.
The terms of the indenture do not fully prohibit us from incurring
significant additional indebtedness in the future. In June 1998, we amended and
restated our credit facilities so that they now provide for a $228.0 million
eight-year term loan and a $185.0 million six-year revolving credit facility.
At December 25,
12
<PAGE>
1998, we had outstanding $225.8 million of borrowings under the term loan and
$143.0 million under the revolving credit facility. As of December 25, 1998 on
a pro forma basis, after giving effect to the offering of the series A notes
and the EFM and Roche acquisitions, approximately $152.0 million would have
been available to us and our subsidiaries for additional borrowing under our
revolving credit facility, including capacity used for letters of credit. All
borrowings under the credit facilities are secured and are and will be senior
to the series B notes and the subsidiary guarantees. If additional debt is
added to our current debt levels, the related risks that we now face could
intensify. For more information on our borrowing ability, see "Capitalization,"
"Selected Financial Data," "Description of Other Indebtedness" and "Description
of Notes--Repurchase at Option of Holders--Change of Control."
Ability to Service Debt--To service our indebtedness, including the series B
notes, we will require a significant amount of cash. Our ability to generate
cash depends on many factors beyond our control.
Our ability to make payments on and to refinance our indebtedness, including
the series B notes, and to fund planned capital expenditures and any future
acquisition will depend on our ability to generate cash in the future. Our
success is dependent upon our results of operations, which are heavily
dependent on various factors, including managing utilization of our
professional staff, properly executing projects and successfully bidding new
contracts at adequate margin levels. This, to a certain extent, is also subject
to general economic, financial, competitive, legislative, regulatory and other
factors that are beyond our control.
Based on our current level of operations and anticipated cost savings and
operating improvements, we believe our cash flow from operations, available
cash and available borrowings under our credit facilities will be adequate to
meet our future liquidity needs, excluding acquisitions, for the next twelve
months.
We can make no assurance, however, that our business will generate
sufficient cash flow from operations or that future borrowings will be
available to us under our credit facilities in an amount sufficient to enable
us to pay our indebtedness, including the series B notes, or to fund our other
liquidity needs.
Subordination--Your right to receive payments on the series B notes will be
junior to our credit facilities and possibly all of our future borrowings.
The series B notes and the subsidiary guarantees rank junior to all of our
and the subsidiary guarantors' existing indebtedness, other than our
convertible notes and trade payables, and all of our and their future
borrowings, except any future indebtedness that expressly provides that it
ranks equal with, or is subordinated in right of payment to, the series B notes
and the subsidiary guarantees. In addition, a substantial portion of our and
the subsidiary guarantors' existing indebtedness is secured by substantially
all of our and their assets. As a result, upon any distribution to our
creditors or the creditors of the subsidiary guarantors in a bankruptcy,
liquidation or reorganization or similar proceeding relating to us or the
subsidiary guarantors or our or their property, the holders of our senior debt
and the subsidiary guarantors will be entitled to be paid in full in cash
before any payment may be made on the series B notes or the subsidiary
guarantees. In addition, all payments on the series B notes and the subsidiary
guarantees will be blocked if we default on the payment of our senior debt and
may be blocked for up to 179 of 360 consecutive days if a non-payment default
occurs on our senior debt.
In the event of a bankruptcy, liquidation or reorganization or similar
proceeding relating to the subsidiary guarantors and us, holders of series B
notes will participate with trade creditors and all other holders of our
subordinated indebtedness and the subsidiary guarantors in the assets remaining
after the subsidiary guarantors and we have paid all of our senior debt.
However, because the indenture requires that amounts otherwise payable to
holders of the series B notes in a bankruptcy or similar proceeding be paid to
holders of senior debt instead, holders of the series B notes may receive less,
ratably, than holders of trade payables in any such proceeding. In any of these
cases, the subsidiary guarantors and we may not have sufficient funds to pay
all of our creditors and holders of the series B notes may receive less,
ratably, than the holders of senior debt.
Assuming we had completed the offering of series A notes on December 25,
1998, the series A notes and the subsidiary guarantees would have been
subordinated to $249.3 million of senior debt, and approximately
13
<PAGE>
$152.0 million would have been available for borrowing as additional senior
debt under our revolving credit facility, including capacity used for letters
of credit.
History of Losses--We may continue to incur losses applicable to common stock,
which could adversely affect our ability to satisfy our obligations under the
series B notes.
The following table shows the losses we have incurred in our five most
recent fiscal periods. We cannot assure that we will not continue to incur
losses. For a more detailed discussion of our operating results and special
charges, see "Management's Discussion and Analysis of Results of Operations and
Financial Condition."
<TABLE>
<CAPTION>
Fiscal Year Ended
-------------------------------------- Nine Months Ended
March March 29, March March December 25,
31, 1995 1996 28, 1997 27, 1998 1998
(In thousands)
<S> <C> <C> <C> <C> <C>
Net loss applicable to
common stock .......... $(18,483) $(3,654) $(13,693) $(23,193) $(12,091)
</TABLE>
Concentration of Revenues--Sixty percent of our pro forma revenues arise from
contracts with the federal government. Any disruption in government funding or
in our relationship with the government could adversely affect our business and
our ability to meet our obligations under the series B notes.
Federal government agencies are among our most significant clients. For the
twelve months ended December 25, 1998 on a pro forma basis, approximately 60%
of our revenue was derived from these agencies as follows:
. 45% from the DOD;
. 9% from the DOE; and
. 6% from other federal agencies.
Many of our contracts with federal government agencies require annual
funding approval and may be terminated at their discretion. A reduction in
spending by these agencies could limit the continued funding of our existing
contracts with them and could limit our ability to obtain additional contracts.
These limitations, if significant, could have a material adverse effect on our
business.
Government Contractor Risks--Our government contracts expose us to the
possibility of substantial fines and penalties, governmental audits and
investigations and suspension or debarment.
As a major provider of services to governmental agencies, we face specific
risks associated with government contracting, which include the risk of
substantial civil and criminal fines and penalties for violations of applicable
laws and regulations and the risk of negative publicity of public scrutiny of
our performance at high-profile sites. Government contracting requirements are
complex, highly technical and subject to varying interpretations. We have been,
are and expect in the future to be, the subject of audits and investigations by
governmental agencies, including the Defense Contract Audit Agency (the "DCAA")
and the EPA's Office of Inspector General ("EPAOIG"). During the course of an
audit, the DCAA or EPAOIG may disallow costs if, for example, it determines
that we improperly accounted for such costs in a manner inconsistent with
government cost accounting standards. Under the typical "cost-reimbursable"
government contracts that we perform, only those costs that are reasonable,
allocable and allowable are recoverable in accordance with Federal Acquisition
Regulations and cost-accounting standards. At present, there are several
unresolved and/or ongoing audits of our billings dating back to 1995 and, in
some instances, earlier years as well. A disallowance of a significant amount
of our costs could have a material adverse effect on our business.
In addition to damage to our business reputation, the failure to comply with
the terms of one or more of our government contracts could also result in our
suspension or debarment from government contract projects
14
<PAGE>
for a significant period of time. This could result in a material adverse
effect on our business. In September 1998, OHM, one of its subsidiaries and the
IT Group entered into a Compliance Agreement with the EPA to address alleged
past practices by OHM that, according to the EPA, may have constituted a basis
for suspension and/or debarment. A breach of the Compliance Agreement by us or
one of our subsidiaries is potentially cause for our immediate suspension from
future work and/or debarment. In this regard, EFM also has several open audits
by EPAOIG and investigations involving both the Department of Justice and
EPAOIG.
Management of Growth--Our growth and acquisition strategy may adversely affect
our ability to manage our business.
We are growing rapidly through acquisitions. Our revenues have increased
from $400.0 million for the twelve months ended March 29, 1996 to $1.3 billion
for the twelve months ended December 25, 1998 on a pro forma basis. Our growth
presents numerous managerial, administrative, operational and other challenges.
Furthermore, our business strategy calls for continued growth and
diversification through acquisitions. Identifying and pursuing future
acquisition opportunities requires a significant amount of management time and
skill. Additionally, acquisitions involve certain risks that could cause our
actual growth or operating results to differ from our or others' expectations.
For example:
. We may not be able to identify suitable acquisition candidates or to
acquire additional companies on favorable terms.
. We may not be able to obtain the necessary financing, on favorable terms
or at all, to finance any of our potential acquisitions.
. We may fail to successfully integrate or manage these acquired companies
due to differences in business backgrounds or corporate cultures or
inadequate internal systems or controls.
. These acquired companies may not perform as we expect.
. If we fail to successfully integrate any acquired company or are unable
to improve our internal systems and controls fast enough to accommodate
our growth, our reputation could be damaged. This could make it more
difficult to market our services or to acquire additional companies in
the future.
. The acquisition and integration process could take significant time away
from management's responsibilities for supervising our ongoing business.
Risks of Achievement of Cost Savings and Integration of Operations--We may not
be able to successfully achieve anticipated cost savings and other benefits
from our recent and future acquisitions.
The pro forma financial data presented in this prospectus and our future
success depend in part on our ability to achieve cost savings from our
acquisitions. We cannot guarantee that we will realize any cost savings or
other benefits from our recent acquisitions other than those already realized,
including the EFM and Roche acquisitions, or that we will realize any cost
savings or other benefits from future acquisitions. See "Unaudited Pro Forma
Consolidated Financial Data" for more detail on our cost savings.
Significant Competition--We may be unable to compete successfully in our
industry, which could adversely affect our business and our ability to satisfy
our obligations under the series B notes.
The environmental services industry is subject to intense competition. We
compete with several national environmental and consulting firms and many
regional or niche firms. Increased competition, combined with changes in client
procurement procedures, has resulted in, among other things:
. lower contract margins,
. more fixed-price or unit-price contracts, and
15
<PAGE>
. contract terms that increasingly require us to indemnify our clients
against damages or injuries to third parties and property and
environmental fines and penalties.
Some of our larger competitors benefit from economies of scale and have
better access to bonding and insurance markets at a lower cost than we can
achieve. The entry of large systems contractors and international engineering
and construction firms into the environmental services industry has increased
competition for major federal government contracts and programs, which have
been our primary source of revenue in recent years.
In addition, our industry recently has been subject to intense
consolidation. We are participating actively in this consolidation to support
our growth and diversification strategy. However, we cannot assure that we will
be able to compete successfully given the intense competition and trends in our
industry.
Fixed-Price Contracts--Thirty percent of our revenues is subject to risks
related to fixed-price contracts.
We enter into various types of contracts with our clients, including fixed-
price contracts. For the twelve months ended December 25, 1998 on a pro forma
basis, approximately 30% of our revenues was derived from fixed-price
contracts. Fixed-price contracts protect clients but expose us to a number of
risks. These risks include:
. underestimation of costs;
. problems with the appropriate choice of technologies;
. unforeseen costs or difficulties;
. delays beyond our control; and
. economic and other changes that may occur during the contract period.
The risks we face under fixed-price contracts could have a material adverse
effect on our business.
Environmental Contractor Risks--We are subject to risks from increased
legislative and regulatory authority and significant liabilities to our
clients.
Although we believe that we generally benefit from increased environmental
regulation, and from enforcement of those regulations, increased regulation,
enforcement and private litigation also create significant risks for us. These
risks include potentially large civil and criminal liabilities from violations
of environmental laws and regulations and liabilities to clients and to third
parties for damages arising from performing services for clients. Our failure
to observe the laws or the terms and conditions of licenses and permits we hold
could adversely impact our ability to carry on our business as presently
conducted.
Liabilities Arising out of Environmental Laws and Regulations
Our operations are subject to regulation by a number of federal and other
laws and agencies. As such, we may be held directly liable for failure to abide
by these laws. Any such failure could lead to our debarment or suspension as a
government contractor. Companies that are subject to environmental liabilities
have also sought to expand the reach of the Comprehensive Environmental
Response, Compensation and Liability Act ("CERCLA" or "Superfund"), the
Resource Conservation and Recovery Act ("RCRA") and similar state statutes to
make contractor firms responsible for cleanup costs. These companies claim that
environmental contractors are owners or operators of hazardous waste facilities
or that they arranged for treatment, transportation or disposal of hazardous
substances. If we are held responsible under CERCLA or RCRA for damages caused
while performing services or otherwise, we may be forced to bear this liability
by ourselves, notwithstanding the potential availability of contribution or
indemnification from other parties. Further, one of our businesses involves the
purchase and redevelopment of environmentally impaired property. As the owner
of such properties, we may be required to clean up all contamination at these
sites, even if we did not place it there. We use insurance and other risk
mitigation techniques to manage these risks but we cannot guarantee the
adequacy of those measures.
16
<PAGE>
Potential Liabilities to Clients and Third Parties
In performing services for our clients, we could become liable for breach of
contract, personal injury, property damage, negligence and other causes of
action. The damages available to a client are potentially large and could
include consequential damages.
Many potential clients, particularly in connection with projects involving
large-scale cleanups, try to shift to contractors the risk of completing the
project, if the contamination is either more extensive or difficult to resolve
than they anticipated. In this competitive market, clients increasingly try to
pressure contractors to accept greater risks of performance, liability for
damage or injury to third parties or property and liability for fines and
penalties. We have from time to time been involved in claims and litigation
involving disputes over such issues.
Environmental management contractors also potentially face liabilities to
third parties for property damage or personal injury stemming from a release of
toxic substances resulting from a project performed for clients. These
liabilities could arise long after completion of a project.
Over the past several years, the EPA and other federal agencies have
constricted significantly the circumstances under which they will indemnify
their contractors against liabilities incurred in connection with cleanup
projects and continue their attempts to renegotiate previously agreed
indemnities.
Closure of Inactive Disposal Sites and Potential CERCLA Liabilities--We remain
subject to significant liabilities arising from our discontinued operations.
Before 1987, we were a major provider of hazardous waste transportation,
treatment and disposal operations in California. In December 1987, we adopted a
strategic restructuring program that included a formal plan to divest our
transportation, treatment and disposal operations. Closure plans for all four
of our inactive disposal sites have now been approved by all applicable
regulatory agencies. Closure construction has been completed at three of these
facilities, Montezuma Hills, Benson Ridge and Vine Hill. At December 25, 1998,
our consolidated balance sheet included accrued liabilities of approximately
$7.9 million to complete the closure and post-closure of our disposal
facilities and to cover potentially responsible party sometimes referred to as
a PRP, matters, net of certain trust fund and annuity investments, restricted
to closure and post-closure use and net of anticipated insurance settlements.
Impact of Uncertainty in Closure Cost Estimates
Closure and post-closure costs associated with our inactive disposal sites
are incurred over a significant number of years and are subject to a number of
variables. We have estimated the impact of these costs in our provision for
loss on disposition of discontinued operations. However, closure and post-
closure costs could be higher than estimated if regulatory agencies were to
require procedures significantly different than those in our plans or if there
are additional delays in the closure plan approval process. Since recording our
initial provision for loss, we have been required to make four upward
adjustments to the provision. During each of the three fiscal years ended
December 25, 1998, we funded accrued costs of $11.1 million for the nine months
ended December 25, 1998, $14.9 million and $15.7 million relating to our
closure plans and construction and PRP matters. We expect to incur costs over
the next several years; however, we expect the nature of the costs to change
from closure design and construction to post-closure monitoring.
Closure plans for our Panoche facility, the final facility to be closed,
were approved on March 18, 1998. The approved plans provide for submittal of
technical studies that will be utilized to determine final aspects, details and
costs of closure construction and monitoring programs. While we believe that
the approved closure plans substantially reduce future cost uncertainties, the
ultimate costs will depend upon the results of the technical studies called for
in the approved plans. Closure construction under the plans is scheduled for
completion in the fall of 2000.
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Uncertainties in Carrying Value of Long-Term Assets
The carrying value of our long-term assets of discontinued operations of
$40.0 million at December 25, 1998 is principally comprised of unused residual
land at the inactive disposal facilities. This value assumes that land sales
will occur at market prices estimated by us based on certain assumptions about
entitlements, development agreements and other factors. A portion of the
residual land is the subject of a local community review of our development
strategy, which will be the subject of public hearings and city council
deliberation through the second quarter of 1999. We can make no assurances as
to the timing of development or sales of any of our residual land, or our
ability to ultimately liquidate the land for the sale prices assumed. If our
assumptions are not realized, the value of the land could be materially
different from the current carrying value.
Impact of Possible PRP Liabilities
There are several disposal sites, including the GBF Pittsburgh Superfund
site, at which we have been named a PRP under CERCLA or otherwise been
identified as responsible for site cleanup. As a major provider of hazardous
waste transportation, treatment and disposal operations in California prior to
the December 1987 adoption of our strategic restructuring program, we have been
named a PRP at a number of other sites and may from time to time be so named at
additional sites, and also may face damage claims by third parties for alleged
releases or discharges of contaminants or pollutants arising out of our
transportation, treatment and disposal discontinued operations.
Summary
Our provision for loss on disposition of transportation, treatment and
disposal discontinued operations is based on various assumptions and estimates,
including those discussed above. We periodically reevaluate the adequacy of
this provision in light of developments since our adoption of the divestiture
plan, and we believe that the provision as adjusted is reasonable. However, the
ultimate effect of the divestiture on our consolidated financial condition,
liquidity and results of operations is dependent on future events, the outcome
of which we cannot determine at this time. Outcomes significantly different
from those used to estimate the provision for loss could result in a material
adverse effect on our business.
For additional information about our discontinued operations, see the note
to our consolidated financial statements entitled "Discontinued Operations."
Control of Board of Directors--Our board of directors is controlled by a small
group of individuals who have the ability to control our management and
strategic direction.
In November 1996, Carlyle and some of its affiliates acquired 45,000 shares
of our 6% cumulative convertible participating preferred stock and warrants to
purchase 1,250,000 shares of our common stock. As a result of paid-in-kind
dividends, paid through December 25, 1998, Carlyle now holds 46,095 shares of
convertible preferred stock, which totals approximately 21%, or approximately
24% assuming the warrants are exercised, of the voting power of the Company.
The terms of our convertible preferred stock provide that until November 20,
2001, the holders of our convertible preferred stock have the right to elect a
majority of the board of directors, as long as they continue to hold at least
20% of the voting power of the Company. In addition, the sale by Carlyle of its
interests under specific conditions constitute events of default under our
credit facilities. For more information on our relationship with Carlyle, see
"Management--Board of Directors," "Description of Capital Stock" and the note
to our consolidated financial statements entitled "Preferred Stock--Carlyle
Investment."
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International Operations--Our international operations are subject to a number
of risks that could adversely affect the results from these operations and our
overall business.
For the twelve months ended December 25, 1998 on a pro forma basis,
approximately 5% of our revenues are derived from international operations. Our
business strategy includes plans to grow our international operations, which in
general are subject to a number of risks, including:
. foreign currency risks,
. differences in accounting practices,
. work stoppages,
. transportation delays and interruptions,
. political instability,
. expropriation and nationalization,
. tariffs and import and export controls,
. differing licensing and permit requirements, and
. conflicting U.S. and foreign laws.
We cannot predict what effect, if any, these risks would have on our
business.
Reliance on Key Personnel--Our failure to attract and retain key personnel
could adversely affect our business.
Our future success is significantly dependent on our senior management team,
which has significant experience in our industry. We have entered into
employment agreements with a number of our senior executives. The loss of the
services of our senior executives could have a material adverse effect on our
business. In addition, we also are dependent on the continuing contributions of
our platform and project managers, scientists and other professionals and other
key personnel, particularly those employees who maintain close relationships
with our clients, which relationships are extremely important to our continued
success. Our failure to attract and retain key personnel also could have a
material adverse effect on our business.
Fluctuations in our Quarterly Operating Results--Fluctuations in our operating
results may adversely affect our ability to satisfy our obligations under the
series B notes.
Our quarterly revenues, expenses and operating results may fluctuate
significantly due to a number of factors, including:
. the seasonality of the spending cycle of our public sector clients,
notably the federal government,
. employee hiring and utilization rates,
. the number and significance of client projects commenced and completed
during a quarter,
. delays incurred in connection with a project,
. the ability of our clients to terminate projects without penalties, and
. weather conditions.
Variations in any of these factors could cause significant fluctuations in
our operating results from quarter to quarter and could result in losses.
Historically, the first calendar quarter has experienced lower revenues
primarily due to weather conditions.
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Risks Associated with Year 2000 Compliance--Any computer problems due to the
Year 2000 may adversely affect our business.
We are highly dependent on our computer software programs and operating
systems in operating our business. We also depend on the proper functioning of
the computer systems of third parties, particularly the federal government and
its ability to pay its bills on a timely basis. The failure of any of these
systems to appropriately interpret the upcoming calendar year 2000 could cause
business interruptions or shutdown, financial loss, regulatory actions,
reputational harm and/or legal liability, which could have a material adverse
effect on our business. In addition, since a substantial portion of our
revenues are derived from federal agencies, the failure of the federal
government to pay its bills on a timely basis could have a material adverse
effect on our business and our ability to meet our obligations under the series
B notes.
In 1998, we established an integration test plan to test our core financial
and administrative software and verify Year 2000 compliance. In February 1998,
these integration tests were successfully completed. Our core hardware was also
tested and found fully compliant with Year 2000 limitations. We also are
communicating with clients, suppliers, financial institutions and others with
which we do business to coordinate Year 2000 conversion. However, given the
complexity of Year 2000 issues and the uncertainty surrounding third party
responses to these issues, we cannot assure you that we will be effective in
eliminating all Year 2000 issues relating to our business. For more information
on our Year 2000 program, see "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Year 2000."
Fraudulent Conveyance Matters--Federal and state statutes allow courts, under
specific circumstances, to avoid the subsidiary guarantees and require holders
of the series B notes to return payments received from the subsidiary
guarantors.
Under federal bankruptcy law and comparable provisions of state fraudulent
transfer laws, a subsidiary guarantee could be avoided by a bankrupt subsidiary
guarantor or its bankruptcy trustee, if, among other things, the subsidiary
guarantor, at the time it incurred the indebtedness evidenced by its subsidiary
guarantee:
. received less than reasonably equivalent value or fair consideration for
its subsidiary guarantee; and
. either:
. was insolvent or rendered insolvent by reason of its subsidiary
guarantee; or
. was engaged in a business or transaction for which the subsidiary
guarantor's remaining assets constituted unreasonably small capital;
or
. intended to incur, or believed that it would incur, debts beyond its
ability to pay such debts as they mature.
In addition, any payment by the subsidiary guarantor pursuant to its subsidiary
guarantee could be required to be returned to it, or to a fund for the benefit
of its creditors.
The measures of insolvency for purposes of these fraudulent transfer laws
will vary depending upon the law applied in any proceeding to determine whether
a fraudulent transfer has occurred. Generally, however, a subsidiary guarantor
would be considered insolvent if:
. the present fair salable value of its assets was less than the amount
that would be required to pay its probable liability on its existing
debts, including contingent liabilities, as they become absolute and
mature, or
. it could not pay its debts as they become due.
On the basis of historical financial information, recent operating history
and other factors, we believe that each subsidiary guarantor, after giving
effect to its subsidiary guarantee, will not be insolvent, will not have
unreasonably small capital for the business in which it is engaged and will not
have incurred debts beyond its
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ability to pay such debts as they mature. We cannot assure, however, what
standard a court would apply in making such determinations or that a court
would agree with our conclusions. Each subsidiary guarantee also contains a
provision intended to limit the liability of the subsidiary guarantor to the
maximum amount of liability the subsidiary guarantor could incur without
causing the incurrence of obligations under its subsidiary guarantee to be a
fraudulent transfer. We cannot assure that this provision will be effective to
prevent the incurrence of subsidiary guarantee obligations from being a
fraudulent transfer.
We, meaning only the IT Group, have no operations of our own and derive all
of our revenue from our subsidiaries. If a subsidiary guarantee was avoided as
a fraudulent transfer, holders of other indebtedness of, and trade creditors
of, that subsidiary would generally be entitled to payment of their claims from
the assets of the subsidiary before such assets were made available for
distribution to us to satisfy our own obligations. The indenture will permit
the incurrence of substantial additional indebtedness by our subsidiaries and
us and will permit significant investments by us in our subsidiaries, including
restricted subsidiaries as defined in the indenture.
Possible Inability to Purchase Series B Notes upon a Change of Control--We may
not have the ability to raise the funds necessary to finance a change of
control required by the indenture.
Upon the occurrence of certain specific kinds of change of control events,
we will be required to offer to repurchase all outstanding series B notes.
However, it is possible that we will not have sufficient funds at the time of
the change of control to repurchase the series B notes or that restrictions in
our credit facilities will not allow such repurchases. In addition, some
important corporate events, such as leveraged recapitalizations that would
increase the level of our indebtedness, would not constitute a "change of
control" under the indenture. For more information on our repurchase
requirements, see "Description of Notes--Repurchase at the Option of Holders"
and "--Change of Control."
Lack of Public Market; Restrictions on Resale--No public market exists for the
series B notes. The offering and sale of the series B notes is subject to
uncertainties regarding the liquidity of the trading market for the series B
notes.
The series A notes are eligible for trading in PORTAL. The series B notes
are a new issue of securities with no established trading market and will not
be listed on any securities exchange. The initial purchasers have informed us
that they intend to make a market in the series B notes. However, they may
cease their market-making at any time. In addition, the liquidity of the
trading market in the series B notes and the market price quoted for the series
B notes, or, in the case of non-tendering holders of series A notes the trading
market and market price for the series A notes, may be adversely affected by
the changes in the overall market for high yield securities and by changes in
our financial performance or prospects or in the prospects for companies in our
industry generally. As a result, you cannot be sure that an active trading
market will develop for the series A or the series B notes. See "Description of
Notes--Registration Rights; Liquidated Damages."
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THE EXCHANGE OFFER
Purpose of the Exchange Offer
This exchange offer is designed to provide holders of series A notes with an
opportunity to acquire series B notes which, unlike the series A notes, will be
freely tradable at all times, subject to any restrictions on transfer imposed
by state "blue sky" laws, provided that the holder is not an affiliate of the
IT Group within the meaning of the Securities Act and represents that the
series B notes are being acquired in the ordinary course of the holder's
business and the holder is not engaged in, and does not intend to engage in a
distribution of the series B notes. The outstanding series A notes in the
aggregate principal amount of $225.0 million were originally issued and sold on
April 9, 1999 in order to provide financing for the Roche and EFM acquisitions,
and to refinance existing indebtedness. The sale of the series A notes to the
initial purchasers was not registered under the Securities Act in reliance upon
the exemption provided by Section 4(2) of the Securities Act. The concurrent
resale of the series A notes to investors was not registered under the
Securities Act in reliance upon the exemption provided by Rule 144A of the
Securities Act. The series A notes may not be reoffered, resold or transferred
other than pursuant to a registration statement filed pursuant to the
Securities Act or unless an exemption from the registration requirements of the
Securities Act is available. Pursuant to Rule 144, series A notes may generally
be resold:
. commencing two years after their original issue date, in an amount up
to, for any three-month period, the greater of 1% of the series A notes
then outstanding or the average weekly trading volume of the series A
notes during the four calendar weeks immediately preceding the filing of
the required notice of sale with the Commission;
. commencing three years after the original issue date, in any amount and
otherwise without restriction by a holder who is not, and has not been
for the preceding 90 days, an affiliate of the IT Group. The series A
notes are eligible for trading in the PORTAL market, and may be resold
to certain qualified institutional buyers pursuant to Rule 144A. Other
exemptions may also be available under other provisions of the federal
securities laws for the resale of the series A notes.
In connection with the original issue and sale of series A notes, we entered
into a registration rights agreement, pursuant to which we agreed to file with
the Commission a registration statement covering the exchange by us of the
series B notes for the series A notes. The registration rights agreement
provides that:
. we will file a registration statement with the commission on or prior to
75 days after the issue date of the series A notes;
. we will use our best efforts to have the registration statement declared
effective by the Commission on or prior to 180 days after the original
issue date;
. unless this exchange offer would not be permitted by applicable law or
Commission policy, we will commence this exchange offer and use our best
efforts to issue, on or prior to 30 business days after the date on
which the registration statement is declared effective by the
Commission, series B notes in exchange for all series A notes tendered
in this exchange offer; and
. if obligated to file a shelf registration statement covering the series
A notes, we will file the shelf registration statement with the
Commission on or prior to 30 days after such filing obligation arises
and use our best efforts to cause the shelf registration statement to be
declared effective by the Commission on or prior to 60 days after such
obligation arises and cause such shelf registration statement to remain
effective and usable for a period of two years following the initial
effectiveness thereof.
We will pay liquidated damages to each holder of transfer-restricted
securities, as described below, if any of the following occurs:
. we fail to file any of the registration statements required by the
registration rights agreement on or before the date specified for such
filing;
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. any of such registration statements is not declared effective by the
Commission on or prior to the date specified for such effectiveness;
. we fail to consummate this offer within 30 business days after the date
on which the registration statement covering the exchange of series B
notes for series A notes is declared effective; or
. any registration statement filed by us pursuant to the terms of the
registration rights agreement is declared effective but thereafter
ceases to be effective or usable in connection with resales of transfer-
restricted securities during the periods specified in the registration
rights agreement without being succeeded immediately by a post-effective
amendment to that registration statement that cures the failure and that
is itself declared effective immediately.
We will pay liquidated damages to each holder of transfer-restricted
securities, with respect to the first 90-day period immediately following the
occurrence of such default in an amount equal to $.05 per week per $1,000
principal amount of transfer-restricted securities held by such person. The
amount paid by us to the holders of series A notes will increase by an
additional $.05 per week per $1,000 principal amount of transfer-restricted
securities with respect to each subsequent 60-day period until all defaults
have been cured up to a maximum amount of $.50 per week per $1,000 principal
amount of transfer-restricted securities, regardless of whether one or more
than one default is outstanding. Following the cure of all defaults, the
accrual of damages will cease. "Transfer-Restricted Securities" means each
series A note until:
. the date on which such series A note has been exchanged by a person
other than a broker-dealer for a series B note in this exchange offer;
. the date on which such series A note has been effectively registered
under the Securities Act and disposed of in accordance with the shelf
registration statement;
. the date on which such series A note is distributed to the public
pursuant to Rule 144 under the Securities Act; or
. the date on which such series A note is salable pursuant to Rule 144(k)
under the Securities Act.
The staff of the Commission has issued certain interpretive letters that
concluded, in circumstances similar to those contemplated by this exchange
offer, that new debt securities issued in a registered exchange for outstanding
debt securities, which new securities are intended to be substantially
identical to the securities for which they are exchanged, may be offered for
resale, resold and otherwise transferred by a holder thereof, other than (1) a
broker-dealer who purchases such securities from the issuer to resell pursuant
to Rule 144A or any other available exemption under the Securities Act or (2) a
person who is an affiliate of the issuer within the meaning of Rule 405 under
the Securities Act, without compliance with the registration and prospectus
delivery provision of the Securities Act; provided that the new securities are
acquired in the ordinary course of such holder's business and such holder has
no arrangement with any person to participate in the distribution of the new
securities. However, a broker-dealer who holds outstanding debt securities that
were acquired for its own account as a result of market-making or other trading
activities may be deemed to be an "underwriter" within the meaning of the
Securities Act and must, therefore, deliver a prospectus meeting the
requirements of the Securities Act in connection with any resales of the new
securities received by the broker-dealer in any such exchange. See "--Resales
of Notes."
We have not requested or obtained an interpretive letter from the Commission
staff with respect to this exchange offer, and neither the holders of series A
notes nor we are entitled to rely on interpretive advice provided by the staff
to other persons, which advice was based on the facts and conditions
represented in such letters. However, this exchange offer is being conducted in
a manner intended to be consistent with the facts and conditions represented in
such letters. If any holder of series A notes has any arrangement or
understanding with respect to the distribution of the series B notes to be
acquired pursuant to this exchange offer, such holder:
. could not rely on the applicable interpretations of the staff of the
Commission; and
. must comply with the registration and prospectus delivery requirements
of the Securities Act in connection with any resale transaction.
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In addition, each broker-dealer that receives series B notes for its own
account in exchange for series A notes, where such series A notes were acquired
by such broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of such series B notes. See "Plan of Distribution." By
delivering the letter of transmittal, you will represent and warrant to us that
you are acquiring the series B notes in the ordinary course of your business
and that you are not engaged in, and do not intend to engage in, a distribution
of the notes. If you are using this exchange offer to participate in a
distribution of series B notes, you must comply with the registration and
prospectus delivery requirements of the Securities Act in connection with a
secondary resale transaction. If you do not exchange your series A notes
pursuant to this exchange offer, you will continue to hold series A notes which
are subject to restrictions on transfer.
It is expected that the series B notes will be freely transferable by the
holders thereof, subject to the limitations described in the immediately
preceding paragraph. Sales of series B notes acquired in this exchange offer by
holders who are "affiliates" of the IT Group within the meaning of their
Securities Act will be subject to certain limitations on resale under Rule 144
of the Securities Act. Such persons will only be entitled to sell series B
notes in compliance with the volume limitations set forth in Rule 144, and
sales of series B notes by affiliates will be subject to certain Rule 144
requirements as to the manner of sale, notice and the availability of current
public information regarding us. The foregoing is only a summary of Rule 144 as
it may apply to our affiliates. If you are an affiliate, you must consult your
own legal counsel for advice as to any restrictions that might apply to the
resale of your series B notes.
The series B notes otherwise will be substantially identical in all material
respects, including interest rate, maturity, security and restrictive
covenants, to the series A notes for which they may be exchanged pursuant to
this exchange offer.
Terms of the Exchange Offer
Upon the terms and subject to the conditions set forth in this prospectus
and in the accompanying letter of transmittal, we will exchange $1,000
principal amount of series B notes for each $1,000 principal amount of our
outstanding series A notes. Series B notes will be issued only in integral
multiplies of $1,000 to each tendering holder of series A notes whose series A
notes are accepted in this exchange offer.
The series B notes will bear interest from and including the original issue
date of the series A notes. Accordingly, if you receive series B notes in
exchange for series A notes, you will forego accrued but unpaid interest on
your exchanged series A notes for the period from and including the issue date
of the series A notes to the date of your exchange for series B notes, but will
be entitled to such interest under the series B notes.
As of April , 1999, $225.0 million aggregate principal amount of series A
notes were outstanding. This prospectus and the letter of transmittal are being
sent to all registered holders of series A notes as of that date. You will not
be required to pay brokerage commissions or fees or, subject to the
instructions in the letter of transmittal, transfer taxes with respect to your
exchange of series A notes pursuant to this exchange offer. We will pay all
charges and expenses, other than certain transfer taxes that may be imposed, in
connection with this exchange offer. See "--Payment of Expenses" below.
As a holder of series A notes, you do not have any appraisal or dissenters'
rights under the Delaware General Corporation Law in connection with this
exchange offer.
Expiration Date; Extensions; Termination
This exchange offer will expire at 5:00 P.M., New York City time, on
, 1999, subject to our extension by notice to The Bank of New York, the
exchange agent. We reserve the right to extend this exchange offer in our
discretion, in which event the expiration date shall be the time and date on
which this exchange offer as so extended shall expire. We shall notify the
exchange agent of any extension by oral or written notice and shall mail to you
an announcement thereof, each prior to 9:00 A.M., New York City time, on the
next business day after the previously scheduled expiration date.
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We reserve the right to extend or terminate this exchange offer and not
accept for exchange any series A notes if any of the events set forth below
under "--Conditions to the Exchange Offer" occur and are not waived by us, by
giving oral or written notice of such delay or termination to the exchange
agent. See "-- Conditions to the Exchange Offer." The rights we reserve in this
paragraph are in addition to our rights set forth below under the caption "--
Conditions to the Exchange Offer."
Procedures for Tendering
Your tender of series A notes pursuant to one of the procedures set forth
below and our acceptance will constitute an agreement between you and we in
accordance with the terms and subject to the conditions set forth in this
prospectus and the letter of transmittal.
Except as set forth below, if you who wish to tender your series A notes for
exchange pursuant to this exchange offer, you must transmit a properly
completed and duly executed letter of transmittal, including all other
documents required by such letter of transmittal, to the exchange agent at the
address set forth below under "Exchange Agent" on or prior to the expiration
date. In addition, either:
. certificates for such series A notes must be received by the exchange
agent along with the letter of transmittal; or
. a timely confirmation of a book-entry transfer of such series A notes,
if such procedure is available, into the exchange agent's account at The
Depository Trust Company pursuant to the procedure for book-entry
transfer described below, must be received by the exchange agent prior
to the expiration date; or
. the holder must comply with the guaranteed delivery procedures described
below. Letters of transmittal and series A notes should not be sent to
us. We are not asking you for a proxy and you are requested not to send
us a proxy.
Signatures on a letter of transmittal must be guaranteed unless the series A
notes tendered pursuant thereto are tendered (1) by a registered holder of
series A notes who has not completed the box entitled "Special Issuance and
Delivery Instructions" on the letter of transmittal or (2) for the account of
any firm that is a member of a registered national securities exchange or a
member of the National Association of Securities Dealers, Inc. or a commercial
bank or trust company having an office in the U.S., sometimes referred to as an
eligible institution. In the event that signatures on a letter of transmittal
are required to be guaranteed, such guarantee must be by an eligible
institution.
Your method of delivery of series A notes and other documents to the
exchange agent is at your election and risk, but if delivery is by mail we
suggest that the mailing be made sufficiently in advance of the expiration date
to permit delivery to the exchange agent before the expiration date.
If the letter of transmittal is signed by a person other than a registered
holder of any series A note tendered therewith, such series A note must be
endorsed or accompanied by appropriate bond powers, in either case signed
exactly as the name or names of the registered holder or holders appear on the
series A note.
If the letter of transmittal or any series A notes or bond powers are signed
by trustees, executors, administrators, guardians, attorneys-in-fact, officers
of corporations or others acting in a fiduciary or representative capacity,
such persons should so indicate when signing, and, unless waived by us, proper
evidence satisfactory of their authority to so act must be submitted.
We will resolve all questions as to the validity, form, eligibility,
including time of receipt, and acceptance of tendered series A notes, which
determination will be final and binding. We reserve the absolute right to
reject any or all tenders that are not in proper form or the acceptance of
which would, in the opinion of our counsel be unlawful. We also reserve the
right to waive any irregularities or conditions of tender as to particular
series A notes. Our interpretation of the terms and conditions of this exchange
offer, including the instructions in the letter of transmittal, will be final
and binding. Unless waived, any irregularities in connection with tenders must
be cured within such time as we shall determine. Neither the exchange agent nor
we is under
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any duty to give notification of defects in such tenders or shall incur
liabilities for failure to give such notification. Tenders of series A notes
will not be deemed to have been made until such irregularities have been cured
or waived. Any series A notes received by the exchange agent that are not
properly tendered and as to which the irregularities have not been cured or
waived will be returned by the exchange agent to the tendering holder, unless
otherwise provided in the letter of transmittal, as soon as practicable
following the expiration date.
Our acceptance of series A notes tendered for exchange pursuant to this
exchange offer will constitute a binding agreement between the tendering person
and us upon the terms and subject to the conditions of this exchange offer.
Book-Entry Transfer
The exchange agent will make a request to establish an account with respect
to the series A notes at DTC for purposes of this exchange offer, including use
of DTC's "ATOP" system, within two business days after the date of
effectiveness of the registration statement of which this prospectus forms a
part, and any financial institution that is a participant in DTC's systems may
make book-entry delivery of series A notes by causing DTC to transfer such
series A notes into the exchange agent's account at DTC in accordance with
DTC's procedures for transfer. However, although delivery of series A notes may
be effected through book-entry transfer at DTC, the letter of transmittal or
facsimile thereof with any required signature guarantees and any other required
documents must, in any case, be transmitted to and received by the exchange
agent at one of the addresses set forth below under "Exchange Agent" on or
prior to the expiration date or the guaranteed delivery procedures described
below must be complied with.
Guaranteed Delivery Procedures
If you wish to tender your series A notes and (1) your series A notes are
not immediately available or (2) you cannot deliver your series A notes, the
letter of transmittal or any other required documents to the exchange agent
prior to the expiration date, you may effect a tender if:
. your tender is made through an eligible institution;
. prior to the expiration date, the exchange agent receives from such
eligible institution a properly completed and duly executed notice of
guaranteed delivery by facsimile transmission, mail or hand delivery
setting forth your name and address, the certificate number or numbers
of your tendered series A notes and the principal amount of your
tendered series A notes tendered, stating that the tender is being made
thereby and guaranteeing that, within five NYSE trading days after the
expiration date, the letter of transmittal or facsimile thereof together
with the certificate(s) representing your series A notes, or a book-
entry confirmation, as the case may be, and any other documents required
by the letter of transmittal will be deposited by the eligible
institution with the exchange agent; and
. such properly completed and executed letter of transmittal or facsimile
thereof, as well as the certificate(s) representing all your tendered
series A notes in proper form for transfer, or a book-entry
confirmation, as the case may be, and all other documents required by
the letter of transmittal are received by the exchange agent within five
NYSE trading days after the expiration date.
Upon request of the exchange agent, a notice of guaranteed delivery will be
sent to you if you wish to tender your series A notes according to the
guaranteed delivery procedures set forth above.
Conditions to the Exchange Offer
Notwithstanding any other provisions of this exchange offer, or any
extension of this exchange offer, we will not be required to issue series B
notes in respect of any properly tendered series A notes not previously
accepted, and may terminate this exchange offer by oral or written notice to
the exchange agent and the
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holders, or at its option, modify or otherwise amend this exchange offer, if
any material change occurs that is likely to affect this exchange offer,
including, but not limited to, the following:
. there shall be instituted or threatened any action or proceeding before
any court or governmental agency challenging this exchange offer or
otherwise directly or indirectly relating to this exchange offer or
otherwise affecting us;
. there shall occur any development in any pending action or proceeding
that, in our sole judgment, would or might (1) have an adverse effect on
our business, (2) prohibit, restrict or delay consummation of this
exchange offer or (3) impair the contemplated benefits of this exchange
offer;
. any statute, rule or regulation shall have been proposed or enacted, or
any action shall have been taken by any governmental authority which, in
our sole judgment, would or might (1) have an adverse effect on our
business, (2) prohibit, restrict or delay consummation of this exchange
offer or (3) impair the contemplated benefits of this exchange offer; or
. there exists, in our sole judgment, any actual or threatened legal
impediment, including a default or prospective default under an
agreement, indenture or other instrument or obligation to which we are a
party or by which we are bound, to the consummation of the transactions
contemplated by this exchange offer.
We expressly reserve the right to terminate this exchange offer and not
accept for exchange any series A notes upon the occurrence of any of the
foregoing conditions. In addition, we may amend this exchange offer at any time
prior to 5:00 P.M., New York City time, on the expiration date if any of the
conditions set forth above occur. Moreover, regardless of whether any of such
conditions has occurred, we may amend this exchange offer in any manner which,
in our good faith judgment, is advantageous to you.
The foregoing conditions are for our sole benefit and may be waived by us,
in whole or in part, in our sole discretion. Any determination we make
concerning an event, development or circumstance described or referred to above
will be final and binding on all parties.
Acceptance of Series A Notes for Exchange; Delivery of Series B Notes
Upon the terms and subject to the conditions of this exchange offer, we will
accept all series A notes validly tendered prior to 5:00 P.M., New York City
time, on the expiration date. We will deliver series B notes in exchange for
series A notes promptly following the expiration date.
For purposes of this exchange offer, we shall be deemed to have accepted
validly tendered series A notes when, as and if we have given oral or written
notice thereof to the exchange agent. The exchange agent will act as agent for
the tendering holders for the purpose of receiving the series A notes. Under no
circumstances will interest be paid by the exchange agent or us by reason of
any delay in making such payment or delivery.
If your tendered series A notes are not accepted for exchange because of an
invalid tender, the occurrence of certain other events set forth herein or
otherwise, your unaccepted series A notes will be returned, at our expense, to
you as promptly as practicable after the expiration or termination of this
exchange offer.
Withdrawal Rights
Your tender of series A notes may be withdrawn at any time prior to the
expiration date.
For a withdrawal to be effective, a written notice of withdrawal must be
received by the exchange agent at the address set forth below under "Exchange
Agent." Any such notice of withdrawal must specify the name of the person
having tendered the series A notes to be withdrawn, identify the series A notes
to be withdrawn, including the principal amount of such series A notes, and,
where certificates for series A notes have been transmitted, specify the name
in which such series A notes are registered, if different from that of the
withdrawing holder. If certificates for series A notes have been delivered or
otherwise identified to the
27
<PAGE>
exchange agent, then, prior to the release of such certificates the withdrawing
holder must also submit the serial numbers of the particular certificates to be
withdrawn and a signed notice of withdrawal with signatures guaranteed by an
eligible institution unless such holder is an eligible institution. If series A
notes have been tendered pursuant to the procedure for book-entry transfer
described above, any notice of withdrawal must specify the name and number of
the account at DTC to be credited with the withdrawn series A notes and
otherwise comply with the procedures of such facility. We will determine all
questions as to the validity, form and eligibility (including time of receipt)
of such notices which determination shall be final and binding on all parties.
Any series A notes so withdrawn will be deemed not to have been validly
tendered for exchange for purposes of this exchange offer. Any series A notes
which have been tendered for exchange but which are not exchanged for any
reason will be returned to the holder thereof without cost to such holder, or,
in the case of series A notes tendered by book-entry transfer into the exchange
agent's account at DTC pursuant to the book-entry transfer procedures described
above, such series A notes will be credited to an account maintained with DTC
for the series A notes, as soon as practicable after withdrawal, rejection of
tender or termination of this exchange offer. Properly withdrawn series A notes
may be retendered by following one of the procedures described under "--
Procedures for Tendering" above at any time on or prior to the expiration date.
Material Federal Income Tax Consequences
The following discussion summarizes the material federal income tax
consequences of this exchange offer. This discussion is not binding on the IRS
or the courts, and we cannot assure you that the IRS will not take, and that a
court would not sustain, a position contrary to that described below. Moreover,
the following discussion is for general information only and does not
constitute comprehensive tax advice to any particular holder of series A notes.
This summary is based on the current provisions of the tax code and applicable
Treasury regulations, judicial authority and administrative pronouncements. The
tax consequences described below could be modified by future changes in the
relevant law, which could have retroactive effect. You should consult your own
tax adviser as to these and any other federal income tax consequences of this
exchange offer as well as any tax consequences to you under foreign, state,
local or other law.
Exchanges of series A notes for series B notes pursuant to this exchange
offer should be treated as a modification of the series A notes that does not
constitute a material change in their terms, and we intend to treat the
exchanges in that manner. Under that approach, a series B note is treated as a
continuation of the corresponding series A note. An exchanging holder's holding
period for a series B note would include such holder's holding period for the
series A note. Such holder would not recognize any gain or loss, and such
holder's basis in the note would be the same as such holder's basis in the
series A note. This exchange offer will result in no federal income tax
consequences to a non-exchanging holder. See "Material Federal Income Tax
Considerations of the Exchange Offer."
Exchange Agent
The Bank of New York has been appointed as exchange agent for this exchange
offer. All correspondence in connection with this exchange offer and the letter
of transmittal should be addressed to the exchange agent as follows:
The Bank of New York
<TABLE>
<CAPTION>
By Registered
or Certified
Mail: Facsimile Transmission Number: By Hand/Overnight Delivery:
------------- ------------------------------ ---------------------------
<S> <C> <C>
The Bank of
New York Attn.: Diane Amoroso The Bank of New York
101 Barclay
Street, Floor
7E Reorganization Section 101 Barclay Street
New York, New
York 10286 (212) 815-6339 Corporate Trust Services Window
Attn.: Diane
Amoroso Ground Level
Reorganization
Section (For Eligible Institutions Only) New York, New York 10286
Confirm by Telephone: Attn.: Diane Amoroso
(212) 815-3750 Reorganization Section
For Information Call:
(212) 815-3750
</TABLE>
28
<PAGE>
You may request additional copies of this prospectus or the letter of
transmittal from the exchange agent or us.
Payment of Expenses
We have not retained any dealer-manager or similar agent in connection with
this exchange offer and will not make any payments to brokers, dealers or
others for soliciting acceptances of this exchange offer. We, however, will pay
reasonable and customary fees and reasonable out-of-pocket expenses to the
exchange agent in connection with the solicitation of acceptances. We will also
pay the cash expenses to be incurred in connection with this exchange offer,
including accounting, legal, printing and related fees and expenses.
Accounting Treatment
The series B notes will be recorded at the same carrying value as the series
A notes, as reflected in our accounting records on the date of the exchange.
Accordingly, no gain or loss for accounting purposes will be recognized. Our
expenses of this exchange offer will be capitalized for accounting purposes.
Resales of Notes
With respect to resales of series B notes, based on certain interpretive
letters issued by the staff of the Commission to third parties, we believe that
a holder of series B notes who exchanged series A notes for series B notes in
the ordinary course of business and who is not participating, does not intend
to participate, and has no arrangement or understanding with any person to
participate, in a distribution of the series B notes, will be allowed to resell
the series B notes to the public without further registration under the
Securities Act and without delivering to the purchasers of the series B notes a
prospectus that satisfies the requirements of the Securities Act, except for:
. a broker-dealer who purchases series B notes directly from us to resell
pursuant to Rule 144A or any other available exemption under the
Securities Act, or
. a person who is our "affiliate" within the meaning of Rule 405 under the
Securities Act.
However, a broker-dealer who holds series A notes that were acquired for
its own account as a result of market-making or other trading activities may be
deemed to be an underwriter within the meaning of the Securities Act and must,
therefore, deliver a prospectus meeting the requirements of the Securities Act.
If any other holder is deemed to be an underwriter within the meaning of the
Securities Act or acquires series B notes in this exchange offer for the
purpose of distributing or participating in a distribution of series B notes,
such holder must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with a secondary resale
transaction, unless an exemption from registration is otherwise available. We
have agreed that for a period of 180 days from the expiration date, we will
make this prospectus, as amended or supplemented, available to any broker-
dealer for use in connection with any such resale.
29
<PAGE>
CAPITALIZATION
(In thousands)
The following table sets forth our consolidated capitalization as of
December 25, 1998 (1) on an actual basis and (2) pro forma to give effect to
the offering of series A notes and the EFM and Roche acquisitions, including
the application of the net proceeds from the offering of series A notes. You
should read this table in conjunction with "Management's Discussion and
Analysis of Results of Operations and Financial Condition," "Description of
Other Indebtedness" and our consolidated financial statements and notes
thereto.
<TABLE>
<CAPTION>
As of December 25,
1998
------------------
Actual Pro Forma
<S> <C> <C>
Cash and cash equivalents ................................. $ 21,265 $ 21,852
======== ========
Long-term debt (including current portion):
Credit agreement debt:
Revolving credit facility borrowings ................... $143,000 $ 12,600(1)
Term loan .............................................. 225,750 225,750
11 1/4% Senior Subordinated Notes due 2009 .............. -- 225,000
8% Convertible Subordinated Debentures due 2006 ......... 44,548 44,548
Other borrowings ........................................ 9,364 10,964
-------- --------
Total long-term debt, including current portion ....... 422,662 518,862
Stockholders' equity ...................................... 238,168 238,168
-------- --------
Total capitalization ...................................... $660,830 $757,030
======== ========
</TABLE>
- --------
(1) As of December 25, 1998 on a pro forma basis, we would have had $152.0
million of undrawn availability under our revolving credit facility,
including capacity used for letters of credit.
30
<PAGE>
SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA
(In thousands, except ratios)
Our selected consolidated financial data is derived from our consolidated
financial statements. In June 1998, we changed our fiscal year-end from the
last Friday in March to the last Friday in December of each year, effective
with the nine months ended December 25, 1998. Historical results should not be
taken as necessarily indicative of the results that may be expected for any
future period. You should read this consolidated financial data in conjunction
with our consolidated financial statements and the related notes and
"Management's Discussion and Analysis of Results of Operations and Financial
Condition" contained in this prospectus.
<TABLE>
<CAPTION>
Twelve Months Ended Nine Months
--------------------------------------------- Ended
March 31, March 29, March 28, March 27, December 25,
1995 1996 1997 1998 1998
<S> <C> <C> <C> <C> <C>
Income Statement Data:
Revenues................ $ 423,972 $400,042 $ 362,131 $ 442,216 $ 757,435
Cost of revenues........ 356,446 341,890 323,993 391,126 666,474
Gross margin............ 67,526 58,152 38,138 51,090 90,961
Sales, general and
administrative
expenses............... 41,936 38,125 33,431 31,774 41,828
Special charges (1)..... (19,777) (25,326) (8,403) (14,248) (24,971)
Operating income
(loss)................. 19,440 20,027 (3,696) 5,068 24,162
Interest expense........ (7,581) (7,014) (7,168) (10,720) (25,876)
Interest income......... 471 569 1,908 2,751 981
Other income, net....... -- -- -- 716 --
Loss from continuing
operations before
income taxes........... (1,297) (11,744) (8,956) (2,185) (733)
Income tax (provision)
benefit................ (2,383) 12,290 179 (4,175) (6,694)
Discontinued
operations--closure
costs (net of income
taxes)................. (10,603) -- -- (4,960) --
Extraordinary item--
early extinguishment of
debt (net of income
taxes)................. -- -- -- (5,706) --
Net income (loss)....... (14,283) 546 (8,777) (17,026) (7,427)
Preferred stock
dividends.............. (4,200) (4,200) (4,916) (6,167) (4,664)
Net loss applicable to
common stock........... (18,483) (3,654) (13,693) (23,193) (12,091)
Ratio of earnings to
fixed charges (2)...... -- -- -- -- --
Other Data:
Adjusted EBITDA (3)..... $ 44,740 $ 34,529 $ 19,070 $ 32,474 $ 69,227
Depreciation and
amortization........... 19,150 14,502 14,363 13,158 20,094
Capital expenditures
(4).................... 10,533 4,696 3,361 4,766 6,860
End of period backlog... 1,176,000 975,000 1,198,000 3,451,000 3,476,000
Balance Sheet Data:
Cash and cash
equivalents............ $ 6,547 $ 24,493 $ 78,897 $ 24,765 $ 21,265
Working capital......... 73,838 89,174 110,705 74,924 120,260
Total assets............ 362,152 315,314 342,531 709,217 948,606
Total long-term debt,
including current
portion................ 81,343 65,708 71,217 301,435 422,662
Total stockholders'
equity................. 145,921 140,865 168,853 148,150 238,168
</TABLE>
- --------
(1) The following table presents a summary of our special charges for the
periods shown.
<TABLE>
<CAPTION>
Twelve Months Ended Nine Months
--------------------------------------- Ended
March 31, March 29, March 28, March 27, December 25,
1995 1996 1997 1998 1998
<S> <C> <C> <C> <C> <C>
Businesses exited....... $ 9,827 $26,416 $ -- $ 1,800 $24,971
Severance and lease and
facility costs......... 850 -- 8,403 -- --
Acquisition
integration............ -- -- -- 5,694 --
Settlement and
litigation............. 9,100 (1,090) -- 3,943 --
Headquarters
relocation............. -- -- -- 2,811 --
------- ------- ------ ------- -------
Total.................. $19,777 $25,326 $8,403 $14,248 $24,971
======= ======= ====== ======= =======
Special charges
included in the
calculation of
operating income...... $ 6,150 $ -- $8,403 $14,248 $24,971
======= ======= ====== ======= =======
</TABLE>
31
<PAGE>
See "Management's Discussion and Analysis of Results of Operations and
Financial Condition--Special Charges."
(2) The ratio of earnings to fixed charges is computed by dividing earnings by
fixed charges. For this purpose, "earnings" include net income (loss) before
taxes and fixed charges (adjusted for interest capitalized during the
period) and "fixed charges" include interest, whether expensed or
capitalized, amortization of debt expenses and the portion of rental expense
that is representative of the interest factor in these rentals. For the
years ended March 31, 1995, March 29, 1996, March 28, 1997, March 27, 1998
and the nine months ended December 25, 1998, earnings were insufficient to
cover fixed charges by approximately $1,297, $11,744, $8,956, $2,185 and
$733.
(3) Adjusted EBITDA represents earnings from continuing operations before
interest expense, net, income taxes and depreciation and amortization
expenses and excludes special charges and other income, net. Adjusted EBITDA
is presented because we believe it is frequently used by securities
analysts, investors and other interested parties in the evaluation of
companies in our industry. However, other companies in our industry may
calculate adjusted EBITDA differently than we do. Adjusted EBITDA is not a
measurement of financial performance under generally accepted accounting
principles and should not be considered as an alternative to cash flow from
operating activities or as a measure of liquidity or an alternative to net
income as indicators of our operating performance or any other measures of
performance derived in accordance with generally accepted accounting
principles. See the Statements of Cash Flows included in our financial
statements.
(4) Excludes acquisition-related capital expenditures.
32
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL DATA
The following unaudited pro forma consolidated financial data is derived
from the historical consolidated financial statements of the IT Group, the
consolidated financial statements of OHM, the consolidated financial statements
of GTI, the statement of assets acquired and liabilities assumed and the
statement of operating revenue and expenses of EFM and the consolidated
financial statements of Roche.
The unaudited pro forma consolidated statement of operations for the twelve
months ended December 25, 1998 and the unaudited pro forma consolidated balance
sheet as of December 25, 1998 are adjusted to give effect to the offering of
the series A notes and the application of its net proceeds, and the
acquisitions of OHM, GTI, EFM and Roche as if those transactions had occurred
as of December 27, 1997 with respect to the unaudited pro forma consolidated
statement of operations, and December 25, 1998 with respect to the unaudited
pro forma consolidated balance sheet.
The unaudited pro forma adjustments are based upon available information and
certain assumptions that we believe are factually supportable. The unaudited
pro forma consolidated financial data does not purport to represent what our
consolidated results of operations or consolidated financial position would
have been had the transactions described above actually occurred at the
beginning of the relevant period. In addition, the unaudited pro forma
consolidated financial data does not purport to project our consolidated
results of operations or consolidated financial position for the current year
or any future date or period.
The unaudited pro forma consolidated financial data should be read in
conjunction with the consolidated financial statements of the IT Group, OHM,
GTI and Roche, and the statement of assets acquired and liabilities assumed and
the statement of operating revenue and expenses of EFM, and the related notes
included in this prospectus.
33
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
December 25, 1998
(In thousands)
<TABLE>
<CAPTION>
IT Group EFM Roche Acquisition
December 25, December 31, December 31, and Offering
1998 1998 1998 Adjustments Pro Forma
<S> <C> <C> <C> <C> <C>
Assets
Current assets:
Cash and cash
equivalents ......... $ 21,265 $ -- $ 587 $ -- $ 21,852
Accounts receivable... 338,589 -- 6,783 -- 345,372
Prepaid expenses and
other current
assets............... 17,308 -- 5,262 (1,182)(a) 21,388
Deferred income
taxes................ 15,919 -- -- -- 15,919
-------- ----- ------- -------- ----------
Total current assets.... 393,081 -- 12,632 (1,182) 404,531
Net property, plant, and
equipment ............. 47,670 235 1,805 -- 49,710
Intangible assets, net.. 356,619 -- 43 83,057 (a) 439,719
Deferred income taxes... 93,719 -- 907 630 (a) 95,256
Other assets............ 17,469 155 3,175 (504)(a) 29,495
9,200 (b)
Long-term assets of
discontinued operations
....................... 40,048 -- -- -- 40,048
-------- ----- ------- -------- ----------
Total assets ........... $948,606 $ 390 $18,562 $ 91,201 $1,058,759
======== ===== ======= ======== ==========
Liabilities and
Stockholders' Equity
Current liabilities:
Accounts payable...... $150,912 $ -- $11,143 $ (5,083)(a) $ 156,972
Accrued liabilities... 88,183 778 110 750 (a) 94,321
4,500 (a)
Billings in excess of
revenues ............ 8,219 -- 1,690 -- 9,909
Short-term debt,
including current
portion of long-term
debt................. 17,603 -- 1,001 -- 18,604
Net current
liabilities of
discontinued
operations .......... 7,904 -- -- -- 7,904
-------- ----- ------- -------- ----------
Total current
liabilities ........... 272,821 778 13,944 167 287,710
Long-term debt.......... 364,824 -- 599 (130,400)(b) 235,023
Senior subordinated
notes.................. -- -- -- 225,000 (b) 225,000
8% convertible
subordinated
debentures............. 40,235 -- -- -- 40,235
Other long-term accrued
liabilities............ 31,979 -- -- -- 31,979
Minority interest....... 579 -- 65 -- 644
Commitments and
contingencies ......... -- -- -- -- --
Stockholders' equity
(deficit).............. 238,168 (388) 3,954 (3,566)(c) 238,168
-------- ----- ------- -------- ----------
Total liabilities and
stockholders' equity... $948,606 $ 390 $18,562 $ 91,201 $1,058,759
======== ===== ======= ======== ==========
</TABLE>
See notes to unaudited pro forma consolidated balance sheet.
34
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
December 25, 1998
(a)--The estimated net purchase price and preliminary adjustments to
historical book value of EFM and Roche as a result of the acquisition together
with the financing and offer are as follows (in thousands):
<TABLE>
<CAPTION>
EFM Roche Total
<S> <C> <C> <C> <C>
Purchase price:
Estimated cash consideration............... $74,000 $10,000 $84,000
Transaction costs.......................... 1,050 350 1,400
Book value (deficit) of net assets of
businesses acquired....................... (388) 3,954 3,566
------- ------- -------
$75,438 $ 6,396 $81,834
======= ======= =======
We acquired EFM for $82.0 million in cash, reduced by $8.0 million representing
working capital retained by ICF Kaiser.
Preliminary allocation of purchase price in excess of net assets acquired (in
thousands):
<CAPTION>
EFM Roche Total
<S> <C> <C> <C> <C>
Prepaid and other current assets............. $ -- $(1,182)* $(1,182)
Other assets................................. -- (504)* (504)
Accounts payable............................. -- 5,083 ** 5,083
Increase in deferred tax assets related to
acquired assets and liabilities having new
basis....................................... 630 -- 630
Accrued liabilities, including claims and
legal costs................................. (750) -- (750)
Accrued liabilities, including severance
($2.0 million) and lease termination cost
($2.5 million) recognized in accordance with
EITF 95-3................................... (4,500) -- (4,500)
Estimated adjustment for costs in excess of
net assets of acquired business............. 80,058 2,999 83,057
------- ------- -------
$75,438 $ 6,396 $81,834
======= ======= =======
</TABLE>
- --------
* We did not acquire these assets from Roche.
** These liabilities are included in the initial payment of $10.0 million to
Roche.
The unaudited pro forma consolidated balance sheet includes an estimated
accrued liability of $4.5 million for severance and lease termination for the
EFM acquisition. The transition plans will be finalized, approved, and
communicated as soon as practical. There are no known significant unresolved
liabilities anticipated by us in the transition plan.
Because EFM and Roche both operate within the same industry as we do, we do
not believe that identifiable intangibles, other than residual goodwill, will
be acquired in the transactions.
(b)--Represents the issuance of senior subordinated notes offered hereby as
follows (in thousands):
<TABLE>
<S> <C>
Senior subordinated notes offered.................................. $225,000
Capitalized debt issue costs, including initial purchasers'
discount.......................................................... (9,200)
Portion used in the EFM and Roche acquisitions..................... (85,400)
--------
Represents amount of paydown on revolving credit facility.......... $130,400
========
</TABLE>
(c)--Represents elimination of owners equity of EFM and Roche.
35
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS AND OTHER DATA
Twelve Months ended December 25, 1998
(In thousands, except ratios)
<TABLE>
<CAPTION>
IT Group
IT Group Three OHM GTI Eleven
Nine months months Two months months EFM Roche
ended ended ended ended Year ended Year ended Acquisition
December 25, March 27, February 24, October 31, December 31, December 31, and Offering
1998(1) 1998(1) 1998(2) 1998(3) 1998(4) 1998(5) Adjustments (6) Pro Forma
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues........... $ 57,435 $136,038 $59,449 $182,243 $105,906 $28,250 $ -- $1,269,321
Cost and expenses:
Cost of revenues.. 666,474 119,554 56,668 148,209 80,918 16,925 (887)(a) 1,081,361
(6,500)(b)
Selling, general,
and administra-
tive expenses.... 41,828 10,592 6,893 28,705 18,863 11,171 3,377 (c) 91,879
(12,200)(b)
(11,700)(b)
(5,650)(b)
Special charges... 24,971 5,694 -- -- -- -- -- 30,665
-------- -------- ------- -------- -------- ------- ------- ----------
Operating income
(loss)............ 24,162 198 (4,112) 5,329 6,125 154 33,560 65,416
Interest expense... (25,876) (5,197) (1,071) -- -- (278) (20,330)(d) (52,752)
Interest income.... 981 614 292 649 -- 7 -- 2,543
Other income
(expense), net.... -- 716 (2,774) (625) -- (236) -- (2,919)
-------- -------- ------- -------- -------- ------- ------- ----------
Income (loss) from
continuing
operations before
income taxes...... (733) (3,669) (7,665) 5,353 6,125 (353) 13,230 12,288
(Provision) benefit
for income taxes.. (6,694) 141 3,066 (4,257) -- 435 (3,845)(e) (11,154)
-------- -------- ------- -------- -------- ------- ------- ----------
Net income (loss).. (7,427) (3,528) (4,599) 1,096 6,125 82 9,385 1,134
Less preferred
dividends......... (4,664) (1,558) -- -- -- -- -- (6,222)
-------- -------- ------- -------- -------- ------- ------- ----------
Net income (loss)
applicable to
common stock...... $(12,091) $ (5,086) $(4,599) $ 1,096 $ 6,125 $ 82 $ 9,385 $ (5,088)
======== ======== ======= ======== ======== ======= ======= ==========
Other data:
Adjusted
EBITDA (7)....... $ 69,227 $ 11,522 $(1,923) $ 8,573 $ 6,183 $ 540 $36,050 $ 130,172
Depreciation and
amortization..... 20,094 5,630 2,189 3,244 58 386 2,490 (a)(c) 34,091
Capital
expenditures..... 6,860 2,226 1,612 4,784 -- 207 -- 15,689
Interest expense........................................................................................... 52,752
Cash interest expense (8).................................................................................. 51,319
Ratio of adjusted EBITDA to cash interest expense.......................................................... 2.5x
Ratio of net total debt to adjusted EBITDA................................................................. 3.8
Ratio of earnings to fixed charges (9)..................................................................... 1.2
</TABLE>
See notes to unaudited pro forma consolidated statement of operations and other
data.
36
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENT
OF OPERATIONS AND OTHER DATA
Twelve Months ended December 25, 1998
General
(1) In June 1998, we changed our fiscal year-end from the last Friday in
March to the last Friday in December of each year effective with the nine
months ended December 25, 1998. Therefore, our statements of operations for the
nine months ended December 25, 1998 and the three months ended March 27, 1998
were used for purposes of preparing the unaudited pro forma consolidated
statement of operations to present a complete twelve months of our operations.
(2) In January 1998, we entered into a merger agreement to acquire OHM. The
transaction was effected through a two-step process consisting of (a) the
acquisition on February 25, 1998 of 54% of OHM through a cash tender offer for
a total consideration of approximately $160.2 million plus approximately $4.6
million in asset acquisition costs and (b) the acquisition of the remaining 46%
of the outstanding OHM stock in the merger providing for the issuance of
12,900,000 shares of our common stock and cash payment of approximately $30.8
million. OHM was included in our historic statement of operations from February
25, 1998 to December 25, 1998. OHM operations for the two months ended February
24, 1998 have been included in the unaudited pro forma consolidated statement
of operations to present a complete twelve months of OHM's operations.
(3) On December 2, 1998, we acquired GTI for a total consideration of $69.4
million plus approximately $2.0 million in transaction costs. GTI was included
in our historic statement of operations from December 2, 1998 to December 25,
1998. The GTI eleven months ended October 31, 1998 historic statement of
operations has been included in the unaudited pro forma consolidated statement
of operations to present a complete twelve months of GTI's operations.
(4) On April 9, 1999, we purchased specified assets of EFM for $82.0 million
in cash, reduced by $8.0 million representing working capital retained by ICF
Kaiser. We also agreed to assume certain liabilities of EFM. The EFM December
31, 1998 historic statement of assets acquired and liabilities assumed and
statement of operating revenue and expenses have been included in the unaudited
pro forma consolidated statement of operations assuming the acquisition
occurred as of the beginning of the period presented.
(5) On March 31, 1999, we acquired all of the capital stock of Roche for
$10.0 million in cash. The final purchase price is subject to a net book value
adjustment and future earnout consideration. The December 31, 1998 historic
financial statements of Roche have been included in the unaudited pro forma
consolidated statements of operations assuming the acquisition occurred as of
the beginning of the period presented. The historic statement of operations has
been adjusted for a contract and certain assets and liabilities that we did not
acquire as follows (in thousands):
<TABLE>
<CAPTION>
Historic year Year ended
ended December 31,
December 31, 1998 Adjustments 1998, as adjusted
<S> <C> <C> <C>
Selling, general and
administrative expenses ..... $11,561 $ (390) $11,171
Other income (expense), net
............................. (4,590) 4,354 (236)
Income (loss) from continuing
operations before income
taxes ....................... (5,097) 4,744 (353)
(Provision) benefit for income
taxes ....................... 1,649 (1,214) 435
------- ------- -------
Net income (loss) ............ $(3,448) $ 3,530 $ 82
======= ======= =======
</TABLE>
37
<PAGE>
(6) Adjustments to reflect the OHM, GTI, EFM and Roche acquisitions (the
final purchase price allocation will be based upon a final determination of the
fair values of the net assets acquired):
(a) The following represents decreased depreciation expense related to
the write-down of duplicate property, plant and equipment acquired in the
OHM and GTI acquisitions (dollars in thousands):
<TABLE>
<CAPTION>
Months not included in
Write-down of Twelve-Month IT Group
Property, Plant, Statement Adjusted
and Equipment of Operations Depreciation
<S> <C> <C> <C>
OHM..................... $33,000 2 $(458)
GTI..................... 2,341 11 (429)
-----
$(887)
=====
</TABLE>
The average historic remaining useful life of property, plant and equipment
written down to estimated fair value is between five and twelve years.
(b) Represents net cost reductions resulting from the elimination of
duplicative personnel and the closure of certain OHM, GTI and EFM
facilities that have not been included in the historic financial
statements. We have formulated a restructuring plan and accrued the
liability pursuant to EITF Issue No. 95-3, "Recognition of Liabilities in
Connection with a Purchase Business Combination." This includes the
following costs (in thousands):
<TABLE>
<CAPTION>
Cost Reductions
---------------------------------
GTI
OHM (i) (ii) EFM (iii) Total
<S> <C> <C> <C> <C>
Facility costs............................. $ 500 $ 4,500 $1,500 $ 6,500
Corporate selling, general and
administrative costs...................... 1,500 8,100 2,600 12,200
Business development and bid proposal
costs..................................... 4,500 3,900 3,300 11,700
Regional costs............................. 1,250 2,200 2,200 5,650
------ ------- ------ -------
Net cost savings........................... $7,750 $18,700 $9,600 $36,050
====== ======= ====== =======
</TABLE>
(i) The OHM cost savings are attributable to the reduction of over
500 personnel in the corporate, selling, general and administration
areas, business development and proposal preparation, and from
elimination of a regional operating structure, which resulted in the
combination or closure of 14 existing facilities.
(ii) The GTI cost savings are attributable to the reduction of over
300 personnel in the corporate, selling, general and administration
areas, business development and proposal preparation and from
elimination of a regional operating structure, which resulted in the
combination or closure of 15 existing facilities.
(iii) The planned EFM cost savings are attributable to the reduction
of more than 75 personnel and the combination or closure of 12 existing
offices.
(c) The following represents the amortization expense related to the
increase in goodwill which is amortized over a period of 40 years (dollars
in thousands).
<TABLE>
<CAPTION>
Months not Included in
Estimated Twelve Month IT
Goodwill Group Statement Adjusted
Adjustment of Operations Amortization
<S> <C> <C> <C>
OHM............................ $282,350 2 $1,177
GTI............................ 5,392 11 124
EFM............................ 80,058 12 2,001
Roche.......................... 2,999 12 75
------
$3,377
======
</TABLE>
38
<PAGE>
(d) Reflects adjustments for additional interest expense assuming the
offering of series A notes and acquisitions occurred on December 27, 1997.
The increase in interest expense and the addition to amortization of
deferred financing costs reflects the change in term loans and revolving
credit facility (dollars in thousands):
<TABLE>
<CAPTION>
Additional Interest
Drawn Expense
Rate Amount Adjustment(i)
<S> <C> <C> <C>
Credit facilities:
Term loan ................................. 8.50% $ 191,000 $ 3,360
Revolving credit facility ................. 8.00 71,397 5,236
Senior Subordinated Notes due 2009 .......... 11.25 225,000 25,313
Reduction of revolving credit facility ...... 8.00 (130,400) (10,432)
Amortization of capitalized financing fees
for the offering of series A notes.......... 920
Tender loan origination costs(ii) ........... (4,067)
--------
Total adjustment ............................ $ 20,330
========
</TABLE>
(i) Interest expense adjustment reflects months not included in our
actual statement of operations for the twelve months ended December 25,
1998 and timing of actual borrowing.
(ii) The tender loan origination costs were expensed by the IT Group
during the twelve months ended December 25, 1998 since the facility was
refinanced. These costs would not have been incurred had the OHM
transaction been completed on December 27, 1997.
Financing fees capitalized are being amortized over the life of the senior
subordinated notes.
Pro forma consolidated debt of $238.4 million has variable interest rates.
The effect on the results of operations of a change in the assumed interest
rates of 12.5 basis points would be approximately $0.3 million for the twelve
months ended December 25, 1998.
(e) Adjustment to reflect income taxes as the amount which would have
been recognized on a consolidated basis assuming the merged entity would
generate future taxable income sufficient to realize the deferred tax
benefit recognized. The difference between the statutory rate and the
effective rate is primarily related to nontax-deductible goodwill
amortization and increases to the deferred tax valuation allowance as
follows (in thousands):
<TABLE>
<CAPTION>
Year ended
December 25,
1998
<S> <C>
Pro forma income before income taxes ............................ $12,288
Permanent difference related to goodwill amortization ........... 6,800
-------
Estimated pro forma taxable income .............................. 19,088
Estimated statutory rate ........................................ 40%
-------
7,635
Research and development tax credits ............................ (2,540)
Deferred tax asset valuation allowance adjustment ............... 6,059
-------
Pro forma tax expense ........................................... $11,154
=======
</TABLE>
Adjustments Reflected in Other Data
(7) Adjusted EBITDA represents earnings from continuing operations before
interest expense, net, income taxes and depreciation and amortization expenses
and excludes special charges and other income, net. Adjusted EBITDA should not
be considered as an alternative to cash provided by operations as a measure of
liquidity, or to net income as a measure of profitability. Adjusted EBITDA and
related ratios have been included because we use them as one means of analyzing
our ability to service our debt, our lenders use them
39
<PAGE>
for the purpose of analyzing our performance with respect to the credit
agreement and the senior subordinated notes, and we understand that they are
used by certain investors as one measure of a company's historical ability to
service debt. Not all companies calculate Adjusted EBITDA in the same fashion
and therefore Adjusted EBITDA as presented may not be comparable to other
similarly titled measures of other companies.
(8) Cash interest expense excludes noncash amortization of financing fees as
follows (in thousands):
<TABLE>
<S> <C>
Interest expense ................................................ $52,752
Amortization of financing costs ................................. (1,433)
-------
$51,319
=======
</TABLE>
(9) The ratio of earnings to fixed charges is computed by dividing earnings
by fixed charges. For this purpose, "earnings" include net income (loss) before
taxes and fixed charges (adjusted for interest capitalized during the period)
and "fixed charges" include interest, whether expensed or capitalized,
amortization of debt expenses and the portion of rental expense that is
representative of the interest factor in these rentals.
40
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION
RESULTS OF OPERATIONS
Overview
We are a leading provider of diversified, value-added services in the areas
of environmental consulting, engineering and construction and remediation. In
addition, we are leveraging our core project management competencies to offer
our clients a variety of outsourcing services such as facilities management. We
have a strong reputation for both the high quality of our work and the breadth
of the services we provide.
Our clients are federal, state and local governments in the U.S. and
commercial businesses worldwide. We obtained 60% of our pro forma revenues for
the twelve months ended December 25, 1998 from the federal government under
more than 120 contracts that range in length from one to ten years. In
addition, we serve more than 1,600 commercial clients on projects that range in
length from one month to more than one year. For the twelve months ended
December 25, 1998, our pro forma revenues were $1.3 billion, and our adjusted
EBITDA was $130.2 million. As of December 25, 1998, our backlog was $4.0
billion. Ninety percent of our pro forma backlog is related to federal
government programs and approximately 84% is expected to be charged to our
clients on a cost-reimbursable basis. Many of our commercial contracts are
evergreen contracts that are typically not part of our backlog.
In the course of providing our services, we routinely subcontract services.
These subcontractor costs are passed through to clients and, in accordance with
industry practice, are included in our revenues. Our cost of revenues includes
subcontractor costs, salaries and direct costs and some indirect overhead costs
such as rents, utilities and travel that are directly attributable to projects.
Salaries represent the majority of these costs. Our selling, general and
administrative expenses are comprised primarily of our corporate headquarters'
costs related to the executive offices, corporate accounting, information
technology, marketing and bid and proposal costs. These costs are generally
unrelated to specific client projects. In addition, we include amortization of
some intangible assets, such as goodwill resulting from acquisitions in these
expenses.
41
<PAGE>
Acquisitions
Since 1996, we have made ten acquisitions to expand and diversify our
business to meet our strategic objectives. The following table provides some
information on these acquisitions.
<TABLE>
<CAPTION>
Most Recent
Fiscal Year
Revenues
Date of Prior to
Acquisition Name Location(s) Business Acquisition
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Mar. 1996 Gradient Massachusetts . Environmental/human health risk $5 million
Corporation assessment
. Litigation support
- --------------------------------------------------------------------------------
Nov. 1996 Chi Mei IT Taiwan . Wastewater treatment design/build $12 million
- --------------------------------------------------------------------------------
May 1997 PHR California . Historical pollution liability research and $3 million
Environmental Washington, DC investigation
Consultants, Inc.
- --------------------------------------------------------------------------------
Sept. 1997 Pacific California . Environmental consulting and engineering $10 million
Environmental services
Group, Inc.
- --------------------------------------------------------------------------------
Jan. 1998 Jellinek, Washington, DC . Science-based environmental consulting $12 million
Schwartz & Colorado and advocacy services
Connolly, Inc. England
- --------------------------------------------------------------------------------
Mar. 1998 LandBank, Inc. Colorado . Real estate acquisition and restoration $3 million
company
- --------------------------------------------------------------------------------
Feb. and OHM Over 30 regional . Leading diversified services firm providing $527 million
June 1998 Corporation offices a broad range of services for governmental
and private sector clients
. Leading provider of operations,
maintenance and construction outsourcing
services
- --------------------------------------------------------------------------------
Dec. 1998 Fluor Daniel Over 30 offices . Broad-based environmental services firm $200 million
GTI, Inc. in North
America, Europe
and Australia
- --------------------------------------------------------------------------------
March 1999 Roche ltee, Quebec City, . Engineering and construction services to $28 million
Groupe conseil Canada wastewater, paper, mining and
transportation industries worldwide
- --------------------------------------------------------------------------------
April 1999 EFM Group [TO COME] . environmental remediation, program $106 million
management and technical support for
federal government agencies and private
sector clients
</TABLE>
- --------------------------------------------------------------------------------
On March 31, 1999, we acquired all of the outstanding capital stock of Roche
for an initial payment of $10.0 million in cash, plus two potential earnout
payments. Roche is based in Quebec City, Canada and provides engineering and
construction services to wastewater, paper, mining and transportation
industries worldwide. Roche has approximately 700 employees and had revenue of
$28.3 million in its most recent year ended December 31, 1998.
On April 9, 1999, we acquired specified assets and assumed specified
liabilities of EFM for $82.0 million in cash reduced by $8.0 million
representing working capital retained by ICF Kaiser. EFM provides environmental
remediation, program management and technical support for federal government
agencies including the DOD, NASA and the DOE as well as private sector
environmental clients. EFM has approximately 500 employees and had revenue of
$105.9 million for the calendar year ended December 31, 1998.
42
<PAGE>
Change in Fiscal Year
In June 1998, we changed our fiscal year-end from the last Friday in March
to the last Friday in December of each year effective with the nine months
ended December 25, 1998. Accordingly, the following discussion compares
financial results for a nine-month period to a full twelve-month year.
Likewise, the financial results for the nine-month period ended December 25,
1998 include OHM's results for the entire nine-month period while the financial
results for the twelve-month period ended March 27, 1998 include only one month
of OHM financial results because we acquired 54% of OHM on February 25, 1998.
In addition, our operating results will be discussed based on the business
platforms we established when we adopted Statement of Financial Accounting
Standards No. 131, "Disclosures about Segments of an Enterprise and Related
Information" for the nine months ended December 25, 1998. These platforms
include engineering & construction, consulting & ventures, outsourced services
and international.
Nine Months Ended December 25, 1998 Compared to Twelve Months Ended March 27,
1998
Revenues and Gross Margin
Company. Revenues for the nine months ended December 25, 1998 were $757.4
million, an increase of approximately 71%, when compared to the $442.2 million
in revenues reported in the twelve months ended March 27, 1998. This increase
is primarily attributable to higher revenues in the engineering & construction
platform resulting from the OHM acquisition.
Our gross margin for the nine months ended December 25, 1998 was 12.0%,
slightly higher than the 11.6% gross margin reported in the twelve months ended
March 27, 1998. In the 1999 fiscal year, management expects to maintain these
gross margin levels. However, our ability to maintain or improve our gross
margin levels is heavily dependent on various factors including utilization of
professional staff, proper execution of projects, successful bidding of new
contracts at adequate margin levels and continued realization of overhead
savings achieved upon the completed integration of recent acquisitions.
Engineering & Construction. Revenues from the engineering & construction
platform were $597.9 million for the nine months ended December 25, 1998
compared to $346.1 million for the twelve months ended March 27, 1998, an
increase of approximately 73%. Our engineering & construction platform includes
revenues from the DOD, DOE and commercial clients. Revenues from the DOD and a
small number of other government agencies were $363.0 million in the nine
months ended December 25, 1998 or $163.6 million greater than the $199.4
million of DOD revenues in the twelve months ended March 27, 1998. DOE revenues
of $79.8 million in the nine months ended December 25, 1998 were $39.3 million
higher than the $40.5 million of DOE revenues reported in the twelve months
ended March 27, 1998. Commercial revenues were $155.1 million in the nine
months ended December 25, 1998 or $48.9 million higher than the $106.2 million
of commercial revenues reported in the twelve months ended March 27, 1998.
A substantial percentage of our revenues continue to be earned from federal
governmental contracts with various federal agencies. Revenues from federal
governmental contracts accounted for 69% of our revenues in the nine months
ended December 25, 1998 compared to 58% in the twelve months ended March 27,
1998. The increase in government revenues for the nine months ended December
25, 1998 both in absolute dollars and as a percentage of revenue is primarily
attributable to the OHM acquisition. Federal governmental revenues are derived
principally from work performed for the DOD and, to a lesser extent, the DOE
and are thus included in our engineering & construction platform. We expect to
continue to earn a substantial portion of our engineering & construction
revenues from the DOD indefinite delivery order contracts which are primarily
related to remedial action work. In addition, management expects to increase
our revenues from the DOE in the future due to an expected transition by the
DOE over the next several years to emphasize remediation, as opposed to
studies, combined with our favorable experience in winning and executing
similar work for the DOD and our past performance of DOE studies. We believe
that we have begun to benefit from this transition by the DOE with the
commencement in 1998 of a $122.0 million project to perform the excavation,
pretreatment and drying of an estimated one million tons of materials for the
DOE's Fernald Environmental Management Project.
43
<PAGE>
The increase in commercial revenues for the nine months ended December 25,
1998 is primarily attributable to the OHM acquisition. However, revenue growth
from the commercial sector, excluding recent acquisitions, could be restricted
in the near term partly due to increased emphasis on competitive bids and
commercial clients 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 could further decrease the demand for our services, as
clients anticipate and adjust to the new regulations. These factors have been
partially offset by an increased desire on the part of commercial clients for
strategic environmental services that provide an integrated, proactive approach
to environmental issues and that are driven by economic, as opposed to legal or
regulatory, concerns. Further, legislative or regulatory changes could also
result in increased demand for our 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 clients'
views on the cost effectiveness of the remedies available.
Our engineering & construction platform segment profit was $63.8 million for
the nine months ended December 25, 1998, an increase of 72% when compared to
the $37.0 million segment profit for the twelve months ended March 27, 1998.
This increase is primarily attributable to the OHM acquisition. The engineering
& construction segment profit was 10.7% of engineering & construction revenues
for both the nine months ended December 25, 1998 and for the twelve months
ended March 27, 1998.
Consulting & Ventures. Revenues from our consulting & ventures platform were
$79.4 million for the nine months ended December 25, 1998 compared to $79.6
million reported during the twelve months ended March 27, 1998, a decrease of
approximately 0.3%. Most of the revenues from consulting & ventures are derived
from commercial clients. The increase in these revenues on an annualized basis
is primarily due to four acquisitions of specialized companies during the
twelve months ended March 27, 1998 as well as the GTI acquisition during the
nine months ended December 25, 1998. Excluding any future acquisitions, revenue
growth from the commercial sector could be restricted as discussed above under
engineering & construction.
Our consulting & ventures platform segment profit was $10.6 million for the
nine months ended December 25, 1998, an increase of 45% when compared to the
$7.3 million segment profit reported in the twelve months ended March 27, 1998.
The consulting & ventures segment profit was 13.4% and 9.2% of consulting &
ventures revenues for the nine months ended December 25, 1998 and the twelve
months ended March 27, 1998, respectively. The increase in absolute dollars and
as a percentage of revenue is primarily attributable to the acquisitions of JSC
and GTI.
Outsourced Services. Outsourced services revenues were $70.4 million for the
nine months ended December 25, 1998 compared to $6.8 million reported in the
twelve months ended March 27, 1998. This increased revenue is almost entirely
attributable to the OHM acquisition and the inclusion of its outsourcing
operations in our results of operations for the nine months ended December 25,
1998, as opposed to the one month of results included in the twelve months
ended March 27, 1998. OHM's outsourcing operations provide a range of project,
program and construction management services to the DOD as well as state and
local government agencies.
Our outsourced services platform segment profit improved to $7.9 million for
the nine months ended December 25, 1998, an increase of $7.0 million when
compared to the $0.9 million segment profit reported in the twelve months ended
March 27, 1998. This increase is also a result of the OHM acquisition.
International. International revenues, primarily from our 50.1% investment
in Chi Mei IT, a subsidiary operating in Taiwan, were $9.8 million for the nine
months ended December 25, 1998 compared to $9.6 million for the twelve months
ended March 27, 1998. The increase, on an annualized basis, is the result of
Chi Mei increased project volume and the GTI acquisition on December 3, 1998.
44
<PAGE>
Our international platform reported a loss of $0.4 million for the nine
months ended December 25, 1998 compared to a loss of $1.4 million in the twelve
months ended March 27, 1998. This improvement is primarily due to improved
project margins on several Chi Mei projects. Through the Chi Mei board of
directors, we undertook to improve management oversight, project management
skills and change order negotiation efforts. We believe these efforts will
minimize future potential losses and provide the basis for profitable Chi Mei
operations. The GTI acquisition increased the size of the international
platform with operations primarily in Australia, the United Kingdom and Italy.
The GTI acquisition included approximately $80.0 million of contract backlog
for work to be performed for the U.S. Air Force Center for Environmental
Excellence under a worldwide, five-year indefinite delivery order cost-
reimbursable contract. We expect to increase the platform further with the
acquisition of Roche in 1999.
Backlog. Our total funded and unfunded backlog at both December 25, 1998 and
March 27, 1998 was approximately $3.5 billion. At December 25, 1998, the
backlog included approximately $525.0 million of funded contracted backlog
scheduled to be completed during 1999 and approximately $320.0 million of
unfunded project work expected to be defined and performed in 1999 under
existing indefinite delivery order contracts. We expect to earn revenues from
our backlog 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 at both
December 25, 1998 and March 27, 1998 includes $2.7 billion of future work we
estimate we will receive, based on historical experience, under existing
indefinite delivery order programs. In accordance with industry practices,
substantially all of our contracts are subject to cancellation, delay or
modification by the customer.
Our backlog at any given time is subject to changes in scope of services
which may lead to increases or decreases in backlog amounts. These scope
changes have led to a number of contract claims requiring negotiations with
clients in the ordinary course of business.
Selling, General and Administrative Expenses
Selling, general and administrative expenses were 5.5% of revenues for the
nine months ended December 25, 1998 compared to 7.2% of revenues in the twelve
months ended March 27, 1998. This decrease is primarily attributable to the
elimination of certain duplicative overhead functions and other cost savings
achieved as a result of the OHM acquisition. In fiscal 1999, management expects
selling, general and administrative expenses to decrease slightly as a
percentage of revenues because the full effect of the cost savings from the OHM
acquisition will be realized. In addition, we anticipate additional cost
savings to be achieved from the GTI acquisition that occurred on December 3,
1998.
Selling, general and administrative expenses include goodwill amortization
expense of $7.0 million for the nine months ended December 25, 1998 and $1.4
million for the twelve months ended March 27, 1998. The significant increase to
goodwill amortization is primarily due to the OHM acquisition. Selling, general
and administrative expenses (excluding goodwill) were 4.6% of revenues for the
nine months ended December 25, 1998 and 6.9% of revenues for the twelve months
ended March 27, 1998.
Special Charges
We recorded special charges of $25.0 million for the nine months ended
December 25, 1998 compared to $14.2 million for the twelve months ended March
27, 1998. For the nine months ended December 25, 1998 we recorded a non-cash
charge of $25.0 million, including $10.6 million (net of cash proceeds of $5.8
million) related to the sale of our investment in Quanterra Incorporated, and
$14.4 million, related to the write-down of assets associated with the HTTS(R)
business. A summary of the special charges incurred during the nine months
ended December 25, 1998 is outlined below (in thousands):
45
<PAGE>
<TABLE>
<CAPTION>
Nine Months Ended December 25, 1998
------------------------------------------
Cash/ Special Reserve balance
Noncash Charges Activity at 12/25/98
<S> <C> <C> <C> <C>
Write-off of the Quanterra
Investment........................ Noncash $(10,550) $10,550 --
Write-down of the assets--Primarily
the Hybrid Thermal Treatment
System(R)......................... Noncash (14,421) 14,421 --
-------- ------- ----
Total ........................... $(24,971) $24,971 --
======== ======= ====
</TABLE>
Quanterra. On May 27, 1998, our board of directors considered and approved
the divestiture of certain non-core assets including our 19% common stock
ownership interest in Quanterra, an environmental laboratory business. This
charge of $10.6 million represented the net book value of our investment in
Quanterra less proceeds of $5.8 million from a sale completed in June 1998. No
additional cash was expended in connection with the writeoff.
Hybrid Thermal Treatment System(R). On May 27, 1998, our board of directors
considered and approved the divestiture of the assets associated with our
Hybrid Thermal Treatment System(R) (HTTS(R)) business. This resulted in a
charge of $14.4 million representing the net book value of these assets less
estimated salvage value.
The special charges of $14.2 million recorded in the twelve months ended
March 27, 1998 included $5.7 million for integration costs associated with the
acquisition of OHM, a $3.9 million non-cash charge related to a project claim
settlement, a $2.8 million charge associated with the relocation of our
corporate headquarters, and a $1.8 million loss from the sale of a small
remediation services business. A summary of the special charges incurred during
the twelve months ended March 27, 1998 is outlined below (in thousands):
<TABLE>
<CAPTION>
Twelve Months Ended March 27, 1998
------------------------------------------
Cash/ Special Reserve balance
Noncash Charges Activity at 12/25/98
<S> <C> <C> <C> <C>
Integration costs--OHM acquisition
Severance.......................... Cash $ (2,197) $ 2,197 --
Duplicative offices/assets......... Cash (2,478) 1,226 $(1,252)
Other.............................. Cash (1,019) 1,019 --
Claim Settlement
Helen Kramer....................... Noncash (3,943) 3,943 --
Relocation of Corporate Headquarters
Severance and relocation........... Cash (1,743) 1,743 --
Duplicative offices/assets......... Cash (710) 710 --
Other.............................. Cash (358) 358 --
Sale of remediation business........ Noncash (1,800) 1,800 --
-------- ------- -------
Total.............................. $(14,248) $12,996 $(1,252)
======== ======= =======
</TABLE>
OHM Acquisition. The $5.7 million special charge for integration costs
associated with the acquisition of OHM included $2.2 million of costs for
severance and $3.5 million of costs and other related items for closing and
eliminating duplicative offices. As part of the plan of integration, we laid-
off more than 100 employees, primarily in the operating group and
administrative support functions. In addition, as part of the plan we closed
three leased facilities, reduced the size of three more facilities and
subleased a portion of eight additional facilities. As of December 25, 1998,
$1.3 million of the integration charge remained to be paid. 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 three years. One lease requires payments over the next seven
years.
46
<PAGE>
Helen Kramer. In December 1997, we 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 our joint venture with Davy
International at the Helen Kramer Superfund project. On December 26, 1997, the
joint venture received a $14.5 million 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 $4.3
million to the Government to resolve related civil claims by the Government.
Our share of the joint venture results is 60%, accordingly, we received net
cash of $6.0 million, our proportionate share of the settlement. In December
1997, we recorded a non-cash pre-tax charge of $3.9 million because the cash
received was less than the receivables related to this project which totaled
approximately $9.9 million.
Relocation of Corporate Headquarters and Sale of Remediation Business. The
special charges that occurred in the first quarter of the twelve months ended
March 27, 1998 resulted from the relocation of our corporate headquarters from
Torrance, California to Monroeville (Pittsburgh), Pennsylvania and the sale of
our California based small project remediation services business. The
headquarters relocation consolidated the corporate overhead functions with our
largest operations office and moved us closer to our lenders and largest
shareholders, which are located in the Eastern United States. As a result of
this relocation, we incurred a pre-tax charge of $2.8 million. The relocation
charge included $0.8 million of costs for severance, $0.9 million of costs for
the relocation of some employees, $0.7 million of costs related to the closure
of the offices in Torrance, California and $0.4 million of other related costs.
As part of this relocation, 32 employees were laid off, primarily corporate
management and administrative support personnel. As of December 25, 1998, these
amounts have been paid. In May 1997, we incurred a non-cash pre-tax charge of
$1.8 million to sell our California-based, small projects remediation services
business.
Interest, Net
Net interest expense was 3.3% of revenues for the nine months ended December
25, 1998 and 1.8% for the twelve months ended March 27, 1998. The following
table shows net interest expense for these comparative periods (in thousands):
<TABLE>
<CAPTION>
Nine Months Twelve Months
Ended Ended
December 25, March 27,
1998 1998
<S> <C> <C>
Interest incurred.................................... $25,876 $10,730
Capitalized interest................................. -- (10)
Interest income...................................... (981) (2,751)
------- -------
Interest, net...................................... $24,895 $ 7,969
======= =======
</TABLE>
The increase in interest expense is primarily attributable to the credit
facilities used in the OHM Acquisition.
Income Taxes
For the nine months ended December 25, 1998, we reported a loss from
continuing operations of $0.7 million and recorded an income tax charge of $9.7
million before adjusting for the special charge. We also provided a deferred
tax asset valuation adjustment for a portion of the special charges and
recognized a tax benefit of $3.0 million on the divestiture of the HTTS(R)
business. The total net tax charge is $6.7 million. Our effective income tax
rate from continuing operations is more than the federal statutory rate
primarily due to the valuation adjustment for the above charge and amortization
of cost in excess of net assets of acquired businesses.
For the twelve months ended March 27, 1998, we reported a loss from
continuing operations before income taxes and an extraordinary item of $2.2
million and recorded an income tax charge of $4.2 million after
47
<PAGE>
adjusting for the special charge and a $2.3 million deferred tax asset
valuation adjustment prior to the acquisition of OHM. We also recognized a tax
benefit of $3.5 million on an extraordinary charge for the early extinguishment
of debt and a $3.0 million benefit for a loss from disposition of a
discontinued operation. The total net tax benefit is $2.4 million. Our
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.
We will need to have approximately $288.0 million of future earnings to
fully realize our deferred tax asset of $109.6 million, net of a valuation
allowance of $50.3 million, at December 25, 1998, assuming a net 38% federal
and state tax rate. We evaluate the adequacy of the valuation allowance and the
realizability of the deferred tax asset on an ongoing basis. Because of our
position in the industry, recent acquisitions and restructuring, and existing
backlog, management expects that our future taxable income will more likely
than not allow us to fully realize our recorded deferred tax asset. The
increase in gross deferred tax asset is primarily due to the acquisitions of
OHM and GTI.
Extraordinary Item
For the twelve months ended March 27, 1998, we recorded a $5.7 million
charge, net of income tax benefit of $3.5 million, for the early extinguishment
of $65.0 million of senior debt which was refinanced in connection with the
acquisition of OHM. We incurred a $5.6 million payment for the make whole
interest provision as a result of retiring our $65.0 million senior debt, in
accordance with the loan agreement. In addition, we also expensed approximately
$3.6 million related to the unamortized loan origination expenses associated
with issuing the $65.0 million senior debt.
Dividends
Our reported dividends for the nine months ended December 25, 1998 were $4.7
million and $6.2 million for the twelve months ended March 27, 1998. Our
reported dividends include imputed dividends on our convertible preferred stock
of $0.9 million for the nine months ended December 25, 1998 and $2.1 million
for the twelve months ended March 27, 1998, which are not payable in cash or
stock. Commencing with November 21, 1997, our convertible preferred stock
outstanding accrued a 3% in-kind stock dividend for one year during which the
statement of operations also included an imputed dividend at a rate of
approximately 3% per annum. This additional imputed dividend of $0.9 million
for the nine months ended December 25, 1998 and $0.5 million for the twelve
months ended March 27, 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. Commencing with November 21, 1998, our
outstanding convertible preferred stock is entitled to a 6% cumulative cash
dividend payable quarterly. We reported cash dividends on our outstanding
depositary shares, each representing 1/100 of a share of our 7% cumulative
convertible exchangeable preferred stock, of $2.7 million in the nine months
ended December 25, 1998 and $3.6 million for the twelve months ended March 27,
1998. The decrease in cash dividends between the March 27, 1998 and December
25, 1998 fiscal periods of $0.9 million is due to the shortened fiscal period
(in thousands).
Our dividends are summarized below:
<TABLE>
<CAPTION>
Twelve
Nine Months Months
Ended Ended
December 25, March 27,
1998 1998
<S> <C> <C>
7% Cumulative convertible exchangeable cash dividend.... $2,697 $3,595
6% Cumulative convertible participating
. Imputed non-cash dividend........................ 860 2,105
. In-kind 3% stock dividend........................ 894 467
. Cash dividend.................................... 213 --
------ ------
Total............................................... $4,664 $6,167
====== ======
</TABLE>
48
<PAGE>
Twelve Months Ended March 27, 1998 Compared to Twelve Months Ended March 28,
1997
Revenues and Gross Margin
Company. Revenues for the twelve months ended March 27, 1998 were $442.2
million or 22% higher than the $362.1 million in revenues reported in the
twelve months ended March 28, 1997. The twelve months ended March 27, 1998
include the results of OHM Corporation since February 25, 1998, the date on
which we acquired a 54% controlling interest. Revenues related to OHM in the
twelve months ended March 27, 1998 were $42.1 million.
Gross margins were 11.6% of revenues in the twelve months ended March 27,
1998 and 10.5% in the twelve months ended March 28, 1997. The improved gross
margin was due to spreading fixed overhead costs over higher revenue levels.
Engineering & Construction. Engineering & construction revenues were $346.1
million in the twelve months ended March 27, 1998 compared to $308.6 million in
the twelve months ended March 28, 1997, an increase of approximately 12%. DOD
revenues were $199.4 million in the twelve months ended March 27, 1998 or $45.9
million greater than the $153.5 million of DOD revenues in the twelve months
ended March 28, 1997. The strong improvement in DOD activity was due to
increased funding of the DOD indefinite delivery order programs and an increase
in the number of DOD contracts being executed. In addition, OHM contributed
about $20.0 million to the increase in DOD revenues in the twelve months ended
March 27, 1998. DOE revenues of $40.5 million in the twelve months ended March
27, 1998 were $9.1 million lower than the $49.6 million of DOE revenues
reported in the twelve months ended March 28, 1997. Commercial revenues were
$106.2 million in the twelve months ended March 27, 1998 or $0.7 million higher
than the $105.5 million in commercial revenue reported in the twelve months
ended March 28, 1997.
Our engineering & construction platform segment profit of $37.0 million in
the twelve months ended March 27, 1998 increased 43% over the $25.9 million
segment profit reported in the twelve months ended March 28, 1997. This
increase is primarily a result of the increase in higher margin, DOD revenues.
The engineering & construction segment profit was 10.7% and 8.4% of engineering
& construction revenues for the twelve months ended March 27, 1998 and the
twelve months ended March 28, 1997, respectively.
Consulting & Ventures. Consulting & ventures revenues of $79.6 million in
the twelve months ended March 27, 1998 exceeded the twelve months ended March
28, 1997 revenues of $48.8 million by $30.8 million, an increase of
approximately 63%. This increase is primarily attributable to the acquisitions
of specialized companies primarily serving targeted commercial markets.
Our consulting & ventures platform segment profit was $7.3 million in the
twelve months ended March 27, 1998 compared to $0.7 million in the twelve
months ended March 28, 1997. The consulting & ventures segment profit was 9.2%
and 1.4% of consulting & ventures revenues for the twelve months ended March
27, 1998 and the twelve months ended March 28, 1997, respectively. The increase
in absolute dollars and as a percentage of revenue is attributable to the
acquisitions that occurred in the twelve months ended March 27, 1998.
Outsourced Services. Outsourced services revenues in the twelve months ended
March 27, 1998 were $6.8 million from the OHM acquisition, compared to none in
the twelve months ended March 28, 1997. As discussed previously, the OHM
acquisition occurred on February 25, 1998 and consequently no revenue from OHM
was included in the twelve months ended March 28, 1997 results.
Outsourced services reported $0.9 million in segment profit in the twelve
months ended March 27, 1998 compared to none in the twelve months ended March
28, 1997.
International. International revenues were $9.6 million in the twelve months
ended March 27, 1998 compared to $4.7 million in the twelve months ended March
28, 1997. This increase is the result of the Chi Mei acquisition in October
1996.
49
<PAGE>
The international platform segment loss of $1.4 million in the twelve months
ended March 27, 1998 compares to segment profit of $0.2 million in the twelve
months ended March 28, 1997. The higher loss is the result of losses on
selected international projects.
Selling, General and Administrative Expenses
Selling, general and administrative expenses were 7.2% of revenues in the
twelve months ended March 27, 1998 and 9.2% in the twelve months ended March
28, 1997. Selling, general and administrative expenses of $31.8 million in the
twelve months ended March 27, 1998 were $1.7 million or 5.0% lower than the
twelve months ended March 28, 1997 level primarily due to the full year impact
of the corporate restructuring initiated at the end of the second fiscal
quarter of 1997 and the relocation of our corporate headquarters in the first
quarter of the twelve months ended March 27, 1998 which resulted in reduced
lease expense and labor cost as we integrated and consolidated management and
corporate functions into our largest facility, see Special Charges.
Selling, general and administrative expenses include goodwill amortization
of $1.4 million for the twelve months ended March 27, 1998 and $0.8 million for
the twelve months ended March 28, 1997. Selling, general and administrative
expenses, excluding goodwill, were 6.9% of revenues for the twelve months ended
March 27, 1998 and 9.0% of revenues for the twelve months ended March 28, 1997.
Special Charges
Special charges of $14.2 million were recorded in the twelve months ended
March 27, 1998. These special items include $5.7 million for integration costs
associated with the acquisition of OHM, $3.9 million non-cash charge related to
the Helen Kramer project claim settlement, $2.8 million charge associated with
the relocation of our corporate headquarters, and $1.8 million loss from the
sale of a small remediation services business. See previous table on Special
Charges incurred in the twelve months ended March 27, 1998.
Corporate Restructuring. Special charges of $8.4 million were recorded in
the twelve months ended March 28, 1997. The special charge relating to a
corporate restructuring included $3.4 million for severance, $4.1 million for
closing and reducing the size of selected offices and $0.9 million for other
related items. As part of the restructuring plan, we laid-off 133 employees and
paid over $2.5 million in termination benefits. In addition, we approved a plan
to close five leased facilities and reduce the size of eleven other leased
facilities by either sublease or abandonment. 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 leases. One of these facility closures has a
remaining lease obligation of approximately six years. A summary of the special
charges incurred during the twelve months ended March 28, 1997 is outlined
below (in thousands):
<TABLE>
<CAPTION>
Twelve Months Ended March 28, 1997
-----------------------------------------
Cash/ Special Reserve balance
Noncash Charges Activity at 12/25/98
<S> <C> <C> <C> <C>
Corporate Restructuring:
Severance and relocation............ Cash $(3,400) $3,400 $ --
Duplicative offices/assets.......... Cash (4,100) 3,227 (873)
Other............................... Cash (903) 903 --
---- ------- ------ -----
Total............................. $(8,403) $7,530 $(873)
======= ====== =====
</TABLE>
50
<PAGE>
Interest, Net
Net interest expense was 1.8% of revenues in the twelve months ended March
27, 1998 and 1.5% of revenues in the twelve months ended March 28, 1997. The
following table shows net interest expense for these comparative periods (in
thousands):
<TABLE>
<CAPTION>
Twelve Months Ended
-------------------
March 27, March 28,
1998 1997
<S> <C> <C>
Interest incurred........................................... $10,730 $ 7,168
Capitalized interest........................................ (10) --
Interest income............................................. (2,751) (1,908)
------- -------
Interest, net............................................. $ 7,969 $ 5,260
======= =======
</TABLE>
The increase in the twelve months ended March 27, 1998 net interest expense
compared to the twelve months ended March 28, 1997 of $2.7 million is
attributable to the credit facilities used in the OHM acquisition. Loan
origination costs, fees and interest expense incurred for the period February
25, 1998 to March 27, 1998 related to the acquisition of OHM stock were
approximately $3.4 million.
Income Taxes
For the twelve months ended March 27, 1998, we reported a loss from
continuing operations before income taxes and an extraordinary item of $2.2
million and recorded an income tax charge of $4.2 million after adjusting for
the special charge and a $2.3 million deferred tax asset valuation adjustment
prior to the acquisition of OHM. We also recognized a tax benefit of $3.5
million on an extraordinary charge for the early extinguishment of debt and a
$3.0 million benefit for a loss from disposition of a discontinued operation.
The total net tax benefit is $2.4 million. Our 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.
For the twelve months ended March 28, 1997, in which we reported a loss from
continuing operations before income taxes of $9.0 million, we recorded an
income tax benefit of $0.2 million which included a $4.6 million tax charge
resulting from the adjustment of our deferred tax asset valuation allowance
based on our assessment of the uncertainty as to when we will generate a
sufficient level of future earnings to realize the deferred tax asset created
by the special charges.
Dividends
Our dividends are summarized below (in thousands):
<TABLE>
<CAPTION>
March 27, March 28,
1998 1997
<S> <C> <C>
7% Cumulative convertible exchangeable cash dividend....... $3,595 $4,050
6% Cumulative convertible participating
. Imputed non-cash dividend.............................. 2,105 866
. In-kind 3% stock dividend (including cash paid of
$12,000 for fractional shares)......................... 467 --
------ ------
Total.................................................. $6,167 $4,916
====== ======
</TABLE>
Commencing with November 21, 1997, our convertible preferred stock
outstanding accrued a 3% in-kind stock dividend for one year during which the
statement of operations also included an imputed dividend at a rate of
approximately 3% per annum.
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<PAGE>
Discontinued Operations
At December 25, 1998, our consolidated balance sheet included accrued
liabilities of $7.9 million to complete the closure and post-closure of our
disposal facilities and the PRP matters net of trust fund and annuity
investments, restricted to closure and post-closure use and anticipated
insurance settlement proceeds. In the twelve months ended March 27, 1998, we
increased our provision for loss on disposition of our discontinued
transportation, treatment and disposal business by $5.0 million, net of income
tax benefit of $3.0 million. This increased provision primarily related to an
additional accrual for closure costs related to the former Panoche disposal
site. In March 1998, we announced approval by the California Department of
Toxic Substances Control of the final closure and post-closure plan for the
last of our four inactive treatment, storage and disposal facilities. The
approved plans allow us 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 our discontinued operations, see the note
to our consolidated financial statement entitled "Discontinued Operations."
LIQUIDITY AND CAPITAL RESOURCES
Working capital increased by $45.4 million or 60.6% to $120.3 million at
December 25, 1998 from $74.9 million at March 27, 1998 as a result of the
acquisitions of OHM and GTI. The current ratio at December 25, 1998 was 1.44:1
which compares to 1.38:1 at March 27, 1998.
Cash used by operating activities for the nine months ended December 25,
1998 totaled $34.5 million compared to $19.5 million of cash used for operating
activities in the twelve months ended March 27, 1998. This $15.0 million
increase is principally due to an increase in working capital requirements as a
result of the OHM acquisition. The $34.5 million of cash used for operating
activities during the nine months ended December 25, 1998 also includes $11.1
million of costs associated with our discontinued operations. We expect our
discontinued operations cash usage for the twelve months ended December 31,
1999 to be less than $8.0 million.
Capital expenditures were $6.9 million, $4.8 million and $3.4 million for
the nine months ended December 25, 1998, the twelve months ended March 27, 1998
and the twelve months ended March 28, 1997, respectively. Capital expenditures
for the nine months ended December 25, 1998 were $2.1 million higher than the
twelve months ended March 27, 1998 due primarily to computer related
expenditures required to integrate our recent acquisitions. We expect capital
expenditures to increase to approximately $14.0 million in fiscal year 1999 due
to information technology upgrades required to integrate recent acquisitions.
Cash used for the acquisition of businesses, net of cash acquired was $81.3
million and $163.2 million for the nine months ended December 25, 1998 and the
twelve months ended March 27, 1998, respectively. On February 25, 1998, we
purchased 54% of OHM for $160.2 million which is included in the Consolidated
Statements of Cash Flows net of $12.0 million of cash acquired. On June 11,
1998, we paid $34.8 million as part of the consideration to acquire the balance
of OHM. On December 3, 1998, we acquired GTI for $69.4 million (or $40.1
million net of $29.3 million in cash acquired). We also acquired specialty
consulting firms PHR, PEG, JSC and LandBank for cash during the twelve months
ended March 27, 1998. These acquisition agreements, along with the acquisition
of Beneco by OHM, include potential future contingent payments. The total
potential future contingent payments range from a low of $1.9 million to a
maximum of approximately $19.1 million.
We do not expect to pay significant cash income taxes over the next several
years due to our net operating loss carryforwards.
In connection with the OHM acquisition, we entered into a $240.0 million
credit facility which was used to complete the cash tender offer to acquire 54%
of OHM, to refinance our $65.0 million principal amount of
52
<PAGE>
senior notes and for working capital purposes until we acquired the balance of
OHM on June 11, 1998. On June 11, 1998, the credit facilities were amended and
restated to effect a $378.0 million refinancing. Under this refinancing, we
initially borrowed $228.0 million under term loan provisions and approximately
$85.0 million through a revolving credit facility. On September 14, 1998, the
lenders under the credit facilities approved the first amendment, increasing
the revolving credit facility from $150.0 million to $185.0 million.
Long-term debt, including OHM's 8% convertible subordinated debentures, of
$405.1 million at December 25, 1998 increased from $284.7 million at March 27,
1998 primarily due to the acquisitions of OHM and GTI. Our ratio of total debt,
including current portion, to equity was 1.77:1 at December 25, 1998, 2.03:1 at
March 27, 1998 and 0.42:1 at March 28, 1997.
Due to conditions existent in the long-term credit markets during the third
and fourth quarter of 1998, we utilized our revolving credit facility and
current cash flow as described above to finance the acquisition of GTI. As a
result of the utilization of funds for acquisition purposes and a $28.8 million
increase in unbilled receivables related to certain government projects which,
according to the contract terms can not be billed until certain milestones are
achieved, we have utilized a larger portion of our existing revolving credit
capacity than would normally be expected. Between the date of the GTI
acquisition and mid March 1999, we have had average daily availability under
our revolving credit facilities and cash of $25.0 million.
We continue to have significant cash requirements including interest,
operating lease payments, preferred dividend obligations, required term loan
and subordinated debenture principal payments, the potential acquisition
contingent payments discussed above, expenditures for the closure of our
inactive disposal sites and PRP matters, see Transportation, Treatment and
Disposal Discontinued Operations, and contingent liabilities.
As of December 25, 1998, on an as adjusted basis after giving effect to the
offering of series A notes and the EFM and Roche acquisitions, the aggregate
amount of debt including the current portion would have been approximately
$518.9 million, and approximately $152.0 million would have been available for
additional working and acquisition capital under the revolving credit
facilities.
Following the Offering of Series A Notes
Our primary sources of liquidity are cash flow from operations and
borrowings under our revolving credit facility. Our primary uses of cash will
be to fund working capital, capital expenditures and potential acquisitions and
to service debt.
We incurred substantial indebtedness in connection with the offering of
series A notes. As of December 25, 1998, on a pro forma basis, we had $518.9
million of indebtedness outstanding. We have significant amounts of scheduled
debt payments, including interest and principal repayments on the series A
notes and under our credit facilities. In addition, our significant debt
service obligations due to our offering of series A notes could, under certain
circumstances, have material adverse consequences to holders of the series A or
series B notes. See "Risk Factors--Substantial Leverage" and "--Ability to
Service Debt."
A portion of the net proceeds of the offering of series A notes was used to
fund the costs of the EFM and Roche acquisitions, the aggregate cost of which,
excluding potential earnout payments, was approximately $85.4 million. We used
approximately $130.4 million to refinance existing indebtedness incurred under
our $185.0 million revolving credit facility. Our term loan and revolving
credit facility interest rates are based on LIBOR and the Prime rate, plus
interest rate spreads that vary depending on our leverage. At December 25,
1998, we had outstanding $225.8 million of borrowings under our term loan and
$143.0 million under our revolving credit facility, and our borrowing rate was
7.25%, with LIBOR rates at approximately 5% and an interest rate spread of
approximately 2.25%.
We expect our capital expenditures to increase to $14.0 million in 1999 due
to information technology upgrades required to integrate recent acquisitions.
53
<PAGE>
We believe that our cash flow from operations and availability under our
credit facilities will provide adequate funds for our working capital needs for
the next twelve months, planned capital expenditures and debt service
requirements. Future acquisitions, joint ventures or similar transactions may
require additional capital and there can be no assurance that such capital will
be available to us on acceptable terms or at all. We cannot assure you that our
business will generate sufficient cash flow from operations, that currently
anticipated revenue growth and cost savings will be realized or that future
borrowings will be available to us under our credit facilities in an amount
sufficient to enable us to pay our indebtedness, including the series A and
series B notes, or to fund our other liquidity needs. We may need to refinance
all or a portion of our indebtedness, including the series A and series B
notes, on or before maturity. We cannot assure you that we will be able to
refinance any of our indebtedness, including our credit facilities and the
series A and series B notes, on commercially reasonable terms or at all.
Quantitative and Qualitative Disclosures About Market Risk
The following discussion of our exposure to various market risks contains
"forward-looking statements" that involve risks and uncertainties. These
projected results have been prepared utilizing assumptions considered
reasonable in the circumstances and in light of information currently available
to us. Nevertheless, because of the inherent unpredictability of interest
rates, actual results could differ materially from those projected in such
forward-looking information.
At December 25, 1998, we had fixed-rate debt totaling $44.5 million in
principal amount and having a fair value of $40.7 million. These instruments
are fixed rate and, therefore, do not expose us to the risk of earnings loss
due to changes in market interest rates. However, the fair value of these
instruments would decrease to approximately $40.0 million if interest rates
were to increase by 10% from their levels at December 25, 1998.
At December 25, 1998, we had floating-rate long-term debt totaling $368.8
million in principal amount and having a fair value of $368.8 million. These
borrowings are under our credit facilities. We have entered into a swap
agreement with a notional amount of $126.0 million as required by our credit
facilities and to reduce our exposure to adverse fluctuations in interest rates
relating to this debt. We have not entered into any other derivative financial
instruments for trading purposes. If floating rates were to increase by 10%
from December 25, 1998 levels, we would incur additional interest expense of
approximately $1.8 million.
As discussed in the notes to our consolidated financial statements, our
consolidated balance sheet includes $7.9 million of accrued liabilities to
complete the closure and post-closure of our disposal facilities and other
matters, net of certain trust fund and annuity investments which are restricted
to closure and post-closure use and insurance recovery. These trust fund assets
total $20.1 million at December 25, 1998 and consist predominately of high
quality common stocks, fixed rate AAA rated corporate and government bonds, and
annuity investments which provide for periodic payments into the trust fund. If
interest rates were to increase by 10% from their levels at December 25, 1998,
the decrease in fair value of the fixed-rate debt securities would not be
material to us. If the market prices of the individual equity securities were
to decrease by 10% from their levels at December 25, 1998, the resulting loss
in fair value of these securities would not be material to us.
Year 2000 Compliance
The Year 2000 issue is the result of computer programs being written using
two digits rather than four to define the applicable year. Any of our computer
programs or hardware that have date-sensitive software or embedded chips may
recognize a date using "00" as the year 1900 rather than the year 2000. This
could result in a system failure or miscalculations causing disruptions of
operations, including, among other things, a temporary inability to process
transactions, send invoices, or engage in similar normal business activities.
State of Readiness. Our core financial and administrative software systems
are certified as Year 2000 compliant by the vendor. During the year ended March
27, 1998, we established an integration test plan to test this software and
verify Year 2000 compliance. In February 1998, these integration tests were
successfully
54
<PAGE>
completed. Our core hardware was also tested and was found to be fully
compliant with the Year 2000 requirements. We have recently hired a Year 2000
Program Director and have begun communicating with clients, suppliers,
financial institutions and others with which we do business to coordinate Year
2000 conversion. At this time, we cannot predict the impact on our consolidated
financial condition, liquidity and results of operations of the U.S. federal
government's Year 2000 readiness. For the nine months ended December 25, 1998,
a significant portion of our business, approximately 69%, is attributable to
the federal government.
Costs. Management has prepared a detailed conversion plan and has estimated
the total cost of Year 2000 compliance to be approximately $3.1 million. As of
December 25, 1998, we have incurred costs of approximately $0.5 million to
address Year 2000 issues. All of the costs have been or will be charged to
operating expense and funded through operating cash flows. Additional costs
could be incurred if significant remediation activities are required with third
parties.
Risks and Contingencies. We are currently developing a contingency plan to
address how we will handle the most reasonably likely worst case scenarios
including situations where our clients, suppliers, financial institutions and
others are not Year 2000 compliant on January 1, 2000. We do not have control
over these third parties and, as a result, cannot currently estimate to what
extent our future operating results may be adversely affected by the failure of
these third parties to successfully address their Year 2000 issues. However,
our contingency plan includes actions designed to identify and minimize any
third party exposures and we believe that, based on third party exposures
identified to date, these issues should be resolved by the year 2000.
55
<PAGE>
BUSINESS
Company Overview
We are a leading provider of diversified, value-added services in the areas
of environmental consulting, engineering and construction and remediation. In
addition, we are leveraging our core project management competencies to offer
our clients a variety of outsourcing services such as facilities management. We
have a strong reputation for both the high quality of our work and the breadth
of the services we provide.
Our clients are federal, state and local governments in the U.S. and
commercial businesses worldwide. We obtained 60% of our pro forma revenues for
the twelve months ended December 25, 1998 from the federal government under
more than 120 contracts that range in length from one to ten years. In
addition, we serve more than 1,600 commercial clients on projects which range
in length from one month to more than one year. As of December 25, 1998 on a
pro forma basis, we employed over 6,000 persons in a network of more than 80
domestic and ten international offices. For the twelve months ended December
25, 1998, our pro forma revenues were $1.3 billion and our adjusted EBITDA was
$130.2 million. As of December 25, 1998, our pro forma backlog was $4.0
billion. Ninety percent of our backlog is related to federal government
programs and approximately 84% is expected to be charged to our clients on a
cost-reimbursable basis. Many of our commercial contracts are evergreen
contracts that are typically not part of our backlog.
Industry Overview and Trends
According to industry sources, over the past five years, the portion of the
domestic environmental services industry in which we compete grew from
approximately $25.4 billion in 1993 revenues to approximately $26.5 billion in
1997 revenues, which equates to a compound annual growth rate of approximately
1.1%. Demand for our environmental services is driven by a number of factors,
including:
. the needs of the DOD and DOE to restore sites formerly used for weapons
production or military bases;
. the need to comply with federal, state and municipal environmental
regulation and enforcement regarding the quality of the environment;
. the need to bring aging production facilities into compliance with
current environmental regulations;
. the need to minimize waste generation on an ongoing basis; and
. the need to reduce or forestall liability associated with pollution-
related injury and damage.
A significant portion of future DOD and DOE environmental expenditures will
be directed to cleaning up hundreds of military bases and to restoring former
nuclear weapons facilities. The DOD has stated that there is an urgent need to
ensure that the hazardous wastes present at these sites, often located near
population centers, do not pose a threat to the surrounding population, and, in
connection with the closure of many military bases, there is an economic
incentive to make sure that the environmental restoration enables these sites
to be developed commercially by the private sector. The DOE has long recognized
the need to stabilize and safely store nuclear weapons materials and to clean
up areas contaminated with hazardous and radioactive waste. According to
federal government publications, the DOD's budget for environmental remediation
will be approximately $2.5 billion annually for the next five years and the
DOE's budget will be approximately $5.7 billion annually for the same period.
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Significant environmental laws have been enacted in the U.S. in response to
public concern about the environment. These laws and the implementing
regulations affected nearly every industrial activity, and efforts to comply
with the requirements of these laws create demand for our services. The
principal federal legislation that has created a substantial market for us, and
therefore has the most significant effect on our business, includes the
following:
. Comprehensive Environmental Response, Compensation and Liability Act of
1980. CERCLA established the Superfund program to clean up existing,
often abandoned hazardous waste sites and provides for penalties and
significant damages for noncompliance with EPA orders. As of September
1998, the EPA identified approximately 1,370 sites as being
significantly contaminated with hazardous materials and, therefore,
named them as Superfund sites. Only approximately 41% of these sites
have been remediated.
. Resource Conservation and Recovery Act of 1976. RCRA provides a
comprehensive scheme for the regulation of hazardous waste from the time
of generation to its ultimate disposal, and sometimes thereafter, as
well as the regulation of persons engaged in the treatment, storage and
disposal of hazardous waste.
. Clean Air Legislation. The Clean Air Act empowered the EPA to establish
and enforce National Ambient Air Quality Standards, National Emission
Standards for Hazardous Air Pollutants and limits on the emission of
various pollutants. The 1990 amendments to the Clean Air Act
substantially increased the number of sources emitting a regulated air
pollutant which will be required to obtain an operating permit; the
amendments also addressed the issues of acid rain and ozone protection.
. Clean Water Act of 1972. The Clean Water Act established a system of
standards, permits and enforcement procedures for the discharge of
pollutants to surface water from industrial, municipal and other
wastewater sources. The Toxic Substance Control Act, enacted in 1976,
established requirements for identifying and controlling toxic chemical
hazards to human health and the environment.
In recent years, our industry has experienced a slowing in revenue growth,
which is principally attributable to spending patterns of commercial clients.
We attribute this slowdown to, among other things:
. decreased federal, state and local enforcement of regulations, and
. delay in the reauthorization of CERCLA.
These factors have been partially offset by an increased desire on the part
of commercial clients for strategic environmental services, which:
. provide an integrated, proactive approach to environmental issues, and
. are driven by economic, as opposed to legal or regulatory concerns.
In addition, there is a growing international market arising from the
increased awareness on the part of foreign governments and private sector
entities of the need for additional and/or initial environmental regulations,
studies and remediation.
Traditionally the DOD has maintained most of its own facilities and
performed its own facility activities, but it is now in the process of
transferring many of these responsibilities to private contractors and private
owners. The privatization market has been created by the government's selling
an asset or revenue stream, such as military housing and electric, water and
wastewater utilities on a military base, to a private company, which is then
responsible for maintenance and operation. The outsourcing market has been
created by private contractors taking over site activities currently conducted
by government, often military, personnel.
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Acquisitions
Since 1996, we have made ten acquisitions to expand and diversify our
businesses to meet our strategic objectives. The following table provides some
basic information on these acquisitions.
<TABLE>
<CAPTION>
Most Recent
Fiscal Year
Revenues
Date of Prior to
Acquisition Name Location(s) Business Acquisition
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Mar. 1996 Gradient Massachusetts . Environmental/human health risk assessment $5 million
Corporation . Litigation support
- -----------------------------------------------------------------------------------------------------------------
Nov. 1996 Chi Mei IT Taiwan . Wastewater treatment design/build $12 million
- -----------------------------------------------------------------------------------------------------------------
May 1997 PHR California . Historical pollution liability research and $3 million
Environmental Washington, DC investigation
Consultants, Inc.
- -----------------------------------------------------------------------------------------------------------------
Sept. 1997 Pacific California . Environmental consulting and engineering $10 million
Environmental services
Group, Inc.
- -----------------------------------------------------------------------------------------------------------------
Jan. 1998 Jellinek, Washington, DC . Science-based environmental consulting and $12 million
Schwartz & Colorado advocacy services
Connolly, Inc. England
- -----------------------------------------------------------------------------------------------------------------
Mar. 1998 LandBank, Inc. Colorado . Real estate acquisition and restoration company $3 million
- -----------------------------------------------------------------------------------------------------------------
Feb. and OHM Corporation Over 30 regional . Leading diversified services firm providing a $527 million
June 1998 offices broad range of services for governmental and
private sector clients
. Leading provider of operations, maintenance
and construction outsourcing services
- -----------------------------------------------------------------------------------------------------------------
Dec. 1998 Fluor Daniel GTI, Over 30 offices in . Broad-based environmental services firm $200 million
Inc. North America,
Europe and
Australia
- -----------------------------------------------------------------------------------------------------------------
March 1999 Roche ltee, Groupe Quebec City, . Engineering and construction services to $28 million
conseil Canada wastewater, paper, mining and transportation
industries worldwide
- -----------------------------------------------------------------------------------------------------------------
April 1999 EFM Group [To come] . environmental remediation, program management $106 million
and technical support for federal government
agencies and private sector clients
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
We believe our recent acquisitions add capabilities that are complementary
to our existing services, and offer us cost savings and other synergies. We
also believe that our matrix organization and our comprehensive management
information system allow us to:
. efficiently integrate acquired operations,
. eliminate duplicative costs,
. centralize common functions,
. consolidate locations that serve the same areas, and
. use our low cost structure to bid successfully on new projects.
In connection with the OHM acquisition, we implemented a cost reduction
program that eliminated approximately $32.0 million in costs on an annualized
basis within six months of acquiring the business, principally through
elimination of management overhead, marketing costs and facilities. In
connection with the GTI acquisition, we executed a similar plan that has
resulted in approximately $18.7 million of annualized cost savings being
realized. We have devised a similar plan with respect to the EFM acquisition
that we believe will
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produce approximately $9.6 million in annualized cost savings. See "Unaudited
Pro Forma Consolidated Financial Data."
EFM
On April 9, 1999, we purchased specified assets and specified liabilities of
EFM from ICF Kaiser for a purchase price of $82.0 million reduced by $8.0
million representing working capital retained by ICF Kaiser.
EFM primarily oversees major program management and technical support
contracts for federal agencies, particularly the DOE, DOD and NASA, as well as
private-sector environmental clients. EFM provides two principal services:
. environmental consulting, characterization, remedial design and
construction; and
. facilities management, which involves engineering, operations and
maintenance.
Examples of current EFM projects include providing technical support for
environmental restoration projects at some of the DOE's former weapons
production facilities and conducting hazardous and radioactive waste cleanups
under two large contracts for the Army Corps of Engineers. EFM also focuses on
providing support to the DOD's privatization and outsourcing initiatives, and
holds a 23% interest in a joint venture providing outsourcing services to NASA.
For the twelve months ended December 31, 1998, EFM had revenues of $105.9
million and adjusted EBITDA of $6.2 million.
Roche
On March 31, 1999, we purchased all of Roche's issued and outstanding
capital stock for an initial payment of $10.0 million in cash, plus two
potential earnout payments.
Roche, an engineering, construction and consulting company based in Canada,
is primarily focused on infrastructure development including transportation and
water/wastewater treatment facilities. Roche also has completed projects in the
pulp and paper and mining markets. Roche operates exclusively outside the U.S.,
and has current project experience in more than 20 countries. We have
collaborated with Roche on projects during the past two years, and we believe
that this acquisition will add to our strategic consulting capabilities and
experience and expertise in international markets. We expect Roche to provide
us with access to international clients as well as a mobile workforce to
respond to our U.S.-based, multinational clients' needs on a global basis. For
the twelve months ended December 25, 1998 Roche had revenues of $28.3 million
and adjusted EBITDA of $0.5 million.
Markets and Services
General
We provide services through four platforms: engineering & construction,
consulting & ventures, outsourced services and international. We do not own or
operate facilities involved in the ongoing commercial disposal of hazardous
waste.
Engineering & Construction
Most of our business is the management of complex hazardous waste
remediation projects. These projects involve the assessment, planning and
execution of the decontamination and restoration of property, plant and
equipment that have been contaminated by hazardous substances. These projects
usually require the cleanup of land sites where hazardous or radioactive
substances have been disposed. These sites can pose threats to adjacent
buildings, production facilities and storage sites and the surrounding rivers,
streams and groundwater. These projects require considerable technical
engineering and analysis to identify the substances involved, the extent of the
contamination, the appropriate alternatives for containing or removing the
contamination, and the
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selection of the technologies for treatment to perform the cleanup of the site.
They also require strong project management and construction and remediation
skills to control costs and to meet required schedules.
Our engineering & construction platform provides full-service DOD and DOE
delivery order program management, engineering and design services, remedial
construction, specialized equipment and decontamination/decommissioning
capabilities. Remedial construction services offered by this platform include:
. 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.
We use our engineering & construction skills to develop partnering
arrangements with clients in which we become the primary supplier of all client
environmental management services and assist clients in innovatively reducing
total environmental costs.
The following is an example of the type of project performed by our
engineering & construction platform. We completed an approximately $70.0
million site remediation and restoration project for the DOD at Fort Ord in
Monterey, California as part of the DOD's base closure program. The project
site consisted of an 8,000 acre military site. We provided a range of services
at this site, including:
. removal of lead and copper from 3.2 miles of beach;
. removal and transportation of over 2.0 million cubic yards of soils and
waste;
. consolidation and closure of four landfills totaling 144 acres;
. restoration of a 44 acre site for a municipal park; and
. revegetation of 100 acres of disturbed property with native species.
Consulting & Ventures
Our consulting & ventures platform helps clients comply with environmental
and/or health and safety regulations. This platform also assists clients in
developing corporate policies and procedures in areas such as pollution
prevention and waste minimization so that they integrate environmental
regulations into their business decisions. Our consulting & ventures platform
provides a wide range of consulting services, including the following:
. environmental permitting,
. facility siting and design,
. strategic environmental management,
. environmental compliance/auditing,
. risk assessment/management,
. air quality assessment/management,
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. pollution prevention and waste minimization,
. industrial hygiene,
. environmental information systems, and
. data management.
The following is an example of the type of project performed by our
consulting & ventures platform. Under a $6.0 million contract with a large,
diversified manufacturing company, we conducted a remedial
investigation/feasibility study on a Superfund site located at a 95-acre coke
plant in Ironton, Ohio. After conducting the study, we prepared a remedial
design/action plan, which included construction services and the design of
facilities and bioremediation and groundwater management. Our plan resulted in
substantial savings for the client.
Outsourced Services
Through our outsourced services platform, we have broad capabilities for
operations, maintenance, management and construction at federal facilities and
in the private sector. This platform is a leading provider of project, program
and construction management services to the DOD and state and local government
agencies. As a result of the OHM acquisition, we are leveraging our core
competencies into new, high-growth service areas, especially toward outsourcing
and privatization occurring in federal, state and local governments. These core
competencies meet facilities management needs in the private sector as well.
Our outsourced services platform also offers recurring services that are not
dependent on regulatory enforcement.
The following is an example of the type of project performed by our
outsourced services platform. We have been awarded a third consecutive contract
by the Air Force to perform construction management services over a five-year
period at Hill Air Force Base in Utah. The value of this contract is
approximately $95.0 million, and involves projects ranging from small
renovation and replacement work to the installation of sophisticated centrifuge
technology. We also are coordinating the activities of several subcontractors
that are performing ongoing construction activities.
International
We are building our international platform to meet the global environmental
needs of our U.S.-based clients. In November 1996, we bought 50.1% of the stock
of Chi Mei Scientech/Entech, a Taiwan-based wastewater treatment design/build
firm, now doing business as Chi Mei IT. As a part of our purchase of GTI, we
acquired GTI's subsidiaries in Australia, Italy and the United Kingdom. We also
entered into a four-year marketing agreement with Fluor Daniel, Inc. that is
expected to provide us project diversification on a worldwide basis. In March
1999, we acquired all of the outstanding capital stock of Roche, a 700 employee
firm based in Canada. Roche has current project experience in over 20
countries. Also, we have in the past, and may in the future, enter into joint
venture agreements or investments for international projects. See "Management's
Discussion and Analysis of Results of Operations and Financial Condition--
Results of Operations--Continuing Operations--Revenues."
The following is an example of the type of project performed by our
international platform. We were appointed to design, install and operate a soil
vapor extraction system to remediate a former gasworks site in London, England,
under a contract for approximately (Pounds)500,000, or approximately $800,000.
Under a detailed design created to speed installation and minimize
commissioning time, we were able to treat an area of 43,000 square meters.
During the course of the project, we bioremediated or volatillised over 100
tons of contaminated soil. The site will now be redeveloped as a major
exhibition site.
Clients
Our clients are federal, state and local governments and commercial
businesses worldwide.
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Federal, State and Local Government Clients
Due to our technical expertise, project management experience and full-
service capabilities, we have successfully bid on and executed CERCLA and RCRA-
related contracts for many federal and other government agencies. See
"Business--Operations--Regulations."
Federal government contracts are typically awarded through competitive
bidding pursuant to federal procurement regulations and involve several
bidders. After a successful bidder is selected, there is usually a period for
contract negotiations. Government contracts also typically have annual funding
limitations and are limited by public sector budgeting constraints. Some of
these contracts provide a maximum amount of services that may be performed by
us, and specific services are authorized from time to time through a series of
task orders under the master contract.
Many of these government contracts are for multi-year indefinite delivery
order contracts. These programs provide estimates of what the agency expects to
spend, and our program management and technical staffs work closely with the
client to define the scope and amount of work required. While these contracts
do not initially provide us with any specific amount of work, as projects are
defined, the work is awarded to us without further competitive bidding.
Approximately 40% of our revenues for the nine months ended December 25, 1998
were from indefinite delivery order contracts.
Although we generally serve as the prime contractor on our federal
government contracts, or as a part of a joint venture that is the prime
contractor, we also serve as a subcontractor to other prime contractors on some
federal government programs. As has become typical in the environmental
industry, we have entered and may continue to enter into joint venture or
teaming arrangements with competitors when bidding on the largest, most complex
contracts.
The table below sets forth the percentage of revenues we receive from
federal, state and local government contracts as a percentage of our
consolidated revenues.
<TABLE>
<CAPTION>
Twelve months ended Pro Forma
------------------- Nine months ended Twelve months ended
March 28, March 27, December 25, December 25,
Source 1997 1998 1998 1998
<S> <C> <C> <C> <C>
Federal government:
DOD................... 42% 47% 52% 45%
DOE................... 14 9 10 9
Other federal
agencies............. 3 2 7 6
--- --- --- ---
59 58 69 60
State and local
governments.......... 8 5 5 5
--- --- --- ---
Total................... 67% 63% 74% 65%
=== === === ===
</TABLE>
Bidding Process
We have a set of company-wide estimating and proposal development procedures
designed to provide consistency across all operating platforms during the
preparation of both commercial and government proposals. Our shared services
group implements these procedures and provides resources to our business
platforms for preparation of cost estimates, proposals and bid submittals. Each
of our platforms has responsibility for responding to customer solicitations.
The final decision requires coordination between operations management,
business development personnel and corporate management. Before our bid is
submitted to a client, the approach and pricing are reviewed by operations and
estimating management, which performs a risk evaluation of commercial terms and
conditions and technical aspects of the bid opportunity. Pricing then is
established in accordance with an authority limits matrix that is issued by our
legal department.
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Commercial Clients
We serve numerous commercial clients including chemical, petroleum and other
manufacturing firms, utilities, real estate and transportation service
companies and law firms. Much of our commercial work represents new contracts
awarded by existing clients. No single commercial client accounted for 10% or
more of our consolidated revenues in the nine months ended December 25, 1998,
or during fiscal years 1998 or 1997. Although in recent years enforcement of
CERCLA has diminished, clients are still seeking strategic, integrated
solutions to their environmental problems, which we seek to provide.
Contracts
We enter into various types of contracts with our clients, including fixed
price and cost-reimbursable plus fixed fee and award fee contracts. For the
twelve months ended December 25, 1998 on a pro forma basis, 30% of our net
revenue was derived from fixed-price contracts and 70% from cost-reimbursable
plus fixed fee and award fee contracts. Under a fixed-price contract, the
client agrees to pay a specified price for our performance of the entire
contract. Under a cost-reimbursable contract, we charge clients negotiated
rates based on our direct and indirect costs plus a fee component. Our ability
to perform profitably under fixed-price and other types of contracts depends on
our ability to identify, manage and recover on claims for differing and
unanticipated conditions and other changes. See "Risk Factors--Government
Contractor Risk."
We provide our services under contracts, purchase orders or retainer
letters. We bill all of our clients periodically based on costs incurred, on
either an hourly-fee basis or on a percentage of completion basis, as the
project progresses. Generally, our contracts do not require that we provide
performance bonds, although we typically require our subcontractors to post a
bond. A performance bond, issued by a surety company, guarantees the
contractor's performance under the contract. If the contractor defaults under
the contract, the surety will, in its discretion, step in to finish the job or
pay the client the amount of the bond. We have signed indemnity agreements with
our two sureties to indemnify them from obligations that arise from our failure
to perform under contracts. If, however, the contractor does not have a
performance bond and defaults in the performance of a contract, the contractor
is responsible for all damages resulting from the breach of contract. These
damages include the cost of completion, together with possible consequential
damages such as lost profits. To date, we have not incurred material damages
beyond the coverage of any performance bond, and we have never had a bond
called where the surety has been required to take over a project or pay
damages.
For the nine months ended December 25, 1998, subcontractor costs comprised
40% of our revenues. The absence of qualified subcontractors with whom we have
a satisfactory relationship could adversely affect the quality of our services
and our ability to perform under some of our contracts.
Backlog
Our total pro forma backlog at December 25, 1998 was approximately $4.0
billion, including approximately $0.9 billion of funded backlog of which $0.7
billion is scheduled to be completed during 1999. Many of our commercial
contracts are evergreen contracts and are typically not part of our backlog. We
believe that the predictability and stability of our backlog permits us to
efficiently manage our overhead and marketing costs by bidding selectively on
new work. As of March 1999, we have approximately $1.4 billion of pending
proposals, and we expect to consider more than $5.0 billion of additional
bidding opportunities in 1999.
Technology Development and Patents
Our technology development program focuses on innovative applications to
client projects of new and existing technologies and methods. The program has
four principal goals:
. to support project managers and clients to ensure successful application
of environmental technologies,
. to continue to improve technologies developed in-house through use on
client projects,
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. to evaluate and implement technologies developed by others that present
commercial opportunities for us, and
. to improve third party technologies for enhanced client value.
We emphasize several technologies, including bioremediation. For example, we
have used naturally occurring organisms in our patented BIOFAST(R) system to
clean a number of sites. We have licensed from a third party "barrier wall and
reactive gate technology," which assists in the decomposition of contaminants,
and continue to apply it to client projects. The EPA has also extended for a
third year our contract to operate its Test & Evaluation Facility in
Cincinnati, Ohio, which is available for private party sponsored technology
evaluations. It also 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. We also have improved our
environmental information management technologies. We have received extensive
patent coverage for the Manage IT system, which we use to manage and track
hazardous waste at client sites. Through the use of proprietary and other
environmental information management systems, we have become a leading user of
advanced data base management technology to serve clients' needs.
We hold over 20 patents for various environmental technologies. Two patents
cover certain design features of equipment used in our on-site remediation
business. The first patent is for a filtration system to remove pollutants from
flowing creeks and streams. The second, known as a Portable Method for
Decontaminating Earth, is for a decontamination system to remove contaminants
from the soil through a process commonly known as soil vapor extraction. We
also have the X*TRAX(R) and LT*X(R) thermal desorption processes. The X*TRAX(R)
and LT*X(R) systems are waste treatment processes that thermally separate
organic contaminants from soils or solids and then treat the resulting organic
vapor stream.
Competition
We believe that the principal competitive factors in all areas of our
business are:
. technical proficiency;
. operational experience;
. price;
. breadth of services offered; and
. local presence.
We compete with a diverse array of small and large organizations including
the following:
. 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 that have developed in-house capabilities.
For a description of the risks we face from industry competition, see "Risk
Factors--Significant Competition."
Employees
As of December 25, 1998 on a pro forma basis, we had more than 6,000
employees. Over 2,500 of these are professional level employees, including
approximately 850 engineers, 450 environmental scientists,
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475 geologists and over 800 other specialists. In addition, our professional
employees hold in the aggregate over 950 masters degrees and 150 PhD's. Our
ability to retain, expand and utilize our staff, including those employees that
have primary responsibility for maintaining client relationships, will be a
significant factor in our future success. None of our employees are represented
by labor unions under company-wide collective bargaining agreements. However,
we do employ union labor from time to time on a project-specific basis. We
consider our relations with our employees to be good.
Properties
We own or lease property in 36 states, the District of Columbia, the United
Kingdom, Italy and Australia. Excluding discontinued operations, we own
approximately 54 acres and lease approximately 1.8 million 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.
We consider these facilities adequate for our present and anticipated
activities.
Additionally, we own approximately 2,800 acres related to discontinued
operations, principally in Northern California, of which approximately 900
acres were used for hazardous waste disposal facilities and approximately 1,900
are adjacent to those facilities, but were never used for waste disposal.
Insurance
We maintain liability insurance programs that are structured to provide
coverage for major and catastrophic losses. We self insure against losses that
may occur in the ordinary course of business. Effective April 1, 1998, our
liability insurance program provides for coverage of up to $75.0 million. This
coverage has a $500,000 deductible. We also carry pollution liability insurance
with policy limits of up to $35.0 million. This coverage has a $1.0 million
deductible. However, we cannot assure that any future claims will not exceed
our coverages.
Regulatory
Our clients and we are subject to extensive and evolving environmental laws
and regulations. The level of enforcement of these laws and regulations affects
the demand for many of our services and creates certain significant risks and
potential opportunities for us in providing our services. Regulatory
enforcement and changes may also affect our inactive disposal sites in Northern
California. See "Risk Factors--Environmental Contractor Risks" and the note to
our consolidated financial statements entitled "Discontinued Operations."
Over the past several years, interested parties have proposed a number of
significant changes to existing environmental laws. Most of the proposed
changes have been delayed in Congress. The proposals would overhaul the
government regulatory process, require regulatory risk assessments and cost-
benefit analyses and reduce requirements for reporting to the government. The
impact of these proposed changes upon our business cannot yet be fully
predicted. However, the proposed changes in regulations and the perception that
enforcement of current environmental laws has been reduced, appear to have
decreased the demand for some of our services, as clients anticipate and adjust
to the potential changes. Proposed changes could result in increased or
decreased demand for some of our services. For example, if regulatory changes
decrease the cost of remediation projects or result in more funds being spent
for actual remediation, that portion of our business could increase while
amounts spent for studying could decrease. The ultimate impact of the proposed
changes will depend upon a number of factors, including the overall strength of
the U.S. economy and clients' views on the cost-effectiveness of remedies
available under the changed regulations.
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The principal environmental legislation and proposed changes in those laws
affecting us and our clients are described below:
Comprehensive Environmental Response, Compensation and Liability Act of
1980. CERCLA governs the cleanup of sites at which there have been or may be
releases or threatened releases of hazardous substances into the environment.
CERCLA provides that any person who (1) currently or at the time of disposal of
a hazardous substance, owned or operated any facility at which hazardous
substances were released, (2) arranged for disposal, treatment, or
transportation of hazardous substances by others or (3) accepted hazardous
substances for transport to facilities or sites from which there is a release
or threatened release of hazardous substances, is liable for the costs of
cleanup and damages to natural resources. These persons are called PRPs. CERCLA
provides that the federal government can either clean up these sites itself or
to order the PRPs to do so. CERCLA created the Hazardous Substance Superfund to
be used by the federal government to pay for certain cleanup efforts. When the
federal government expends Superfund money for remedial activities, it must
seek reimbursement from the PRPs. CERCLA generally imposes strict, joint and
several retroactive liability upon PRPs. See our "Notes to Consolidated
Financial Statements" for additional information on CERCLA liability on us and
PRPs in general.
CERCLA's Superfund taxing authority expired in December 1995, and CERCLA's
authority to expend funds originally expired in September 1994. However,
Congress has extended the EPA's authority to use funds on an interim basis.
Congress to date has linked long-term reinstatement of Superfund's taxing and
spending authority to comprehensive reauthorization and revision of CERCLA. The
Congressional Budget Office estimates that the Superfund trust fund has
sufficient funds for the CERCLA program through the year 2001.
A number of changes in CERCLA have been proposed. The suggested changes
include changes in cleanup standards, remedy selection, the amount of funds
available for cleanup, and CERCLA's provision for allocating responsibility for
cleanups. We believe Congress' failure to reauthorize CERCLA, and continuing
uncertainty concerning the details of the legislation, have resulted in project
delays and/or the failure of clients to initiate or proceed with projects.
Arguments over state participation in CERCLA programs and provisions for
damages to natural resources make passage of a bill reauthorizing CERCLA more
uncertain. Potential exhaustion of the monies in the Superfund trust may
accelerate the passage of legislation reauthorizing CERCLA.
The EPA has attempted, through various regulatory initiatives, to make it
easier to redevelop "brownfields," or 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. The EPA is currently
attempting to raise funds for brownfields programs through bond programs. While
we believe such programs offer additional opportunities, we cannot predict the
ultimate impact of these programs.
Resource Conservation and Recovery Act of 1976. RCRA regulates the treatment,
storage and disposal of hazardous and solid wastes. It also restricts the land
disposal of certain wastes, prescribes more stringent management standards for
hazardous waste disposal sites, sets standards for underground storage tank
management and provides for corrective action procedures. RCRA also imposes
liability and stringent management standards on generators or transporters of
hazardous waste and owners or operators of waste treatment, storage or disposal
facilities.
RCRA's requirement that underground storage tanks be upgraded to double-
walled tanks with leak detection systems became effective on December 22, 1998,
with some 250,000 tanks estimated to remain in violation nationwide. We believe
that increased state and EPA enforcement actions for underground storage tank
noncompliance will prompt increased repair or replacement of these tanks.
Further, in November 1998, the EPA adopted its new Hazardous Waste
Identification Rule regulation, allowing more flexible and cost-effective
approaches to site cleanups. In particular, the final rule streamlines
permitting, treatment and technological requirements for waste remediation.
Clean Air Legislation. The Clean Air Act requires compliance with National
Ambient Air Quality Standards for specific pollutants and empowers the EPA to
establish and enforce limits on the emission of
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<PAGE>
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, these amendments:
. 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 regulated 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 EPA recently promulgated regulations significantly tightening
standards for ozone and particulate emissions, and these regulations might
eventually increase demand for our air quality services, the proposals have met
with substantial opposition (including court challenges) and their ultimate
fate and impact remain uncertain. Also, while world leaders recently agreed to
the "Kyoto Protocol" (treaty) to reduce greenhouse gas emissions, and these
proposals could increase demand for our air quality services, they have also
met with substantial opposition, and their ultimate fate remains uncertain.
Also uncertain are the fate and impact of proposals for tax credits for
greenhouse gas emission reductions as an alternative to the Kyoto Protocol.
The Price Anderson Act. Approximately 11% of our $4.0 billion in backlog
consists of projects in our energy and nuclear services business. We service
the need of the DOE in converting its weapons facilities to civilian purposes
and the need of the nuclear power industry in the decontamination and
decommissioning of nuclear power plants. We expect this portion of our business
to continue to grow as up to 35 operating commercial power plants reach the end
of their useful lives over the next 20 years.
The PAA promotes and regulates the nuclear power industry in the U.S. The PAA
comprehensively regulates the manufacture, use and storage of radioactive
materials, and promotes the nuclear power industry by offering broad
indemnification to nuclear power plant operators and DOE contractors. While the
PAA's indemnification provisions are broad, it has not been determined whether
they apply to all liabilities that might be incurred by a radioactive materials
cleanup contractor such as us. Also, the PAA expires in 2002. Because nuclear
power remains controversial and no new nuclear plants are planned in the U.S.,
it is not clear that the PAA and its indemnification provisions will be
extended beyond 2002. Our business could be adversely affected if the PAA were
not extended beyond 2002.
The Food Quality Protection Act of 1996. The FQPA has created an increased
demand for agricultural chemical registration and defense services. JSC, one of
our recent acquisitions, is a leading supplier of these services. Also, the
regulatory initiatives incorporated in the 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 our services.
Other Federal and State Environmental Laws. Our clients also use our
services in complying with, and our 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.
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<PAGE>
Many states also have 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,
. underground storage tank and aboveground storage tank management,
. water quality,
. solid waste,
. hazardous waste,
. surface impoundments,
. site cleanup, and
. wastewater discharge.
Discontinued Operations
At December 25, 1998, our consolidated balance sheet included accrued
liabilities of $7.9 million to complete the closure and post-closure of our
disposal facilities and the PRP matters, net of trust fund and annuity
investments, restricted to closure and post-closure use and anticipated
insurance settlement proceeds. In December 1987, we 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 others. Subsequent to this date, we ceased obtaining
new business for these operations. We have funded previously accrued costs of
$11.1 million for the nine months ended December 25, 1998, $14.9 million in the
year ended March 27, 1998 and $15.7 million in the year ended March 28, 1997
relating to our closure plans and construction and PRP matters. We expect to
incur costs over the next several years, but the nature of the costs will
change from closure design and construction to post-closure monitoring. See
"Risk Factors--Closure of Inactive Disposal Sites and Potential CERCLA
Liabilities," "Management's Discussion and Analysis of Results of Operations
and Financial Condition--Liquidity and Capital Resources" and the note to our
consolidated financial statements entitled "Discontinued Operations" for more
information on the financial implications of our discontinued operations.
Legal Proceedings
Continuing Operations Legal Proceedings
We are subject from time to time to a number of different types of claims
arising in the ordinary course of our business, including contractual disputes
with clients, subcontractors and suppliers, claims for professional negligence,
environmental claims, governmental audits and investigations and claims for
personal injuries and property damage. We do not believe that any of these
claims will have a material adverse effect on our business. See the note to our
consolidated financial statements entitled "Commitments and Contingencies--
Contingencies" for information regarding the legal proceedings related to our
continuing operations.
Discontinued Operations Legal Proceedings
We have been, are and may in the future be subject from time to time to a
number of different types of claims arising out of our discontinued operations
including environmental claims for recovery of all or a portion of the cleanup
costs at sites we previously owned or operated or to which we took our or a
client's wastes, including claims for personal injuries and property damage. We
do not believe that any of these claims will have a material adverse effect on
our business. See the note to our consolidated financial statements entitled
"Discontinued Operations" for information regarding the legal proceedings
related to our transportation, treatment and disposal discontinued operations.
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<PAGE>
MANAGEMENT
Board Of Directors
At our 1996 annual meeting, stockholders approved a cash investment of $45.0
million by certain investors affiliated with Carlyle. Carlyle is a private
global investment firm, based in Washington, DC, which originates, structures
and acts as lead equity investor in management-led buyouts, strategic minority
equity investments, equity private placements, consolidations and build-ups and
growth capital financings. Formed in 1987, Carlyle has invested over $1.6
billion of equity in over 50 transactions. The firm currently has more than
$3.0 billion of capital under management by separate teams dedicated to
management-led buyouts and strategic minority investments, venture capital,
real estate and international investment opportunities.
In consideration of its investment, Carlyle received 45,000 shares of newly
issued convertible preferred stock and warrants to purchase up to 1,250,000
shares of our common stock. Carlyle's purchase of the convertible preferred
stock and warrants was financed through the private sale of interests in
limited partnerships affiliated with Carlyle or through other entities. These
partnerships and other entities then purchased the convertible preferred stock
and warrants.
Pursuant to the terms of this investment, Carlyle is entitled to elect a
majority of our board of directors until November 20, 2001, provided that
Carlyle continues to own at least 20% of our voting securities. A majority of
the directors, sometimes referred to as the preferred stock directors, will be
elected by the holders of the convertible preferred stock, and the remaining
directors, sometimes referred to as the common stock directors, will be elected
by our common stockholders. See "Description of Capital Stock" for additional
information regarding the provisions of Carlyle investment agreements with
respect to the election of directors.
Directors are elected annually to serve until the next annual meeting and
until their successors have been elected and have qualified. Our board of
directors is constituted as follows:
<TABLE>
<CAPTION>
Director of The
Name Age Current Position IT Group Since
<S> <C> <C> <C>
Common Stock Directors:
Anthony J. DeLuca (1) 51 Director, Chief Executive Officer and President 1996
James C. McGill (3) 55 Director 1990
Richard W. Pogue (3) 70 Director 1998
Charles W. Schmidt (2) 71 Director 1998
Preferred Stock
Directors:
Daniel A. D'Aniello (1) 52 Director and Chairman of the Board 1996
(2) (non-officer position)
Philip B. Dolan (1) (2) 41 Director 1996
E. Martin Gibson (3) 61 Director 1994
Robert F. Pugliese (3) 66 Director 1996
James David Watkins (2) 72 Director 1996
</TABLE>
- --------
(1) Member of Executive Committee.
(2) Member of Compensation Committee.
(3) Member of Audit Committee.
Background of the Directors
Mr. D'Aniello has been a Managing Director for Carlyle since 1987. Mr.
D'Aniello was Vice President, Finance and Development for Marriott Corporation,
a hospitality company, from 1981 to 1987. He currently serves on the board of
directors for GTS Duratek, Inc., an environmental services company, Baker &
Taylor, Inc., a wholesale distributor of books, and PRA International, Inc. Mr.
D'Aniello is Chairman of GTS Duratek, Inc. and Vice Chairman of Baker & Taylor,
Inc.
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<PAGE>
Mr. DeLuca was named our Chief Executive Officer and President on July 22,
1997 and President and our Acting Chief Executive Officer and a Director as of
July 1, 1996. Prior thereto, Mr. DeLuca had been our Senior Vice President and
Chief Financial Officer since March 1990. Before joining us, Mr. DeLuca had
been a senior partner at the public accounting firm Ernst & Young LLP.
Mr. Dolan has been a Principal for Carlyle since 1998. Prior thereto, he was
a Vice President for Carlyle from 1989. He also serves on the board of
directors of Baker & Taylor, Inc. Prior to joining Carlyle, Mr. Dolan was an
investment analyst and fund manager with the Trust Division of the Mercantile-
Safe Deposit and Trust Company and was engaged in management consulting and
practiced public accounting with Seidman & Seidman. Mr. Dolan is a Certified
Public Accountant.
Mr. Gibson served as Chairman of the board of directors, a non-officer, non-
employee position, from April 6, 1995 until his resignation as Chairman upon
completion of the investment. From 1990 until December 1994, Mr. Gibson served
as Chairman of Corning Life Sciences, Inc., a subsidiary of Corning
Incorporated. Mr. Gibson served in various other senior management capacities
with Corning Incorporated during his 32-year career there, including as a
Senior Vice President and General Manager of Corning Medical and Scientific
Division from 1980 until 1983, and as Group President of Corning Consumer
Products and Laboratory Sciences from 1983 until 1990. From 1983 to 1994, Mr.
Gibson served on the board of directors of Corning Incorporated. Mr. Gibson
also serves on the Boards of Directors of Hardinge, Inc., NovaCare, Inc. and
Primerica, Inc.
Mr. McGill is currently, and has been for at least five years, a private
investor. He served as Chairman of McGill Environmental Systems, Inc. from 1970
to 1987. Mr. McGill serves on the board of trustees of the University of Tulsa
and on the boards of directors of two private corporations that are engaged in
the venture capital and health exercise equipment businesses.
Mr. Pogue is a consultant with Dix & Eaton, a public relations firm.
Effective June 30, 1994, Mr. Pogue retired as Senior Partner of the law firm of
Jones, Day, Reavis & Pogue, Cleveland, Ohio, of which he had been a partner
since 1961. Mr. Pogue is also a Director of Continental Airlines, Inc., Derlan
Industries Limited, M.A. Hanna Company, KeyCorp, LAI Worldwide, Inc., Rotek
Incorporated and TRW Inc. Mr. Pogue was a Director of OHM from 1986 until the
OHM merger.
Mr. Pugliese has been Special Counsel to Eckert Seamans Cherin & Mellott
since 1993. Mr. Pugliese was Executive Vice President, Legal and Corporate
Affairs for Westinghouse Electric Corporation and served as General Counsel
from 1976 to 1992. Mr. Pugliese is a member of the Association of General
Counsel. Mr. Pugliese has served as Secretary to the board of directors of
Westinghouse Electric Corporation and Chairman of the board of trustees at the
University of Scranton, and served as a Director of OCWEN Asset investment
Corporation and St. Clair Memorial Hospital.
Mr. Schmidt retired in January 1991 as Senior Vice President, External
Affairs of Raytheon Company, a broadly diversified manufacturer of industrial
and consumer products, and was formerly President and Chief Executive Officer
of SCA Services, Inc., a company that provided waste management-related
services, and President and Chief Executive Officer of S.D. Warren Company, a
division of Scott Paper Company. Mr. Schmidt also serves as a trustee of the
Massachusetts Financial Services Family of Mutual Funds and is a Director of
Mohawk Paper Company. Mr. Schmidt was a Director of OHM from 1986 until the OHM
merger.
Admiral Watkins has been the President of the Joint Oceanographic
Institutions, Inc. since 1993 and President of Consortium Oceanographic
Research and Education since 1994. Admiral Watkins was Secretary of Energy of
the United States from 1989 to 1993. Prior to his appointment as Secretary of
Energy, the Admiral served as Director of Philadelphia Electric Company and
VESTAR, Inc., a pharmaceutical company, and was a consultant to the Carnegie
Corporation of New York. From 1982 to 1986, he served as the Chief of Naval
Operations, capping a career spanning nearly four decades. Admiral Watkins was
also appointed to chair the Presidential Commission on AIDS from 1987 to 1988.
He was a Trustee of the Carnegie Corporation of
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<PAGE>
New York from 1993 to 1998. Admiral Watkins currently serves as a Director of
Edison International and GTS-Duratek and as Chairman of Eurotech, Ltd.
Executive Officers
The following table provides information as of December 25, 1998 regarding
our executive officers and the positions they hold. Our officers are appointed
annually by our board of directors.
<TABLE>
<CAPTION>
First Elected as Officer
Name Age Position of the IT Group
<C> <C> <S> <C>
Chief Executive Officer
Anthony J. DeLuca 51 and President 1990
David L. Backus 58 Senior Vice President, 1998
Outsourced Services
and International
Vice President, General
James G. Kirk 60 Counsel and Secretary 1996
Senior Vice President,
James R. Mahoney 60 Consulting & Ventures 1991
Senior Vice President,
Engineering &
Raymond J. Pompe 65 Construction 1988
Senior Vice President,
Chief Administrative
Philip O. Strawbridge 44 Officer 1998
</TABLE>
- --------
Mr. DeLuca was described above.
Mr. Backus joined us as Senior Vice President, Outsourced Services and
International in December 1998 in connection with the GTI acquisition. Mr.
Backus joined GTI in 1992 as Vice President of GTI's western operations. Prior
to joining GTI, Mr. Backus was employed by Morrison Knudsen Corporation from
1975 to 1992 in various executive positions, including Group Vice President of
Morrison Knudsen's environmental group. From 1972-1975, Mr. Backus was the
Director of Business Development for M.K. Ferguson Company. Prior to that, Mr.
Backus was involved in the construction business.
Mr. Kirk joined us as General Counsel, Eastern Operations, in 1991. He was
named Vice President, General Counsel and Secretary in September 1996. Prior to
joining us, 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 joined us in January 1991 as Senior Vice President and Director
of Technology. He 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 & Ventures in
July 1996. Prior to his employment with us, Mr. Mahoney was Director of the
National Acid Precipitation Assessment Program, a federal 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 us in 1988 as Vice President, Construction and Remediation.
He was named Senior Vice President, Project Operations in March 1995 and Senior
Vice President, Engineering & Construction in July 1996. Prior to joining us,
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 us in May 1998 as Senior Vice President and Chief
Administrative Officer through the merger with OHM. Mr. Strawbridge joined OHM
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 federal government in various management
and executive capacities.
Executive Compensation
We incorporate by reference to the section entitled "Executive Compensation"
of our Form 10-K for the nine months ended December 25, 1998 the information
required in this prospectus on the compensation of our directors and executive
officers.
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<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth information as of March 5, 1999 with respect
to beneficial ownership of (1) common stock, (2) depositary shares, each
representing 1/100 of a share of 7% preferred stock, (3) convertible preferred
stock and (4) warrants, by (a) each person known by us to be the beneficial
owner of 5% or more of our outstanding common stock, based solely on
information contained in Schedules 13D, -G, or -F filed by such persons and
delivered to us, depositary shares, convertible preferred stock or warrants,
(b) each of our directors, (c) each of our executive officers and (d) all
directors and persons serving as executive officers as a group.
<TABLE>
<CAPTION>
Amount and Amount and Amount and Percent of
Nature of Nature of Percent of Nature of Convertible
Beneficial Percent of Beneficial Depositary Beneficial Preferred
Ownership of Common Stock Ownership of Shares Ownership of Stock
Common Stock Beneficially Depositary Beneficially Convertible Beneficially
Name (1)(2) Owned (2) Shares Owned Preferred Stock Owned
<S> <C> <C> <C> <C> <C> <C>
TCG Holdings, L.L.C. ... 6,556,061(3) 22.49% 41,263 89.52%
Carlyle Investment
Management, L.L.C. .... 766,954(4) 3.28 4,832 10.48
Brahman Capital Corp. et
al. ................... 2,939,492(5) 13.01
T. Rowe Price
Associates, Inc. (6)... 1,493,311 6.61
Dimension Fund Advisors
(7) ................... 1,239,915 5.49
Baron Capital Group,
Inc. (8) .............. 1,200,000 5.31
Daniel A. D'Aniello (9)
....................... 0 --
Philip B. Dolan (11) ... 0 --
E. Martin Gibson ....... 12,226 * 5,000 *
James C. McGill (10) ... 20,713 * 1,000 *
Robert F. Pugliese ..... 2,966 *
James D. Watkins ....... 2,966 *
Anthony J. DeLuca ...... 188,485 *
David L. Backus ........ 0 *
James G. Kirk .......... 2,624 *
James R. Mahoney ....... 85,730 *
Richard W. Pogue ....... 69,841(11) *
Raymond J. Pompe ....... 74,725 *
Charles W. Schmidt ..... 15,940 *
Philip O. Strawbridge
....................... 173,195 *
All directors and
executive officers as a
group (14 persons) (12)
....................... 649,411 2.83
</TABLE>
- --------
*Reflects less than 1%
(1) The number of shares of common stock beneficially owned includes shares of
common stock in which the persons set forth in the table have either
investment or voting power. Unless otherwise indicated, all of such
interests are owned directly, and the indicated person or entity has sole
voting and investment power, subject to community property laws where
applicable. The number of shares beneficially owned also includes shares
that the following individuals have the right to acquire within 60 days of
March 5, 1999 upon exercise of stock options, and conversion of depositary
shares in the case of Messrs. Gibson and McGill, in the following amounts:
(a) 6,875 shares upon exercise of options and 5,351 shares upon conversion
of the depositary shares as to Mr. Gibson, (b) 1,875 shares upon exercise
of options and 1,070 shares upon conversion of the depositary shares as to
Mr. McGill, (c) 55,760 shares as to Mr. Pogue, (d) 13,940 shares as to Mr.
Schmidt, (e) 38,834 shares as to Mr. DeLuca, (f) 31,834 shares as to Mr.
Mahoney, (g) 20,355 shares as to Mr. Pompe, (h) 2,624 shares as to Mr.
Kirk, and (i) 136,565 shares as to Mr. Strawbridge.
(2) For the purposes of determining the number of shares of common stock
beneficially owned, as well as the percentage of outstanding common stock
held, by each person or group set forth in the table, the number of such
shares is divided by the sum of the number of outstanding shares of common
stock on March 5, 1999 plus (a) the number of shares of common stock
subject to options exercisable currently or within
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<PAGE>
60 days of [March 5, 1999] by such person or group, (b) shares of common
stock into which persons who hold depositary shares or convertible
preferred stock may convert such security or otherwise obtain common stock,
and/or receive common stock upon exercise of warrants, in accordance with
Rule 13d-3(d)(1) under the Securities Exchange Act. Depositary shares may
be converted at any time into common stock at the ratio of 1.0702 shares of
common stock for each depositary share. The convertible preferred stock may
be converted at any time into common stock at the ratio of 131.75 shares of
common stock for each share of convertible preferred stock, reflecting a
conversion price of $7.59 per share of convertible preferred stock.
(3) Represents shares of common stock issuable upon conversion of all shares
of convertible preferred stock and exercise of all of the warrants held by
certain limited partnerships controlled by TCG Holdings, L.L.C., a
Delaware limited liability company, as set forth in more detail in the
following sentence. The cumulative TCG Holdings ownership figure
represents (a) 1,826,339 shares beneficially owned by Carlyle Partners II,
L.P., a Delaware limited partnership, (b) 82,936 shares beneficially owned
by Carlyle Partners III, L.P., a Delaware limited partnership, (c)
1,530,275 shares beneficially owned by Carlyle International Partners II,
L.P., a Cayman Islands limited partnership, (d) 82,095 shares beneficially
owned by Carlyle International Partners III, L.P., a Cayman Islands
limited partnership, (e) 344,474 shares beneficially owned by C/S
International Partners, a Cayman Islands partnership, (f) 1,907 shares
beneficially owned by Carlyle Investment Group, L.P., a Delaware limited
partnership, (g) 2,407,370 shares beneficially owned by Carlyle-IT
International Partners, L.P., a Cayman Islands limited partnership, (h)
80,818 shares beneficially owned by Carlyle-IT International Partners II,
L.P., a Cayman Islands limited partnership, and (i) 199,847 shares
beneficially owned by Carlyle-IT Partners, L.P., a Delaware limited
partnership. TC Group, L.L.C., a Delaware limited liability company, may
be deemed to be the beneficial owner of 6,556,061 shares of common stock
as the general partner of Carlyle Partners II, Carlyle Partners III,
Carlyle-IT International Partners and Carlyle-IT Partners, and as the
managing general partner of Carlyle International Partners II, Carlyle
International Partners III, C/S International Partners, Carlyle-IT
International Partners and Carlyle-IT International Partners II. TCG
Holdings, as a member holding a controlling interest in TC Group, may be
deemed to share all rights herein described belonging to TC Group.
Furthermore, because certain managing members of TCG Holdings are also
managing members of Carlyle Investment Management, L.L.C., a Delaware
limited liability company, TCG Holdings may be deemed the beneficial owner
of the shares of Common Stock controlled by Carlyle Investment Management.
See footnote 4 below. The principal business address of TC Group and TCG
Holdings is c/o The Carlyle Group, 1001 Pennsylvania Avenue, N.W., Suite
220 South, Washington, DC 20004. The principal business address of Carlyle
Partners II, Carlyle Partners III, Carlyle Investment Group, Carlyle-IT
Partners and Carlyle Investment Management is Delaware Trust Building, 900
Market Street, Suite 200, Wilmington, Delaware 19801. The principal
business address of Carlyle International Partners II, Carlyle
International Partners III, C/S International Partners, Carlyle-IT
International Partners and Carlyle-IT International Partners II is Coutts
& Co., P.O. Box 707, Cayman Islands, British West Indies.
(4) Represents shares of common stock issuable upon conversion of all shares
of convertible preferred stock and exercise of all of the warrants held by
the State Board of Administration of the State of Florida over which
Carlyle Investment Management holds sole voting and disposition power.
Because certain managing members of TCG Holdings are also managing members
of Carlyle Investment Management, Carlyle Investment Management may be
deemed to be the beneficial owner of the shares of common stock controlled
by TCG Holdings. See footnote 3 above.
(5) Such information is derived solely from a Schedule 13G filed by the
Brahman stockholders, which is comprised of the entities listed in the
following sentence, filing as joint filers, with the Commission dated
February 12, 1999. The Brahman stockholders' cumulative ownership
represents (a) 469,042 shares with respect to which Brahman Partners II,
L.P. has shared power to vote or direct the vote and shared power to
dispose or direct the disposition, (b) 1,052,641 shares with respect to
which Brahman Institutional Partners, L.P. has shared power to vote or
direct the vote and shared power to dispose or direct the
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<PAGE>
disposition, (c) 1,214,219 shares with respect to which BY Partners, L.P.
has shared power to vote or direct the vote and shared power to dispose or
direct the disposition, (d) 2,735,902 shares with respect to which Brahman
Management, L.L.C. has shared power to vote or direct the vote and shared
power to dispose or direct the disposition, (e) 1,273,509 shares with
respect to which Brahman Capital Corp. has shared power to vote or direct
the vote and shared power to dispose or direct the disposition, which
position includes shares owned by Brahman Partners II Offshore, Ltd., and
(f) 2,795,192 shares with respect to which each of Peter A. Hochfelder,
Robert J. Sobel, and Mitchell A. Kuflik have shared power to vote or direct
the vote and shared power to dispose or direct the disposition. The Brahman
stockholders further report in such Schedule 13G that (i) none of the above
named entities individually has the sole power to vote or direct the vote or
to dispose or direct the disposition of the shares it beneficially owns,
(ii) Brahman Management, as the sole general partner of Brahman Partners II,
L.P., BY Partners, L.P. and Brahman Institutional Partners, L.P., has the
power to vote and dispose of the shares owned by each of Brahman Partners
II, L.P., BY Partners, L.P. and Brahman Institutional Partners, L.P., and
(iii) Brahman Capital Corp., pursuant to investment advisory contracts and
arrangements, has the power to vote and dispose of the shares owned by BY
Partners, L.P. and Brahman Partners II Offshore, Ltd., a Cayman Islands
exempted company. The address of Brahman Capital Corp. and the affiliated
reporting persons is 277 Park Avenue, 26th Floor, New York, New York 10172
except in the case of Brahman Partners II Offshore, Ltd., the address of
which is c/o Citco, N.V. Kaya Flamboyan 9, Willemstad, Curacao, Netherlands
Antilles.
(6) Such information is based solely from a Schedule 13G filed by T. Rowe Price
Associates with the Commission dated February 12, 1999. T. Rowe Price's
ownership represents (a) 1,328,000 shares which T. Rowe Price owns directly
and (b) 165,911 shares deemed outstanding and owned directly subject to
warrants and conversion privileges. Further, of the 1,493,911 shares
T. Rowe Price holds, it has sole power to vote or direct the vote of
271,300 shares. These securities are owned by various individual and
institutional investors which T. Rowe Price serves as investment adviser
with power to direct investments and/or sole power to vote the securities.
For purposes of the reporting requirements of the Securities Exchange Act,
T. Rowe Price is deemed to be a beneficial owner of such securities;
however, T. Rowe Price expressly disclaims that it is, in fact, the
beneficial owner of such securities. T. Rowe Price's address is 100 E.
Pratt Street, Baltimore, Maryland 21202.
(7) Such information is derived solely from a Schedule 13G filed by Dimension
Fund Advisors, Inc. with the Commission dated February 11, 1999. Dimension
reports that it is an investment advisor registered under Section 203 of
the Investment Advisors Act of 1940, and furnishes investment advice to
four investment companies registered under the Investment Company Act of
1940, and serves as investment manager to certain other investment
vehicles, including commingled group trusts. In its role as investment
advisor and investment manager, Dimension possesses both voting and
investment power over our securities that are owned by these investment
companies and investment vehicles. All securities reported in this schedule
are owned by these investment companies and investment vehicles, and
Dimension disclaims beneficial ownership of such securities. Dimension
further reports that none of its advisory clients, to its knowledge, owns
more than 5% of the class. Dimension disclaims beneficial ownership of all
such securities. Dimension's address is 1299 Ocean Avenue, 11th Floor,
Santa Monica, CA 90401.
(8) Such information is derived solely from a Schedule 13G filed by the Baron
stockholders, which is composed of the entities listed in the following
sentence, filing as joint filers, with the Commission dated June 4, 1998.
The Baron stockholders is comprised of Baron Capital Group, Inc., Bamco,
Inc., Baron Small Cap Fund, Baron Asset Fund, and Ronald Baron. The Baron
stockholders report in such Schedule 13G that (a) Baron Capital Group,
Bamco, Baron Small Cap. Fund, Baron Asset Fund and Ronald Baron have the
shared power to vote or direct the vote of 1,200,000 shares of common
stock; (b) Baron Capital Group, Bamco, Baron Asset Fund and Ronald Baron
have shared power to dispose of or direct the disposition of 1,200,000
shares of common stock, but that none of Baron Capital Group, Bamco, Baron
Small Cap Fund, or Ronald Baron have the sole power to vote or direct the
vote of or the sole power to dispose or to direct the disposition of, any
common stock. Bamco is a subsidiary of Baron Capital Group. Baron Small Cap
Fund is an investment advisory client of Bamco. Ronald Baron owns a
controlling
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interest in Baron Capital Group. Baron Capital Group and Ronald Baron
disclaim beneficial ownership of shares held by their controlled entities
or the investment advisory client thereof to the extent such shares are
held by persons other than Bamco Capital Group and Ronald Baron. Bamco
disclaims beneficial ownership of shares held by its investment advisory
clients to the extent such shares are held by persons other than Bamco and
its affiliates. The address of Baron Capital Group, Inc. and the affiliated
reporting persons is 767 Fifth Avenue, 24th Floor, New York, New York
10153.
(9) Mr. D'Aniello is a Managing Member of TCG Holdings. Mr. D'Aniello's
interest in TCG Holdings is not controlling and thus Mr. D'Aniello
expressly disclaims any beneficial ownership in the shares of common stock
beneficially owned by TCG Holdings. Mr. Dolan is a Principal of Carlyle
but holds no economic interest in either TC Group or TCG Holdings, and as
such expressly disclaims any beneficial ownership in the shares of common
stock beneficially owned by any of such entities.
(10) Includes 1,000 shares of common stock and 1,000 depositary shares,
convertible into 1,070 shares of common stock, owned by Mr. McGill's
wife, as to which Mr. McGill has no voting or dispositive power, and
1,250 shares owned by a revocable living trust maintained by Mr. McGill.
Mr. McGill disclaims beneficial ownership of all such shares. Also
includes 1,875 shares that may be purchased upon the exercise of options
that are currently exercisable or that will become exercisable within 60
days of March 5, 1999.
(11) Includes 1,081 shares of common stock owned by a revocable trust for Mr.
Pogue's wife with respect to which Mr. Pogue is a trustee. Mr. Pogue
disclaims beneficial ownership of all such shares.
(12) Includes 308,662 shares of common stock that may be purchased upon the
exercise of options that are currently exercisable or that will become
exercisable within 60 days of March 5, 1999 and 6,000 depositary shares,
convertible into 6,421 shares of common stock.
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MATERIAL RELATIONSHIPS AND RELATED TRANSACTIONS
Carlyle Financial Advisory Fees
In connection with Carlyle's investment in us, we agreed to pay Carlyle an
annual financial advisory fee of $100,000, payable quarterly, and investment
banking fees equal to 1% of the value of any transaction undertaken. We also
agreed to reimburse them for reasonable out-of-pocket expenses for investment
banking services rendered to us. We paid Carlyle $2.5 million in investment
banking fees and reimbursable out-of-pocket expenses for services rendered in
connection with the acquisition of OHM, which was less than the 1% fee to which
they would otherwise have been entitled pursuant to the terms of our existing
agreement.
We incorporate by reference to the section entitled "Certain Relationships
and Related Transactions" of our Form 10-K for the nine months ended December
25, 1998 any additional information required in this prospectus on any
transactions between us and any of our directors or executive officers or any
other related parties.
DESCRIPTION OF OTHER INDEBTEDNESS
The following is a summary of the important terms of our debt instruments.
Credit Facilities
We have a term loan and revolving credit facility with Citicorp USA, Inc., as
Administrative Agent, BankBoston, N.A., as Documentation Agent, and Royal Bank
of Canada and Credit Lyonnais New York Branch, as Co-Agents, and other bank
lenders.
Our credit facilities consist of an eight-year amortizing term loan of $228.0
million and a six-year revolving credit facility of up to $185.0 million.
As of December 25, 1998 on a pro forma basis, we had used $12.6 million of
the revolving credit facility and had $152.0 million still available, including
capacity used for letters of credit.
Security
Our credit facilities are secured by a security interest in substantially all
of our assets and substantially all of the assets of our subsidiaries.
Interest Rate
The term loans made under our credit facilities now bear interest at a rate
equal to LIBOR plus an applicable premium, and revolving loans made under the
credit facilities now bear interest at a rate equal to LIBOR plus an applicable
premium, with adjustments based on the ratio of our consolidated total debt to
consolidated EBITDA.
Maturity
The term loan made under our credit facilities amortizes on a semi-annual
basis in aggregate annual installments of $4.5 million until June 2004, with
the remainder payable in eight equal quarterly installments after June 2004
until the term loan matures in June 2006. The revolving credit facility is
scheduled to terminate in June 2004, without any reduction in availability
before that date. We are also required to prepay the loans under our credit
facilities with the net proceeds of asset sales and some debt and equity
financings, and with a portion of our consolidated excess cash flow.
Conditions; Representations and Warranties; Covenants
Our credit facilities include conditions precedent to the funding of
revolving loans, representations and warranties and covenants customary for
facilities of this type. The covenants include:
. financial covenants consisting of:
. a minimum fixed charge coverage ratio,
. a minimum interest expense coverage ratio,
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. a maximum leverage ratio,
. a minimum liquidity requirement,
. a maximum capital expenditure limitation, and
. a minimum net worth requirement,
. maintenance of cash concentration accounts and lockboxes,
. preservation of corporate existence,
. compliance with laws,
. payment of taxes,
. maintenance of properties and insurance,
. financial and other reporting requirements, and
. limitations, subject to some exceptions, on:
. indebtedness,
. guarantees,
. liens,
. lease obligations,
. mergers and acquisitions,
. sales of assets and other fundamental changes,
. joint ventures and other investments,
. transactions with affiliates,
. dividends and stock repurchases and redemptions,
. prepayment or modification of debt, and
. hedging obligations.
Events of Default
Our credit facilities also include customary events of default, including:
. payment defaults,
. breaches of representations and warranties,
. covenant defaults,
. cross defaults to other indebtedness,
. bankruptcy events,
. defaults in satisfaction of money judgments,
. material adverse change,
. certain events under the Employee Retirement Income Security Act of
1974, and
. change of control.
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OHM 8% Convertible Subordinated Debentures due October 1, 2006
OHM offered $50.0 million principal amount of convertible subordinated
debentures under an indenture dated as of October 1, 1986, later amended by a
first supplemental indenture dated as of May 20, 1994. After we acquired OHM,
we entered into a second supplemental indenture with OHM and the trustee for
the debentures, pursuant to which these debentures became convertible at any
time prior to October 1, 2006 into a combination of our common stock and cash.
Subordination
The debentures are subordinated to all of our and OHM's senior indebtedness
and rank equal in right of payment to the series A and series B notes.
Interest Rate
The OHM debentures bear interest at a rate of 8% per year, payable semi-
annually on April 1 and October 1, beginning on April 1, 1987.
Maturity
The debentures are due October 1, 2006.
Conversion
Holders may convert the debentures at any time prior to maturity, unless
previously redeemed by us, at a rate that is subject to adjustment. Currently,
the debentures are convertible into 45.04 shares of our common stock and
$107.50 in cash per $1,000 unit.
Redemption
We may redeem the debentures at our option in whole or, from time to time, in
part.
Sinking Fund
We are required to make annual sinking fund payments of 7.5% of the principal
amount, or approximately $4.3 million, which began in 1996 and will continue
through October 1, 2005.
Guarantee
We guaranteed the payment of all of OHM's obligations under the indenture for
the debentures, but are entitled to reimbursement by OHM for any amounts paid
by us under our guarantee. Our obligations under our guarantee are subordinated
to our obligations under our credit facilities.
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DESCRIPTION OF NOTES
You can find the definitions of material terms used in this description
under the subheading "Certain Definitions." In this description, the words
"we," "us," "our" and similar terms refer only to the IT Group and not to any
of our subsidiaries.
We issued the series A notes under an indenture among The Bank of New York,
as trustee, the Guarantors and us in a private transaction that was not subject
to the registration requirements of the Securities Act. The terms of the
indenture apply to the series A notes and to the series B notes to be issued in
exchange for the series A notes pursuant to the exchange offer. The terms of
the series B notes include those stated in the indenture and those made a part
of the indenture by reference to the Trust Indenture Act. The series B notes
are subject to all of these terms.
The following description is a summary of the material provisions of the
indenture. It does not restate the indenture in its entirety. We urge you to
read the indenture because it, and not this description, defines your rights as
holders of series B notes.
Brief Description of the Series B Notes and the Guarantees
The Series B Notes
The series B notes:
. are general, unsecured obligations;
. are subordinated in right of payment to all of our existing and future
Senior Debt;
. are pari passu in right of payment with any of our future senior
subordinated Indebtedness, and with any of our other obligations that
are not Senior Debt and are not expressly subordinated to the series B
notes; and
. are unconditionally guaranteed by the Guarantors.
The Guarantees
The Guarantees of the series B notes:
. are general, unsecured obligations of each Guarantor;
. are subordinated in right of payment to all existing and future Senior
Debt of each Guarantor; and
. are pari passu in right of payment with any future senior subordinated
Indebtedness of each Guarantor, and with any other obligations of such
Guarantor that are not Senior Debt and are not expressly subordinated to
the series B notes.
As of the date of the indenture, all of our subsidiaries will be "Restricted
Subsidiaries." Under the circumstances described below under the subheading "--
Certain Covenants--Designation of Restricted and Unrestricted Subsidiaries," we
will be permitted to designate certain of our subsidiaries as "Unrestricted
Subsidiaries." Our Unrestricted Subsidiaries will not be subject to any of the
restrictive covenants in the indenture.
All of our Domestic Subsidiaries, other than Universal Professional
Insurance Company, will guarantee the series B notes. Our Unrestricted
Subsidiaries will not guarantee the notes. In the event of a bankruptcy,
liquidation or reorganization of any of these non-guarantor subsidiaries, these
non-guarantor subsidiaries will pay the holders of their debts and their trade
creditors before they will be able to distribute any of their assets to us. The
Guarantors generated 98% of our consolidated revenues in the twelve-month
period ended December 25, 1998 and held substantially all of our consolidated
assets as of December 25, 1998. See our consolidated financial statements and
related notes contained in this prospectus for more detail about the division
of our consolidated revenues and assets between the Guarantors and our non-
guarantor subsidiaries.
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Principal, Maturity and Interest
We will issue notes with a maximum aggregate principal amount of $400.0
million, of which $225.0 million series A notes were issued in the initial
offering. We may issue additional notes in one or more series from time to
time. Any offering of additional notes is subject to the covenant described
below under the caption "--Certain Covenants--Incurrence of Indebtedness and
Issuance of Preferred Stock." The series A and series B notes and any
additional notes subsequently issued under the indenture would be treated as a
single class for all purposes under the indenture, including, without
limitation, waivers, amendments, redemptions and offers to purchase. We have
issued and will issue notes only in denominations of $1,000 and integral
multiples of $1,000. The series B notes will mature on April 1, 2009.
Interest on the series B notes will accrue at the rate of 11 1/4% per annum
and will be payable semi-annually in arrears on April 1 and October 1,
commencing on October 1, 1999. We will make each interest payment to the
holders of record on the immediately preceding March 15 and September 15.
Interest on the series B notes will accrue from the date of original
issuance or, if interest has already been paid, from the date it was most
recently paid. Interest will be computed on the basis of a 360-day year
comprised of twelve 30-day months.
Methods of Receiving Payments on the Series B Notes
If you have given wire transfer instructions to us, we will pay all
principal, interest and premium and Liquidated Damages, if any, on your series
B notes in accordance with those instructions. All other payments on series B
notes will be made at the office or agency of the paying agent and registrar
within the City and State of New York unless we elect to make interest
payments by check mailed to the holders at their addresses set forth in the
register of holders.
Paying Agent and Registrar for the Series B Notes
The trustee will initially act as paying agent and registrar. We may change
the paying agent or registrar without prior notice to the holders of series B
notes, and any of our subsidiaries or we may act as paying agent or registrar.
Transfer and Exchange
A holder may transfer or exchange series B notes in accordance with the
indenture. The registrar and the trustee may require a holder, among other
things, to furnish appropriate endorsements and transfer documents and we may
require a holder to pay any taxes and fees required by law or permitted by the
indenture. We are not required to transfer or exchange any series B note
selected for redemption. Also, we are not required to transfer or exchange any
series B note for a period of fifteen days before a selection of series B
notes to be redeemed.
The registered holder of a series B note will be treated as the owner of it
for all purposes.
Subsidiary Guarantees
The Guarantors will jointly and severally guarantee our obligations under
the series B notes. Each Guarantee will be subordinated to the prior payment
in full of all Senior Debt of that Guarantor. The obligations of each
Guarantor under its Guarantee will be limited as necessary to prevent that
Guarantee from constituting a fraudulent conveyance under applicable law. See
"Risk Factors--Fraudulent Conveyance Matters."
A Guarantor may not sell or otherwise dispose of all or substantially all
of its assets to, or consolidate with or merge with or into another Person,
other than another Guarantor or us, whether or not such Guarantor is the
surviving Person, unless the Guarantee of that Guarantor is released as
described below or:
(1) immediately after giving effect to that transaction, no Default or
Event of Default exists; and
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(2) either:
(a) the Guarantor is the surviving Person or the Person acquiring
the property in any such sale or disposition or the Person formed by or
surviving any such consolidation or merger assumes all the obligations
of that Guarantor under the indenture, its Guarantee and the
Registration Rights Agreement pursuant to a supplemental indenture
satisfactory to the trustee; or
(b) the Net Proceeds of such sale or other disposition are applied
in accordance with the "Asset Sale" provisions of the indenture.
The Guarantee of a Guarantor will be released:
(1) in connection with any sale or other disposition of all or
substantially all of the assets of that Guarantor, including by way of
merger or consolidation, to a Person that is not, either before or after
giving effect to such transaction, our subsidiary, if the Guarantor
applies, or certifies its intention to apply, the Net Proceeds of that sale
or other disposition in accordance with the "Asset Sale" provisions of the
indenture;
(2) in connection with any sale of all of the Capital Stock of a
Guarantor to a Person that is not, either before or after giving effect to
such transaction, our Subsidiary, if we apply, or certifies its intention
to apply, the Net Proceeds of that sale in accordance with the "Asset Sale"
provisions of the indenture; or
(3) if we properly designate any Restricted Subsidiary that is a
Guarantor as an Unrestricted Subsidiary.
See "--Repurchase at the Option of Holders--Asset Sales."
Subordination
The payment of principal, interest, premium and Liquidated Damages, if any,
on the series B notes will be subordinated to the prior payment in full of all
of our Senior Debt, including Senior Debt incurred after the date of the
indenture.
The holders of Senior Debt will be entitled to receive payment in full in
cash or Cash Equivalents of all Hedging Obligations due in respect of Senior
Debt, including interest after the commencement of any bankruptcy proceeding at
the rate specified in the applicable Senior Debt, before the holders of series
B notes will be entitled to receive any payment with respect to the series B
notes, except that holders of series B notes may receive and retain Permitted
Junior Securities and payments made from the trust described under "--Legal
Defeasance and Covenant Defeasance," in the event of any distribution to our
creditors:
(1) in our liquidation or dissolution;
(2) in a bankruptcy, reorganization, insolvency, receivership or similar
proceeding relating to us or our property;
(3) in an assignment for the benefit of creditors; or
(4) in any marshaling of our assets and liabilities.
We also may not make any payment in respect of the series B notes, except in
Permitted Junior Securities or from the trust described under "--Legal
Defeasance and Covenant Defeasance", if:
(1) a Payment Default on Designated Senior Debt occurs and is continuing
beyond any applicable grace period; or
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(2) any other Default occurs and is continuing on any series of
Designated Senior Debt that permits holders of that series of Designated
Senior Debt to accelerate its maturity and the trustee receives a notice of
such Default (a "Payment Blockage Notice") from the holders of any
Designated Senior Debt or us.
Payments on the series B notes may and shall be resumed:
(1) in the case of a Payment Default, upon the date on which such
Default is cured or waived; and
(2) in case of a Nonpayment Default, the earlier of the date on which
such Nonpayment Default is cured or waived or 179 days after the date on
which the applicable Payment Blockage Notice is received, unless the
maturity of any Designated Senior Debt has been accelerated.
No new Payment Blockage Notice may be delivered unless and until 360 days
have elapsed since the delivery of the immediately prior Payment Blockage
Notice.
No Nonpayment Default that existed or was continuing on the date of
delivery of any Payment Blockage Notice to the trustee and which was known to
the holders of Designated Senior Debt who delivered such Payment Blockage
Notice shall be, or be made, the basis for a subsequent Payment Blockage
Notice unless such Default shall have been cured or waived for a period of not
less than 90 days.
We must promptly notify holders of Senior Debt if payment of the series B
notes is accelerated because of an Event of Default.
As a result of the subordination provisions described above, in the event
of our bankruptcy, liquidation or reorganization, holders of series B notes
may recover less ratably than our creditors who are holders of Senior Debt.
See "Risk Factors--Subordination."
Optional Redemption
At any time prior to April 1, 2002, we may on any one or more occasions
redeem up to 35% of the aggregate principal amount of series B notes
originally issued under the indenture at a redemption price of 111.250% of the
principal amount thereof, plus accrued and unpaid interest and Liquidated
Damages, if any, to the redemption date, with the net cash proceeds of one or
more public equity offerings; provided that:
(1) at least 65% of the aggregate principal amount of series B notes
issued under the indenture remains outstanding immediately after the
occurrence of such redemption, excluding series B notes held by any of our
subsidiaries or us; and
(2) the redemption must occur within 45 days of the date of the closing
of such Public Equity Offering.
Except pursuant to the preceding paragraph, the series B notes will not be
redeemable at our option prior to April 1, 2004.
After April 1, 2004, we may redeem all or a part of the series B notes upon
not less than 30 nor more than 60 days' notice, at the redemption prices,
expressed as percentages of principal amount, set forth below plus accrued and
unpaid interest and Liquidated Damages, if any, thereon, to the applicable
redemption date, if redeemed during the twelve-month period beginning on April
1 of the years indicated below:
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
2004 ............................................................. 106.625%
2005.............................................................. 104.750%
2006.............................................................. 102.875%
2007 and thereafter .............................................. 100.000%
</TABLE>
Mandatory Redemption
We are not required to make mandatory redemption or sinking fund payments
with respect to the series B notes.
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Repurchase at the Option of Holders
Change of Control
If a Change of Control occurs, each holder of notes will have the right to
require us to repurchase all or any part, equal to $1,000 or an integral
multiple thereof, of your series B notes pursuant to a Change of Control Offer
on the terms set forth in the indenture. In the Change of Control Offer, we
will offer a Change of Control payment in cash equal to 101% of the aggregate
principal amount of series B notes repurchased plus accrued and unpaid interest
and Liquidated Damages, if any, thereon, to the date of purchase. Within ten
days following any Change of Control, we will mail a notice to each holder
describing the transaction or transactions that constitute the Change of
Control and offering to repurchase series B notes on the Change of Control
Payment Date specified in such notice which date shall be no earlier than 30
days and no later than 60 days from the date such notice is mailed, pursuant to
the procedures required by the indenture and described in such notice. We will
comply with the requirements of Rule 14e-1 under the Exchange Act and any other
securities laws and regulations thereunder to the extent such laws and
regulations are applicable in connection with the repurchase of the series B
notes as a result of a Change of Control. To the extent that the provisions of
any securities laws or regulations conflict with the Change of Control
provisions of the indenture, we will comply with the applicable securities laws
and regulations and will not be deemed to have breached our obligations under
the Change of Control provisions of the indenture by virtue of such conflict.
On the Change of Control Payment Date, we will, to the extent lawful:
(1) accept for payment all series B notes or portions thereof properly
tendered pursuant to the Change of Control Offer;
(2) deposit with the paying agent an amount equal to the Change of
Control payment in respect of all series B notes or portions thereof so
tendered; and
(3) deliver or cause to be delivered to the trustee the series B notes
so accepted together with an officers' certificate stating the aggregate
principal amount of series B notes or portions thereof being purchased by
us.
The paying agent will promptly mail to each holder of series B notes so
tendered the Change of Control payment for such series B notes, and the trustee
will promptly authenticate and mail or cause to be transferred by book-entry to
each holder a new series B note equal in principal amount to any unpurchased
portion of the notes surrendered, if any; provided that each such new series B
note will be in a principal amount of $1,000 or an integral multiple thereof.
The terms of outstanding Senior Debt may prohibit us from repurchasing series
B notes pursuant to a Change of Control Offer. Prior to complying with any of
the provisions of this "Change of Control" covenant, but in any event within 90
days following a Change of Control, we will either repay all outstanding Senior
Debt or obtain the requisite consents, if any, under all agreements governing
outstanding Senior Debt to permit the repurchase of series B notes required by
this covenant. If we are unable to refinance all of the Senior Debt that
prohibits a repurchase of series B notes or to obtain the requisite consents,
we will not be permitted to satisfy our obligation to make a Change of Control
Offer, and an Event of Default will occur as a result. We will publicly
announce the results of the Change of Control Offer on or as soon as
practicable after the Change of Control Payment Date.
The provisions described above that require us to make a Change of Control
Offer following a Change of Control will be applicable regardless of whether or
not any other provisions of the indenture are applicable. Except as described
above with respect to a Change of Control, the indenture does not contain
provisions that permit the holders of the notes to require that we repurchase
or redeem the notes in the event of a takeover, recapitalization or similar
transaction.
We will not be required to make a Change of Control Offer upon a Change of
Control if a third party makes the Change of Control Offer in the manner, at
the times and otherwise in compliance with the requirements set forth in the
indenture applicable to a Change of Control Offer made by us and purchases all
series B notes validly tendered and not withdrawn under such Change of Control
Offer.
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The definition of Change of Control includes a phrase relating to the direct
or indirect sale, lease, transfer, conveyance or other disposition of "all or
substantially all" of the properties or assets of our Subsidiaries and us
taken as a whole. Although there is a limited body of case law interpreting
the phrase "substantially all," there is no precise established definition of
the phrase under applicable law. Accordingly, the ability of a holder of
series B notes to require us to repurchase such series B notes as a result of
a sale, lease, transfer, conveyance or other disposition of less than all of
the assets of our Subsidiaries and us taken as a whole to another Person or
Group may be uncertain.
"Change of Control" means the occurrence of any of the following:
(1) the direct or indirect sale, transfer, conveyance or other
disposition, other than by way of merger or consolidation, in one or a
series of related transactions, of all or substantially all of the
properties or assets of our Restricted Subsidiaries and us taken as a whole
to any "Person," as that term is used in Section 13(d)(3) of the Exchange
Act, other than a Principal or a Related Party of a Principal;
(2) the adoption of a plan relating to our liquidation or dissolution;
(3) the consummation of any transaction, including, without limitation,
any merger or consolidation, the result of which is that any "Person,"
other than the Principals and their Related Parties, becomes the Beneficial
Owner, directly or indirectly, of more than 50% of our Voting Stock,
measured by voting power rather than number of shares; or
(4) the first day on which a majority of the members of our Board of
Directors are not Continuing Directors.
"Principals" means TC Group, L.L.C., a Delaware limited liability company,
and its Affiliates.
"Related Party" means:
(1) any controlling stockholder, 80% or more owned subsidiary, or
immediate family member, in the case of an individual, of any Principal; or
(2) any trust, corporation, partnership or other entity, the
beneficiaries, stockholders, partners, owners or Persons beneficially
holding an 80% or more controlling interest of which consist of any one or
more Principals and/or such other Persons referred to in the immediately
preceding clause (1).
Asset Sales
We will not, and will not permit any of our Restricted Subsidiaries to,
consummate an Asset Sale unless:
(1) we, or our Restricted Subsidiaries, as the case may be, receive
consideration at the time of such Asset Sale at least equal to the fair
market value of the assets or Equity Interests issued or sold or otherwise
disposed of;
(2) with respect to an Asset Sale involving consideration in excess of
$5.0 million, such fair market value is determined by our Board of
Directors and evidenced by a resolution of our Board of Directors set forth
in an officers' certificate delivered to the trustee; and
(3) at least 75% of the consideration therefor received by such
Restricted Subsidiary or us is in the form of cash. For purposes of this
provision, each of the following shall be deemed to be cash:
(a) any liabilities, as shown on our or any of our Restricted
Subsidiaries' most recent balance sheet, of any of our Restricted
Subsidiaries or us, other than contingent liabilities and liabilities
that are by their terms subordinated to the notes or any Guarantee, that
are assumed by the transferee of any such assets pursuant to a customary
novation agreement that releases any of our Restricted Subsidiaries or
us from further liability; and
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(b) any securities, notes or other obligations received by any of
our Restricted Subsidiaries or us from such transferee that are
contemporaneously, subject to ordinary settlement periods, converted by
any of our Restricted Subsidiaries or us into cash, to the extent of
the cash received in that conversion.
Within 365 days after the receipt of any Net Proceeds from an Asset Sale, we
may apply such Net Proceeds at our option:
(1) to repay Senior Debt and, if the Senior Debt repaid is revolving
credit Indebtedness, to correspondingly reduce commitments with respect
thereto;
(2) to acquire all or substantially all of the assets of, or a majority
of the Voting Stock of, another Permitted Business as long as such Person
becomes a Restricted Subsidiary;
(3) to make a capital expenditure; or
(4) to acquire other long-term assets that are used or useful in a
Permitted Business.
"Asset Sale" means:
(1) the sale, lease, conveyance or other disposition of any assets or
rights, other than sales of inventory in the ordinary course of business;
provided that the sale, conveyance or other disposition of all or
substantially all of the assets of our Subsidiaries and us taken as a whole
will be governed by the provisions of the indenture described above under
the caption "--Repurchase at the Option of Holders--Change of Control"
and/or the provisions described above under the caption "--Certain
Covenants--Merger, Consolidation or Sale of Assets" and not by the
provisions of the Asset Sale covenant; and
(2) the issuance of Equity Interests in any of our Restricted
Subsidiaries or the sale of Equity Interests in any of our Subsidiaries.
Notwithstanding the preceding, the following items shall not be deemed to be
Asset Sales:
(1) any single transaction or series of related transactions that
involves assets having a fair market value of less than $1.0 million;
(2) a transfer of assets between or among our Wholly Owned
Subsidiaries and us,
(3) an issuance of Equity Interests by a Wholly Owned Subsidiary to
another Wholly Owned Subsidiary or us;
(4) the sale or lease of equipment, inventory, accounts receivable or
other assets in the ordinary course of business;
(5) the sale or other disposition of cash or Cash Equivalents; and
(6) a Restricted Payment or Permitted Investment that is permitted by
the covenant described below under the caption "--Certain Covenants--
Restricted Payments."
Pending the final application of any such Net Proceeds, we may temporarily
reduce revolving credit borrowings or otherwise invest such Net Proceeds in any
manner that is not prohibited by the indenture.
Any Net Proceeds from Asset Sales that are not applied or invested as
provided in the preceding paragraph will constitute "Excess Proceeds." When the
aggregate amount of Excess Proceeds exceeds $10.0 million, we will make an
Asset Sale Offer to all holders of series B notes and all holders of other
Indebtedness that is pari passu with the series B notes containing provisions
similar to those set forth in the indenture with respect to offers to purchase
or redeem with the proceeds of sales of assets to purchase the maximum
principal amount of series B notes and such other pari passu Indebtedness that
may be purchased out of the Excess Proceeds. The offer price in any Asset Sale
Offer will be equal to 100% of principal amount plus accrued and unpaid
interest
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and Liquidated Damages, if any, to the date of purchase, and will be payable in
cash. If any Excess Proceeds remain after consummation of an Asset Sale Offer,
we may use such Excess Proceeds for any purpose not otherwise prohibited by the
indenture. If the aggregate principal amount of series B notes and such other
pari passu Indebtedness tendered into such Asset Sale Offer exceeds the amount
of Excess Proceeds, the trustee shall select the series B notes and such other
pari passu Indebtedness to be purchased on a pro rata basis based on the
principal amount of series B notes and such other pari passu Indebtedness
tendered. Upon completion of each Asset Sale Offer, the amount of Excess
Proceeds shall be reset at zero.
We will comply with the requirements of Rule 14e-1 under the Exchange Act
and any other securities laws and regulations thereunder to the extent such
laws and regulations are applicable in connection with each repurchase of
series B notes pursuant to an Asset Sale Offer. To the extent that the
provisions of any securities laws or regulations conflict with the Asset Sale
provisions of the indenture, we will comply with the applicable securities laws
and regulations and will not be deemed to have breached our obligations under
the Asset Sale provisions of the indenture by virtue of such conflict.
Our outstanding Senior Debt currently prohibits us from purchasing any
series B notes, and also provides that certain Change of Control events with
respect to us would constitute a Default under the agreements governing the
Senior Debt. Any future credit agreements or other agreements relating to
Senior Debt to which we become a party may contain similar restrictions and
provisions. In the event a Change of Control occurs at a time when we are
prohibited from purchasing series B notes, we could seek the consent of our
senior lenders to the purchase of series B notes or could attempt to refinance
the borrowings that contain such prohibition. If we do not obtain such a
consent or repay such borrowings, we will remain prohibited from purchasing
series B notes. In such case, our failure to purchase tendered series B notes
would constitute an Event of Default under the indenture which would, in turn,
constitute a Default under such Senior Debt. In such circumstances, the
subordination provisions in the indenture would likely restrict payments to the
holders of series B notes.
Selection and Notice
If less than all of the series B notes are to be redeemed at any time, the
trustee will select series B notes for redemption as follows:
(1) if the series B notes are listed, in compliance with the
requirements of the principal national securities exchange on which the
series B notes are listed; or
(2) if the series B notes are not so listed, on a pro rata basis, by lot
or by such method as the trustee shall deem fair and appropriate.
No series B notes of $1,000 or less shall be redeemed in part. Notices of
redemption shall be mailed by first class mail at least 30 but not more than 60
days before the redemption date to each holder of series B notes to be redeemed
at its registered address. Notices of redemption may not be conditional.
If any series B note is to be redeemed in part only, the notice of
redemption that relates to that series B note shall state the portion of the
principal amount thereof to be redeemed. A new series B note in principal
amount equal to the unredeemed portion of the original series B note will be
issued in the name of the holder thereof upon cancellation of the original
series B note. Series B notes called for redemption become due on the date
fixed for redemption. On and after the redemption date, interest ceases to
accrue on series B notes or portions of them called for redemption.
Certain Covenants
Restricted Payments
We will not, and will not permit any of our Restricted Subsidiaries to,
directly or indirectly:
(1) declare or pay any dividend or make any other payment or
distribution on account of our or any of our Restricted Subsidiaries'
Equity Interests, including, without limitation, any payment in connection
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with any merger or consolidation involving any of our Restricted
Subsidiaries or us, or to the direct or indirect holders of any of our
Restricted Subsidiaries' or our Equity Interests in their capacity as such,
other than dividends or distributions payable in Equity Interests of ours,
other than Disqualified Stock, or to any of our Restricted Subsidiaries or
us;
(2) purchase, redeem or otherwise acquire or retire for value,
including, without limitation, in connection with any merger or
consolidation involving us, any of our Equity Interests or any direct or
indirect parent of us;
(3) make any payment on or with respect to, or purchase, redeem, defease
or otherwise acquire or retire for value any Indebtedness that is
subordinated to the series B notes or the Guarantees, except a payment of
interest or principal at the Stated Maturity thereof; or
(4) make any Restricted Investment (all such payments and other actions
set forth in clauses (1) through (4) above being collectively referred to
as "Restricted Payments"), unless, at the time of and after giving effect
to such Restricted Payment:
(5) no Default or Event of Default shall have occurred and be continuing
or would occur as a consequence thereof; and
(6) we would, at the time of such Restricted Payment and after giving
pro forma effect thereto as if such Restricted Payment had been made at the
beginning of the applicable four-quarter period, have been permitted to
incur at least $1.00 of additional Indebtedness pursuant to the Fixed
Charge Coverage Ratio test set forth in the first paragraph of the covenant
described below under the caption "--Incurrence of Indebtedness and
Issuance of Preferred Stock;" and
(7) such Restricted Payment, together with the aggregate amount of all
other Restricted Payments made by our Restricted Subsidiaries and us after
the date of the indenture, excluding Restricted Payments permitted by
clauses (2), (3), (4) and (5) of the next succeeding paragraph, is less
than the sum, without duplication, of
(a) 50% of our Consolidated Net Income for the period, taken as one
accounting period, from the beginning of the first fiscal quarter
commencing after the date of the indenture to the end of our most
recently ended fiscal quarter for which internal financial statements
are available at the time of such Restricted Payment, or, if such
Consolidated Net Income for such period is a deficit, less 100% of such
deficit, plus
(b) 100% of the aggregate net cash proceeds received by us since the
date of the indenture as a contribution to our common equity capital or
from the issue or sale of our Equity Interests, other than Disqualified
Stock, or from the issue or sale of our convertible or exchangeable
Disqualified Stock or convertible or exchangeable debt securities that
have been converted into or exchanged for such Equity Interests, other
than Equity Interests, or Disqualified Stock or debt securities, sold
to any of our Subsidiaries, plus
(c) the amount by which Indebtedness of our Restricted Subsidiaries
or us is reduced on our balance sheet upon the conversion or exchange
subsequent to the issue date of any Indebtedness of us convertible or
exchangeable for our Equity Interests, other than Disqualified Stock,
less the amount of any cash, or other property, distributed by any
Restricted Subsidiary or us upon such conversion or exchange, plus
(d) without duplication, to the extent that any Restricted
Investment that was made after the date of the indenture is sold for
cash or otherwise liquidated or repaid for cash, the lesser of (i) the
cash return of capital with respect to such Restricted Investment, less
the cost of disposition, if any, and (ii) the initial amount of such
Restricted Investment.
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So long as no Default has occurred and is continuing or would be caused
thereby, the preceding provisions will not prohibit:
(1) the payment of any dividend within 60 days after the date of
declaration thereof, if at said date of declaration such payment would have
complied with the provisions of the indenture;
(2) the redemption, repurchase, retirement, defeasance or other
acquisition of any subordinated Indebtedness of any Guarantor or us or of
any of our Equity Interests in exchange for, or out of the net cash
proceeds of the substantially concurrent sale, other than to any of our
Restricted Subsidiaries, of, our Equity Interests, other than Disqualified
Stock; provided that the amount of any such net cash proceeds that are
utilized for any such redemption, repurchase, retirement, defeasance or
other acquisition shall be excluded from clause (7) (b) of the preceding
paragraph;
(3) the defeasance, redemption, repurchase or other acquisition of
subordinated Indebtedness of any Guarantor or us with the net cash proceeds
from an incurrence of Permitted Refinancing Indebtedness;
(4) the payment of any dividend by us on Existing Preferred Stock
pursuant to the terms of such Existing Preferred Stock as of the date of
the indenture;
(5) the payment of any dividend by any of our Restricted Subsidiaries to
the holders of its common Equity Interests on a pro rata basis;
(6) the repurchase, redemption or other acquisition or retirement for
value of any of our Equity Interests or any of our Restricted Subsidiaries
held by any member of our, or any of our Restricted Subsidiaries',
management pursuant to any management equity subscription agreement or
stock option agreement; provided that the aggregate price paid for all such
repurchased, redeemed, acquired or retired Equity Interests shall not
exceed $1.5 million in any twelve-month period; and
(7) Restricted Payments not to exceed $5.0 million since the date of the
indenture.
The amount of all Restricted Payments, other than cash, shall be the fair
market value on the date of the Restricted Payment of the asset(s) or
securities proposed to be transferred or issued to or by such Restricted
Subsidiary or us, as the case may be, pursuant to the Restricted Payment. The
fair market value of any assets or securities that are required to be valued by
this covenant shall be determined by our Board of Directors whose resolution
with respect thereto shall be delivered to the trustee. Our Board of Directors'
determination must be based upon an opinion or appraisal issued by an
accounting, appraisal or investment banking firm of national standing if the
fair market value exceeds $10.0 million. Not later than the date of making any
Restricted Payment, we shall deliver to the trustee an officers' certificate
stating that such Restricted Payment is permitted and setting forth the basis
upon which the calculations required by this "Restricted Payments" covenant
were computed, together with a copy of any fairness opinion or appraisal
required by the indenture.
Incurrence of Indebtedness and Issuance of Preferred Stock
We will not, and will not permit any of our Restricted Subsidiaries to,
directly or indirectly, create, incur, issue, assume, guarantee or otherwise
become directly or indirectly liable, contingently or otherwise, with respect
to (collectively, "incur") any Indebtedness, including Acquired Debt, and we
will not issue any Disqualified Stock and will not permit any of our
Subsidiaries to issue any shares of preferred stock; provided, however, that we
may incur Indebtedness, including Acquired Debt, or issue Disqualified Stock,
and our Restricted Subsidiaries may incur Indebtedness or issue Preferred
Stock, if the Fixed Charge Coverage Ratio for our most recently ended four full
fiscal quarters for which internal financial statements are available
immediately preceding the date on which such additional Indebtedness is
incurred or such Disqualified Stock is issued would have been at least 2.0 to
1, determined on a pro forma basis, including a pro forma application of the
Net Proceeds therefrom, as if the additional Indebtedness had been incurred or
the Preferred Stock or Disqualified Stock had been issued, as the case may be,
at the beginning of such four-quarter period.
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The first paragraph of this covenant will not prohibit the incurrence of any
of the following items of Indebtedness (collectively, "Permitted Debt"):
(1) the incurrence by any Guarantor and us of additional Indebtedness
and letters of credit under Credit Facilities in an aggregate principal
amount at any one time outstanding under this clause (1), with letters of
credit being deemed to have a principal amount equal to the maximum
potential liability of any Guarantor and us thereunder, not to exceed an
amount equal to $380.0 million less the aggregate amount of all Net
Proceeds of Asset Sales applied by any Guarantor or us to repay
Indebtedness under a Credit Facility pursuant to the covenant described
above under the caption "--Repurchase at the Option of Holders--Asset
Sales;"
(2) the incurrence by our Restricted Subsidiaries and us of the Existing
Indebtedness;
(3) the incurrence by the Guarantors and us of Indebtedness represented
by the series A notes and the series B notes to be issued pursuant to this
exchange offer, including, in each case, the Guarantees;
(4) the incurrence by any of our Restricted Subsidiaries or us of
Indebtedness represented by Capital Lease Obligations, mortgage financings
or purchase money obligations, in each case, incurred for the purpose of
financing all or any part of the purchase price or cost of construction or
improvement of property, plant or equipment used in the our business or
such Restricted Subsidiary, in an aggregate principal amount, including all
Permitted Refinancing Indebtedness incurred to refund, refinance or replace
any Indebtedness incurred pursuant to this clause (4), not to exceed $25.0
million at any time outstanding;
(5) the incurrence by any of our Restricted Subsidiaries or us of
Permitted Refinancing Indebtedness in exchange for, or the Net Proceeds of
which are used to refund, refinance or replace Indebtedness, other than
intercompany Indebtedness, that was permitted by the indenture to be
incurred under the first paragraph of this covenant or clauses (2), (3),
(4), (5) or (11) of this paragraph;
(6) the incurrence by any of our Restricted Subsidiaries or us of
intercompany Indebtedness between or among any of our Restricted
Subsidiaries and us; provided, however, that:
(a) if any Guarantor or we are the obligor on such Indebtedness,
such Indebtedness, other than Indebtedness owing to Universal
Professional Insurance Company and any Indebtedness pledged as security
for any Senior Debt, must be expressly subordinated to the prior
payment in full in cash of all Hedging Obligations with respect to the
series B notes, in our case, or the Guarantee, in the case of a
Guarantor; and
(b) (i) any subsequent issuance or transfer of Equity Interests,
other than any pledge thereof as security for any Senior Debt, that
results in any such Indebtedness being held by a Person other than any
of our Restricted Subsidiaries or us and (ii) any sale or other
transfer of any such Indebtedness to a Person that is not either our
Restricted Subsidiary or us thereof shall be deemed, in each case, to
constitute an incurrence of such Indebtedness by such Restricted
Subsidiary or us, as the case may be, that was not permitted by this
clause (6);
(7) the incurrence by any of our Restricted Subsidiaries or us of
Hedging Obligations that are incurred for the purpose of fixing or hedging
interest rate risk with respect to any floating rate Indebtedness that is
permitted by the terms of the indenture to be outstanding;
(8) the guarantee by any of the Guarantors or us of any or our or any of
our Restricted Subsidiaries' Indebtedness that was permitted to be incurred
by another provision of this covenant;
(9) the incurrence by any of our Unrestricted Subsidiaries of Non-
Recourse Debt, provided, however, that if any such Indebtedness ceases to
be Non-Recourse Debt of an Unrestricted Subsidiary, such event shall be
deemed to constitute an incurrence of Indebtedness by any of our Restricted
Subsidiaries that was not permitted by this clause (9);
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(10) the accrual of interest, the accretion or amortization of original
issue discount, the payment of interest on any Indebtedness in the form of
additional Indebtedness with the same terms, and the payment of dividends
on Disqualified Stock in the form of additional shares of the same class of
Disqualified Stock will not be deemed to be an incurrence of Indebtedness
or an issuance of Disqualified Stock for purposes of this covenant;
provided, in each such case, that the amount thereof is included in our
Fixed Charges as accrued;
(11) the incurrence of Indebtedness by our Foreign Subsidiaries in an
amount not to exceed $10.0 million at any time outstanding; and
(12) the incurrence by any of our Restricted Subsidiaries or us of
additional Indebtedness in an aggregate principal amount, or accreted
value, as applicable, at any time outstanding, including all Permitted
Refinancing Indebtedness incurred to refund, refinance or replace any
Indebtedness incurred pursuant to this clause (12), not to exceed $10.0
million.
For purposes of determining compliance with this "Incurrence of Indebtedness
and Issuance of Preferred Stock" covenant, in the event that an item of
proposed Indebtedness meets the criteria of more than one of the categories of
permitted debt described in clauses (1) through (12) above, or is entitled to
be incurred pursuant to the first paragraph of this covenant, we will be
permitted to classify such item of Indebtedness on the date of its incurrence,
or reclassify all or a portion of such item of Indebtedness, in any manner that
complies with this covenant. Indebtedness under Credit Facilities outstanding
on the date on which notes are first issued and authenticated under the
indenture shall be deemed to have been incurred on such date in reliance on the
exception provided by clause (1) of the definition of Permitted Debt.
Liens
We will not, and will not permit any of our Restricted Subsidiaries to,
directly or indirectly, create, incur, assume or suffer to exist any Lien of
any kind securing Indebtedness that is pari passu or subordinated in right of
payment to the series B notes on any asset now owned or hereafter acquired,
except Permitted Liens, unless the series B notes are secured by such Lien on
an equal and ratable basis.
Dividend and Other Payment Restrictions Affecting Subsidiaries
We will not, and will not permit any of our Restricted Subsidiaries to,
directly or indirectly, create or permit to exist or become effective any
consensual encumbrance or restriction on the ability of any Restricted
Subsidiary to:
(1) pay dividends or make any other distributions on its Capital Stock
to any of our Restricted Subsidiaries or us, or with respect to any other
interest or participation in, or measured by, its profits, or pay any
Indebtedness owed to any of our Restricted Subsidiaries or us;
(2) make loans or advances to any of our Restricted Subsidiaries or us;
or
(3) transfer any of its properties or assets to any of our Restricted
Subsidiaries or us.
However, the preceding restrictions will not apply to encumbrances or
restrictions existing under or by reason of:
(1) Existing Indebtedness and the Credit Agreement, each as in effect on
the date of the indenture and any amendments, modifications, restatements,
renewals, increases, supplements, refundings, replacements or refinancings
thereof, provided that such amendments, modifications, restatements,
renewals, increases, supplements, refundings, replacement or refinancings
are no more restrictive, taken as a whole, with respect to such dividend
and other payment restrictions than those contained in such Existing
Indebtedness and such Credit Agreement, each as in effect on the date of
the indenture;
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(2) the indenture and the series B notes;
(3) applicable law;
(4) any instrument governing Indebtedness or Capital Stock of a Person
acquired by any of our Restricted Subsidiaries or us as in effect at the
time of such acquisition, except to the extent such Indebtedness was
incurred in connection with or in contemplation of such acquisition, which
encumbrance or restriction is not applicable to any Person, or the
properties or assets of any Person, other than the Person, or the property
or assets of the Person, so acquired, provided that, in the case of
Indebtedness, such Indebtedness was permitted by the terms of the indenture
to be incurred;
(5) customary non-assignment provisions in leases entered into in the
ordinary course of business;
(6) purchase money obligations for property acquired that impose
restrictions on the property so acquired of the nature described in clause
(3) of the preceding paragraph;
(7) any agreement for the sale or other disposition of a Restricted
Subsidiary that restricts distributions by that Restricted Subsidiary
pending its sale or other disposition;
(8) Permitted Refinancing Indebtedness, provided that the restrictions
contained in the agreements governing such Permitted Refinancing
Indebtedness are no more restrictive, taken as a whole, than those
contained in the agreements governing the Indebtedness being refinanced;
(9) Liens securing Indebtedness that limit the right of the debtor to
dispose of the assets subject to such Lien;
(10) provisions with respect to the disposition or distribution of
assets or property in joint venture agreements, asset sale agreements,
stock sale agreements and other similar agreements; and
(11) restrictions on cash or other deposits or net worth imposed by
customers under contracts entered into in the ordinary course of business.
Merger, Consolidation or Sale of Assets
We may not, directly or indirectly: (1) consolidate or merge with or into
another Person, whether or not we are the surviving corporation; or (2) sell,
assign, transfer, convey or otherwise dispose of all or substantially all of
the properties or assets of our Restricted Subsidiaries and us taken as a
whole, in one or more related transactions, to another Person; unless:
(1) either: (a) we are the surviving corporation or (b) the Person
formed by or surviving any such consolidation or merger, if other than us,
or to which such sale, assignment, transfer, conveyance or other
disposition shall have been made is a corporation organized or existing
under the laws of the U.S., any state thereof or the District of Columbia;
(2) the Person formed by or surviving any such consolidation or merger,
if other than us, or the Person to which such sale, assignment, transfer,
conveyance or other disposition shall have been made assumes all our
obligations under the series B notes, the indenture and the registration
rights agreement pursuant to agreements reasonably satisfactory to the
trustee;
(3) immediately after such transaction no Default or Event of Default
exists; and
(4) we, or the Person formed by or surviving any such consolidation or
merger, if other than us, or to which such sale, assignment, transfer,
conveyance or other disposition shall have been made, will, on the date of
such transaction after giving pro forma effect thereto and any related
financing transactions as if the same had occurred at the beginning of the
applicable four-quarter period, be permitted to incur at least $1.00 of
additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test
set forth in the first paragraph of the covenant described above under the
caption "--Incurrence of Indebtedness and Issuance of Preferred Stock."
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In addition, we may not, directly or indirectly, lease all or substantially
all of our properties or assets, in one or more related transactions, to any
other Person. This "Merger, Consolidation, or Sale of Assets" covenant will not
apply to a sale, assignment, transfer, conveyance or other disposition of
assets between or among any of our Wholly Owned Restricted Subsidiaries and us.
Designation of Restricted and Unrestricted Subsidiaries
Our Board of Directors may designate any Restricted Subsidiary to be an
Unrestricted Subsidiary if that designation would not cause a Default. If a
Restricted Subsidiary is designated as an Unrestricted Subsidiary, the
aggregate fair market value of all outstanding Investments owned by our
Restricted Subsidiaries and us in the Subsidiary so designated will be deemed
to be an Investment made as of the time of such designation and will either
reduce the amount available for Restricted Payments under the first paragraph
of the covenant described above under the caption "--Restricted Payments" or
reduce the amount available for future Investments under one or more clauses of
the definition of Permitted Investments, as we shall determine. That
designation will only be permitted if such Investment would be permitted at
that time and if such Restricted Subsidiary otherwise meets the definition of
an Unrestricted Subsidiary. Our Board of Directors may redesignate any
Unrestricted Subsidiary to be a Restricted Subsidiary if the redesignation
would not cause a Default.
Transactions with Affiliates
We will not, and will not permit any of our Restricted Subsidiaries to, make
any payment to, or sell, lease, transfer or otherwise dispose of any of its
properties or assets to, or purchase any property or assets from, or enter into
or make or amend any transaction, contract, agreement, understanding, loan,
advance or guarantee with, or for the benefit of, any Affiliate (each, an
"Affiliate Transaction"), unless:
(1) such Affiliate Transaction is on terms that are no less favorable to
the relevant Restricted Subsidiary or us than those that would have been
obtained in a comparable transaction by such Restricted Subsidiary or us
with an unrelated Person; and
(2) we deliver to the trustee:
(a) with respect to any Affiliate Transaction or series of related
Affiliate Transactions involving aggregate consideration in excess of
$1.0 million, a resolution of our Board of Directors set forth in an
officers' certificate certifying that such Affiliate Transaction
complies with this covenant and that such Affiliate Transaction has
been approved by a majority of the disinterested members of our Board
of Directors; and
(b) with respect to any Affiliate Transaction or series of related
Affiliate Transactions involving aggregate consideration in excess of
$5.0 million, an opinion as to the fairness to the holders of such
Affiliate Transaction from a financial point of view issued by an
accounting, appraisal or investment banking firm of national standing.
The following items shall not be deemed to be Affiliate Transactions and,
therefore, will not be subject to the provisions of the prior paragraph:
(1) any employment agreement entered into by any of our Restricted
Subsidiaries or us in the ordinary course of business;
(2) transactions between or among our Restricted Subsidiaries and/or us;
(3) transactions with a Person that is our Affiliate solely because we
own an Equity Interest in such Person;
(4) payment of reasonable directors' fees to Persons who are not
otherwise our Affiliates;
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(5) payments of annual management, consulting and advisory fees and
related expenses to the Principal and its Affiliates pursuant to the
Management Agreement; and
(6) Restricted Payments that are permitted by the provisions of the
indenture described above under the caption "--Restricted Payments."
Additional Subsidiary Guarantees
If any of our Subsidiaries or we acquire or create another Domestic
Subsidiary after the date of the indenture or if any Subsidiary becomes a
Domestic Subsidiary, then that Domestic Subsidiary must become a Guarantor and
execute a supplemental indenture and deliver an opinion of counsel to the
trustee within ten Business Days of the date on which it was acquired or
created. This covenant shall not apply to any Subsidiary that has been properly
designated as an Unrestricted Subsidiary.
Business Activities
We will not, and will not permit any Subsidiary to, engage in any business
other than Permitted Businesses, except to such extent as would not be material
to our Subsidiaries and us taken as a whole.
Payments for Consent
We will not, and will not permit any of our Subsidiaries to, directly or
indirectly, pay or cause to be paid any consideration to or for the benefit of
any holder of series B notes for or as an inducement to any consent, waiver or
amendment of any of the terms or provisions of the indenture or the notes
unless such consideration is offered to be paid and is paid to all holders of
the series B notes that consent, waive or agree to amend in the time frame set
forth in the solicitation documents relating to such consent, waiver or
agreement.
No Senior Subordinated Debt
We will not incur, create, issue, assume, guarantee or otherwise become
liable for any Indebtedness that is subordinate or junior in right of payment
to any of our Senior Debt and senior in any respect in right of payment to the
series B notes. No Guarantor will incur, create, issue, assume, guarantee or
otherwise become liable for any Indebtedness that is subordinate or junior in
right of payment to the Senior Debt of such Guarantor and senior in any respect
in right of payment to such Guarantor's Guarantee.
Reports
Whether or not required by the Commission, so long as any series B notes are
outstanding, we will furnish to the holders of series B notes, within the time
periods specified in the Commission's rules and regulations:
(1) all quarterly and annual financial information that would be
required to be contained in a filing with the Commission on Forms 10-Q and
10-K if we were required to file such Forms, including a "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
and, with respect to the annual information only, a report on the annual
financial statements by our certified independent accountants; and
(2) all current reports that would be required to be filed with the
Commission on Form 8-K if we were required to file such reports.
If we have designated any of our Subsidiaries as Unrestricted Subsidiaries,
then the quarterly and annual financial information required by the preceding
paragraph shall include a reasonably detailed presentation, either on the face
of the financial statements or in the footnotes thereto, and in Management's
Discussion and Analysis of Financial Condition and Results of Operations, of
the financial condition and results of operations of our Restricted
Subsidiaries and us separate from the financial condition and results of
operations of our Unrestricted Subsidiaries.
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In addition, following the consummation of this exchange offer contemplated
by the registration rights agreement, whether or not required by the
Commission, we will file a copy of all information and reports referred to in
clauses (1) and (2) above with the Commission for public availability within
the time periods specified in the Commission's rules and regulations, unless
the Commission will not accept such a filing, and make such information
available to securities analysts and prospective investors upon request. In
addition, the Guarantors and we have agreed that, for so long as any series B
notes remain outstanding, we will furnish to the holders and to securities
analysts and prospective investors, upon their request, the information
required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act.
Events of Default and Remedies
Each of the following is an Event of Default:
(1) Default for 30 days in the payment when due of interest on, or
Liquidated Damages with respect to, the series B notes whether or not
prohibited by the subordination provisions of the indenture;
(2) Default in payment when due of the principal of, or premium, if any,
on the series B notes, whether or not prohibited by the subordination
provisions of the indenture;
(3) failure by any of the Guarantors or us to comply with the provisions
described under the captions "--Repurchase at the Option of Holders--Change
of Control," "--Repurchase at the Option of Holders--Asset Sales," "--
Certain Covenants--Restricted Payments," "--Certain Covenants--Incurrence
of Indebtedness and Issuance of Preferred Stock" or "--Certain Covenants--
Merger, Consolidation or Sale of Assets;"
(4) failure by any of our Restricted Subsidiaries or us for 60 days
after notice to comply with any of the other agreements in the indenture;
(5) Default under any mortgage, indenture or instrument under which
there may be issued or by which there may be secured or evidenced any
Indebtedness for money borrowed by any of our Restricted Subsidiaries or
us, or the payment of which is guaranteed by any of our Restricted
Subsidiaries or us, whether such Indebtedness or guarantee now exists, or
is created after the date of the indenture, if that Default:
(a) is caused by a failure to pay principal of, or interest or
premium, if any, on such Indebtedness prior to the expiration of the
grace period provided in such Indebtedness on the date of such Default
(a "Payment Default"); or
(b) results in the acceleration of such Indebtedness prior to its
express maturity,
and, in each case, the principal amount of any such Indebtedness, together
with the principal amount of any other such Indebtedness under which there
has been a Payment Default or the maturity of which has been so
accelerated, aggregates $10.0 million or more;
(6) failure by any of our Restricted Subsidiaries or us to pay final
judgments aggregating in excess of $10.0 million, which judgments are not
paid, discharged or stayed for a period of 60 days; and
(7) except as permitted by the indenture, any Guarantee shall be held in
any judicial proceeding to be unenforceable or invalid or shall cease for
any reason to be in full force and effect or any Guarantor, or any Person
acting on behalf of any Guarantor, shall deny or disaffirm its obligations
under its Guarantee; and
(8) certain events of bankruptcy or insolvency with respect to any of
our Restricted Subsidiaries or us.
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In the case of an Event of Default arising from certain events of bankruptcy
or insolvency, with respect to us, any Subsidiary that is a Significant
Subsidiary or any group of Subsidiaries that, taken together, would constitute
a Significant Subsidiary, all outstanding series B notes will become due and
payable immediately without further action or notice. If any other Event of
Default occurs and is continuing, the trustee or the holders of at least 25% in
principal amount of the then outstanding series B notes may declare all the
series B notes to be due and payable immediately.
Holders of series B notes may not enforce the indenture or the series B
notes except as provided in the indenture. Subject to certain limitations,
holders of a majority in principal amount of the then outstanding series B
notes may direct the trustee in its exercise of any trust or power. The trustee
may withhold from holders of series B notes notice of any continuing Default or
Event of Default, except a Default or Event of Default relating to the payment
of principal or interest or Liquidated Damages, if it determines that
withholding notice is in their interest.
The holders of a majority in aggregate principal amount of the series B
notes then outstanding by notice to the trustee may on behalf of the holders of
all of the series B notes waive any existing Default or Event of Default and
its consequences under the indenture except a continuing Default or Event of
Default in the payment of interest or Liquidated Damages on, or the principal
of, the series B notes.
We are required to deliver to the trustee annually a statement regarding
compliance with the indenture. Upon becoming aware of any Default or Event of
Default, we are required to deliver to the trustee a statement specifying such
Default or Event of Default.
No Personal Liability of Directors, Officers, Employees and Stockholders
No director, officer, employee, incorporator or stockholder of any Guarantor
or us, as such, shall have any liability for any obligations of the Guarantors
or us under the series B notes, the indenture, the Guarantees, or for any claim
based on, in respect of, or by reason of, such obligations or their creation.
Each holder of series B notes by accepting a series B note waives and releases
all such liability. The waiver and release are part of the consideration for
issuance of the series B notes. The waiver may not be effective to waive
liabilities under the federal securities laws.
Legal Defeasance and Covenant Defeasance
We may, at our option and at any time, elect to have all of our obligations
discharged with respect to the outstanding notes and all obligations of the
Guarantors discharged with respect to their Guarantees ("Legal Defeasance")
except for:
(1) the rights of holders of outstanding series B notes to receive
payments from the trust referred to below in respect of the principal of,
or interest and Liquidated Damages, if any, on such series B notes when
such payments are due;
(2) our obligations with respect to the series B notes concerning
issuing temporary series B notes, registration of notes, mutilated,
destroyed, lost or stolen series B notes and the maintenance of an office
or agency for payment and money for security payments held in trust;
(3) the rights, powers, trusts, duties and immunities of the trustee,
and our obligations in connection therewith; and
(4) the Legal Defeasance provisions of the indenture.
In addition, we may, at our option and at any time, elect to have the
obligations of the Guarantors and us released with respect to certain covenants
that are described in the indenture ("Covenant Defeasance") and thereafter any
omission to comply with those covenants shall not constitute a Default or Event
of Default with respect to the series B notes. In the event Covenant Defeasance
occurs, certain events, not including non-payment, bankruptcy, receivership,
rehabilitation and insolvency events, described under "Events of Default" will
no longer constitute an Event of Default with respect to the series B notes.
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In order to exercise either Legal Defeasance or Covenant Defeasance:
(1) we must irrevocably deposit with the trustee, in trust, for the
benefit of the holders of the series B notes, cash in U.S. dollars, non-
callable Government Securities, or a combination thereof, in such amounts
as will be sufficient, in the opinion of a nationally recognized firm of
independent public accountants, to pay the principal of, or interest and
premium and Liquidated Damages, if any, on the outstanding series B notes
on the Stated Maturity or on the applicable redemption date, as the case
may be, and we must specify whether the series B notes are being defeased
to maturity or to a particular redemption date;
(2) in the case of Legal Defeasance, we shall have delivered to the
trustee an opinion of counsel reasonably acceptable to the trustee
confirming that (a) we have received from, or there has been published by,
the Internal Revenue Service a ruling or (b) since the date of the
indenture, there has been a change in the applicable federal income tax
law, in either case to the effect that, and based thereon such opinion of
counsel shall confirm that, the holders of the outstanding series B notes
will not recognize income, gain or loss for federal income tax purposes as
a result of such Legal Defeasance and will be subject to federal income tax
on the same amounts, in the same manner and at the same times as would have
been the case if such Legal Defeasance had not occurred;
(3) in the case of Covenant Defeasance, we shall have delivered to the
trustee an opinion of counsel reasonably acceptable to the trustee
confirming that the holders of the outstanding series B notes will not
recognize income, gain or loss for federal income tax purposes as a result
of such Covenant Defeasance and will be subject to federal income tax on
the same amounts, in the same manner and at the same times as would have
been the case if such Covenant Defeasance had not occurred;
(4) no Default or Event of Default shall have occurred and be continuing
either: (a) on the date of such deposit, other than a Default or Event of
Default resulting from the borrowing of funds to be applied to such
deposit; or (b) with respect only to events of Default resulting from
bankruptcy or insolvency events at any time in the period ending on the
91st day after the date of deposit;
(5) such Legal Defeasance or Covenant Defeasance will not result in a
breach or violation of, or constitute a Default under any material
agreement or instrument, other than the indenture, to which we, or any of
our Subsidiaries, are a party or by which we, or any of our subsidiaries,
are bound;
(6) we must have delivered to the trustee an opinion of counsel to the
effect that, assuming no intervening bankruptcy of any Guarantor or us
between the date of deposit and the 91st day following the deposit and
assuming that no holder is considered our "insider" under applicable
bankruptcy law, after the 91st day following the deposit, the trust funds
will not be subject to the effect of any applicable bankruptcy, insolvency,
reorganization or similar laws affecting creditors' rights generally;
(7) we must deliver to the trustee an officers' certificate stating that
the deposit was not made by us with the intent of preferring the holders of
series B notes over our other creditors with the intent of defeating,
hindering, delaying or defrauding our creditors or others; and
(8) we must deliver to the trustee an officers' certificate and an
opinion of counsel, each stating that all conditions precedent relating to
the Legal Defeasance or the Covenant Defeasance have been complied with.
Amendment, Supplement and Waiver
Except as provided in the next two succeeding paragraphs, the indenture or
the series B notes may be amended or supplemented with the consent of the
holders of at least a majority in principal amount of the series B notes then
outstanding, including, without limitation, consents obtained in connection
with a purchase of, or tender offer or exchange offer for, series B notes, and
any existing Default or compliance with any provision of the indenture or the
series B notes may be waived with the consent of the holders of a majority in
principal amount of the then outstanding series B notes, including, without
limitation, consents obtained in connection with a purchase of, or tender offer
or exchange offer for, series B notes.
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Without the consent of each holder affected, an amendment or waiver may not,
with respect to any series B notes held by a non-consenting holder:
(1) reduce the principal amount of notes whose holders must consent to
an amendment, supplement or waiver;
(2) reduce the principal of or change the fixed maturity of any series B
note or alter the provisions with respect to the redemption of the series B
notes, other than provisions relating to the covenants described above
under the caption "--Repurchase at the Option of Holders;"
(3) reduce the rate of or change the time for payment of interest on any
series B note;
(4) waive a Default or Event of Default in the payment of principal of,
or interest or premium, or Liquidated Damages, if any, on the series B
notes, except a rescission of acceleration of the series B notes by the
holders of at least a majority in aggregate principal amount of the series
B notes and a waiver of the Payment Default that resulted from such
acceleration;
(5) make any series B note payable in money other than that stated in
the series B notes;
(6) make any change in the provisions of the indenture relating to
waivers of past Defaults or the rights of holders of series B notes to
receive payments of principal of, or interest or premium or Liquidated
Damages, if any, on the series B notes;
(7) waive a redemption payment with respect to any series B note, other
than a payment required by one of the covenants described above under the
caption "--Repurchase at the Option of Holders";
(8) release any Guarantor from any of its obligations under its
Guarantee or the indenture, except in accordance with the terms of the
indenture; or
(9) make any change in the preceding amendment and waiver provisions.
In addition, any amendment to, or waiver of, the provisions of the indenture
relating to subordination that adversely affects the rights of the holders of
the series B notes will require the consent of the holders of at least 75% in
aggregate principal amount of notes then outstanding.
Notwithstanding the preceding, without the consent of any holder of series B
notes, the Guarantors, the trustee and we may amend or supplement the indenture
or the series B notes:
(1) to cure any ambiguity, defect or inconsistency;
(2) to provide for uncertificated series B notes in addition to or in
place of Certificated Notes;
(3) to provide for the assumption of our obligations to holders of
series B notes in the case of a merger or consolidation or sale of all or
substantially all of our assets;
(4) to make any change that would provide any additional rights or
benefits to the holders of series B notes or that does not adversely affect
the legal rights under the indenture of any such holder; or
(5) to comply with requirements of the Commission in order to effect or
maintain the qualification of the indenture under the Trust Indenture Act.
Concerning the Trustee
If the trustee becomes a creditor of any guarantor or us, the indenture
limits its right to obtain payment of claims in certain cases, or to realize on
certain property received in respect of any such claim as security or
otherwise. The trustee will be permitted to engage in other transactions;
however, if it acquires any conflicting interest it must eliminate such
conflict within 90 days, apply to the Commission for permission to continue or
resign.
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The holders of a majority in principal amount of the then outstanding series
B notes will have the right to direct the time, method and place of conducting
any proceeding for exercising any remedy available to the trustee, subject to
certain exceptions. The indenture provides that in case an Event of Default
shall occur and be continuing, the trustee will be required, in the exercise of
its power, to use the degree of care of a prudent man in the conduct of his own
affairs. Subject to such provisions, the trustee will be under no obligation to
exercise any of its rights or powers under the indenture at the request of any
holder of series B notes, unless such holder shall have offered to the trustee
security and indemnity satisfactory to it against any loss, liability or
expense.
Additional Information
Anyone who receives this prospectus may obtain a copy of the indenture and
the registration rights agreement without charge by writing to The IT Group,
Inc., 2790 Mosside Boulevard, Monroeville, PA 15146-2792, Attention: General
Counsel.
Book-Entry, Delivery and Form
The series B notes will be in the form of a Global Note without interest
coupons. Upon issuance, the Global Note will be deposited with the trustee, as
custodian for DTC, in New York, New York, and registered in the name of DTC or
its nominee, in each case for credit to the accounts of DTC's Participants or
Indirect Participants.
The Global Note may be transferred, in whole and not in part, only to
another nominee of DTC or to a successor of DTC or its nominee. Beneficial
interests in the Global Note may not be exchanged for series B notes in
certificated form except in the limited circumstances described below. See "--
Transfer of Interests in the Global Note for Certificated Notes." Except in the
limited circumstances described below, owners of beneficial interests in the
Global Note will not be entitled to receive physical delivery of series B notes
in certificated form.
Initially, the trustee will act as paying agent and registrar. The series B
notes may be presented for registration of transfer and exchange at the offices
of the registrar.
Depository Procedures
The following description of the operations and procedures of DTC, Euroclear
and Cedel are provided solely as a matter of convenience. These operations and
procedures are solely within the control of their respective settlement systems
and are subject to changes by them. We take no responsibility for these
operations and procedures and urge investors to contact the DTC, Euroclear or
Cedel or their Participants directly to discuss these matters.
DTC has advised us that DTC is a limited-purpose trust company created to
hold securities for its participating organizations and to facilitate the
clearance and settlement of transactions in those securities between
Participants through electronic book-entry changes in accounts of its
Participants. The Participants include securities brokers and dealers,
including the initial purchasers, banks, trust companies, clearing corporations
and certain other organizations. Access to DTC's system is also available to
other entities such as banks, brokers, dealers and trust companies that clear
through or maintain a custodial relationship with a Participant, either
directly or indirectly, collectively, the "Indirect Participants." Persons who
are not Participants may beneficially own securities held by or on behalf of
DTC only through the Participants or the Indirect Participants. The ownership
interests in, and transfers of ownership interests in, each security held by or
on behalf of DTC are recorded on the records of the Participants and Indirect
Participants.
DTC has also advised us that, pursuant to procedures established by it:
(1) upon deposit of the Global Note, DTC will credit the accounts of
Participants designated by the initial purchasers with portions of the
principal amount of the Global Note; and
(2) ownership of these interests in the Global Note will be shown on,
and the transfer of ownership thereof will be effected only through,
records maintained by DTC, with respect to the Participants, or by
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the Participants and the Indirect Participants, with respect to other
owners of beneficial interest in the Global Note.
Investors in the Global Note may hold their interests directly through DTC
if they are direct Participants in DTC or indirectly through organizations that
are direct Participants in DTC.
Except as described below, owners of interests in the Global Note will not
have series B notes registered in their names, will not receive physical
delivery of series B notes in certificated form and will not be considered the
registered owners or "Holders" thereof under the indenture for any purpose.
Payments in respect of the principal of, and interest and premium and
Liquidated Damages, if any, on the Global Note registered in the name of DTC or
its nominee will be payable to DTC in its capacity as the registered holder
under the indenture. Under the terms of the indenture, the trustee and we will
treat the Persons in whose names the series B notes, including the Global Note,
are registered as the owners thereof for the purpose of receiving payments and
for all other purposes. Consequently, neither we, the trustee nor any agent of
the trustee or us has or will have any responsibility or liability for:
(1) any aspect of DTC's records or any Participant's or Indirect
Participant's records relating to or payments made on account of Beneficial
Ownership interest in the Global Note or for maintaining, supervising or
reviewing any of DTC's records or any Participant's or Indirect
Participant's records relating to the Beneficial Ownership interests in the
Global Note; or
(2) any other matter relating to the actions and practices of DTC or any
of its Participants or Indirect Participants.
DTC has advised us that its current practice, upon receipt of any payment in
respect of securities such as the series B notes, including principal and
interest, is to credit the accounts of the relevant Participants with the
payment on the payment date unless DTC has reason to believe it will not
receive payment on such payment date. Each relevant Participant is credited
with an amount proportionate to its Beneficial Ownership of an interest in the
principal amount of the relevant security as shown on the records of DTC.
Payments by the Participants and the Indirect Participants to the Beneficial
Owners of notes will be governed by standing instructions and customary
practices and will be the responsibility of the Participants or the Indirect
Participants and will not be the responsibility of DTC, the trustee or us.
Neither the trustee nor we will be liable for any delay by DTC or any of its
Participants in identifying the Beneficial Owners of the notes, and the trustee
and we may conclusively rely on and will be protected in relying on
instructions from DTC or its nominee for all purposes.
We expect that interests in the Global Note will be eligible to trade in
DTC's Same-Day Funds Settlement System and, therefore, transfers between
Participants in DTC will be effected in accordance with DTC's procedures, and
will be settled in immediately available funds, and transfers between
Participants in Euroclear and Cedel will be effected in accordance with their
respective rules and operating procedures.
Subject to compliance with the transfer restrictions applicable to the
series B notes described herein, cross-market transfers between the
Participants in DTC, on the one hand, and Euroclear or Cedel Participants, on
the other hand, will be effected through DTC in accordance with DTC's rules on
behalf of Euroclear or Cedel, as the case may be, by its respective depositary;
however, such cross-market transactions will require delivery of instructions
to Euroclear or Cedel, as the case may be, by the counterparty in such system
in accordance with the rules and procedures and within the established
deadlines (Brussels time) of such system. Euroclear or Cedel, as the case may
be, will, if the transaction meets its settlement requirements, deliver
instructions to its respective depositary to take action to effect final
settlement on its behalf by delivering or receiving interests in the Global
Note in DTC, and making or receiving payment in accordance with normal
procedures for same-day funds settlement applicable to DTC. Euroclear
Participants and Cedel Participants may not deliver instructions directly to
the depositories for Euroclear or Cedel.
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DTC has advised us that it will take any action permitted to be taken by a
holder of series B notes only at the direction of one or more Participants to
whose account DTC has credited the interests in the Global Note and only in
respect of such portion of the aggregate principal amount of the series B notes
as to which such Participant or Participants has or have given such direction.
However, if there is an Event of Default under the series B notes, DTC reserves
the right to exchange the Global Note for legended series B notes in
certificated form, and to distribute such series B notes to its Participants.
Transfer of Interests in the Global Note for Certificated Notes
The entire Global Note is exchangeable for definitive series B notes in
registered, certificated form without interest coupons ("Certificated Notes")
if:
(1) DTC (a) notifies us that it is unwilling or unable to continue as
depositary for the Global Note and we fail to appoint a successor
depositary or (b) has ceased to be a clearing agency registered under the
Exchange Act;
(2) we, at our option, notify the trustee in writing that we elect to
cause the issuance of the Certificated Notes; or
(3) there shall have occurred and be continuing a Default or Event of
Default with respect to the series B notes.
In addition, beneficial interests in the Global Note may be exchanged for
Certificated Notes upon prior written notice given to the trustee by or on
behalf of DTC in accordance with the indenture. In all cases, Certificated
Notes delivered in exchange for the Global Note or beneficial interests in the
Global Note will be registered in the names, and issued in any approved
denominations, requested by or on behalf of the depositary, in accordance with
its customary procedures.
Neither the trustee, the Guarantors nor we will be liable for any delay by
the holder of the Global Note or DTC in identifying the Beneficial Owner of
series B notes, and the trustee and we may conclusively rely on, and will be
protected in relying on, instructions from the holder of the Global Note or DTC
for all purposes.
Same Day Settlement and Payment
We will make payments in respect of the series B notes represented by the
Global Note, including principal, premium, if any, interest and Liquidated
Damages, if any, by wire transfer of immediately available funds to the
accounts specified by the holder of the Global Note. We will make all payments
of principal, interest and premium and Liquidated Damages, if any, with respect
to Certificated Notes by wire transfer of immediately available funds to the
accounts specified by the holders thereof or, if no such account is specified,
by mailing a check to each such holder's registered address. We expect that
secondary trading in any Certificated Notes will also be settled in immediately
available funds.
Because of time zone differences, the securities account of a Euroclear or
Cedel Participant purchasing an interest in the Global Note from a Participant
in DTC will be credited, and any such crediting will be reported to the
relevant Euroclear or Cedel Participant, during the securities settlement
processing day, which must be a business day for Euroclear and Cedel,
immediately following the settlement date of DTC. DTC has advised us that cash
received in Euroclear or Cedel as a result of sales of interests in the Global
Note by or through a Euroclear or Cedel Participant to a Participant in DTC
will be received with value on the settlement date of DTC but will be available
in the relevant Euroclear or Cedel cash account only as of the business day for
Euroclear or Cedel following DTC's settlement date.
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Registration Rights; Liquidated Damages
The following description is a summary of the material provisions of the
registration rights agreement. It does not restate that agreement in its
entirety. We urge you to read the registration rights agreement in its
entirety because it, and not this description, defines the registration rights
of the holders of the series A notes. See "--Additional Information."
The Guarantors, the initial purchasers and we entered into the Registration
Rights Agreement upon the closing of the initial offering. Pursuant to the
registration rights agreement, the Guarantors and we agreed to file with the
Commission the Exchange Offer Registration Statement on the appropriate form
under the Securities Act with respect to the series A notes. Upon the
effectiveness of the Exchange Offer Registration Statement, the Guarantors and
we will offer to the holders of Transfer-Restricted Securities pursuant to the
exchange offer who are able to make certain representations the opportunity to
exchange their Transfer-Restricted Securities for series B notes.
If:
(1) the Guarantors and we are not permitted to consummate the exchange
offer because the exchange offer is not permitted by applicable law or
Commission policy; or
(2) any holder of Transfer-Restricted Securities notifies us prior to
the 20th day following consummation of the exchange offer that:
(a) it is prohibited by law or Commission policy from participating
in the exchange offer; or
(b) that it may not resell the series B notes acquired by it in the
exchange offer to the public without delivering a prospectus and the
prospectus contained in the Exchange Offer Registration Statement is not
appropriate or available for such resales; or
(c) that it is a broker-dealer and owns series B notes acquired
directly from any of our Affiliates or us,
the Guarantors and we will file with the Commission a Shelf Registration
Statement to cover resales of the series B notes by the holders thereof who
satisfy certain conditions relating to the provision of information in
connection with the Shelf Registration Statement.
The Guarantors and we will use our best efforts to cause the applicable
registration statement to be declared effective as promptly as possible by the
Commission.
For purposes of the preceding, "Transfer-Restricted Securities" means each
note until:
(1) the date on which such series A note has been exchanged by a Person
other than a broker-dealer for a series B note in this exchange offer;
(2) following the exchange by a broker-dealer in the exchange offer of a
series A note for a series B note, the date on which such series B note is
sold to a purchaser who receives from such broker-dealer on or prior to the
date of such sale a copy of the prospectus contained in the Exchange Offer
Registration Statement;
(3) the date on which such series B note has been effectively registered
under the Securities Act and disposed of in accordance with the Shelf
Registration Statement; or
(4) the date on which such series B note is distributed to the public
pursuant to Rule 144 under the Securities Act.
The Registration Rights Agreement provides:
(1) the Guarantors and we will file an Exchange Offer Registration
Statement with the Commission on or prior to 75 days after the closing of
the initial offering;
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(2) the Guarantors and we will use our best efforts to have the Exchange
Offer Registration Statement declared effective by the Commission on or
prior to 180 days after the closing of the initial offering;
(3) unless the exchange offer would not be permitted by applicable law
or Commission policy, the Guarantors and we will:
(a) commence the exchange offer; and
(b) use our best efforts to issue on or prior to 30 business days,
or longer, if required by the federal securities laws, after the date
on which the Exchange Offer Registration Statement was declared
effective by the Commission, notes in exchange for all series A notes
tendered prior thereto in the exchange offer; and
(4) if obligated to file the Shelf Registration Statement, the
Guarantors and we will use our best efforts to file the Shelf Registration
Statement with the Commission on or prior to 30 days after such filing
obligation arises and to cause the Shelf Registration Statement to be
declared effective by the Commission on or prior to 90 days after such
obligation arises.
If:
(1) the Guarantors and we fail to file any of the registration
statements required by the registration rights agreement on or before the
date specified for such filing; or
(2) any of such registration statements is not declared effective by the
Commission on or prior to the date specified for such effectiveness (the
"Effectiveness Target Date"); or
(3) the Guarantors and we fail to consummate the exchange offer within
30 business days of the Effectiveness Target Date with respect to the
Exchange Offer Registration Statement; or
(4) the shelf registration statement or the Exchange Offer Registration
Statement is declared effective but thereafter ceases to be effective or
usable in connection with resales of transfer-restricted securities during
the periods specified in the registration rights agreement (each such event
referred to in clauses (1) through (4) above, a "Registration Default"),
then the Guarantors and we will pay Liquidated Damages to each holder of series
A notes, with respect to the first 90-day period immediately following the
occurrence of the first Registration Default in an amount equal to $.05 per
week per $1,000 principal amount of series A notes held by such holder.
The amount of Liquidated Damages will increase by an additional $.05 per
week per $1,000 principal amount of series A notes with respect to each
subsequent 90-day period until all Registration Defaults have been cured, up to
a maximum amount of Liquidated Damages for all Registration Defaults of $.50
per week per $1,000 principal amount of series A notes.
All accrued Liquidated Damages will be paid by the Guarantors and us on each
Damages Payment Date to the holder of the Global Note by wire transfer of
immediately available funds or by federal funds check and to holders of
Certificated Notes by wire transfer to the accounts specified by them or by
mailing checks to their registered addresses if no such accounts have been
specified.
Following the cure of all Registration Defaults, the accrual of Liquidated
Damages will cease.
Holders of series A notes are required to make certain representations to
us, as described in the registration rights agreement, in order to participate
in the exchange offer and will be required to deliver certain information to be
used in connection with the Shelf Registration Statement and to provide
comments on the Shelf Registration Statement within the time periods set forth
in the registration rights agreement in order to have their series A notes
included in the Shelf Registration Statement and benefit from the provisions
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regarding Liquidated Damages set forth above. By acquiring Transfer-Restricted
Securities, a holder will be deemed to have agreed to indemnify the Guarantors
and us against certain losses arising out of information furnished by such
holder in writing for inclusion in any Shelf Registration Statement. Holders
of series A notes will also be required to suspend their use of the prospectus
included in the Shelf Registration Statement under certain circumstances upon
receipt of written notice to that effect from us.
Certain Definitions
Set forth below are certain defined terms used in the indenture. Reference
is made to the indenture for a full disclosure of all such terms, as well as
any other capitalized terms used herein for which no definition is provided.
"Acquired Debt" means, with respect to any specified Person:
(1) Indebtedness of any other Person existing at the time such other
Person is merged with or into or became a subsidiary of such specified
Person, whether or not such Indebtedness is incurred in connection with, or
in contemplation of, such other Person merging with or into, or becoming a
Subsidiary of, such specified Person; and
(2) Indebtedness secured by a Lien encumbering any asset acquired by
such specified Person.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition,
"control," as used with respect to any Person, shall mean the possession,
directly or indirectly, of the power to direct or cause the direction of the
management or policies of such Person, whether through the ownership of voting
securities, by agreement or otherwise; provided that Beneficial Ownership of
10% or more of the Voting Stock of a Person shall be deemed to be control. For
purposes of this definition, the terms "controlling," "controlled by" and
"under common control with" shall have correlative meanings.
"Beneficial Owner" has the meaning assigned to such term in Rule 13d-3 and
Rule 13d-5 under the Exchange Act, except that in calculating the beneficial
ownership of any particular "person", as that term is used in Section 13(d)(3)
of the Exchange Act, such "person" shall be deemed to have Beneficial
Ownership of all securities that such "person" has the right to acquire by
conversion or exercise of other securities, whether such right is currently
exercisable or is exercisable only upon the occurrence of a subsequent
condition. The terms "Beneficially Owns" and "Beneficially Owned" shall have a
corresponding meaning.
"Board of Directors" means:
(1) with respect to a corporation, the board of directors of the
corporation;
(2) with respect to a partnership, the board of directors of the general
partner of the partnership; and
(3) with respect to any other Person, the board or committee of such
Person serving a similar function.
"Capital Lease Obligation" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that
would at that time be required to be capitalized on a balance sheet in
accordance with GAAP.
"Capital Stock" means:
(1) in the case of a corporation, corporate stock;
(2) in the case of an association or business entity, any and all
shares, interests, participations, rights or other equivalents, however
designated, of corporate stock;
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(3) in the case of a partnership or limited liability company,
partnership or membership interests, whether general or limited; and
(4) any other interest or participation that confers on a Person the
right to receive a share of the profits and losses of, or distributions of
assets of, the issuing Person.
"Cash Equivalents" means:
(1) U.S. dollars;
(2) securities issued or directly and fully guaranteed or insured by the
U.S. government or any agency or instrumentality thereof, provided that the
full faith and credit of the U.S. is pledged in support thereof, having
maturities of not more than six months from the date of acquisition;
(3) certificates of deposit and eurodollar time deposits with maturities
of six months or less from the date of acquisition, bankers' acceptances
with maturities not exceeding six months and overnight bank deposits, in
each case, with any lender party to the Credit Agreement or with any
domestic commercial bank having capital and surplus in excess of $500.0
million and a Thomson Bank Watch Rating of "B" or better;
(4) repurchase obligations with a term of not more than seven days for
underlying securities of the types described in clauses (2) and (3) above
entered into with any financial institution meeting the qualifications
specified in clause (3) above;
(5) commercial paper having the highest rating obtainable from Moody's
Investors Service, Inc. or Standard & Poor's Rating Services and in each
case maturing within six months after the date of acquisition; and
(6) money market funds at least 95% of the assets of which constitute
Cash Equivalents of the kinds described in clauses (1) through (5) of this
definition.
"Consolidated Cash Flow" means, with respect to any specified Person for any
period, the Consolidated Net Income of such Person for such period plus:
(1) an amount equal to any extraordinary loss plus any net loss realized
by such Person or any of its Restricted Subsidiaries in connection with an
Asset Sale, to the extent such losses were deducted in computing such
Consolidated Net Income; plus
(2) provision for taxes based on income or profits of such Person and
its Restricted Subsidiaries for such period, to the extent that such
provision for taxes was deducted in computing such Consolidated Net Income;
plus
(3) consolidated interest expense of such Person and its Restricted
Subsidiaries for such period, whether paid or accrued and whether or not
capitalized, including, without limitation, amortization of debt issuance
costs and original issue discount, non-cash interest payments, the interest
component of any deferred payment obligations, the interest component of
all payments associated with Capital Lease Obligations, commissions,
discounts and other fees and charges incurred in respect of letter of
credit or bankers' acceptance financings, and net of the effect of all
payments made or received pursuant to Hedging Obligations, to the extent
that any such expense was deducted in computing such Consolidated Net
Income; plus
(4) depreciation, amortization, including amortization of goodwill and
other intangibles but excluding amortization of prepaid cash expenses that
were paid in a prior period, and other non-cash expenses, excluding any
such non-cash expense to the extent that it represents an accrual of or
reserve for cash expenses in any future period or amortization of a prepaid
cash expense that was paid in a prior
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period, of such Person and its Restricted Subsidiaries for such period to
the extent that such depreciation, amortization and other non-cash expenses
were deducted in computing such Consolidated Net Income; minus
(5) non-cash items increasing such Consolidated Net Income for such
period, other than the accrual of revenue in the ordinary course of
business, in each case, on a consolidated basis and determined in
accordance with GAAP.
Notwithstanding the preceding, the provision for taxes based on the income
or profits of, and the depreciation and amortization and other non-cash
expenses of, any of our subsidiaries, unless such Subsidiary is a Guarantor and
its Guarantee continues to be in full force and effect, shall be added to our
Consolidated Net Income to compute our Consolidated Cash Flow only to the
extent that a corresponding amount would be permitted at the date of
determination to be dividended to us by such subsidiary without prior
governmental approval that has not been obtained, and without direct or
indirect restriction pursuant to the terms of its charter and all agreements,
instruments, judgments, decrees, orders, statutes, rules and governmental
regulations applicable to that Subsidiary or its stockholders.
"Consolidated Net Income" means, with respect to any specified Person for
any period, the aggregate of the Net Income of such Person and its Restricted
Subsidiaries for such period, on a consolidated basis, determined in accordance
with GAAP; provided that:
(1) the (a) Net Income of any Person that is not a Subsidiary or that is
accounted for by the equity method of accounting shall be included only to
the extent of the amount of dividends or distributions paid in cash to the
specified Person or a Wholly Owned Subsidiary thereof and (b) the Net
Income of any Unrestricted Subsidiary shall be excluded, whether or not
distributed to the specified Person or one of its Subsidiaries;
(2) the Net Income of any Restricted Subsidiary, unless such Restricted
Subsidiary is a Guarantor and its Guarantee continues to be in full force
and effect, shall be excluded to the extent that the declaration or payment
of dividends or similar distributions by that Restricted Subsidiary of that
Net Income is not at the date of determination permitted without any prior
governmental approval that has not been obtained or, directly or
indirectly, by operation of the terms of its charter or any agreement,
instrument, judgment, decree, order, statute, rule or governmental
regulation applicable to that Subsidiary or its stockholders, provided,
that, only for purposes of the covenant described under the caption "--
Certain Covenants--Restricted Payments," the aggregate amount of such Net
Income that could be paid to a Restricted Subsidiary or us by loans or
advances or repayments of loans or advances, intercompany transfer or
otherwise will be included in Consolidated Net Income;
(3) the Net Income of any Person acquired in a pooling of interests
transaction for any period prior to the date of such acquisition shall be
excluded; and
(4) the cumulative effect of a change in accounting principles shall be
excluded.
"Continuing Directors" means, as of any date of determination, any member of
our Board of Directors who:
(1) was a member of such Board of Directors on the date of the
indenture; or
(2) was nominated for election or elected to such Board of Directors
with the approval of a majority of the Continuing Directors who were
members of such Board of Directors at the time of such nomination or
election.
"Credit Agreement" means that certain Credit Agreement dated as of February
25, 1998, as amended and restated as of June 11, 1998, by and among Citicorp
USA, Inc., as Administrative Agent, BankBoston, N.A., as Documentation Agent
and Royal Bank of Canada and Credit Lyonnais New York Branch, as Co-Agents, the
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lenders party thereto from time to time and us, including any related notes,
guarantees, collateral documents, instruments and agreements executed in
connection therewith, and in each case as amended, modified, renewed, refunded,
replaced or refinanced from time to time.
"Credit Facilities" means, one or more debt facilities, including, without
limitation, the Credit Agreement, or commercial paper facilities, in each case
with banks or other institutional lenders providing for revolving credit loans,
term loans, receivables financing, including through the sale of receivables to
such lenders or to special purpose entities formed to borrow from such lenders
against such receivables, or letters of credit, in each case, as amended,
restated, modified, renewed, refunded, replaced or refinanced in whole or in
part from time to time.
"Default" means any event that is, or with the passage of time or the giving
of notice or both would be, an Event of Default.
"Designated Senior Debt" means (i) any Indebtedness outstanding under the
Credit Agreement and (ii) after payment in full of all Hedging Obligations
under the Credit Agreement, any other Senior Debt permitted under the indenture
the principal amount of which is $25.0 million or more and that has been
designated by us as "Designated Senior Debt."
"Disqualified Stock" means any Capital Stock that, by its terms, or by the
terms of any security into which it is convertible, or for which it is
exchangeable, in each case at the option of the holder thereof, or upon the
happening of any event, matures or is mandatorily redeemable, pursuant to a
sinking fund obligation or otherwise, or redeemable at the option of the holder
thereof, in whole or in part, on or prior to the date that is 91 days after the
date on which the notes mature. Notwithstanding the preceding sentence, any
Capital Stock that would constitute Disqualified Stock solely because the
holders thereof have the right to require us to repurchase such Capital Stock
upon the occurrence of a Change of Control or an Asset Sale shall not
constitute Disqualified Stock if the terms of such Capital Stock provide that
we may not repurchase or redeem any such Capital Stock pursuant to such
provisions unless such repurchase or redemption complies with the covenant
described above under the caption "--Certain Covenants--Restricted Payments."
"Domestic Subsidiary" means any Restricted Subsidiary that was formed under
the laws of the U.S. or any state thereof or the District of Columbia or that
guarantees or otherwise provides direct credit support for any of our
Indebtedness.
"Equity Interests" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock, but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock.
"Existing Indebtedness" means Indebtedness of our Subsidiaries and us, other
than Indebtedness under the Credit Agreement, in existence on the date of the
indenture, until such amounts are repaid.
"Existing Preferred Stock" means shares of our 7% cumulative convertible
exchangeable preferred stock issued and outstanding on the date of the
indenture and our cumulative convertible participating preferred stock issued
and outstanding on the date of the indenture.
"Fixed Charges" means, with respect to any specified Person or any of its
Restricted Subsidiaries for any period, the sum, without duplication, of:
(1) the consolidated cash interest expense of such Person and its
Restricted Subsidiaries for such period, including, without limitation,
amortization of debt issuance costs and original issue discount, non cash
interest payments, the interest component of any deferred payment
obligations, the interest component of all payments associated with Capital
Lease Obligations, commissions, discounts and other fees and charges
incurred in respect of letter of credit or bankers' acceptance financings,
and net of the effect of all payments made or received pursuant to Hedging
Obligations; plus
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(2) the consolidated interest of such Person and its Restricted
Subsidiaries that was capitalized during such period; plus
(3) any interest expense on Indebtedness of another Person that is
guaranteed by such Person or one of its Restricted Subsidiaries or secured
by a Lien on assets of such Person or one of its Restricted Subsidiaries,
whether or not such guarantee or Lien is called upon; plus
(4) the product of (a) all dividends, paid in cash, on any series of
preferred stock of such Person or any of its Restricted Subsidiaries, other
than dividends on Equity Interests payable solely our Equity Interests,
other than Disqualified Stock, or to any of our Restricted Subsidiaries or
us, times (b) a fraction, the numerator of which is one and the denominator
of which is one minus the then current combined federal, state and local
statutory tax rate of such Person, expressed as a decimal, in each case, on
a consolidated basis and in accordance with GAAP.
"Fixed Charge Coverage Ratio" means with respect to any specified Person and
its Restricted Subsidiaries for any period, the ratio of the Consolidated Cash
Flow of such Person and its Restricted Subsidiaries for such period to the
Fixed Charges of such Person for such period and its Restricted Subsidiaries.
In the event that the specified Person or any of its Restricted Subsidiaries
incurs, assumes, guarantees, repays, repurchases or redeems any Indebtedness,
other than ordinary working capital borrowings, or issues, repurchases or
redeems preferred stock subsequent to the commencement of the period for which
the Fixed Charge Coverage Ratio is being calculated and on or prior to the date
on which the event for which the calculation of the Fixed Charge Coverage Ratio
is made, then the Fixed Charge Coverage Ratio shall be calculated giving pro
forma effect to such incurrence, assumption, guarantee, repayment, repurchase
or redemption of Indebtedness, or such issuance, repurchase or redemption of
preferred stock, and the use of the proceeds therefrom as if the same had
occurred at the beginning of the applicable four-quarter reference period.
In addition, for purposes of calculating the Fixed Charge Coverage Ratio:
(1) acquisitions that have been made by the specified Person or any of
its Subsidiaries, including through mergers or consolidations and including
any related financing transactions, during the four-quarter reference
period or subsequent to such reference period and on or prior to the
calculation date of the Fixed Charge Coverage Ratio shall be given pro
forma effect as if they had occurred on the first day of the four-quarter
reference period and Consolidated Cash Flow for such reference period shall
be calculated on a pro forma basis in accordance with Regulation S-X under
the Securities Act, but without giving effect to clause (3) of the proviso
set forth in the definition of Consolidated Net Income;
(2) the Consolidated Cash Flow attributable to discontinued operations,
as determined in accordance with GAAP, and operations or businesses
disposed of prior to the calculation date of the Fixed Charge Coverage
Ratio, shall be excluded; and
(3) the Fixed Charges attributable to discontinued operations, as
determined in accordance with GAAP, and operations or businesses disposed
of prior to the calculation date of the Fixed Charge Coverage Ratio, shall
be excluded, but only to the extent that the obligations giving rise to
such Fixed Charges will not be obligations of the specified Person or any
of its Subsidiaries following the calculation date of the Fixed Charge
Coverage Ratio.
"Foreign Subsidiary" means any Restricted Subsidiary that was organized
under the laws of a jurisdiction outside the U.S.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect on the date of the indenture.
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"Guarantee" means a guarantee of payment of Indebtedness of another Person
other than by endorsement of negotiable instruments for collection in the
ordinary course of business, direct or indirect, in any manner including,
without limitation, by way of a pledge of assets or through letters of credit
or reimbursement agreements in respect thereof, of all or any part of any
Indebtedness.
"Guarantors" means each of:
(1) our Domestic Subsidiaries, except for Universal Professional
Insurance Company; and
(2) any other subsidiary that executes a Guarantee in accordance with
the provisions of the indenture;
and their respective successors and assigns.
"Hedging Obligations" means, with respect to any specified Person, the
obligations of such Person under:
(1) interest rate swap agreements, interest rate cap agreements and
interest rate collar agreements; and
(2) other agreements or arrangements designed solely to protect such
Person against fluctuations in interest rates.
"Indebtedness" means, with respect to any specified Person, any
Indebtedness of such Person, whether or not contingent, in respect of:
(1) borrowed money;
(2) evidenced by bonds, notes, debentures or similar instruments;
(3) banker's acceptances and letters of credit, or reimbursement
agreements in respect thereof;
(4) Capital Lease Obligations;
(5) the balance deferred and unpaid of the purchase price of any
property, except any such balance that constitutes an accrued expense or
trade payable; or
(6) Hedging Obligations,
if and to the extent any of the preceding items, other than letters of
credit and Hedging Obligations, would appear as a liability upon a balance
sheet of the specified Person prepared in accordance with GAAP. In addition,
the term "Indebtedness" includes all Indebtedness of others secured by a Lien
on any asset of the specified Person, whether or not such Indebtedness is
assumed by the specified Person, and, to the extent not otherwise included,
the guarantee by the specified Person of any Indebtedness of any other Person.
The term "Indebtedness" shall not include the incurrence of any Indebtedness
in respect of bid, performance or surety bonds issued for the account of any
of our Restricted Subsidiaries or us in the ordinary course of business,
including guarantees or obligations of any Restricted Subsidiary or us thereof
with respect to letters of credit supporting such bid, performance or surety
obligations, and guarantees made in the ordinary course of business by any of
our Restricted Subsidiaries or us of performance of any contractual obligation
by a Restricted Subsidiary, any other entity in which a subsidiary or we own
an Equity Interest or us, in each case other than for an obligation for money
borrowed.
The amount of any Indebtedness outstanding as of any date shall be:
(1) the accreted value thereof, in the case of any Indebtedness issued
with original issue discount; and
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(2) the principal amount thereof, together with any interest thereon
that is more than 30 days past due, in the case of any other Indebtedness.
"Investments" means, with respect to any Person, all investments by such
Person in other Persons, including Affiliates, in the forms of direct or
indirect loans, including guarantees or other obligations, advances or capital
contributions, excluding commission, travel and similar advances to officers
and employees made in the ordinary course of business, purchases or other
acquisitions for consideration of Indebtedness, Equity Interests or other
securities, together with all items that are or would be classified as
investments on a balance sheet prepared in accordance with GAAP. If any of our
Subsidiaries or we sell or otherwise dispose of any Equity Interests of any of
our direct or indirect Subsidiaries such that, after giving effect to any such
sale or disposition, such Person is no longer our Subsidiary, we shall be
deemed to have made an investment on the date of any such sale or disposition
equal to the fair market value of the Equity Interests of such Subsidiary not
sold or disposed of in an amount determined as provided in the final paragraph
of the covenant described above under the caption "--Certain Covenants--
Restricted Payments."
"Lien" means, with respect to any asset, any mortgage, lien, pledge, charge,
security interest or encumbrance of any kind in respect of such asset, whether
or not filed, recorded or otherwise perfected under applicable law, including
any conditional sale or other title retention agreement, any lease in the
nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement
under the Uniform Commercial Code or equivalent statutes of any jurisdiction.
"Management Agreement" means the agreement, dated August 28, 1996, between
Carlyle and us, as amended, modified, supplemented, extended, renewed or
restated from time to time, provided, that any such amendment, modification,
supplement, extension, renewal or restatement does not materially disadvantage
the holders of series B notes.
"Net Income" means, with respect to any specified Person, the Net Income
(loss) of such Person, determined in accordance with GAAP and before any
reduction in respect of preferred stock dividends, excluding, however:
(1) any gain or loss, together with any related provision for taxes on
such gain, but not loss, realized in connection with: (a) any Asset Sale;
or (b) the disposition of any securities by such Person or any of its
Subsidiaries or the extinguishment of any Indebtedness of such Person or
any of its Restricted Subsidiaries; and
(2) any extraordinary gain or loss, together with any related provision
for taxes on such extraordinary gain or loss.
"Net Proceeds" means the aggregate cash proceeds received by any of our
Restricted Subsidiaries or us in respect of any Asset Sale, including, without
limitation, any cash received upon the sale or other disposition of any non-
cash consideration received in any Asset Sale, net of the direct costs relating
to such Asset Sale, including, without limitation, legal, accounting and
investment banking fees, and sales commissions, and any relocation expenses
incurred as a result thereof, taxes paid or payable as a result thereof, in
each case, after taking into account any available tax credits or deductions
and any tax sharing arrangements, and amounts required to be applied to the
repayment of Indebtedness, other than Senior Debt secured by a Lien on the
asset or assets that were the subject of such Asset Sale.
"Non-Recourse Debt" means Indebtedness:
(1) as to which neither we nor any of our Restricted Subsidiaries (a)
provide credit support of any kind, including any undertaking, agreement or
instrument that would constitute Indebtedness, (b) are directly or
indirectly liable as a guarantor or otherwise or (c) constitute the lender;
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(2) no Default with respect to which, including any rights that the
holders thereof may have to take enforcement action against an Unrestricted
Subsidiary, would permit upon notice, lapse of time or both any holder of
any other Indebtedness, other than the series B notes, of any of our
Restricted Subsidiaries or us to declare a Default on such other
Indebtedness or cause the payment thereof to be accelerated or payable
prior to its Stated Maturity; and
(3) as to which the lenders have been notified in writing that they will
not have any recourse to the stock or assets of any of our Restricted
Subsidiaries or us.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Permitted Business" means the businesses conducted by our Subsidiaries and
us on the date of the indenture and reasonable extensions thereof and such
other business activities which are incidental or related thereto.
"Permitted Investments" means:
(1) any Investment in us or in any of our Restricted Subsidiaries or any
of our Permitted Joint Ventures that is engaged in a Permitted Business;
(2) any Investment in Cash Equivalents;
(3) any Investment by any of our Subsidiaries or us in a Person, if as a
result of such Investment:
(a) such Person becomes our Restricted Subsidiary or our Permitted
Joint Venture and such Person is engaged in a Permitted Business; or
(b) such Person is merged, consolidated or amalgamated with or into,
or transfers or conveys substantially all of its assets to, or is
liquidated into, any of our Restricted Subsidiaries or us or any of our
Permitted Joint Ventures that is engaged in a Permitted Business;
(4) any Investment made as a result of the receipt of non-cash
consideration from an Asset Sale that was made pursuant to and in
compliance with the covenant described above under the caption "--
Repurchase at the Option of Holders--Asset Sales;"
(5) any acquisition of assets solely in exchange for the issuance of our
Equity Interests, other than Disqualified Stock;
(6) Hedging Obligations;
(7) any Investment by any of our Restricted Subsidiaries or us
constituting a performance guaranty of contractual obligations, other than
any obligation for money borrowed, of any entity in which a Subsidiary or
we own an Equity Interest, which are made in the ordinary course of
business by such Restricted Subsidiary or us; and
(8) other Investments in any Person having an aggregate fair market
value, measured on the date each such Investment was made and without
giving effect to subsequent changes in value, when taken together with all
other outstanding Investments made pursuant to this clause (8) since the
date of the indenture not to exceed $40.0 million at any one time
outstanding.
"Permitted Joint Venture" means, with respect to any Person:
(1) any corporation, association, or other business entity, other than a
partnership, of which 50% or more of the Voting Stock is at the time of
determination owned or controlled, directly or indirectly, by such Person
or one or more of the Restricted Subsidiaries of that Person or a
combination thereof (collectively, a "Group"),
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(2) any corporation, association or other business entity, other than a
partnership, as to which the Group, at the time of initial Investment, has
a contractual right to acquire 50% or more of the Voting Stock, provided
that such Investment shall cease to be a Permitted Joint Venture if such
Group fails to acquire such 50% or more of such Voting Stock within six
months of such initial Investment; and
(3) any partnership, joint venture, limited liability company or similar
entity of which:
(a) 50% of the capital accounts, distribution rights, total equity
and voting interests or general or limited partnership interests, as
applicable, are owned or controlled, directly or indirectly, by such
Group, whether in the form of membership, general, special or limited
partnership interests or otherwise; and
(b) such Person or any Restricted Subsidiary of such Person is a
controlling general partner or otherwise controls such entity, which in
the case of each of clauses (1), (2) and (3) is engaged in the
Permitted Business.
"Permitted Junior Securities" means:
(1) Equity Interests in any Guarantor or us; or
(2) debt securities that are subordinated to all Senior Debt and any
debt securities issued in exchange for Senior Debt to substantially the
same extent as, or to a greater extent than, the series B notes and the
Guarantees are subordinated to Senior Debt under the indenture and have a
Stated Maturity after, and do not provide for scheduled principal payments
prior to, the Stated Maturity of any Senior Debt and any debt securities
issued in exchange for Senior Debt; provided, however, that, if such Equity
Interests or debt securities are distributed in a bankruptcy or insolvency
proceeding, such Equity Interests or debt securities are distributed
pursuant to a plan of reorganization consented to by each class of
Designated Senior Debt.
"Permitted Liens" means:
(1) Liens in favor of the Guarantors or us;
(2) Liens on property of a Person existing at the time such Person is
merged with or into or consolidated with any of our subsidiaries or us;
provided that such Liens were in existence prior to the contemplation of
such merger or consolidation and do not extend to any assets other than
those of the Person merged into or consolidated with the Subsidiary or us;
(3) Liens on property existing at the time of acquisition thereof by any
of our Subsidiaries or us; provided that such Liens were in existence prior
to the contemplation of such acquisition;
(4) Liens to secure the performance of statutory obligations, surety or
appeal bonds, performance bonds or other obligations of a like nature
incurred in the ordinary course of business;
(5) Liens existing on the date of the indenture;
(6) Liens for taxes, assessments or governmental charges or claims that
are not yet delinquent or that are being contested in good faith by
appropriate proceedings promptly instituted and diligently concluded;
provided that any reserve or other appropriate provision as shall be
required in conformity with GAAP shall have been made therefor;
(7) Liens on assets of Unrestricted Subsidiaries that secure Non-
Recourse Debt of Unrestricted Subsidiaries; and
(8) Liens incurred in the ordinary course of business of any of our
Subsidiaries or us with respect to obligations that do not exceed $5.0
million at any one time outstanding.
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"Permitted Refinancing Indebtedness" means any Indebtedness of any of our
Restricted Subsidiaries or us issued in exchange for, or the Net Proceeds of
which are used to extend, refinance, repay, prepay, renew, replace, defease or
refund other Indebtedness of any of our Restricted Subsidiaries or us, other
than intercompany Indebtedness; provided that:
(1) the principal amount, or accreted value, if applicable, of such
Permitted Refinancing Indebtedness does not exceed the principal amount, or
accreted value, if applicable, of the Indebtedness so extended, refinanced,
repaid, prepaid, renewed, replaced, defeased or refunded, plus all accrued
interest thereon and the amount of all customary expenses and premiums
incurred in connection therewith;
(2) if the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded is equal in right of payment to or subordinated in
right of payment to the series B notes, such Permitted Refinancing
Indebtedness has a final maturity date 91 days after the Stated Maturity of
the series B notes, and is equal in right of payment to, in the case of
pari passu Indebtedness, or subordinated in right of payment to, in the
case of subordinated Indebtedness, to the series B notes on terms at least
as favorable to the holders of series B notes as those contained in the
documentation governing the Indebtedness being extended, refinanced,
renewed, replaced, defeased or refunded; and
(3) such Indebtedness is incurred either by us or by the Restricted
Subsidiary who is the obligor on the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded.
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Restricted Subsidiary" of a Person means any Subsidiary of such Person that
is not an Unrestricted Subsidiary.
"Senior Debt" means:
(1) all Indebtedness of any Guarantor or us outstanding under Credit
Facilities and all Hedging Obligations with respect thereto;
(2) any other Indebtedness of any Guarantor or us permitted to be
incurred under the terms of the indenture, unless the instrument under
which such Indebtedness is incurred expressly provides that it is on a
parity with or subordinated in right of payment to the series B notes or
any Guarantee; and
(3) all Hedging Obligations with respect to the items listed in the
preceding clauses (1) and (2).
Notwithstanding anything to the contrary in the preceding, Senior Debt will
not include:
(1) any liability for federal, state, local or other taxes owed or owing
by us;
(2) any Indebtedness of us to any of our Subsidiaries or other
Affiliates;
(3) any trade payables; or
(4) the portion of any Indebtedness that is incurred in violation of the
indenture.
"Significant Subsidiary" means any Subsidiary that would be a "Significant
Subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, as such
Regulation is in effect on the date hereof.
"Stated Maturity" means, with respect to any installment of interest or
principal on any series of Indebtedness, the date on which such payment of
interest or principal was scheduled to be paid in the original documentation
governing such Indebtedness, and shall not include any contingent obligations
to repay, redeem or repurchase any such interest or principal prior to the date
originally scheduled for the payment thereof.
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"Subsidiary" means, with respect to any specified Person:
(1) any corporation, association or other business entity of which more
than 50% of the total voting power of shares of Capital Stock entitled,
without regard to the occurrence of any contingency, to vote in the
election of directors, managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by such Person or one or more of the
other subsidiaries of that Person or a combination thereof; and
(2) any partnership (a) the sole general partner or the managing general
partner of which is such Person or a subsidiary of such Person or (b) the
only general partners of which are such Person or one or more subsidiaries
of such Person or any combination thereof.
"Unrestricted Subsidiary" means any of our Subsidiaries that is designated
by our Board of Directors as an Unrestricted Subsidiary pursuant to a Board of
Directors resolution, but only to the extent that such Subsidiary:
(1) has no Indebtedness other than Non-Recourse Debt;
(2) is not party to any agreement, contract, arrangement or
understanding with any of our Restricted Subsidiaries or us unless the
terms of any such agreement, contract, arrangement or understanding are no
less favorable to such Restricted Subsidiary or us than those that might be
obtained at the time from Persons who are not our Affiliates;
(3) is a Person with respect to which neither we nor any of our
Restricted Subsidiaries have any direct or indirect obligation (a) to
subscribe for additional Equity Interests or (b) to maintain or preserve
such Person's financial condition or to cause such Person to achieve any
specified levels of operating results; and
(4) has not guaranteed or otherwise directly or indirectly provided
credit support for any Indebtedness of any of our Restricted Subsidiaries
or us;
Any designation of any of our Subsidiaries as an Unrestricted Subsidiary
shall be evidenced to the trustee by filing with the trustee a certified copy
of a resolution of our Board of Directors giving effect to such designation and
an officers' certificate certifying that such designation complied with the
preceding conditions and was permitted by the covenant described above under
the caption "--Certain Covenants--Restricted Payments." If, at any time, any
Unrestricted Subsidiary would fail to meet the preceding requirements as an
Unrestricted Subsidiary, it shall thereafter cease to be an Unrestricted
Subsidiary for purposes of the indenture and any Indebtedness of such
subsidiary shall be deemed to be incurred by one of our Restricted Subsidiaries
as of such date and, if such Indebtedness is not permitted to be incurred as of
such date under the covenant described under the caption "--Certain Covenants--
Incurrence of Indebtedness and Issuance of Preferred Stock," we shall be in
Default of such covenant. Our Board of Directors may at any time designate any
Unrestricted Subsidiary to be a Restricted Subsidiary; provided that such
designation shall be deemed to be an incurrence of Indebtedness by our
Restricted Subsidiary of any outstanding Indebtedness of such Unrestricted
Subsidiary and such designation shall only be permitted if (1) such
Indebtedness is permitted under the covenant described under the caption "--
Certain Covenants--Incurrence of Indebtedness and Issuance of Preferred Stock,"
calculated on a pro forma basis as if such designation had occurred at the
beginning of the four-quarter reference period; and (2) no Default or Event of
Default would be in existence following such designation.
"Voting Stock" of any Person as of any date means the Capital Stock of such
Person that is at the time entitled to vote in the election of the Board of
Directors of such Person.
"Wholly Owned Subsidiary" of any specified Person means a Subsidiary of such
Person all of the outstanding Capital Stock or other ownership interests of
which, other than directors' qualifying shares, shall at the time be owned by
such Person or by one or more Wholly Owned Subsidiaries of such Person and one
or more Wholly Owned Subsidiaries of such Person.
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DESCRIPTION OF CAPITAL STOCK
Our authorized capital stock consists of 50,000,000 shares of common stock,
par value $0.01 per share, of which 22,675,917 shares were issued and
outstanding as of December 25, 1998, and 180,000 shares of preferred stock, par
value $100 per share, of which 20,556 shares of 7% preferred stock were issued
and outstanding, and 46,095 shares of convertible preferred stock were issued,
with 45,271 shares outstanding, as of December 25, 1998.
Pursuant to the terms of its investment in us, Carlyle is entitled to elect
a majority of our board of directors, until November 20, 2001, which date is
five years from the consummation of its investment; provided that Carlyle
continues to own at least 20% of our voting power. Also pursuant to the terms
of Carlyle's investment, the board of directors consists of four preferred
stock directors, elected by the holders of our convertible preferred stock, and
three common stock directors, elected by our common stockholders. During the
five-year period following Carlyle's investment, holders of our convertible
preferred stock will not participate in elections of our common stock
directors, and our preferred stock directors will not have the right to vote on
the election of any director to fill a vacancy among our common stock
directors. At the end of the five-year period following Carlyle's investment,
if Carlyle continues to own at least 20% of our voting power, holders of our
convertible preferred stock will be entitled to elect the largest number of
directors which is a minority of our directors and to vote with our common
stockholders as a single class on the election of our remaining directors.
Additionally, the holders of our convertible preferred stock, in the event they
no longer have the right to elect at least a minority of our directors, will
have the right, voting as a class with holders of our 7% preferred stock and
any other parity stock, to elect two directors to our board of directors in the
event we fail to pay dividends on our convertible preferred stock for six
dividend periods.
Common Stock
Our outstanding shares of common stock are validly issued, fully paid and
nonassessable. Our common stockholders are entitled to one vote for each share
held of record on all matters submitted to a vote of the stockholders, and have
cumulative voting rights with respect to the election of directors.
Our common stockholders do not have any preemptive rights or rights to
subscribe for any additional securities. Our common stock is neither redeemable
nor convertible into other securities, and there are no sinking fund
provisions. Subject to the preferences applicable to any shares of preferred
stock outstanding at the time, our common stockholders are entitled to
dividends if, when and as declared by the board of directors from funds legally
available therefore and are entitled, in the event of liquidation, to share
ratably in all assets remaining after payment of liabilities and preferred
stock preferences, if any.
Preferred Stock
Convertible Preferred Stock
Holders of our convertible preferred stock are entitled to cumulative annual
dividends. No dividends were payable in the first year following the closing of
Carlyle's investment. Thereafter, dividends are payable quarterly in kind for
one year at the rate of 3% per annum and in cash thereafter at the rate of 6%
per annum. Holders of our convertible preferred stock have the right to
participate with our common stockholders in any dividends paid with respect to
the common stock into which it may be converted. Our convertible preferred
stock may at any time, at the option of Carlyle, be converted into shares of
our common stock. The conversion price of our convertible preferred stock is
$7.59 per share. We will be entitled, at Carlyle's option, to redeem all of our
convertible preferred stock at its liquidation preference plus accumulated and
unpaid dividends on or after November 21, 2003.
On or after the seventh anniversary of Carlyle's investment, we will be
entitled, at our option, as determined by a majority of the common stock
directors, to redeem all of the our convertible preferred stock at its
liquidation preference of $1,000 per share plus accumulated and unpaid
dividends.
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Holders of our convertible preferred stock generally have the right to vote,
on an as-converted basis, as a single class with our common stockholders and
other classes or series of our capital stock entitled to vote as a single class
with our common stock, on all matters submitted to a vote of our stockholders
except (1) matters for which class voting is required by law or under our
certificate of incorporation, and (2) with respect to the election of the
common stock directors during the five-year period following Carlyle's
investment. Holders of our convertible preferred stock vote as a separate class
with respect to:
. the creation, authorization or issuance of any class or series of
shares ranking on parity with or prior to our convertible preferred stock
as to dividends or redemption,
. the increase in the authorized shares of, or issuance of any shares of
our convertible preferred stock,
. the amendment, alteration, waiver of the application of, or repeal of
an provision of our certificate of incorporation, the entering into of any
agreement or the taking of any corporate action which would in any manner
alter, change or otherwise adversely affect the powers, rights or
preferences of our convertible preferred stock, and
. the reorganization, recapitalization, liquidation, dissolution or
winding up of us, the disposition of substantially all of our assets,
property or business, the merger or consolidation with or into any other
corporation, if the transaction would adversely affect the powers, rights
or preferences of our convertible preferred stock.
7% Preferred Stock
Our 7% preferred stock ranks on parity as to dividends and liquidation with
our convertible preferred stock, and prior to our common stock. The dividend
per annum on each share of 7% preferred stock is $175 and the liquidation
preference is $2,500. Dividends on our 7% preferred stock are cumulative and
payable quarterly.
Holders of shares of our 7% preferred stock are not entitled to vote on
matters submitted to our stockholders, 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 our 7% preferred stock is
in arrears. These voting rights will continue until such time as the dividend
arrearage on our 7% preferred stock has been paid in full.
Our 7% preferred stock is convertible at the option of the holder into
shares of our common stock at a conversion price of $23.36 per share, subject
to adjustment under some circumstances. On any dividend payment date, our 7%
preferred stock is exchangeable at our option, in whole but not in part, for 7%
subordinated debentures due 2008 in a principal amount equal to $2,500 per
share of 7% preferred stock. Our 7% preferred stock is redeemable at any time,
at our option, initially at a price of $2,622.50 per share of 7% preferred
stock and thereafter at prices declining to $2,500 per share of 7% preferred
stock on or after September 30, 2003. Additionally, our 7% preferred stock has
a special conversion right that becomes effective in the event of significant
transactions affecting our ownership or control. In such situations, the
special conversion right would, for a limited period, reduce the then
prevailing conversion price to the market value of the common stock, except
that the conversion right will not be reduced below $3.17 per share. Generally,
the special conversion right becomes effective if:
. a person or group acquires at least 50% of our common stock,
. if we sell all or substantially all of our assets, or
. if we participate in a merger or consolidation in which we are not the
surviving company or our common stockholders immediately prior to such
merger or consolidation do not hold, directly or indirectly, at least a
majority of the common stock of the surviving corporation after such a
transaction.
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The form of consideration issued, cash, securities or other property, upon
the exercise of the special conversion right by a holder of 7% preferred stock
depends upon, among other things, the type of transaction that gives rise to
the special conversion right.
MATERIAL FEDERAL INCOME TAX CONSIDERATIONS OF THE EXCHANGE OFFER
The exchange of series A notes for series B notes pursuant to this exchange
offer should not be treated as a taxable transaction for U.S. federal income
tax purposes because the series B notes will not be considered to differ
materially in kind or extent from the series A notes. Rather, any series B
notes received by you should be treated as a continuation of your investment
in the series A notes. As a result, you should bear no material U.S. federal
income tax consequences due to the exchange, and you should have the same
adjusted issue price, adjusted basis and holding period in the series B notes
as you had in the series A notes immediately prior to the exchange.
You should consult your own tax advisor concerning the consequences of your
exchange of series A notes for series B notes, including the tax consequences
under state, local, foreign or other tax laws and the possible effects on you
of changes in U.S. federal or other tax laws.
FEDERAL INCOME TAX CONSIDERATIONS FOR NON-U.S. HOLDERS
The following discussion is a summary of the material U.S. federal tax
consequences of ownership and disposition of any series of our notes by a
holder of our notes who is not a U.S. Holder. A "U.S. Holder" means a holder
of notes who is:
. a citizen or resident of the U.S. or any political subdivision
thereof,
. estate the income of which is subject to U.S. federal income taxation
regardless of its source, or
. a trust if a court within the U.S. is able to exercise primary
supervision of the administration of the trust and one or more U.S. persons
have the authority to control all decisions of the trust or certain
electing trusts that were in existence on August 19, 1996, and treated as a
domestic trust on such date.
"U.S." refers to the United States of America, including the States and the
District of Columbia, and its possessions, which include, as of the date
hereof, Puerto Rico, the U.S. Virgin Islands, Guam, American Samoa, Wake
Island and the Northern Mariana Islands. This summary is based upon current
provisions of the tax code, applicable Treasury regulations, judicial
authority and administrative rulings and practice, any of which may be altered
with retroactive effect thereby changing the U.S. federal tax consequences
discussed below.
The tax treatment of a holder of the notes may vary depending upon the
holder's particular situation. Certain holders, including, but not limited to,
certain financial institutions, insurance companies, tax-exempt organizations,
broker-dealers and persons holding the notes as part of a straddle, hedge or
conversion transaction, may be subject to special rules not discussed below.
This discussion is limited to holders who purchase the notes on original
issuance and who hold the notes as capital assets, generally, property held
for investment, within the meaning of Section 1221 of the tax code. We will
not seek a ruling from the IRS with respect to any of the matters discussed
herein and there can be no assurance that the IRS will not challenge one or
more of the tax consequences described below. Persons considering the purchase
of the notes should consult their tax advisors as to the particular tax
consequences of the ownership and disposition of the notes, including the
applicability and effect of any state, local, foreign or other tax laws.
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Under present U.S. federal income and estate tax law, and subject to the
discussion below concerning backup withholding:
(a) The so-called portfolio interest exception provides that
withholding of U.S. federal income tax will be required with respect to
the payment by us or our paying agent of principal or interest on notes
owned by a non-U.S. holder; provided that (1) the beneficial owner of
the notes does not actually or constructively own 10% or more of the
total combined voting power of all classes of our stock entitled to
vote within the meaning of Section 871(h)(3) of the tax code and the
Treasury regulations issued thereunder, (2) the beneficial owner is not
(i) a foreign tax exempt organization or a foreign private foundation
for U.S. federal income tax purposes, (ii) a bank whose receipt of
interest on the notes is described in Section 881(c)(3)(A) of the tax
code or (iii) a "controlled foreign corporation" as defined Section 957
of the tax code, that is related directly, indirectly or constructively
to us through stock ownership, and (3) such interest is not considered
contingent interest under Section 871(h)(4) of the tax code and the
Treasury regulations thereunder and (4) the beneficial owner satisfies
the requirements (described generally below) set forth in Section
871(h) and Section 881(c) of the tax code and the Treasury regulations
thereunder relating to registered securities.
To satisfy the requirements referred to in (4) above, the beneficial owner
of the notes, or a financial institution holding the notes on behalf of such
owner, must provide, in accordance with specified procedures, the paying agent
with a statement to the effect that the beneficial owner is not a U.S. person.
Currently, these requirements will be met if either (i) the beneficial owner of
the notes certifies to us or our paying agent, under penalties of perjury, that
it is not a U.S. person, which certification may be made on an IRS Form W-8 or
successor form, and provides its name and address or (ii) a securities clearing
organization, bank or other financial institution that holds customers'
securities in the ordinary course of its trade or business and that holds the
notes on behalf of a beneficial owner, certifies to us or our paying agent,
under penalties of perjury, that such statement has been received by it from
the beneficial owner, directly or through another intermediary financial
institution, and furnishes us or our paying agent with a copy thereof. A
certificate described in this paragraph is effective only with respect to
payments of interest made to the certifying non-U.S. holder after the issuance
of the certificate, in the calendar year of its issuance and two immediately
succeeding calendar years.
Treasury regulations finalized in 1997, applicable to interest paid after
December 31, 1999, provide alternative documentation procedures for satisfying
the certification requirement described above. Such regulations add
intermediary certification option for certain qualifying agents. Under one such
option, a withholding agent would be allowed to rely on IRS Form W-8 furnished
by a financial institution or other intermediary on behalf of one or more
beneficial owners or other intermediaries without having to obtain the
beneficial owner certificate described in the preceding paragraph, provided
that the financial institution or intermediary has entered into a withholding
agreement with the IRS and thus is a qualified intermediary. Under another
option, an authorized foreign agent of a U.S. withholding agent would be
permitted to act on behalf of the U.S. withholding agent, provided certain
conditions are met. With respect to the certification requirement for notes
that are held by a foreign partnership, the Treasury regulations provide that
unless the foreign partnership has entered into a withholding agreement with
the IRS, the foreign partnership will be required, in addition to providing an
intermediary Form W-8, to attach an appropriate certification by each partner.
Prospective investors, including foreign partnerships and their partners,
should consult their tax advisors regarding possible additional reporting
requirements.
(b) If a non-U.S. holder cannot satisfy the requirements of
"portfolio interest" exception described in paragraph (a) above,
payments of interest made to such non-U.S. holder will generally be
subject to withholding tax of 30% unless the beneficial owner of the
notes provides us or our paying agent, as the case may be, with a
properly executed (i) IRS Form 1001 or a successor form claiming an
exemption from or reduced rate of withholding under the benefit of a
tax treaty or (ii) IRS Form 4224 or a successor form stating that
interest paid on the notes is not subject to withholding tax because it
is effectively connected with the beneficial owner's conduct of a trade
or
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business in the United States. Under the Treasury regulations, non-U.S.
holders will generally be required to provide IRS Form W-8 in lieu of
Form 1001 and Form 4224, although alternative documentation may be
applicable in certain situations. In each such case, the relevant IRS
form must be delivered pursuant to applicable procedures and must be
properly transmitted to the person otherwise required to withhold U.S.
federal income tax, and none of the persons receiving the relevant form
may have actual knowledge that any statement on the form is false.
(c) A non-U.S. holder will not be subject to withholding of U.S.
federal income tax on any gain realized on the sale, exchange,
retirement, or other disposition of the notes, unless (i) such holder
is an individual who is present in the U.S. for 183 days or more during
the taxable year and certain other requirements are met, or (ii) the
gain is effectively connected with the conduct of a U.S. trade or
business of the holder.
(d) Under Section 2105(b) of the tax code, if interest on the notes
would be exempt from withholding of U.S. federal income tax under the
rules set forth in paragraph (a) above, without regard to the statement
requirement, the notes will not be included in the estate of a non-U.S.
holder for U.S. federal estate tax purposes.
(e) If a non-U.S. holder is engaged in a trade or business in the
U.S. and interest on the notes, or gain realized on the sale, exchange
or other disposition of the notes, is effectively connected with the
conduct of such trade or business, the non-U.S. holder, although exempt
from the withholding tax discussed above, will generally be subject to
U.S. federal income tax on such effectively connected income in the
same manner as if it were a U.S. person. Under the Treasury
regulations, such non-U.S. holder may also need to provide a U.S.
taxpayer identification number, social security number or employer
identification number on forms referred to in paragraph (b) above in
order to meet the requirements set forth above. In addition, if such
non-U.S. holder is a foreign corporation, it may be subject to a branch
profits tax equal to 30% of its effectively connected earnings and
profits for the taxable year, subject to adjustments. For this purpose,
interest on, and any gain recognized on the sale, exchange or other
disposition of, the notes will be included in such foreign
corporation's effectively connected earnings and profits if such
interest or gain, as the case may be, is effectively connected with the
conduct by such foreign corporation of a trade or business in the U.S.
Backup Withholding and Information Reporting
Certain backup withholding and information reporting requirements may apply
to payments on, and to proceeds of sale before maturity of, the notes. Interest
paid to a non-U.S. holder on a registered security will be required to be
reported annually on IRS Form 1042-S. We are not obligated to reimburse or
indemnify holders of the notes, including non-U.S. holders, for any tax imposed
on, or withheld from payments with respect to, the notes.
No information reporting on IRS Form 1099 or backup withholding will be
required with respect to payments made by us or any paying agent to non-U.S.
holders on registered securities with respect to which a statement described in
paragraph (a)(4) above has been received; provided that we or our paying agent,
as the case may be, does not have actual knowledge that the beneficial owner is
a U.S. person.
In addition, backup withholding and information reporting will not apply if
payments of principal or interest on the notes are paid to or collected by a
foreign office of a custodian, nominee or other foreign agent on behalf of the
beneficial owner of such notes, or if the foreign office of a broker, as
defined in applicable Treasury regulations, pays the proceeds of the sale of
the notes to the owner thereof. If, however, such nominee, custodian, agent or
broker is, for U.S. federal income tax purposes, a U.S. person, a controlled
foreign corporation or a foreign person 50% or more of whose gross income is
effectively connected with the conduct of a U.S. trade or business for a
specified three-year period, or another U.S. related person described in
Section 1.6049-5(c)(5) of the Treasury regulations, then information reporting
will be required unless (i) such
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custodian, nominee, agent or broker has in its records documentary evidence
that the beneficial owner is not a U.S. person and certain other conditions are
met or (ii) the beneficial owner otherwise establishes an exemption.
Payments of principal and interest on the notes to the beneficial owner of
such notes by a U.S. office of a custodian, nominee or agent, or payment by the
U.S. office of a broker of the proceeds of the sale of the notes, will be
subject to information reporting and backup withholding unless the holder or
beneficial owner provides the statement referred to in paragraph (a)(4) above
or otherwise establishes an exemption from information reporting and backup
withholding, and the payor does not have actual knowledge that the beneficial
owner is a U.S. person.
The U.S. federal tax discussion set forth above is included for general
information only and may not be applicable depending upon a holder's particular
situation. You should consult your own tax advisor with respect to the tax
consequences of your ownership and disposition of the notes, including the tax
consequences under state, local, foreign and other tax laws and the possible
effects on you of changes in U.S. federal or other tax laws.
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PLAN OF DISTRIBUTION
Each broker-dealer that receives series B notes for its own account pursuant
to this exchange offer, sometimes referred to as a participating broker, must
acknowledge that it will deliver a prospectus in connection with any resale of
such series B notes. This prospectus, as it may be amended or supplemented from
time to time, may be used by a participating broker in connection with any
resale of series B notes received in exchanged for series A notes where such
series A notes were acquired as a result of market-making activities or other
trading activities. We have agreed that for a period of 180 days from the
expiration of this exchange offer, we will make this prospectus, as amended or
supplemented, available to any participating broker for use in connection with
any such resale. In addition, until , 1999, 90 days from the date of
this prospectus, all broker-dealers effecting transactions in the notes may be
required to deliver a prospectus.
We will not receive any proceeds from any sale of series B notes by broker-
dealers. Series B notes received by any participating broker may be sold from
time to time in one or more transactions in the over-the-counter market, in
negotiated transactions, through the writing of options on the series B notes
or a combination of such methods of resale, at market prices prevailing at the
time of resale, at prices related to such prevailing market prices or
negotiated prices. Any such resale may be made directly to purchasers or to or
through brokers or dealers who may receive compensation in the form of
commissions or concessions from any such broker-dealer and/or the purchasers of
any such series B notes. Any participating broker that resells notes that were
received by it for its own account pursuant to this exchange offer and any
broker or dealer that participates in a distribution of series B notes may be
deemed to be an underwriter within the meaning of the Securities Act and any
profit on any such resale of series B notes and any commissions or concessions
received by any such persons may be deemed to be underwriting compensation
under the Securities Act. The letter of transmittal states that by
acknowledging that it will deliver, and by delivering, a prospectus as
required, a participating broker will not be deemed to admit that it is an
underwriter within the meaning of the Securities Act.
For a period of 180 days from the expiration of this exchange offer, we will
send a reasonable number of additional copies of this prospectus and any
amendment or supplement to this prospectus to any participating broker that
requests such documents in the letter of transmittal. We will pay all the
expenses incident to this exchange offer, which shall not include the expenses
of any holder in connection with resales of series B notes. We have agreed to
indemnify holders of series B notes, including any participating broker,
against certain liabilities, including liabilities under the Securities Act.
LEGAL MATTERS
Gibson, Dunn & Crutcher LLP, Los Angeles, California will opine on the
validity of the notes for us.
EXPERTS
Our consolidated financial statements as of December 25, 1998 and March 27,
1998 and for the nine months ended December 25, 1998 and the years ended March
27, 1998 and March 28, 1997, and OHM's consolidated financial statements as of
December 31, 1997 and 1996 and for the three years ended December 31, 1997,
included in the registration statement of which this prospectus forms a part,
have been audited by Ernst & Young LLP, independent auditors, as set forth in
their reports included in the registration statement of which this prospectus
forms a part and are included in reliance upon their reports given upon their
authority as experts in accounting and auditing. The consolidated financial
statements of GTI for the year ended October 31, 1998, included in the
registration statement of which this prospectus forms a part, have been audited
by Ernst & Young LLP, independent auditors, as set forth in their report
included in the registration statement of which this prospectus forms a part
and are included in reliance upon their report given upon their authority as
experts in accounting and auditing. EFM's statement of assets acquired and
liabilities assumed as
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of December 31, 1998, and the related statement of operating revenue and
expenses for the year ended December 31, 1998, included in the registration
statement of which this prospectus forms a part, have been audited by
PricewaterhouseCoopers LLP, independent accountants, as set forth in their
report included in the registration statement of which this prospectus forms a
part, and are included in reliance upon their report given upon their
authority as experts in accounting and auditing. The financial statements of
Roche for the three years ended December 31, 1998, included in the
registration statement of which this prospectus forms a part, have been
audited by Mallette Maheu General Partnership Chartered Accountants associated
with Arthur Andersen, independent public accountants, as set forth in their
report included in the registration statement of which this prospectus forms a
part, and are included in reliance upon their report given upon their
authority as experts in accounting and auditing.
AVAILABLE INFORMATION
We are subject to the informational requirements of the Securities Exchange
Act, and in accordance therewith we file reports, proxy and information
statements and other information with the Commission. You can inspect and copy
these reports, proxy and information statements and other information at:
. the public reference facilities maintained by the Commission at 450
Fifth Street, N.W., Washington, DC 20549, and
. the regional offices of the Commission located at:
. 500 West Madison Street, Room 1400, Chicago, Illinois 60606, and
. 7 World Trade Center, 13th Floor, New York, New York 10048.
You also can obtain copies of these materials from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington, DC 20549 at
prescribed rates. You can obtain electronic filings made through the
Electronic Data Gathering, Analysis and Retrieval System at the Commission's
web site, http://www.sec.gov.
In addition, you can inspect material filed by us at the offices of the
NYSE, 20 Broad Street, New York, New York, 10005, and the PE, 301 Pine Street,
San Francisco, California, 94104, on which shares of our common stock are
listed.
INCORPORATION BY REFERENCE
We are incorporating by reference in this prospectus the information we
file with the Commission, which means that we are disclosing important
information to you by referring you to those documents. The information that
we file later with the Commission will be deemed to automatically update and
supersede this information. Specifically, we incorporate by reference our
Transition Report on Form 10-K for the nine months ended December 25, 1998,
our Current Report on Form 8-K dated March 19, 1999 and any future filings
made with the Commission under Sections 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act as long as any notes remain outstanding.
You may request a copy of these filings at no cost, by writing or
telephoning us at the following address:
The IT Group, Inc.
2790 Mosside Boulevard
Monroeville, PA 15146-2792
Attn: Vice President, Finance
(412) 372-7701
121
<PAGE>
THE IT GROUP, INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
The IT Group, Inc.
Report of Independent Auditors........................................... F-2
Consolidated Balance Sheets as of December 25, 1998 and March 27, 1998... F-3
Consolidated Statements of Operations for the nine months ended December
25, 1998 and the years ended March 27, 1998 and March 28, 1997.......... F-4
Consolidated Statements of Stockholders' Equity for the nine months ended
December 25, 1998 and the years ended March 27, 1998 and March 28,
1997.................................................................... F-5
Consolidated Statements of Cash Flows for the nine months ended December
25, 1998 and the years ended March 27, 1998 and March 28, 1997.......... F-6
Notes to Consolidated Financial Statements............................... F-7
OHM Corporation
Report of Independent Auditors........................................... F-35
Consolidated Balance Sheets as of December 31, 1997 and 1996............. F-36
Consolidated Statements of Operations for the three years ended December
31, 1997................................................................ F-37
Consolidated Statements of Shareholders' Equity for the three years ended
December 31, 1997....................................................... F-38
Consolidated Statements of Cash Flows for the three years ended December
31, 1997................................................................ F-39
Notes to Consolidated Financial Statements............................... F-40
Fluor Daniel GTI, Inc.
Report of Independent Auditors........................................... F-62
Consolidated Statements of Operations for the year ended October 31,
1998.................................................................... F-63
Consolidated Statements of Cash Flows for the year ended October 31,
1998.................................................................... F-64
Notes to Consolidated Financial Statements............................... F-65
EFM
Report of Independent Accountants........................................ F-70
Statement of Assets Acquired and Liabilities Assumed as of December 31,
1998.................................................................... F-71
Statement of Operating Revenue and Expenses for the year ended December
31, 1998................................................................ F-72
Notes to Statements...................................................... F-73
Roche Limited, Consulting Group
Auditors' Report......................................................... F-77
Consolidated Balance Sheets as of December 31, 1998 and 1997............. F-78
Consolidated Statements of Operations for the three years ended December
31, 1998................................................................ F-79
Consolidated Statements of Stockholders' Equity for the three years ended
December 31, 1998....................................................... F-80
Consolidated Statements of Cash Flows for the three years ended December
31, 1998................................................................ F-81
Notes to Consolidated Financial Statements............................... F-82
</TABLE>
F-1
<PAGE>
REPORT OF ERNST & YOUNG LLP INDEPENDENT AUDITORS
The Board of Directors
The IT Group, Inc.
We have audited the accompanying consolidated balance sheets of The IT
Group, Inc. as of December 25, 1998 and March 27, 1998 and the related
consolidated statements of operations, stockholders' equity, and cash flows for
the nine months ended December 25, 1998 and for each of the two 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 The IT Group, Inc. at December 25, 1998 and March 27, 1998 and the
consolidated results of its operations and its cash flows for the nine months
ended December 25, 1998 and each of the two 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
February 15, 1999, except for the
subsequent event footnote as to
which the date is March 8, 1999
F-2
<PAGE>
THE IT GROUP, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 25, March 27,
1998 1998
------------ ---------
(In thousands)
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents............................. $ 21,265 $ 24,765
Accounts receivable, less allowance for doubtful
accounts of $18,958,000 and $19,026,000,
respectively......................................... 338,589 210,630
Prepaid expenses and other current assets............. 17,308 25,523
Deferred income taxes................................. 15,919 12,750
--------- ---------
Total current assets................................ 393,081 273,668
Property, plant and equipment, at cost:
Land and land improvements............................ 2,166 846
Buildings and leasehold improvements.................. 15,072 18,222
Machinery and equipment............................... 81,763 159,433
--------- ---------
99,001 178,501
Less accumulated depreciation and amortization...... 51,331 102,480
--------- ---------
Net property, plant and equipment................. 47,670 76,021
Cost in excess of net assets of acquired businesses.... 356,619 211,878
Investment in Quanterra................................ -- 16,300
Other assets........................................... 17,469 17,557
Deferred income taxes.................................. 93,719 73,745
Long-term assets of discontinued operations............ 40,048 40,048
--------- ---------
Total assets........................................ $ 948,606 $ 709,217
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable...................................... $ 150,912 $ 82,597
Accrued wages and related liabilities................. 44,929 38,395
Billings in excess of revenues........................ 8,219 3,723
Other accrued liabilities............................. 43,254 42,091
Short-term debt, including current portion of long-
term debt............................................ 17,603 16,738
Net current liabilities of discontinued operations.... 7,904 15,200
--------- ---------
Total current liabilities........................... 272,821 198,744
Long-term debt......................................... 364,824 240,147
8% convertible subordinated debentures................. 40,235 44,550
Long-term accrued liabilities of discontinued
operations, net....................................... -- 3,773
Other long-term accrued liabilities.................... 31,979 23,755
Minority interest...................................... 579 50,098
Commitments and contingencies
Stockholders' equity:
Preferred stock, $100 par value; 180,000 shares
authorized...........................................
7% cumulative convertible exchangeable, 20,556
issued and outstanding, 24,000 shares authorized... 2,056 2,056
6% cumulative convertible participating, 46,095 and
45,271 shares issued and outstanding .............. 4,609 4,451
Common stock, $.01 par value; 50,000,000 shares
authorized; 22,675,917 and 9,737,589 shares issued,
respectively......................................... 227 97
Treasury stock at cost, 47,484 and 8,078 shares,
respectively......................................... (74) (74)
Additional paid-in capital............................ 348,794 246,681
Deficit............................................... (116,984) (104,893)
Accumulated other comprehensive income (deficit)...... (460) (168)
--------- ---------
Total stockholders' equity........................ 238,168 148,150
--------- ---------
Total liabilities and stockholders' equity............ $ 948,606 $ 709,217
========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE>
THE IT GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
<TABLE>
<CAPTION>
Twelve Months Ended
Nine Months Ended --------------------
December 25, March 27, March 28,
1998 1998 1997
----------------- --------- ---------
<S> <C> <C> <C>
Revenues............................... $757,435 $442,216 $362,131
Cost and expenses:
Cost of revenues..................... 666,474 391,126 323,993
Selling, general and administrative
expenses............................ 41,828 31,774 33,431
Special charges...................... 24,971 14,248 8,403
-------- -------- --------
Operating income (loss)................ 24,162 5,068 (3,696)
Other income, net...................... -- 716 --
Interest, net.......................... (24,895) (7,969) (5,260)
-------- -------- --------
Loss from continuing operations before
income taxes.......................... (733) (2,185) (8,956)
(Provision) benefit for income taxes... (6,694) (4,175) 179
-------- -------- --------
Loss from continuing operations........ (7,427) (6,360) (8,777)
Discontinued operations--closure costs
(net of $3,040 income tax benefit).... -- (4,960) --
-------- -------- --------
Loss before extraordinary item......... (7,427) (11,320) (8,777)
Extraordinary item--early
extinguishment of debt (net of $3,497
income tax benefit)................... -- (5,706) --
Net loss............................... (7,427) (17,026) (8,777)
Less preferred stock dividends......... (4,664) (6,167) (4,916)
-------- -------- --------
Net loss applicable to common stock.... $(12,091) $(23,193) $(13,693)
======== ======== ========
Net loss per share basic and diluted:
Continuing operations (net of
preferred stock dividends).......... $ (0.63) $ (1.28) $ (1.48)
Discontinued operations--closure
costs............................... -- (0.51) --
Extraordinary item--early
extinguishment of debt.............. -- (0.59) --
-------- -------- --------
$ (0.63) $ (2.38) $ (1.48)
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE>
THE IT GROUP, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
For nine months ended December 25, 1998 and
two years ended March 27, 1998
(In thousands)
<TABLE>
<CAPTION>
7% 6%
cumulative cumulative Accumulated
convertible convertible Other
exchangeable participating Additional Comprehensive
preferred preferred Common Treasury paid-in Income
stock stock stock stock capital Deficit (Deficit) Totals
------------ ------------- ------ -------- ---------- --------- ------------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at March 29,
1996................... $2,400 $ -- $ 91 $(84) $206,465 $ (68,007) $ -- $140,865
Comprehensive income:
Net loss.............. -- -- -- -- -- (8,777) -- (8,777)
Foreign currency
translation
adjustments net of
tax.................. -- -- -- -- -- -- (17) (17)
--------
Comprehensive loss..... (8,794)
--------
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)
------ ------ ---- ---- -------- --------- ----- --------
Balance at March 28,
1997................... 2,056 4,204 97 (74) 244,287 (81,700) (17) 168,853
Comprehensive income:
Net loss.............. -- -- -- -- -- (17,026) -- (17,026)
Foreign currency
translation
adjustments net of
tax.................. -- -- -- -- -- -- (151) (151)
--------
Comprehensive loss..... (17,177)
--------
Restricted stock....... -- -- -- -- 223 -- -- 223
Dividends on preferred
stock................. -- 247 -- -- 2,232 (6,167) -- (3,688)
Stock options
exercised............. -- -- -- -- (61) -- -- (61)
------ ------ ---- ---- -------- --------- ----- --------
Balance at March 27,
1998................... 2,056 4,451 97 (74) 246,681 (104,893) (168) 148,150
Comprehensive income:
Net loss.............. -- -- -- -- -- (7,427) -- (7,427)
Foreign currency
translation
adjustments net of
tax.................. -- -- -- -- -- -- (292) (292)
--------
Comprehensive loss..... (7,719)
--------
Restricted stock....... -- -- -- -- 38 -- -- 38
Dividends on preferred
stock................. -- 158 -- -- 1,421 (4,664) -- (3,085)
IT shares issued in
exchange for OHM
stock, net of stock
issue costs........... -- -- 130 -- 100,654 -- -- 100,784
------ ------ ---- ---- -------- --------- ----- --------
Balance at December 25,
1998................... $2,056 $4,609 $227 $(74) $348,794 $(116,984) $(460) $238,168
====== ====== ==== ==== ======== ========= ===== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE>
THE IT GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Twelve Months Ended
Nine Months Ended --------------------
December 25, March 27, March 28,
1998 1998 1997
----------------- --------- ---------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss.............................. $ (7,427) $ (17,026) $ (8,777)
Adjustments to reconcile net 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..... 20,094 13,158 14,363
Non-recurring special charges..... 24,971 5,743 --
Deferred income taxes............. 6,187 678 370
Other............................. 13 (980) (45)
Changes in assets and liabilities, net
of effects from acquisitions and
dispositions of businesses:
(Increase) decrease in receivables.. (88,612) 386 25,422
(Increase) decrease in prepaid
expenses and other current assets.. (364) (717) 601
Increase (decrease) in accounts
payable............................ 65,359 (7,687) 905
(Decrease) increase in accrued wages
and related liabilities............ (14,825) (4,471) 2,473
Increase (decrease) in billings in
excess of revenues................. 4,496 (4,634) 5,183
(Decrease) increase in other accrued
liabilities........................ (30,190) 1,591 (2,111)
(Decrease) increase in other long-
term accrued liabilities........... (3,126) 733 452
Decrease in liabilities of
discontinued operations............ (11,069) (14,914) (14,041)
--------- --------- --------
Net cash (used for) provided by
operating activities............... (34,493) (19,540) 24,795
Cash flows from investing activities:
Capital expenditures.................. (6,860) (4,766) (3,361)
Investment in Quanterra............... -- -- (3,325)
Proceeds from sale of equity interest
in Quanterra......................... 5,750 -- --
Proceeds from disposition of business -- 2,800 --
Acquisition of businesses, net of cash
acquired............................. (81,332) (163,189) (1,455)
Other, net............................ 1,003 (4,896) 700
--------- --------- --------
Net cash used by investing
activities........................... (81,439) (170,051) (7,441)
Cash flows from financing activities:
Financing costs....................... (6,179) (4,113) --
Repayments of long-term borrowings.... (409,690) (68,666) (438)
Long-term borrowings.................. 531,015 210,940 962
Net proceeds from issuance of
preferred stock -- -- 40,609
Dividends paid on preferred stock..... (2,714) (2,702) (4,050)
Issuances of common stock, net........ -- -- (33)
--------- --------- --------
Net cash provided by financing
activities........................... 112,432 135,459 37,050
--------- --------- --------
Net (decrease) increase in cash and cash
equivalents............................ (3,500) (54,132) 54,404
Cash and cash equivalents at beginning
of period.............................. 24,765 78,897 24,493
--------- --------- --------
Cash and cash equivalents at end of
period................................. $ 21,265 $ 24,765 $ 78,897
========= ========= ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE>
THE IT GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Summary of significant accounting policies:
Basis of presentation and principles of consolidation
The consolidated financial statements include The IT Group, Inc. (formerly
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.
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 is IT's
Annual Report on Form 10-K for the nine months ended December 25, 1998.
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.
Recent Accounting Pronouncements
In June of 1998, the Financial Accounting Standards Board (FASB) issued
Statement No. 133, "Accounting for Derivative Instruments and Hedging
Activities". This statement will be required to be adopted as of the first
fiscal quarter of the year 2000. The Company intends to adopt FASB No. 133 by
the effective date although earlier adoption is permitted. The statement
requires the swap agreements, used by the Company to manage the interest rate
risks associated with the variable nature of the Company's Credit Facilities,
to be recorded at fair market value and reflected in earnings. The Company has
evaluated its existing interest rate contracts and management does not believe
that the effect of market volatility on interest rates will have a material
effect on earnings for the existing contracts including anticipated
modifications.
F-7
<PAGE>
THE IT GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Transition Period
The Company elected to change its fiscal year-end from the last Friday in
March to the last Friday in December effective for the nine months ended
December 25, 1998. Comparative information for the nine months ended December
25, 1998, December 26, 1997 and December 27, 1996 is as follows:
<TABLE>
<CAPTION>
Nine Months Ended
--------------------------------------
December 25, December 26, December 27,
1998 1997 1996
------------ ------------ ------------
(unaudited) (unaudited)
(In thousands, except per share data)
<S> <C> <C> <C>
Revenues............................... $757,435 $306,178 $266,419
Cost of revenues....................... 666,474 271,572 239,778
-------- -------- --------
Gross profit........................... 90,961 34,606 26,641
Selling, general and administrative
expense............................... 41,828 21,182 25,339
Special charges........................ 24,971 8,554 8,403
-------- -------- --------
Operating income (loss)................ 24,162 4,870 (7,101)
Interest, net.......................... (24,895) (3,386) (4,105)
-------- -------- --------
Income (loss) from continuing
operations............................ (733) 1,484 (11,206)
(Provision) benefit for income taxes... (6,694) (4,316) 1,146
-------- -------- --------
Net loss............................... (7,427) (2,832) (10,060)
-------- -------- --------
Less preferred stock dividends......... (4,664) (4,609) (3,395)
-------- -------- --------
Net loss applicable to common stock.... $(12,091) $ (7,441) $(13,455)
======== ======== ========
Basic and diluted loss per common
share................................. $ (0.63) $ (0.76) $ (1.48)
======== ======== ========
</TABLE>
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. The Company's contracts are generally
completed within 2 years.
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 to settle the amounts in the ordinary course of
business, leading to some estimates of claim or scope change amounts being
included in revenues. When such amounts are finalized, any changes from the
estimates are reflected in earnings.
Included in accounts receivable, net at December 25, 1998 are billed
receivables, unbilled receivables and retention in the amounts of $269.0
million, $60.6 million and $9.0 million, respectively. Billed receivables,
unbilled receivables and retention from the U.S. Government as of December 25,
1998 were $145.6 million,
F-8
<PAGE>
THE IT GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
$37.5 million and $2.2 million, respectively. At March 27, 1998, billed
receivables, unbilled receivables and retention were $172.7 million, $27.0
million and $10.9 million, respectively. Billed receivables, unbilled
receivables and retention from the U.S. Government as of March 27, 1998 were
$93.1 million, $9.9 million and $2.2 million, respectively.
Unbilled receivables typically represent amounts earned under the Company's
contracts but not yet billable according to the contract terms, which usually
consider the passage of time, achievement of certain milestones, negotiation of
change orders or completion of the project. Generally, unbilled receivables are
expected to be billed and collected in the subsequent year. Billings in excess
of revenues represent amounts billed in accordance with contract terms, which
are in excess of the amounts includable in revenue.
Included in accounts receivable at December 25, 1998 is approximately $31.6
million 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 amount includes 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.
The Company performs periodic evaluations of its clients' financial
condition and generally does not require collateral. At December 25, 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.
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--3 to 10 years including salvage value. Amortization of leasehold
improvements is provided using the straight-line method over the term of the
respective lease.
Interest
Interest incurred was $25.9 million, $10.7 million and $7.2 million for the
nine months ended December 25, 1998, the twelve months ended March 27, 1998 and
the twelve months ended March 28, 1997, respectively.
Interest income is principally earned on the Company's investments in cash
equivalents and was $1.0 million, $2.8 million and $1.9 million for the nine
months ended December 25, 1998, the twelve months ended March 27, 1998 and the
twelve months ended March 28, 1997, 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 December 25, 1998 and March 27, 1998,
accumulated amortization is $16.6 million and $9.6 million, respectively. The
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.
F-9
<PAGE>
THE IT GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
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 its stock
grants in accordance with APB Opinion No. 25, "Accounting for Stock Issued to
Employees," ("APB No. 25") and the related interpretations. 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.
Changes in Presentation of Comparative Financial Statements
Certain amounts in the March 27, 1998 financial statements were reclassified
to conform with the presentation in the current period.
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 clients
and to third parties for damages arising from performing services for clients,
which could have a material adverse effect on the consolidated financial
condition, liquidity and results of operations of 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 74%, 63% and
67% of revenue for the nine months ended December 25, 1998, the twelve months
ended March 27, 1998 and the twelve months ended March 28, 1997, 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
consolidated financial condition, liquidity and results of operations of the
Company. 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 Business Acquisitions and Commitments and
contingencies.)
F-10
<PAGE>
THE IT GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Fair value of financial instruments (continuing operations)
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 December 25, 1998. 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>
December 25, 1998 March 27, 1998
------------------- -------------------
Carrying Estimated Carrying Estimated
amount fair value amount fair value
-------- ---------- -------- ----------
(In thousands)
<S> <C> <C> <C> <C>
Cash and cash equivalents.............. $ 21,265 $ 21,265 $ 24,765 $ 24,765
Long and short-term debt:
Credit agreement debt:
Revolver borrowings outstanding--
pre-OHM merger.................... -- -- 33,200 33,200
Revolver borrowings outstanding.... 143,000 143,000 126,293 126,293
Term Loan.......................... 225,750 225,750 80,000 80,000
8% Convertible Subordinated
Debentures--Due October 1, 2006..... 44,548 40,650 46,753 45,643
Other................................ 9,364 9,364 15,189 15,189
</TABLE>
Business Acquisitions:
Fluor Daniel GTI, Inc.
On December 3, 1998, the Company acquired the outstanding common stock of
Fluor Daniel GTI, Inc. (GTI), an environmental consulting, engineering and
construction management services company. GTI operates mainly throughout the
United States with minor foreign operations. Total consideration amounted to
$69.4 million plus approximately $2.0 million in transaction costs. This
transaction was accounted for as a purchase in accordance with Accounting
Principles Board (APB) No. 16. The excess of the purchase price over the fair
value of assets acquired and liabilities assumed in the merger of $16.3 million
is primarily classified as cost in excess of net assets of acquired businesses
and is being amortized over forty years.
The estimated fair value of the assets acquired and liabilities assumed of
GTI are as follows:
<TABLE>
<CAPTION>
Description Amount
- ----------- --------------
(In thousands)
<S> <C>
Current assets................................................. $91,644
Property and equipment......................................... 3,587
Intangibles, primarily cost in excess of net assets of acquired
businesses.................................................... 16,324
Other long term assets......................................... 5,972
Current liabilities............................................ 46,130
</TABLE>
F-11
<PAGE>
THE IT GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
As a result of the merger with GTI, the Company has adopted a plan and
commenced the process of closing specific overlapping facilities and reducing
consolidated employment. The acquired balance sheet includes an accrual of
$7.9 million for the estimated GTI severance, office closure costs and lease
termination costs of which $0.9 million has been paid through December 25,
1998. The balance will be paid primarily over the next twelve months.
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 date of
the acquisition. Management does not anticipate material changes to the
preliminary allocation.
OHM Acquisition
In January 1998, the Company entered into a merger agreement to acquire OHM
Corporation (OHM), an environmental and hazardous waste remediation company
servicing primarily industrial, federal government and local government
agencies located primarily in the United States. The transaction was effected
through a two-step process for a total purchase price of $303.4 million
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 13.9 million shares of OHM common stock, for a total
consideration of $160.2 million plus $4.6 million in acquisition costs and (b)
the acquisition on June 11, 1998 of the remaining 46% of the total outstanding
shares through the exchange of 12.9 million shares of Company common stock
valued at $8.04 per share, or $103.8 million and payment of $30.8 million plus
$4.0 million in acquisition costs.
This transaction was accounted for as a step acquisition and therefore the
effects of the first phase of the merger were included in the March 27, 1998
financial statements and the effects of both phases were included in the June
26, 1998 financial statements. The excess of the purchase price over the fair
value of assets acquired and liabilities assumed in the merger of $328.5
million has been finalized during the nine months ended December 25, 1998 and
is classified as cost in excess of net assets of acquired businesses with
amortization over forty years.
The estimated fair value of the assets acquired and liabilities assumed of
OHM as adjusted are as follows:
<TABLE>
<CAPTION>
Description Amount
- ----------- --------------
(In thousands)
<S> <C>
Current assets................................................... $117,309
Property and equipment........................................... 19,324
Cost in excess of net assets of acquired businesses.............. 328,495
Other long term assets........................................... 72,666
Current liabilities.............................................. 126,385
Long term liabilities, primarily debt............................ 107,924
</TABLE>
As a result of the merger with OHM (the "OHM Merger"), the Company adopted
a plan and has commenced the process of closing specific overlapping
facilities and reducing consolidated employment. The acquired balance sheet
includes an accrual of $16.2 million for the estimated OHM severance, office
closure costs and lease termination costs of which $7.3 million has been paid
through December 25, 1998. The balance relating primarily to office lease
costs is anticipated to be paid over the next seven years.
Pro Forma Effects of Acquisitions
The following unaudited pro forma condensed statements of operations gives
effect to the GTI acquisition as if the acquisition occurred on March 28, 1997
and the effect of the OHM merger as if this merger occurred
F-12
<PAGE>
THE IT GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
on March 29, 1996. Basic and diluted loss per share has been calculated
utilizing the basic and diluted weighted average of IT shares outstanding
during the periods adjusted for approximately 12.9 million shares of common
stock issued June 11, 1998 for the OHM acquisition assuming the 12.9 million
shares were outstanding as of the beginning of the periods presented.
<TABLE>
<CAPTION>
Twelve Months Ended
Nine months ended -----------------------------
December 25, 1998 March 27, 1998 March 28, 1997
Pro Forma Pro Forma Pro Forma
----------------- -------------- --------------
(In thousands, except per share data)
<S> <C> <C> <C>
Revenues...................... $897,284 $1,119,115 $984,945
Loss from continuing
operations before
extraordinary item........... (3,680) (53,074) (12,280)
Net loss...................... (9,771) (48,602) (12,280)
Net loss applicable to common
stock........................ (14,435) (54,769) (17,196)
Loss per share:
Basic and diluted........... (0.64) (2.42) (0.78)
</TABLE>
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 GTI and OHM mergers had taken place at the date and on the
basis assumed above.
Other Acquisitions
The Company acquired certain other businesses during the twelve months ended
March 27, 1998 and the twelve months ended March 28, 1997 for aggregate
consideration of $12.3 million and $1.5 million, respectively. These
acquisition agreements include potential contingent payments. The Company paid
$1.3 million in cash under two of these agreements through December 25, 1998.
Potential future contingent payments relating to these acquisitions as of
December 25, 1998 range from a low of $1.9 million to a maximum of
approximately $9.1 million. The Company paid $1.9 million in January 1999. 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 to require disclosure of pro forma
financial information. 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 $10.0 million. See Subsequent Events also for acquisitions after
December 25, 1998.
Consolidated statements of cash flows supplemental disclosures:
Supplemental cash flow information is:
<TABLE>
<CAPTION>
Twelve Months Ended
Nine Months Ended -------------------
December 25, March 27, March 28,
1998 1998 1997
----------------- --------- ---------
(In thousands)
<S> <C> <C> <C>
Interest paid, net of amounts
capitalized............................ $ 24,634 $ 11,060 $6,713
Interest received....................... 1,008 2,652 1,730
Income taxes paid....................... 335 770 287
Income tax refunds received............. -- 3 1,178
Acquisition liabilities assumed......... 66,050 218,440 6,346
Stock issued in connection with
acquisitions........................... 103,810 -- --
</TABLE>
F-13
<PAGE>
THE IT GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Special Charges:
Asset Sales. On May 27, 1998, the Company'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 the Company's Hybrid Thermal Treatment System (HTTS(R))
business (thermal transportable incineration equipment). As a result of these
actions, the Company recorded a non-cash charge of $25.0 million in the three
months ending June 26, 1998 including $10.6 million (net of cash proceeds of
$5.8 million) related to the sale of the Quanterra investment and $14.4
million, primarily related to assets associated with the HTTS(R) business.
Special charges of $14.2 million were recorded in the twelve months ended
March 27, 1998. The charges include $5.7 million for integration costs
associated with the acquisition of OHM, a $3.9 million non-cash charge related
to a project claim settlement, a $2.8 million charge associated with the
relocation of the Company's corporate headquarters, and a $1.8 million loss
from the sale of a small remediation services business.
OHM. The $5.7 million special charge for integration costs associated with
the acquisition of OHM included $2.2 million of costs for severance and $3.5
million of costs and other related items for closing and consolidating the
Company's 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 a plan for restructuring IT offices in which it
would close three leased facilities, reduce the size of three more facilities
and sublease a portion of eight additional facilities. As of December 25, 1998,
$1.3 million of the integration charge remained to be paid. 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 three years. One lease requires payments over the next seven
years.
Helen Kramer. 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 U.S. Environmental Protection Agency (USEPA) 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 $14.5 million 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 $4.3 million 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 $6.0 million, its proportionate share of the settlement.
In December 1997, the Company recorded a non-cash pre-tax charge of $3.9
million as the cash received was less than the unbilled and billed receivables
related to this project which totaled approximately $9.2 million and $0.7
million, respectively.
Relocation. The special charges that occurred in the first quarter of the
twelve months ended March 27, 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
moved it 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 $2.8 million. The relocation charge included $0.8 million
of costs for severance, $0.9 million of costs for the relocation of IT
employees, $0.7 million of costs related to the closure of the offices in
Torrance, California and $0.4 million of other related costs. As part of this
relocation, 32 employees were laid off, primarily
F-14
<PAGE>
THE IT GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
corporate management and administrative support personnel. As of December 25,
1998, these amounts have been paid. In May 1997, the Company incurred a non-
cash pre-tax charge of $1.8 million to sell its California based small projects
remediation services business.
Restructuring. In conjunction with the corporate restructuring which was
initiated in the second quarter of the twelve months ended March 28, 1997, the
Company incurred a pre-tax restructuring charge of $8.4 million. The
restructuring charge included $3.4 million of costs for severance, $4.1 million
of costs for closing and reducing the size of a number of the Company's
offices, and $0.9 million of costs for other related items. As part of the plan
of termination, the Company laid-off 133 employees and paid over $2.5 million
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 six years. At December 25, 1998, $0.9 million
of the charge remained to be paid.
Long-term debt:
Long-term debt consists of the following:
<TABLE>
<CAPTION>
December 25, March 27,
1998 1998
------------ ---------
(In thousands)
<S> <C> <C>
8% Convertible Subordinated Debentures--Due October 1,
2006................................................ $ 44,548 $ 46,753
Credit Agreement Debt:
Revolver borrowings outstanding...................... -- 33,200
Revolver borrowings outstanding...................... 143,000 126,293
Term Loan............................................ 225,750 80,000
Other.................................................. 9,364 15,189
-------- --------
422,662 301,435
Less current portion................................... 17,603 16,738
-------- --------
$405,059 $284,697
======== ========
</TABLE>
Aggregate maturity of long-term debt, including annual mandatory sinking
fund payments for the convertible subordinated debentures, for the five fiscal
years following December 25, 1998 is: 1999, $17.6 million; 2000, $9.4 million;
2001, $8.8 million; 2002, $8.8 million; 2003 and thereafter $378.0 million.
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.
IT executed the OHM Tender Offer with a $240.0 million credit facility (the
"credit facilities"). The credit facilities were used to complete the Tender
Offer, to refinance IT's $65.0 million 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. Loans made
under the credit facilities bore interest at a rate equal to LIBOR plus 2.50%
per annum (or the lender's base rate plus 1.50% per annum) through
June 10, 1998, at the Company's option and required no amortization. The
Company recorded an extraordinary charge of $9.2 million, reduced by $3.5
million of deferred tax benefit, as the result of the early extinguishment of
existing debt necessary to obtaining the credit facilities. On June 11, 1998,
upon consummation of the second step of the OHM acquisition (see Business
Acquisitions), the Company's credit facilities were
F-15
<PAGE>
THE IT GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
refinanced. As such, the Company classified applicable portions of the credit
facilities outstanding as of March 27, 1998 as long-term debt in accordance
with the provisions of the credit facilities.
After the refinancing in conjunction with the OHM Merger, the credit
facilities consist of an eight-year amortizing term loan (term loans) of $228.0
million and a six-year revolving credit facility (revolving loans) of $185.0
million that contains a sublimit of $50.0 million for letter of credit
issuance. The term loans made under the credit facilities bear interest at a
rate equal to LIBOR plus 2.50% per annum (or the lender's base rate plus 1.50%
per annum) and amortize on a semi-annual basis in aggregate annual installments
of $4.5 million for the first six years after the OHM Merger, with the
remainder payable in eight equal quarterly installments in the seventh and
eighth years after the OHM Merger. The revolving loans made under the credit
facilities bear interest at a rate equal to LIBOR plus 2.00% per annum (or the
lender's base rate plus 1.00% per annum). Six months after completion of the
merger, adjustments to the interest rates were made based on the ratio of IT's
consolidated total debt to consolidated earnings before interest, taxes,
depreciation and amortization. The credit facilities are secured by a security
interest in substantially all of the assets of the Company and its
subsidiaries. In addition, the facilities include representations, warranties
and covenants customary for facilities of this type that include various
financial covenants and limitations (subject to certain exceptions) on
indebtedness, lease obligations, mergers and acquisitions and other fundamental
changes prohibit the payment of cash dividends on common stock and limit
capital expenditures. The credit facilities also include customary events of
default. Events constituting defaults include a change of control of IT
including among other things, the disposition under certain circumstances of
the Company's 6% Cumulative Convertible Participating Preferred Stock and
warrants on or after the funding of the credit facilities on June 11, 1998, to
a person other than the Preferred Stock Group (see Notes to Consolidated
Financial Statements--Preferred stock).
On September 14, 1998, the lenders under the credit facilities approved the
first amendment to the agreement covering the credit facilities to increase the
revolving credit facility from $150.0 million to $185.0 million. This increase
in revolver funding availability was based upon growth projections of the
Company's business, the increase in seasonality of revenue streams related to
OHM contracts and to create additional flexibility to finance further strategic
and diversifying acquisitions, particularly due to turmoil in the long-term
credit markets during the second half of 1998.
At October 26, 1998, the lenders under the credit facilities approved the
second amendment to the loan agreement. This second amendment provided for the
acquisition of GTI as a permitted acquisition under the credit facilities,
provided for the borrowing of up to $35.0 million under the revolving credit
facility to make the GTI acquisition and amended the financial covenants to
provide for the effects of the GTI acquisition. IT closed the acquisition of
GTI on December 3, 1998. The GTI acquisition was funded through the use of the
Company's cash on hand, borrowing of $35.0 million under the revolving facility
and use of $20.0 million of GTI's cash on hand, which was loaned to the Company
and is evidenced by an interest bearing promissory note payable on demand.
Letters of credit outstanding at December 25, 1998 were $20.4 million.
As required by the credit facilities, on August 11, 1998, the Company
executed a six year swap agreement with a large multi national banking
organization. The swap agreement is based upon a notional amount of $126.0
million wherein the Company, the fixed-rate payer, pays (receives) the
difference between 3-month LIBOR and a fixed rate of 5.58% with its swap
counter-party, the floating-rate payer. The LIBOR rate is adjusted quarterly
and amounts owning or due are settled at each quarterly reset date. The Company
charges (credits) amounts exchanged under the swap to interest expense. Net
credits to the Company in the nine months ended December 25, 1998 were not
material. The swap agreement contains a one time cancellation option for the
counter-party and an imbedded interest rate cap for the Company. At any
quarterly reset date beginning
F-16
<PAGE>
THE IT GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
with February 11, 2000, the counter-party, at its option, may cancel the swap
agreement for the remaining term. If the counter-party elects to exercise its
cancellation option, the Company receives the benefit of a 7% interest rate cap
on the notional amount of $126.0 million. The terms of the interest rate cap
allow the Company to utilize the interest rate cap for any six quarterly
periods during the term of the swap agreement remaining after exercise of the
cancellation option by the counter-party. The election of the six quarterly cap
periods by the Company need not be consecutive quarters. The mark to market
value of the swap at December 24, 1998 represents a cost to the Company of $3.3
million. This value is based on 1) the shape of the yield curve at the
valuation date, 2) the assumption that future rate changes are parallel shifts
along the yield curve at all points, 3) LIBOR futures prices at the measurement
date and 4) that option volatility remains unchanged from current levels. The
market value of the swap, assuming only a 50 basis point increase in LIBOR
rates, is a positive $1.2 million, reflecting the significant change in market
values associated with small interest rate changes.
The Company also has various miscellaneous outstanding notes payable and
capital lease obligations totaling $9.4 million. These notes payable mature at
various dates between January 1999 and November 2000, at interest rates ranging
from to 7.5% to 8.6%.
Income taxes:
Income tax provision (benefit), net of changes in the deferred tax valuation
allowance, consists of the following:
<TABLE>
<CAPTION>
Twelve Months Ended
Nine Months Ended -------------------
December 25, March 27, March 28,
1998 1998 1997
----------------- --------- ---------
(In thousands)
<S> <C> <C> <C>
Current:
Federal................................. $ 57 $ 54 $(764)
State................................... 450 559 215
------ ------- -----
507 613 (549)
------ ------- -----
Deferred:
Federal................................. 5,696 (2,801) 336
State................................... 491 (174) 57
Foreign................................. -- -- (23)
------ ------- -----
6,187 (2,975) 370
------ ------- -----
Total provision (benefit)............... $6,694 $(2,362) $(179)
====== ======= =====
</TABLE>
F-17
<PAGE>
THE IT GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Income tax provision (benefit) is included in the statements of operations
as follows:
<TABLE>
<CAPTION>
Twelve Months Ended
Nine Months Ended -------------------
December 25, March 27, March 28,
1998 1998 1997
----------------- --------- ---------
(In thousands)
<S> <C> <C> <C>
Continuing operations before
extraordinary items.................... $6,694 $ 4,175 $(179)
Extraordinary item: early extinguishment
of debt................................ -- (3,497) --
6,694 678 (179)
Discontinued operations................. -- (3,040) --
------ ------- -----
Total provision (benefit)............. $6,694 $(2,362) $(179)
====== ======= =====
</TABLE>
A reconciliation of the provision (benefit) for income taxes on the total
provision (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 provision (benefit) is as
follows:
<TABLE>
<CAPTION>
Twelve Months Ended
Nine Months Ended -------------------
December 25, March 27, March 28,
1998 1998 1997
----------------- --------- ---------
(In thousands)
<S> <C> <C> <C>
Income tax benefit computed at statutory
federal income tax rate................ $ (249) $ (743) $(3,045)
State income taxes, net of federal tax
benefit, if any........................ 335 504 179
Equity in income (loss) of foreign
subsidiaries........................... -- 121 --
Amortization of cost in excess of net
assets of acquired businesses.......... 2,557 287 100
Extraordinary item: early extinguishment
of debt................................ -- (3,129) --
Discontinued operations................. -- (2,720) --
Federal deferred tax asset valuation
allowance adjustment................... 6,059 1,906 2,597
Research and development tax credits.... (2,540) -- --
Other................................... 532 1,412 (10)
------- ------- -------
Total provision (benefit)............. $ 6,694 $(2,362) $ (179)
======= ======= =======
</TABLE>
F-18
<PAGE>
THE IT GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
At December 25, 1998 and March 27, 1998, the Company had deferred tax assets
and liabilities as follows:
<TABLE>
<CAPTION>
December 25, March 27,
1998 1998
------------ ---------
(In thousands)
<S> <C> <C>
Deferred tax assets:
Closure accruals--discontinued operations............. $ 11,229 $ 15,771
NOL carryforwards..................................... 64,490 72,319
Tax basis in excess of book basis in Quanterra........ -- 11,145
Capital loss carryover................................ 17,446 --
Alternative minimum tax credit carryforwards.......... 3,458 3,458
Investment and other tax credit carryforwards......... 12,750 10,474
Other accrued liabilities............................. 5,458 17,050
Asset basis difference--OHM and GTI................... 62,292 25,987
Other, net............................................ 23,253 7,933
-------- --------
Gross deferred tax asset............................ 200,376 164,137
Valuation allowance for deferred tax asset............ (50,267) (31,865)
-------- --------
Total deferred tax asset............................ 150,109 132,272
Deferred tax liabilities:
Tax depreciation in excess of book depreciation....... (17,120) (19,465)
Asset basis difference--discontinued operations....... (11,576) (13,012)
Other, net............................................ (11,775) (13,300)
-------- --------
Total deferred tax liabilities...................... (40,471) (45,777)
-------- --------
Net deferred tax asset.............................. $109,638 $ 86,495
======== ========
Net current asset....................................... $ 15,919 $ 12,750
Net noncurrent asset.................................. 93,719 73,745
-------- --------
Net deferred tax asset.............................. $109,638 $ 86,495
======== ========
</TABLE>
Approximately $15.2 million and $3.9 million of the valuation allowance
relates to the OHM and GTI acquisitions, respectively. Tax benefits
subsequently recognized that are related to these amounts will reduce cost in
excess of net assets of acquired businesses.
At December 25, 1998, the Company had net operating losses (NOL's), tax
credit carryforwards and capital losses with expiration dates as follows:
<TABLE>
<CAPTION>
Research
Net and Capital
Operating Development Other Loss
Expiration Dates Losses Tax Credits Credits Carry Over
- ---------------- --------- ----------- ------- ----------
(In thousands)
<S> <C> <C> <C> <C>
1998--2003............................. $ 72 $ 1,140 $2,225 $45,910
2004--2008............................. 18,700 3,393 -- --
2009--2013............................. 156,386 5,992 -- --
Indefinite............................. -- -- 3,458 --
-------- ------- ------ -------
Total................................ $175,158 $10,525 $5,683 $45,910
======== ======= ====== =======
</TABLE>
F-19
<PAGE>
THE IT GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
During the nine months ended December 25, 1998, the Company increased its
deferred tax asset valuation allowance from $31.9 million to $50.2 million. The
increase was principally related to the acquisition of OHM and GTI
corporations, respectively, and based on the Company's assessment of the
uncertainty as to when it will generate a sufficient level of future earnings
of applicable character to realize a portion of the deferred tax asset created
by the special charges. 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 twelve months ended March 27, 1998, the Company increased its
deferred tax asset valuation allowance from $9.5 million to $31.9 million. 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 OHM (see Business
Acquisitions--OHM Acquisition) which substantially increased projected taxable
income.
During the twelve months ended March 28, 1997, the Company increased its
deferred tax asset valuation allowance from $4.9 million to $9.5 million. 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).
F-20
<PAGE>
THE IT GROUP, INC.
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>
Twelve Months Ended
Nine Months Ended --------------------
December 25, March 27, March 28,
1998 1998 1997
----------------- --------- ---------
(In thousands, except per share data)
<S> <C> <C> <C>
Numerator:
Loss from continuing operations and
before extraordinary items............ $ (7,427) $ (6,360) $ (8,777)
Preferred stock dividends.............. (4,664) (6,167) (4,916)
-------- -------- --------
Numerator for basic and dilutive
earnings per share--income available
to common stockholders................ (12,091) (12,527) (13,693)
Discontinued operations--closure costs
(net of income tax benefit)........... -- (4,960) --
-------- -------- --------
(12,091) (17,487) (13,693)
Extraordinary charge for early
retirement of debt (net of income tax
benefit).............................. -- (5,706) --
-------- -------- --------
Net income (loss) applicable to common
stock................................... $(12,091) $(23,193) $(13,693)
======== ======== ========
Denominator:
Weighted-average number of common
shares outstanding for basic and
dilutive earnings per share........... 19,149 9,737 9,227
======== ======== ========
Net loss per share:
Earnings from continuing operations
(net of preferred stock dividends).... $ (0.63) $ (1.28) $ (1.48)
Earnings from discontinued operations.. -- (0.51) --
Extraordinary item--early
extinguishment of debt................ -- (0.59) --
-------- -------- --------
Net loss per share....................... $ (0.63) $ (2.38) $ (1.48)
======== ======== ========
</TABLE>
In June 1998, approximately 12.9 million 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 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 December 25, 1998, future minimum rental commitments under noncancelable
leases with terms longer than one year aggregate $125.1 million and require
payments in the five succeeding years and thereafter of $36.8 million, $31.1
million, $22.5 million, $14.6 million, $8.6 million, and $11.5 million,
respectively. A portion of these leased assets represent duplicative facilities
and equipment resulting from the OHM and GTI acquisitions. The Company is
currently and actively involved in attempting to sublease these assets.
Rental expense related to continuing operations was $29.4 million for the
nine months ended December 25, 1998, $12.9 million (including $1.2 million of
the special charges) for the twelve months ended
F-21
<PAGE>
THE IT GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
March 27, 1998, and $12.6 million (including $2.2 million of the special
charges) for the twelve months ended March 28, 1997.
Contingencies
Coakley Landfill Action
On March 9, 1998, the Coakley Landfill PRP Steering Committee terminated,
allegedly for cause, IT Corporation'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) IT disputes that
the Steering Committee is entitled to terminate the agreement for cause and
believes the termination action arose from IT's pending change order request of
approximately $6.3 million (which has now grown to $7.2 million). IT 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 December 25, 1998 include a claim receivable of $8.7 million
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 $8.8 million 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 $9.2 million
(inclusive of $8.7 million of claim receivable) for damages arising from
Occidental's breach of contract, misrepresentation and failure to pay
outstanding contract amounts. The Company 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. The parties have completed discovery
in the case and filed motions for summary judgement against each other.
Although the court may rule on the matter at any time, its ultimate outcome
cannot be predicted.
GM--Hughes Massena Litigation
These two matters (General Motors Corporation v. OHM Remediation Services
Corporation, U.S.D.C., N.D.N.Y., Case No. 7:96-CV-1214TJMDS) and (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) have now been
fully settled.
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
F-22
<PAGE>
THE IT GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
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 financial condition, liquidity and results of
operations.
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 a material adverse effect on the consolidated
financial conditional, liquidity and results of operations of the Company.
Preferred stock:
Carlyle Investment
At the November 20, 1996 Annual Meeting of Stockholders, IT's shareholders
voted to approve a $45.0 million 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 detachable 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 $4.4 million) from the Carlyle Investment were $40.6
million.
Carlyle holds approximately 21% (approximately 24% assuming exercise of the
Carlyle Warrants) of the voting power of IT. 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. 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 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 were payable quarterly in kind for the second year at the rate of 3%
per annum and, through November 1998, Carlyle was paid dividends of an
additional 1,095 shares of Convertible Preferred Stock. Commencing November 21,
1998, dividends are payable 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 detachable warrants may at any time, at
the option of Carlyle, be converted into IT common shares. At December 25,
1998, 7,323,015 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 were imputed during this period at a rate of
approximately 6% per annum. Imputed dividends were $0.9 million, $2.1 million
and $0.9 million in the nine months ended December 25, 1998, the twelve months
ended
F-23
<PAGE>
THE IT GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
March 27, 1998 and the twelve months ended March 28, 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.
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 December 25, 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 December 25, 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 242,819. At January 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
F-24
<PAGE>
THE IT GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
date. During the nine months ended December 25, 1998, 331,500 stock options
were granted under the 1996 Plan, which expire in fiscal year 2008.
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 December 25, 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 nine months ended
December 25, 1998, the twelve months ended March 27, 1998 and the twelve months
ended March 28, 1997 are summarized as follows:
<TABLE>
<CAPTION>
Twelve Months Ended
Nine Months Ended --------------------
December 25, March 27, March 28,
1998 1998 1997
----------------- --------- ---------
<S> <C> <C> <C>
Outstanding at beginning of year......... 770,457 747,679 744,847
Options converted........................ 262,125 -- --
Options granted
(Nine months ended December 25, 1998,
$6.44--$10.13 per share; 1998, $7.00--
$8.50 per share; 1997, $8.63 per
share)................................ 331,000 132,921 171,000
Options exercised
(Nine months ended December 25, 1998,
$10.24 per share 1997, $11.50 per
share)................................ (750) -- (3,629)
Options expired and forfeited............ (51,156) (110,143) (164,539)
--------- -------- --------
Outstanding at end of year ($7.00--$32.50
per share).............................. 1,311,676 770,457 747,679
========= ======== ========
Vested options........................... 776,500 486,520 473,257
========= ======== ========
Common stock reserved for future
issuance................................ 1,554,495
</TABLE>
Additional information regarding stock options granted to employees is
outline below:
<TABLE>
<CAPTION>
Twelve Months Ended
Nine Months Ended -------------------
December 25, March 27, March 28,
1998 1998 1997
----------------- --------- ---------
<S> <C> <C> <C>
Weighted average fair value of options
at grant date.......................... $ 6.19 $ 4.79 $ 5.34
Weighted average exercise price of all
outstanding options.................... $11.11 $13.99 $15.96
Weighted average exercise price of
vested options......................... $12.39 $16.95 $19.04
Weighted average exercise price of
options exercised...................... $10.24 $11.50 $ --
Weighted average exercise price for
expired and forfeited options.......... $22.73 $19.69 $18.53
Weighted average remaining contractual
life of options outstanding............ 7.4 6.7 6.8
</TABLE>
Approximately 188,000 OHM stock options converted into approximately 262,000
IT stock options on June 11, 1998. As of December 25, 1998, these options
remain outstanding.
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
F-25
<PAGE>
THE IT GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
because, as discussed below, the alternative fair value accounting provided for
under Financial Accounting Standards Board 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, 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:
<TABLE>
<CAPTION>
Twelve Months Ended
Nine Months Ended -------------------
December 25, March 27, March 28,
1998 1998 1997
----------------- --------- ---------
<S> <C> <C> <C>
Risk free interest rate based upon zero-
coupon U.S. Treasury Notes............. 6.0% 6.0% 6.38%
Dividend yield.......................... None None None
Volatility factor of expected market
price of the Company's common stock.... 0.443 0.395 0.395
Weighted average expected life of each
option................................. 7.4 6.7 6.8
</TABLE>
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 SFAS No. 123, the
Company's net loss applicable to common stock and net loss per common share
would have increased to the following pro forma amounts:
<TABLE>
<CAPTION>
Twelve Months Ended
Nine Months Ended --------------------
December 25, March 27, March 28,
1998 1998 1997
----------------- --------- ---------
(In thousands, except per share data)
<S> <C> <C> <C>
Net loss applicable to common stock
As reported.......................... $(12,091) $(23,193) $(13,693)
======== ======== ========
Pro forma............................ $(12,367) $(23,386) $(13,735)
======== ======== ========
Net loss per common share
As reported.......................... $ (0.63) $ (2.38) $ (1.48)
======== ======== ========
Pro forma............................ $ (0.65) $ (2.40) $ (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 the
twelve months ended March 29, 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
F-26
<PAGE>
THE IT GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
date of grant. On December 25, 1998, the total number of shares of restricted
stock outstanding was 105,900. The cost of restricted stock awards is generally
expensed over the vesting period, which ranges from two to five years, and
amounted to $0.2 million, $0.5 million and $0.6 million for the nine months
ended December 25, 1998, the twelve months ended March 27, 1998 and the twelve
months ended March 28, 1997, 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 amended the Plan, effective December 25, 1998, to
discontinue the minimum annual contribution of 3% of participants' eligible
compensation. Additionally, beginning January 1, 1999, the Company amended its
voluntary 401(k) savings plan. The Company now contributes up to 4% of
participants' eligible compensation by matching 100% of each participants'
contribution (up to 4% of eligible compensation). Prior to January 1, 1999, the
Company contributed 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
$10,000 annually. The Company funds current costs as accrued, and there are no
unfunded vested benefits.
Pension and profit sharing expense was $3.5 million, $3.6 million and $3.6
million for the nine months ended December 25, 1998, the twelve months ended
March 27, 1998 and the twelve months ended March 28, 1997, respectively.
Operating segments:
Organization
The IT Group, Inc. has four reportable segments: Engineering & Construction
(E & C), Consulting & Ventures (C & V), Outsourced Services and International.
The Company's E & C Platform manages complex hazardous waste remediation
projects of all sizes involving the assessment, planning and execution of the
decontamination and restoration of property, plant and equipment that have been
contaminated by hazardous substances. The Outsourced Services Platform provides
full service capabilities for operations, maintenance, management and
construction at federal, state and local government facilities and in the
private sector. The C & V Platform 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's International Platform
is designed to meet the global needs of the Company's U.S. based clients and to
invest in businesses or enter into joint ventures to pursue and perform
international projects. Current International operations consist of a 50.1%
investment in a Taiwan-based wastewater treatment design/build firm and with
the acquisition of GTI in December 1998, the Company expanded its international
presence and provides environmental services through offices located in Europe
and Australia.
F-27
<PAGE>
THE IT GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Segment Information
<TABLE>
<CAPTION>
Outsourced
E & C Services C & V International Total
-------- ---------- ------- ------------- --------
(In thousands)
<S> <C> <C> <C> <C> <C>
Nine months ended December
25, 1998
Revenues................. $597,897 $70,400 $79,353 $ 9,785 $757,435
Segment profit (loss).... 63,817 7,896 10,617 (418) 81,912
Depreciation expense..... 6,044 162 1,607 69 7,882
Segment assets........... 218,940 11,697 56,896 8,539 296,072
Twelve Months Ended March
27, 1998
Revenues................. $346,143 $ 6,819 $79,643 $ 9,611 $442,216
Segment profit (loss).... 37,045 948 7,272 (1,419) 43,846
Depreciation expense..... 4,387 22 1,605 113 6,127
Segment assets........... 188,342 6,226 22,395 4,118 221,081
Twelve Months Ended March
28, 1997
Revenues................. $308,635 $ -- $48,832 $ 4,664 $362,131
Segment profit........... 25,909 -- 694 177 26,780
Depreciation expense..... 8,704 -- 758 56 9,518
Segment assets........... 73,650 -- 19,828 7,087 100,565
</TABLE>
<TABLE>
<CAPTION>
Twelve Months Ended
Nine months ended --------------------
December 25, March 27, March 28,
1998 1998 1997
----------------- --------- ---------
<S> <C> <C> <C>
Profit or Loss
Total profit for reportable
segments............................ $ 81,912 $ 43,846 $ 26,780
Unallocated amounts:
Corporate selling, general and
administrative expense............ (32,779) (23,814) (22,073)
Special charges (a)................ (24,971) (14,248) (8,403)
Interest expense, net.............. (24,895) (7,969) (5,260)
-------- -------- --------
Loss before income taxes,
extraordinary
item and discontinued operations.. $ (733) $ (2,185) $ (8,956)
======== ======== ========
Assets (b)
Assets for reportable segments....... $296,072 $221,081 $100,565
Other assets......................... 652,534 488,136 241,966
-------- -------- --------
Total consolidated assets.......... $948,606 $709,217 $342,531
======== ======== ========
Depreciation Expense
Depreciation for reportable
segments............................ $ 7,882 $ 6,127 $ 9,518
Depreciation on corporate assets
(c)................................. 2,059 2,606 2,842
-------- -------- --------
Total depreciation expense......... $ 9,941 $ 8,733 $ 12,360
======== ======== ========
</TABLE>
- --------
(a) See Notes to Consolidated Financial Statements--Special Charges. These
special charges are excluded from segment profit (loss) because most of
these items can not be identified with a particular segment and because
management does not include special charges when analyzing the Company's
business segments.
(b) Segment assets include primarily accounts receivable of each business
segment. Other assets are principally long-term assets including property
and equipment, cost in excess of net assets of acquired businesses, income
tax assets and assets of discontinued operations.
(c) Depreciation on corporate assets includes corporate facilities, furniture
and equipment and the Company's mainframe computer hardware and software
which have not been allocated to the operating segments.
F-28
<PAGE>
THE IT GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Geographic Information
<TABLE>
<CAPTION>
Twelve Months Ended
Nine months ended -----------------------------------------------
December 25, 1998 March 27, 1998 March 28, 1997
----------------------- ----------------------- -----------------------
Long-Lived Long-Lived Long-Lived
Revenues (a) Assets (b) Revenues (a) Assets (b) Revenues (a) Assets (b)
------------ ---------- ------------ ---------- ------------ ----------
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
United States........... $746,992 $458,233 $431,599 $358,973 $351,152 $117,386
Other foreign
countries.............. 10,443 3,573 10,617 2,831 10,979 1,848
-------- -------- -------- -------- -------- --------
$757,435 $461,806 $442,216 $361,804 $362,131 $119,234
======== ======== ======== ======== ======== ========
</TABLE>
- --------
(a) Revenues are attributed to countries based on the location of clients.
(b) Long-lived assets include non-current assets of the Company, excluding
deferred income taxes.
Major Clients
The Company's revenues attributable to the U.S. federal government were
$525.0 million, $255.9 million and $215.1 million for the nine months ended
December 25, 1998, the twelve months ended March 27, 1998 and the twelve months
ended March 28, 1997, respectively. All four of the Company's operating
segments report revenues from the U.S. government. No other customer accounted
for 10% or more of the Company's consolidated revenues in any fiscal period.
Revenues by Products and Services
<TABLE>
<CAPTION>
Twelve Months Ended
Nine months ended -------------------
December 25, March 27, March 28,
1998 1998 1997
----------------- --------- ---------
(In thousands)
<S> <C> <C> <C>
Site remedial action projects........... $607,682 $355,754 $313,299
Project, program and construction
management............................. 70,400 6,819 --
Consulting and engineering services..... 79,353 79,643 48,832
-------- -------- --------
$757,435 $442,216 $362,131
======== ======== ========
</TABLE>
Quarterly results of operations (unaudited):
<TABLE>
<CAPTION>
First Second Third
quarter quarter quarter
--------- --------- ---------
(In thousands, except per share data)
<S> <C> <C> <C>
Nine months ended December 25, 1998:
Revenues............................. $225,188 $260,187 $272,060
Gross margin......................... 27,058 30,553 33,350
Income (loss) from continuing
operations.......................... (19,291) 5,468 6,396
Net income (loss) applicable to
common stock........................ (20,860) 3,899 4,870
Net income (loss) per share:
Basic.............................. $ (1.76) $ 0.17 $ 0.22
======== ======== ========
Diluted............................ $ (1.76) $ 0.16 $ 0.19
======== ======== ========
</TABLE>
F-29
<PAGE>
THE IT GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
<TABLE>
<CAPTION>
First Second Third Fourth
quarter quarter quarter quarter
--------- --------- --------- ---------
(In thousands, except per share data)
<S> <C> <C> <C> <C>
Twelve Months Ended March 27, 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--closure
costs............................. -- -- -- (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:
Basic and diluted:
Earnings from continuing
operations
(net of preferred stock
dividends)...................... (0.46) 0.04 (0.35) (0.52)
Discontinued operations.......... -- -- -- (0.51)
Extraordinary item--early
extinguishment of debt.......... -- -- -- (0.59)
-------- --------- --------- ---------
Net income (loss) per share........ $ (0.46) $ 0.04 $ (0.35) $ (1.62)
======== ========= ========= =========
</TABLE>
See Notes to Consolidated Financial Statements--Special Charges.
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 $8.0
million or $5.0 million, net of income tax benefit of $3.0 million, primarily
for additional closure costs related to the approval of the closure plan by the
DTSC for the Panoche disposal site. Prior to the twelve months ended March 27,
1998, the Company cumulatively recorded a provision for loss on disposition
(including the initial provision and three subsequent adjustments) in the
amount of $168.2 million, net of income tax benefit of $32.9 million. During
each of the three fiscal years ended December 25, 1998 the Company has funded
previously accrued costs of $11.1 million, $14.9 million, and $15.7 million,
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 design and construction to post-closure
monitoring. At December 25, 1998, the Company's consolidated balance sheet
included accrued liabilities of approximately $7.9 million 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 trust funds are invested in high quality common stock and AAA
rated corporate and government bonds which are recognized at fair market value
and annuity investments which pay periodic payments into the trust fund.
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. As closure and
post closure obligations are met by the Company, DTSC is obligated to release
funds from the trusts to reflect reduced estimates of remaining costs.
F-30
<PAGE>
THE IT GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
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 is
periodically 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. 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 regulations or permit
conditions. 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 operations, the Company operated a
series of treatment, storage and disposal facilities in California, including
four 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 three of these facilities (Montezuma Hills,
Benson Ridge, and Vine Hill).
On March 18, 1998, the DTSC certified the Environmental Impact Report and
approved the Closure Plan for the Panoche facility. The approved plans provide
for 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 in the fall of 2000.
The carrying value of the long-term assets of discontinued operations of
$40.0 million at December 25, 1998 is principally comprised of unused residual
land at the inactive disposal facilities and assumes that sales will occur at
market prices estimated by the Company based on certain assumptions
(entitlements, development agreements, etc.). A portion of the residual land is
the subject of a local community review of its strategy which will be the
subject of public hearings and city council deliberation through the second
quarter of 1999. 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 estimated sale prices. 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.
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 $32.0 million 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. Between October 1995 and April
1996, the Company, the USEPA and the Steering Committee agreed to settlements
of the Company's alleged liability for certain prior response costs incurred by
the USEPA. While resolving the Company's alleged liability for these response
costs, the settlement did not include a release of liability for
F-31
<PAGE>
THE IT GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
future or final OII remedies. The USEPA has requested, and the Steering
Committee and the Company have submitted, proposals to work cooperatively with
interested parties on the final remedy. While the USEPA has estimated response
costs for the final remedy to approximate $161.8 million, and the USEPA has
alleged the Company generated 2% by volume of the manifested hazardous wastes
disposed of at the site, the Company believes that USEPA's final remedy cost
estimates are substantially overstated. 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, the cost to the
Company of concluding this matter could materially increase.
GBF Pittsburg Site
In September 1987, the Company and 17 others were served with a Remedial
Action Order (RAO) issued by the DTSC, concerning the GBF Pittsburg landfill
site near Antioch, California. 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.
In June 1997, the DTSC completed and released a final Remedial Action Plan
(RAP) selecting DTSC's preferred pump-and-treat remedial alternative, which the
Company now estimates to cost up to $18.0 million based on DTSC's prior
estimates. 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 $4.0 million. (The DTSC also seeks
approximately $1.0 million 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 $4.0 million, is
appropriate and has filed an application with the appropriate Regional Water
Quality Control Board (RWQCB) for designation of the site as a containment zone
which, if approved, would facilitate the PRP group's preferred remedial
alternative.
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.
The PRP group continues to work with the RWQCB and the DTSC to determine the
scope of the studies necessary for consideration of the application.
In the final RAP the DTSC assigned the Company and the other members of the
PRP group collective responsibility (on a non-binding basis) for 50% of the
site's response costs. 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 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 are vigorously defending the PRP group's litigation, and the
outcome of the litigation cannot be determined at this time. Mediation of this
litigation has been postponed until late September 1999. IT Corporation has
paid approximately 50% of the PRP group's costs to-date on an interim basis.
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.
F-32
<PAGE>
THE IT GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
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.
Subsequent events:
On February 5, 1999, the Company signed an agreement to acquire all of the
stock of Roche Limited Consulting Group (Roche) for $10.0 million plus two
potential earnout payments. Roche is based in Quebec City, Canada and provides
engineering and construction services to wastewater, paper, mining and
transportation industries worldwide. Roche has approximately 700 employees and
had revenue of $28.0 million in its most recent year ended December 31, 1998.
The acquisition is expected to close in April 1999.
On March 8, 1999, the Company signed an agreement to acquire specified
assets of the Environment and Facilities Management Group (EFM Group) of ICF
Kaiser International, Inc. for $82.0 million in cash reduced by $8.0 million
representing working capital retained by Kaiser. The EFM Group provides
environmental remediation, program management and technical support for United
States Government agencies including the DOD, National Aeronautics and Space
Administration (NASA) and the DOE as well as private sector environmental
clients. The EFM Group has approximately 500 employees and had revenue of
approximately $106.0 million for the calendar year ended December 31, 1998. The
acquisition is expected to close in April 1999.
The Company has begun a private placement of $200 million of subordinated
notes (Notes). If the offering of the Notes is completed, the Notes will have a
fixed rate of interest payable every six months in cash commencing in 1999 and
will be redeemable in or after 2004 at a premium. The Notes will be general
unsecured obligations of the Company, subordinated to the Company's credit
facilities (see Notes to Consolidated Financial Statements--Long-term debt) and
other senior indebtedness and pari passu with other existing future
indebtedness unless the terms of that indebtedness expressly provide otherwise.
The proceeds of the Notes, assuming the offering is completed, will be used to
fund the Roche and EFM acquisitions and to refinance existing indebtedness.
On March 5, 1999, the lenders under the Company's credit facilities approved
the third amendment to the loan agreement. The third amendment provides for the
Company to issue up to $250 million in subordinated notes for the acquisitions
(discussed above) and to pay down outstanding borrowings under the revolving
credit facility portion of the credit facilities.
F-33
<PAGE>
THE IT GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Financial information for subsidiary guarantors (unaudited):
The Company's payment obligations under the Notes discussed in the
Subsequent Events footnote will be fully and unconditionally guaranteed on a
joint and several basis by substantially all of the Company's wholly owned
domestic subsidiaries. The Notes will not been guaranteed by one of the
Company's domestic subsidiaries and all of the Company's existing foreign
subsidiaries and will not be guaranteed by Roche. Separate financial statements
for Roche are included in the Offering Memorandum for the Notes. In accordance
with previous positions established by the Securities and Exchange Commission,
the following summarized financial information presents separately the
composition of the Guarantor Subsidiaries and the Non-Guarantor Subsidiaries.
The principal elimination entries eliminate investments in subsidiaries and
intercompany balances and transactions.
Summarized Condensed Financial Information
Nine Months Ended December 25, 1998
<TABLE>
<CAPTION>
Guarantor Non-Guarantor
Parent Subsidiaries Subsidiaries Eliminations Consolidated
------- ------------ ------------- ------------ ------------
(In thousands)
<S> <C> <C> <C> <C> <C>
Current assets.......... $ -- $375,907 $17,484 $ (310) $393,081
Non current assets...... 12,474 735,924 12,441 (205,314) 555,525
Current liabilities..... 2,127 258,232 19,110 (6,648) 272,821
Revenues................ -- 746,740 11,148 (453) 757,435
Gross margin............ -- 90,281 1,133 (453) 90,961
Loss from continuing
operations............. (2,852) (4,013) 1,995 (2,557) (7,427)
Net loss................ (2,852) (4,013) 1,995 (2,557) (7,427)
Summarized Condensed Financial Information
Twelve Months Ended March 27, 1998
<CAPTION>
Guarantor Non-Guarantor
Parent Subsidiaries Subsidiaries Eliminations Consolidated
------- ------------ ------------- ------------ ------------
(In thousands)
<S> <C> <C> <C> <C> <C>
Current assets.......... $ 137 $265,063 $ 8,913 $ (445) $273,668
Non current assets...... 15,058 515,605 4,482 (99,596) 435,549
Current liabilities..... 1,466 189,867 16,246 (8,835) 198,744
Revenues................ -- 432,462 11,142 (1,388) 442,216
Gross margin............ -- 52,284 (621) (573) 51,090
Loss from continuing
operations............. (808) (3,615) 126 (2,063) (6,360)
Net loss................ (808) (14,281) 126 (2,063) (17,026)
Summarized Condensed Financial Information
Twelve Months Ended March 28, 1997
<CAPTION>
Guarantor Non-Guarantor
Parent Subsidiaries Subsidiaries Eliminations Consolidated
------- ------------ ------------- ------------ ------------
(In thousands)
<S> <C> <C> <C> <C> <C>
Revenues................ $ -- $357,670 $ 7,942 $ (3,481) $362,131
Gross margin............ -- 37,802 (333) 669 38,138
Loss from continuing
operations............. (888) (7,792) 1,094 (1,191) (8,777)
Net loss................ (888) (7,792) 1,094 (1,191) (8,777)
</TABLE>
F-34
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Board of Directors and Shareholders
OHM Corporation
We have audited the accompanying consolidated balance sheets of OHM
Corporation and subsidiaries as of December 31, 1997 and 1996, and the related
consolidated statements of operations, changes in shareholders' equity, and
cash flows for each of the three years in the period ended December 31, 1997.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with 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 OHM Corporation and subsidiaries at December 31, 1997 and 1996, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1997, in conformity with generally
accepted accounting principles.
Ernst & Young LLP
Columbus, Ohio
February 12, 1998, except for Note 1, as to
which the date is May 4, 1998
F-35
<PAGE>
OHM CORPORATION
CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Share Data)
<TABLE>
<CAPTION>
December 31,
-----------------
1997 1996
-------- --------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents................................... $ 31,784 $ 14,002
Accounts receivable........................................ 70,627 85,461
Costs and estimated earnings on contracts in process in
excess of billings........................................ 47,774 56,303
Materials and supply inventory, at cost.................... 13,285 13,899
Prepaid expenses and other assets........................... 15,111 20,558
Deferred income taxes....................................... 11,166 10,513
Refundable income taxes.................................... 259 493
-------- --------
190,006 201,229
-------- --------
Property and Equipment, net.................................. 56,610 70,521
-------- --------
Other Noncurrent Assets:
Investment in affiliated company........................... 5,637 23,185
Intangible assets relating to acquired businesses, net..... 46,364 33,534
Deferred debt issuance and financing costs................. 1,114 1,412
Deferred income taxes...................................... 15,725 3,563
Other assets............................................... 1,587 3,093
-------- --------
70,427 64,787
-------- --------
Total Assets............................................. $317,043 $336,537
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable............................................ $ 72,692 $ 69,230
Billings on contracts in process in excess of costs and
estimated earnings......................................... 1,530 897
Accrued compensation and related taxes...................... 8,646 6,528
Federal, state and local taxes.............................. 86 150
Other accrued liabilities................................... 17,769 21,477
Current notes payable....................................... 5,000 --
Current portion of noncurrent liabilities................... 3,064 5,321
-------- --------
108,787 103,603
-------- --------
Noncurrent Liabilities:
Long-term debt.............................................. 50,041 52,972
Deferred gain from sale leaseback of equipment.............. 2,890 4,484
Capital leases.............................................. 65 32
Pension agreement........................................... 1,100 874
-------- --------
54,096 58,362
-------- --------
Commitments and Contingencies................................ -- --
Shareholders' Equity:
Preferred stock, $10.00 par value, 2,000,000 shares
authorized; none issued and outstanding.................... -- --
Common stock, $.10 par value, 50,000,000 shares authorized;
shares issued: 1997--27,425,046; 1996--26,992,140.......... 2,742 2,699
Additional paid-in capital.................................. 142,453 138,989
Retained earnings........................................... 8,965 32,884
-------- --------
154,160 174,572
Total Liabilities and Shareholders' Equity............... $317,043 $336,537
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-36
<PAGE>
OHM CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands, Except per Share Data)
<TABLE>
<CAPTION>
Years Ended December 31,
----------------------------
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Revenue......................................... $526,691 $550,984 $457,925
Cost of services............................... 454,556 478,924 393,149
-------- -------- --------
Gross Profit.................................... 72,135 72,060 64,776
Claims settlement costs and other, excluding
bad debts..................................... 15,919 -- --
Provision for bad debts: Claims settlement..... 21,958 -- --
Other........................................... 2,900 5,343 2,931
Selling, general and administrative expenses... 43,160 43,907 42,292
-------- -------- --------
Operating (Loss) Income......................... (11,802) 22,810 19,553
-------- -------- --------
Other (Income) Expenses:
Investment income.............................. (389) (124) (849)
Interest expense............................... 5,186 7,087 10,413
Equity in net earnings of affiliate............ 1,997 (748) (287)
Write-down of investment in NSC Corporation.... 14,949 -- --
Miscellaneous (income) expenses................ 878 (296) (72)
-------- -------- --------
22,621 5,919 9,205
-------- -------- --------
(Loss) Income Before Income Taxes (Benefit)..... (34,423) 16,891 10,348
Income taxes (Benefit)......................... (10,490) 5,376 3,541
-------- -------- --------
Net (Loss) Income............................... $(23,933) $ 11,515 $ 6,807
-------- -------- --------
Net (Loss) Income Per Common Share.............. $ (0.88) $ 0.43 $ 0.31
======== ======== ========
Weighted-Average Common Shares.................. 27,210 26,820 22,211
-------- -------- --------
Net (Loss) Income Per Common Share--Assuming
Dilution....................................... $ (0.88) $ 0.43 $ 0.30
======== ======== ========
Adjusted Weighted-Average Common Shares--
Assuming Dilution.............................. 27,210 26,840 22,413
-------- -------- --------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-37
<PAGE>
OHM CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(In Thousands, Except Share Data)
<TABLE>
<CAPTION>
Common Stock
----------------- Additional Cumulative
Number of Paid-In Retained Translation Treasury
Shares Amount Capital Earnings Adjustments Stock
---------- ------ ---------- -------- ----------- --------
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1,
1995................... 15,848,089 $1,584 $ 63,294 $14,656 $(58) $(2,556)
Proceeds from sale of
1,000,000 shares common
stock, less issuance
expenses of $25,000.... 1,000,000 100 9,875
Shares issued for the
acquisition of the
Division............... 9,668,000 967 61,149
Issuance of common stock
warrants............... 1,372
Stock options exercised,
211,624 shares reissued
from treasury.......... (861) 2,556
Shares issued for stock
options................ 37,921 4 776
Shares issued for 401(k)
plan funding........... 93,067 9 823
Deferred translation
adjustments............ (5)
Net income.............. 6,807
---------- ------ -------- ------- ---- -------
Balance at December 31,
1995................... 26,647,077 2,664 136,428 21,463 (63) --
Shares issued for 401(k)
plan funding........... 345,063 35 2,561
Deferred translation
adjustments............ (31)
Net income.............. 11,515
---------- ------ -------- ------- ---- -------
Balance at December 31,
1996................... 26,992,140 2,699 138,989 32,978 (94) --
Shares issued for 401(k)
plan funding........... 326,711 32 2,658
Shares issued for stock
options................ 106,195 11 806
Deferred translation
adjustments............ 14
Net income (loss)....... (23,933)
---------- ------ -------- ------- ---- -------
Balance at December 31,
1997................... 27,425,046 $2,742 $142,453 $ 9,045 $(80) $ --
========== ====== ======== ======= ==== =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-38
<PAGE>
OHM CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
<TABLE>
<CAPTION>
Years Ended December 31,
-------------------------------
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Cash flows from operating activities:
Net (loss) income............................ $ (23,933) $ 11,515 $ 6,807
Adjustments to reconcile net (loss) income to
net cash provided by operating activities:
Depreciation and amortization............... 13,131 19,963 10,652
Amortization of other noncurrent assets..... 3,139 3,332 2,916
Deferred income taxes....................... (10,490) 5,335 3,483
(Gain) loss on sale of property and
equipment.................................. (1,705) (206) 423
Equity in net loss (earnings) of affiliate,
net of dividends received.................. 2,599 (147) 314
Writedown of investment in affiliated
company.................................... 14,949 -- --
Deferred translation adjustments and other.. (568) (1,305) (1,881)
Changes in current assets and liabilities:
Accounts receivable......................... 19,034 13,622 10,049
Costs and estimated earnings on contracts in
process in excess of billings.............. 8,529 11,972 (10,278)
Materials and supply inventory.............. 614 (2,068) (1,732)
Prepaid expenses and other assets........... 6,324 (8,125) (206)
Refundable income taxes and other........... 234 (92) (196)
Accounts payable............................ (1,864) 2,949 3,907
Billings on contracts in process in excess
of costs and estimated earnings............ 633 (490) (1,019)
Accrued compensation and related taxes...... 1,638 (512) 476
Federal, state and local income taxes....... (64) (50) 98
Other accrued liabilities................... (7,504) (11,286) (4,416)
--------- --------- ---------
Net cash flows provided by operating
activities............................... 24,696 44,407 19,397
--------- --------- ---------
Cash flows from investing activities:
Purchases of property and equipment.......... (18,036) (23,279) (14,276)
Proceeds from sale of property and
equipment................................... 1,908 4,612 3,813
Proceeds from sale and leaseback of
equipment................................... 21,800 12,850 --
Cash (used) acquired from purchase of
business, net of acquisition costs.......... (7,092) -- 13,527
Decrease (increase) in receivable from
affiliated company.......................... -- 15,000 (6,695)
Increase in other noncurrent assets.......... (1,090) (1,140) (589)
--------- --------- ---------
Net cash (used in) provided by investing
activities............................... (2,510) 8,043 (4,220)
--------- --------- ---------
Cash flows from financing activities:
Increase in long-term debt................... 8 204 2,209
Payments on long-term debt and capital
leases...................................... (7,802) (10,230) (8,691)
Proceeds from borrowing under revolving
credit agreement............................ 187,554 202,300 159,900
Payments on revolving credit agreement....... (187,554) (244,400) (175,500)
Proceeds from private placement of common
stock....................................... -- -- 9,975
Common Stock issued for 401(k) funding and
stock options............................... 3,507 2,597 1,612
Payments on pension agreement................ (117) (124) (102)
Reissuance of treasury stock................. -- -- 1,695
--------- --------- ---------
Net cash (used in) financing activities... (4,404) (49,653) (8,902)
--------- --------- ---------
Net increase in cash and cash
equivalents.............................. 17,782 2,797 6,275
Cash and cash equivalents at beginning of
year......................................... 14,002 11,205 4,930
--------- --------- ---------
Cash and cash equivalents at end of year...... $ 31,784 $ 14,002 $ 11,205
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-39
<PAGE>
OHM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997
1. Summary of Significant Accounting Policies
Basis of Presentation and Principles of Consolidation. The accompanying
consolidated financial statements include the accounts of OHM Corporation (the
"Company") and its subsidiaries. The Company's investment in 40% of the
outstanding common stock of NSC Corporation ("NSC") is carried on the equity
basis. See "Note 17--Special Charges" and "Note 20--Subsequent Events"
regarding disposition of the NSC investment. All material intercompany
transactions and balances among the consolidated group have been eliminated in
consolidation.
The 1997 financial statements have been restated to continue to apply the
equity method of accounting for its investment in NSC. The Company previously
had concluded in the second quarter of 1997 that it no longer had the ability
to exercise significant influence over the operating and financial policies of
NSC after the Company announced its intention to sell its investment in NSC. As
a result, the Company wrote down its investment in NSC to its fair value (see
"Note 17--Special Charges"), discontinued reporting its share of NSC's profits
and losses in the Company's results of operations in accordance with the equity
method of accounting, and because of the change in circumstances started
accounting for its investment in NSC under FASB Statement No. 115, Accounting
for Certain Investments in Debt and Equity Securities. Based on discussions
with the SEC staff, the Company concluded that it should continue to apply the
equity method of accounting for its investment in NSC. The effect of this
restatement was to decrease 1997 net income by $2,736,000 or $0.10 per share.
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 requires separate reporting of
certain items, already disclosed by the Company, affecting shareholders' equity
outside of those included in arriving at net earnings. Statement No. 131,
effective for fiscal 1999, 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.
Use of Estimates. The preparation of the accompanying consolidated financial
statements in conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the amounts reported
in the consolidated financial statements and the accompanying notes. Actual
results could differ from those estimates.
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 which should be 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.
F-40
<PAGE>
OHM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
December 31, 1997
The Company's revenue from government agencies accounted for 79%, 77% and
76% of revenue for the years ended December 31, 1997, 1996 and 1995,
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 "Note 2--Acquisitions" and "Note 15--Litigation and
Contingencies."
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 Company has no intention of changing this accounting
practice. 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 "Note 13--Stock
Option Plan."
Revenue and Cost Recognition. The Company primarily derives its revenue from
providing environmental services under cost plus fee, time and materials, fixed
price and unit price contracts. The Company records revenue and related income
from its contracts in process using the percentage-of-completion method of
accounting based on the costs incurred relative to total estimated costs.
Provisions for estimated losses on uncompleted contracts are made in the period
in which such losses are determined. For the year ended December 31, 1997, the
Company recorded a loss of $15,014,000 on its contract at the Hilton-Davis
project in Cincinnati, Ohio. See "Note 17--Special Charges" for further
discussion of the nature and timing of the loss recorded. Changes in project
performance, project conditions and estimated profitability may result in
revisions to costs and income and are recognized in the period in which the
revisions are determined. An amount equal to contract costs attributable to
claims is included in revenue when realization is probable and the amount can
be reliably estimated. Back charges to subcontractors are recorded as
receivables to the extent considered collectible. Contract costs include all
direct labor, material, per diem, subcontract and other direct and indirect
project costs related to contract performance. Certain precontract costs are
capitalized and deferred to be amortized on a straight line basis over the life
of the contract by the Company when the Company concludes that their
recoverability from the contract to which they relate is probable. Revenue
derived from non-contract activities is recorded when the services are
performed.
Property and Equipment. Property and equipment are carried at cost and
include expenditures which substantially increase the useful lives of the
assets. Maintenance, repairs and minor renewals are expensed as incurred.
Depreciation and amortization, including amortization of assets under capital
leases, are provided on a specific item basis net of salvage value over the
estimated useful lives of the respective assets, using the straight-line
method.
F-41
<PAGE>
OHM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
December 31, 1997
Capitalized Interest. Interest expense incurred on capital expenditures for
assets constructed by the Company is capitalized and is included in the cost of
such assets. Total interest expense incurred by the Company was $6,104,000,
$8,085,000 and $11,205,000 for the years ended December 31, 1997, 1996 and
1995, respectively. Total interest capitalized was $918,000, $998,000 and
$792,000 for the years ended December 31, 1997, 1996 and 1995, respectively.
Intangible Assets. Intangible assets consist principally of goodwill and
other intangible assets resulting primarily from acquisitions accounted for
using the purchase method of accounting. Goodwill and other intangible assets
are recorded at the amounts and amortized using the straight-line method over
the lives set forth in the following table:
<TABLE>
<CAPTION>
December 31,
---------------
1997 1996 Useful Lives
------- ------- ------------
(In Thousands)
<S> <C> <C> <C>
Goodwill........................................ $45,655 $33,498 40 Years
Proprietary processes........................... 0 36 10 Years
Assembled workforce............................. 397 0 7 Years
Trade name...................................... 311 0 5 Years
------- -------
$46,363 $33,534
======= =======
</TABLE>
The carrying value of goodwill is reviewed if the facts and circumstances
suggest that it may be impaired. If this review indicates that goodwill will
not be recoverable, as determined based on the undiscounted cash flows of the
entity acquired over the remaining amortization period, the Company's carrying
value of the goodwill will be reduced by the estimated shortfall of cash flows.
The accumulated amortization of intangible assets, including goodwill, relating
to acquired businesses, was $3,061,000 and $1,938,000 at December 31, 1997 and
1996, respectively.
Insurance Programs. The Company maintains a comprehensive liability
insurance program that is structured to provide coverage for major and
catastrophic losses while essentially self-insuring losses that may occur in
the ordinary course of business. The Company contracts with primary and excess
insurance carriers and generally retains $250,000 to $500,000 of liability per
occurrence through deductible programs, self-insured retentions or through
reinsurance provided by a wholly-owned insurance captive which reinsures some
of the Company's workers' compensation risks. Provisions for losses expected
under these programs are recorded based upon the Company's estimates of the
aggregate liability for claims incurred, including claims incurred but not
reported. Such estimates utilize certain actuarial assumptions followed in the
industry. The Company incurred expense of $5,659,000, $6,949,000 and $4,047,000
for each of the years ended December 31, 1997, 1996 and 1995 respectively.
Legal Expenses. The Company regularly reviews known litigation matters with
counsel and makes a reasonable estimate of its exposure to not only the impact
of settlements, but also the related expenses, such as attorney's fees. The
Company accrues such cost as necessary based on this analysis.
Income Taxes. The Company accounts for income taxes under the liability
method pursuant to Statement of Financial Accounting Standards No. 109,
Accounting for Income Taxes (SFAS No. 109). Under the liability method,
deferred tax assets and liabilities are determined based on differences between
the financial reporting and tax bases of assets and liabilities using the
enacted tax rates and laws that will be in effect when the differences are
expected to reverse.
F-42
<PAGE>
OHM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
December 31, 1997
Statement of Cash Flows. The Company considers all short-term deposits and
highly liquid investments purchased with an original maturity of three months
or less to be cash equivalents. Cash paid for income taxes for the years ended
December 31, 1997, 1996 and 1995 was $603,000, $482,000 and $986,000,
respectively. Cash paid for interest was $6,159,000, $8,137,000 and $10,937,000
for each of the years ended December 31, 1997, 1996 and 1995, respectively.
With respect to non-cash investing and financing activities, the Company
acquired $2,564,000, $1,870,000 and $29,000 of fixed assets under financial
obligations for the years ended December 31, 1997, 1996 and 1995, respectively.
In addition, the Company issued $5,000,000 of unsecured promissory notes in
connection with an acquisition in fiscal 1997 and 9,668,000 shares of its
common stock in fiscal 1995 for an acquisition. See Note 2--Acquisitions.
Net Income (Loss) Per Share. 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. Shares of common stock issuable upon conversion
of the 8% Convertible Subordinated Debentures due 2006 were antidilutive in
each of the years presented; therefore, they were excluded from the calculation
of net income per share. See Note 11--Earnings Per Share.
Reclassification. Certain amounts presented for the years ended December 31,
1996 and 1995 have been reclassified to conform to the 1997 presentation.
2. Acquisitions
Effective June 1, 1997, the Company acquired all of the outstanding stock of
Beneco Enterprises, Inc., a Utah corporation (Beneco), for an aggregate
purchase price of $14,700,000. The purchase price was paid as follows: (i)
$9,700,000 (excluding the $2,608,000 of cash acquired as part of Beneco--net
cash paid $7,092,000) in cash and (ii) unsecured promissory notes in the
aggregate of $5,000,000, bearing interest at 7.25%, due and payable June 17,
1998. The Company has agreed to make an additional payment in the year 2000
contingent upon the achievement of certain operating results and other
contractual conditions. Beneco is a provider of project, program and
construction management services to the Department of Defense and other
government agencies throughout the United States.
The estimated fair value of the assets acquired and liabilities assumed at
the date of the acquisition of Beneco are as follows (in thousands):
<TABLE>
<S> <C>
Current assets...................................................... $ 8,208
Property and equipment.............................................. 615
Goodwill............................................................ 13,179
Other intangibles................................................... 774
Current liabilities................................................. 8,024
</TABLE>
On May 30, 1995, the Company completed the acquisition of substantially all
of the assets and certain liabilities of the hazardous and nuclear waste
remediation service business (the Division) of Rust International Inc. (Rust)
in exchange for 9,668,000 shares of common stock of the Company, or
approximately 37% of the outstanding shares of the Company's common stock. Such
shares issued to Rust are subject to a number of
F-43
<PAGE>
OHM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
December 31, 1997
restrictions set forth in a Standstill and Non-competition Agreement that was
entered into pursuant to the Agreement and Plan of Reorganization dated
December 5, 1994, as amended (the Reorganization Agreement), among the Company,
Rust and certain of their subsidiaries. In addition to the net assets of the
Division, the Company received $16,636,000 in cash pursuant to provisions of
the Reorganization Agreement that provided for an adjustment based on the
average per share price of the Company's common stock for a 20 trading day
period prior to closing. Also, under terms of the Reorganization Agreement, as
amended on March 22, 1996, the Company received an additional $15,000,000 on
March 25, 1996, which reduced goodwill. For purposes of calculating the
consideration given by the Company for the Division, such 20 trading day
average per share price of $11.25 was used, adjusted to reflect a 40% discount
for the restricted nature of the common stock issued. Consideration for the
Division aggregated $65,259,000, which includes $3,143,000 of direct costs
related to the acquisition.
In exchange for a warrant to purchase up to 700,000 shares of the Company's
common stock at an exercise price of $15.00 per share during the five years
following the closing date, Rust's parent company, WMX Technologies, Inc.
("WMX"), will provide the Company with a credit enhancement in the form of
guarantees, issued from time to time upon request of the Company, of up to
$62,000,000 of the Company's indebtedness, which will increase proportionately
up to $75,000,000 upon issuance of shares under the warrant. See "Note 19--
Subsequent Events".
The acquisitions of Beneco and the Division have been accounted for using
the purchase method and, accordingly, the acquired assets and assumed
liabilities, including goodwill, have been recorded at their estimated fair
values as of June 1, 1997 for Beneco and May 30, 1995 for the Division. The
Company's consolidated financial statements for the twelve months ended
December 31, 1997 include the results of Beneco since June 1, 1997. The
following table sets forth the unaudited combined pro forma results of
operations of the Company for the twelve months ended December 31, 1997 and
1996, giving effect to the acquisition of Beneco as if such acquisition had
occurred on January 1, 1996. The Company's consolidated financial statements
also include the results of operations for the Division since May 30, 1995. The
following table sets forth the unaudited combined pro forma results of
operations for the year ended December 31, 1995 giving effect to the
acquisition of the Division as if such acquisition had occurred on January 1,
1995.
<TABLE>
<CAPTION>
Pro Forma
Year Ended December 31,
---------------------------------------
1997 1996 1995
------------ ------------ ------------
(In Thousands, Except Per Share Data)
<S> <C> <C> <C>
Revenue............................. $ 555,271 $ 622,814 $ 520,465
Net income (loss)................... (24,895) 13,050 8,142
Net income (loss) per share......... $ (0.92) $ 0.49 $ 0.31
</TABLE>
The combined pro forma results of operations for the years ended December
31, 1997, 1996 and 1995 are based upon certain assumptions and estimates which
the Company believes are reasonable. The combined pro forma results of
operations may not be indicative of the operating results that actually would
have been reported had the transactions been consummated on January 1, 1996 for
Beneco and January 1, 1995 for the Division, nor are they necessarily
indicative of results which will be reported in the future.
F-44
<PAGE>
OHM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
December 31, 1997
3. Accounts Receivable and Costs and Estimated Earnings on Contracts in Process
Accounts receivable are summarized as follows:
<TABLE>
<CAPTION>
December 31,
----------------
1997 1996
------- -------
(In Thousands)
<S> <C> <C>
Accounts billed and due currently.......................... $43,982 $45,573
Unbilled receivables....................................... 37,827 59,649
Retainage.................................................. 4,265 5,167
------- -------
86,074 110,389
Allowance for uncollectible accounts....................... (15,447) (24,928)
------- -------
$70,627 $85,461
======= =======
</TABLE>
The consolidated balance sheets include the following amounts:
<TABLE>
<CAPTION>
December 31,
------------------
1997 1996
-------- --------
(In Thousands)
<S> <C> <C>
Costs incurred on contracts in process................. $306,314 $442,923
Estimated earnings..................................... 63,128 90,442
-------- --------
369,442 533,365
Less billings to date.................................. (323,198) (477,959)
-------- --------
$ 46,244 $55,406
======== ========
Costs and estimated earnings on contracts in process in
excess of billings.................................... $ 47,774 $ 56,303
Billings on contracts in process in excess of costs and
estimated earnings.................................... (1,530) (897)
-------- --------
$ 46,244 $ 55,406
======== ========
</TABLE>
Unbilled receivables and costs and estimated earnings on contracts in
process typically represent: (i) amounts earned under the Company's contracts
but not yet billable to clients according to contract terms, which usually
consider passage of time, achievement of certain project milestones or
completion of the project; and (ii) amounts equal to contract costs
attributable to claims included in revenue. In addition, unbilled receivables
and costs and estimated earnings on contracts in process include amounts
relating to contracts with federal government agencies which require services
performed by the Company's subcontractors to be paid prior to billing. The
Company reasonably expects to collect the accounts receivable and the costs and
estimated earnings on contracts in process in excess of billings net of the
allowance for uncollectible accounts within one year. Amounts subject to
uncertainty include certain claims and other similar items for which an
allowance for uncollectible accounts has been established. See "Note 15--
Litigation and Contingencies" and "Note 17--Special Charges" for further
discussion of principal items comprising the allowance.
The Company provides a broad range of environmental and hazardous waste
remediation services to industrial, federal government agencies, and state and
local government agencies located primarily in the United States and Canada.
The Company's industrial, federal government, and state and local government
clients constituted 38%, 58%, and 4%, respectively, of total accounts
receivable and costs and estimated earnings on contracts in process at December
31, 1997.
F-45
<PAGE>
OHM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
December 31, 1997
4. Property and Equipment
<TABLE>
<CAPTION>
December 31,
---------------- Useful
1997 1996 Lives
------- ------- ----------
(In Thousands)
<S> <C> <C> <C>
Land.......................................... $ 284 $ 257 --
Buildings and improvements.................... 21,798 21,698 1-40 Years
Machinery and equipment....................... 72,326 89,831 3-15 Years
Construction in progress...................... 1,823 8,385 --
------- -------
96,231 120,171
Less accumulated depreciation and
amortization................................. (39,621) (49,650) --
------- -------
$56,610 $70,521
======= =======
</TABLE>
5. Investment in Affiliated Company
The combined summarized financial information of the Company's 40% owned
asbestos abatement and specialty contracting subsidiary, NSC, is set forth
below:
<TABLE>
<CAPTION>
December 31,
---------------
1997 1996
------- -------
(In Thousands)
<S> <C> <C>
Current assets.............................................. $34,906 $41,123
Noncurrent assets........................................... 39,583 44,102
Total assets................................................ 74,489 85,225
Current liabilities......................................... 18,080 19,969
Noncurrent liabilities...................................... 5,253 7,610
</TABLE>
<TABLE>
<CAPTION>
Years Ended December 31,
---------------------------
1997 1996 1995
-------- -------- --------
(In Thousands)
<S> <C> <C> <C>
Revenue.......................................... $115,955 $129,043 $124,529
Gross profit..................................... 11,027 22,589 19,447
Operating (loss) income.......................... (7,785) 4,361 1,859
Net (loss) income................................ (4,994) 1,861 715
Company's interest in net (loss) income.......... (1,997) 748 287
</TABLE>
During the second quarter of 1997, the Company wrote down its investment in
NSC to the expected net realizable value based on its plans to sell its 40%
share of NSC. As a result, the Company recorded a $12,089,000 (net of
$2,860,000 income tax benefit) charge to earnings. The Company accounts for the
investment in 40% of the outstanding stock of NSC Corporation on the equity
method. Although NSC's stock had traded below the per share carrying value of
the recorded investment for some time prior to June 1997, the Company believed
this decline was temporary because NSC had continued to report net income,
positive cash flow from operations, and continued to pay dividends. In the
second quarter of 1997, the Company made the decision to sell its investment in
NSC. The Company concluded in the second quarter of 1997 that as a result of
its decision to sell its investment in NSC, it should record an impairment
loss. This loss was calculated to be $14.9 million before tax which represents
the difference between the Company's carrying amount of its investment per
share ($5.83) and the fair market value per share of NSC's stock on the day
that the Company decided to sell ($2.10) times the 4,010,000 shares held by the
Company. See "Note 20--Subsequent Events". The Company received cash dividends
from NSC aggregating $602,000 for each of the years ended December 31, 1997,
1996, and 1995.
F-46
<PAGE>
OHM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
December 31, 1997
6. Other Accrued Liabilities
Other accrued liabilities are summarized as follows:
<TABLE>
<CAPTION>
December 31,
---------------
1997 1996
------- -------
(In Thousands)
<S> <C> <C>
Reserve for loss projects................................... $ 4,328 $ 5,839
Reserve for legal settlements............................... 2,694 5,490
Reserve for self-insurance.................................. 4,360 4,212
Accrued insurance........................................... 2,411 2,601
Other....................................................... 3,976 3,335
------- -------
$17,769 $21,477
======= =======
</TABLE>
7. Long-Term Debt
The long-term debt of the Company is summarized below:
<TABLE>
<CAPTION>
December 31,
----------------
1997 1996
------- -------
(In Thousands)
<S> <C> <C>
8% Convertible Subordinated Debentures due October 1,
2006................................................... $46,764 $46,764
Notes payable to financial institutions................. 2,806 8,434
Notes payable........................................... 3,494 3,066
------- -------
53,064 58,264
Less current portion.................................... (3,023) (5,292)
------- -------
$50,041 $52,972
======= =======
</TABLE>
The convertible subordinated debentures are convertible into 41.67 shares of
common stock 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. The Company purchased and retired $5,736,000 and $5,000,000 of the
outstanding debentures during 1996 and 1995, respectively. The fair value of
the convertible subordinated debentures, based on a quoted market price,
approximates $45,325,000 at December 31, 1997. The amortization of debt
issuance costs related to the convertible subordinated debentures was $88,000,
$97,000 and $108,000 for the years ended December 31, 1997, 1996 and 1995,
respectively.
On May 31, 1995, the Company 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. There were no cash borrowings outstanding at December 31,
1997 or 1996. The agreement has a five year term and is scheduled to expire on
May 30, 2000. WMX has issued a guarantee of up to $62,000,000 outstanding under
the credit agreement in favor of the Bank Group. See "Note 2--Acquisition."
Under the terms of the agreement the entire credit facility can be used for
either cash borrowings or letters of credit subject to certain covenants. Cash
borrowings bear interest at either the prime rate plus a percentage up to
0.625% or, at the Company's option, the Eurodollar market rate plus a
percentage ranging from 0.325% to 1.625%. The percentage over the prime rate or
the Eurodollar market is based on the aggregate amount borrowed under the
facility, the presence of the WMX guarantee, and the Company's financial
performance as measured by an interest coverage ratio and a total funded debt
ratio. The arrangement provides the participating banks and WMX with a security
interest in the Company's equipment, inventories, accounts receivables, general
intangibles and in the Company's investment in the common stock of NSC as well
as the Company's other subsidiaries. The agreement also
F-47
<PAGE>
OHM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
December 31, 1997
imposes, among other covenants, a minimum tangible net worth covenant, a
restriction on all of the Company's retained earnings including the declaration
and payment of cash dividends and a restriction on the ratio of total funded
debt to earnings before income taxes, depreciation and amortization. The
Company had $13,300,000 and $12,223,000 of letters of credit outstanding under
its revolving credit facility at December 31, 1997 and 1996, respectively.
Notes payable to financial institutions consist of a $2,806,000 note payable
bearing interest at 8.58% payable in quarterly installments of $356,000 with
the final payment of $957,000 due in August 1999. The above agreement provides
the respective financial institution with a security interest in the equipment
financed with the proceeds from such note.
Notes payable include: (i) a $143,000 interest bearing note at a rate of
9.50% payable in equal monthly installments of $48,000, due in April 1998, (ii)
a $66,000 interest bearing note at a rate of 9.22% payable in equal monthly
installments of $13,000, due in June 1998, (iii), a $79,000 interest bearing
note at a rate of 7.50% payable in equal monthly installments of $8,000, due in
December 1998, (iv) a $717,000 interest bearing note at a rate of 8.67% payable
in equal monthly installments of $48,000, due in July 1999, (v) a $72,000
interest bearing note at a rate of 8.70% payable in equal installments of
$5,000, due in June 1999, (vi) a $187,000 interest bearing note at a rate of
7.51% payable in equal monthly installments of $8,000, due in July 1999, (vii)
a $1,637,000 interest bearing note at a rate of 8.50% payable in equal monthly
installments of $61,000, due in May 2000 and (viii) a $593,000 interest bearing
note at a rate of 7.96% payable in equal monthly installments of $20,000, due
in October 2000.
Current Notes payable include $5,000,000 of unsecured promissory notes
bearing interest of 7.25% due June 17, 1998 to the former shareholders of
Beneco.
The aggregate maturity of long term debt, including annual mandatory sinking
fund payments for the convertible subordinated debentures, for the five years
ending December 31 is: 1998, $5,226,000; 1999, $7,099,000; 2000, $4,804,000;
2001, $4,313,000; 2002, $4,313,000; 2003 and thereafter $27,309,000. The
aggregate maturity of the required mandatory sinking fund payments for the
convertible subordinated debentures for the five years ending December 31 is:
1998, $2,203,000; 1999, $4,313,000; 2000, $4,313,000; 2001, $4,313,000; 2002,
$4,313,000; 2003 and thereafter, $27,309,000.
8. Leases
Future minimum lease payments under noncancelable operating leases total
$15,744,000, $13,264,000, $10,659,000, $7,532,000 and $3,308,000 for the years
ended December 31, 1998, 1999, 2000, 2001 and 2002, respectively. Lease
payments under noncancelable operating leases subsequent to the year ended
December 31, 2002 aggregate $6,510,000.
In addition to the above, the Company has entered into agreements for the
sale and leaseback of certain of the Company's thermal destruction units
located at various project sites. The leases are for one or two years with
annual renewals at the option of the Company with a maximum term of four or
five years each. The leases call for rental payments which total $8,002,000,
$8,106,000, $8,106,000, $5,696,000 and $1,223,000 for the years ended December
31, 1998, 1999, 2000, 2001 and 2002, respectively, with required early
termination payments of up to $19,986,000, $19,561,000, $12,710,000 or
$4,269,000 in the event that some or all of the leases are canceled on or
before expiration of the full lease terms in 1998, 1999, 2000 or 2001,
respectively. The leases are classified as operating leases in accordance with
Statement of Financial Accounting Standards No. 13, "Accounting for Leases".
For the year ended December 31, 1997, the total cost and accumulated
depreciation of $29,701,000 and $13,080,000, respectively, were removed from
the accounts and total gains realized on the sales of $2,979,000 were deferred.
For the year ended December 31, 1996, the total cost and
F-48
<PAGE>
OHM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
December 31, 1997
accumulated depreciation of $11,579,000 and $4,181,000, respectively, were
removed from the accounts and total gain realized on the sale of $5,452,000 was
deferred. The deferred gains are being amortized to income as adjustments to
lease expense over the terms of the leases.
Rental expense under operating leases totaled $23,177,000, $14,029,000 and
$8,858,000 for the years ended December 31, 1997, 1996 and 1995, respectively.
9. Income Taxes
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes.
Significant components of the Company's deferred tax liabilities and assets
as of December 31, 1997 and 1996 are as follows:
<TABLE>
<CAPTION>
December 31,
----------------
1997 1996
------- -------
(In Thousands)
<S> <C> <C>
Long-term deferred tax liabilities:
Property and equipment..................................... $ 9,410 $10,470
Intangible assets.......................................... 1,726 1,131
Investments................................................ 8 2,784
------- -------
Total long-term deferred tax liabilities................. 11,144 14,385
Long-term deferred tax assets:
Net operating loss ("NOL") carryforwards................... 22,505 7,571
Intangible assets.......................................... 1,446 1,840
Research and development tax credits....................... 7,307 5,832
Other tax credit carryforwards............................. 2,421 2,431
Other, net................................................. 1,837 3,474
------- -------
Total long-term deferred tax assets...................... 35,516 21,148
Valuation allowance for long-term deferred tax assets...... (8,808) (3,358)
------- -------
Total long-term deferred tax assets--net of valuation
allowance............................................... 26,708 17,790
------- -------
Net long-term deferred tax assets--domestic operations..... 15,564 3,405
Foreign tax NOL carryforwards.............................. 167 167
Valuation allowance for foreign deferred tax assets........ (6) (9)
------- -------
Net long-term deferred tax assets........................ $15,725 $ 3,563
======= =======
Current deferred tax liabilities:
Revenue recognition........................................ $ 2,779 $ --
Prepaid expenses........................................... 1,047 1,095
Tax reserves............................................... 55 366
------- -------
Total current deferred tax liabilities................... 3,881 1,461
Current deferred tax assets:
Bad debt reserves.......................................... 5,941 9,722
Project accruals........................................... 4,282 8,709
NOL carryforwards.......................................... 5,787 1,950
Other, net................................................. 3,193 1,196
------- -------
Total current deferred tax assets........................ 19,203 21,577
Valuation allowance for current deferred tax assets........ (4,156) (9,603)
------- -------
Total current deferred tax assets--net of valuation
allowance............................................... 15,047 11,974
------- -------
Net current deferred tax assets.......................... $11,166 $10,513
======= =======
</TABLE>
F-49
<PAGE>
OHM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
December 31, 1997
The net foreign long-term deferred tax assets of $161,000 and $158,000 at
December 31, 1997 and 1996, respectively, are attributable to the foreign
operations of the Company and cannot be offset with the net long-term deferred
tax liabilities resulting from the Company's domestic operations. The
provisions for income taxes (benefit) consist of the following:
<TABLE>
<CAPTION>
Years Ended December 31,
---------------------------
1997 1996 1995
--------- ----------------
(In Thousands)
<S> <C> <C> <C>
Current:
Federal......................................... $ -- $ -- $ --
State........................................... -- 41 58
--------- ------- -------
-- 41 58
Deferred:
Federal......................................... (9,477) 4,569 3,036
State........................................... (1,013) 766 447
--------- ------- -------
(10,490) 5,335 3,483
--------- ------- -------
$(10,490) $ 5,376 $ 3,541
========= ======= =======
</TABLE>
The reasons for differences between the provisions for income taxes and the
amount computed by applying the statutory federal income tax rate to income
(loss) from operations before income taxes are as follows:
<TABLE>
<CAPTION>
Years Ended December 31,
----------------------------
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Federal statutory rate....................... 34.0% 34.0% 34.0%
Add (deduct):
State income taxes, net of federal
benefit................................... 3.2 4.8 3.2
Research and development tax credits....... 4.3 (8.6) (4.5)
Goodwill................................... (1.3) 2.4 1.2
Write-down of investment in NSC
Corporation............................... (7.0) -- --
Equity in net earnings of affiliates....... (2.3) (1.2) (0.8)
Other, net................................. (0.4) 0.4 1.1
-------- -------- --------
30.5% 31.8% 34.2%
======== ======== ========
</TABLE>
F-50
<PAGE>
OHM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
December 31, 1997
Net operating loss, capital loss and tax credit carryforward amounts and
their respective expiration dates for income tax purposes are as follows (in
thousands):
<TABLE>
<CAPTION>
Amount Expiration Date
------- ---------------
<S> <C> <C>
Net operating losses: $ 2,473 2006
17,268 2010
53,467 2012
-------
$73,208
=======
State net operating losses in excess of federal: $ 389 1998
72 1999
2,942 2006
2,235 2007
2,165 2008
2,848 2009
3,769 2010
-------
$14,420
=======
Research and development tax credits: $ 261 2002
413 2003
331 2004
610 2005
556 2006
969 2007
715 2008
1,121 2009
225 2010
985 2011
1,121 2012
-------
$ 7,307
=======
Alternative minimum tax credits: $ 1,218 Indefinite
=======
Miscellaneous credits: $190 1998
41 1999
106 2000
121 2001
24 2005
-------
$ 482
=======
Foreign tax net operating loss: $ 427 1998
=======
</TABLE>
F-51
<PAGE>
OHM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
December 31, 1997
10. Related Party Transactions
The Company has a policy whereby transactions with directors, executive
officers and related parties require the approval of a disinterested majority
of the Board of Directors.
The Company has been reimbursed by NSC for certain third party charges paid
on NSC's behalf, such as letter of credit fees, insurance and bonding costs and
legal fees. The costs charged to NSC for general liability and other insurance
coverages were $188,000, $1,774,000 and $981,000 for the years ended
December 31, 1997, 1996 and 1995, respectively. In the normal course of
business, NSC has provided the Company with subcontract services on certain of
its projects for asbestos abatement and industrial maintenance services. The
costs for such services were $233,000, $40,000 and $212,000 for the years ended
December 31, 1997, 1996 and 1995, respectively. The Company has provided
remediation services to NSC in the amount of $121,000 for the year ended
December 31, 1996.
In the normal course of business, the Company has provided to WMX and its
affiliates certain subcontractor services on remediation and construction
projects, the cost of these services, in the aggregate, were $23,664,000,
$12,959,000 and $10,242,000 for the years ended December 31, 1997, 1996 and
1995, respectively. The Company has purchased from WMX and its affiliates,
hazardous waste disposal services, the cost of these services, in the
aggregate, were $6,868,000, $7,536,000 and $6,636,000 for the years ended
December 31, 1997, 1996 and 1995, respectively. At December 31, 1997, 1996 and
1995, the Company has $2,831,000, $6,873,000 and $3,871,000 of accounts
receivable and $1,385,000, $968,000 and $806,000 of accounts payable,
respectively, recorded related to such activities. In addition to the above,
WMX paid $15,000,000 to the Company in 1996, which was related to final
payments due under terms of the Reorganization Agreement, as amended March 22,
1996.
The Company rents certain buildings and contracts certain services from The
KDC Company and Findlay Machine and Tool, Inc. Such expenses totaled $318,000,
$348,000 and $94,000 for the years ended December 31, 1997, 1996 and 1995,
respectively. The principal shareholders of the companies are officers and
directors of the Company.
The Company has purchased general contractor services and equipment from
Alvada Construction, Inc. which totaled $7,000, $957,000 and $226,000 for the
years ended December 31, 1997, 1996 and 1995, respectively. The principal
shareholder of the company is directly related to certain officers and
directors of the Company.
In the normal course of business, the Company has purchased subcontractor
services on certain of its projects from Kirk Brothers Co., Inc. which totaled
$1,161,000, $2,265,000 and $615,000 for the years ended December 31, 1997, 1996
and 1995, respectively. The principal shareholders of the company are directly
related to certain officers and directors of the Company.
During 1985, the Company executed a pension agreement with a former officer,
directly related to certain directors of the Company, for an annual pension
commencing on June 1, 1990, of $96,000, subject to cost of living adjustments,
for the remainder of his life and that of his spouse if she survives him. The
Company made pension payments totaling $118,000, $124,000 and $102,000 pursuant
to this agreement during the years ended December 31, 1997, 1996 and 1995,
respectively.
F-52
<PAGE>
OHM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
December 31, 1997
11. Earnings per Share
The following table sets forth the computation of basic and diluted earnings
per share:
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993
-------- ------- ------ ------- ------
(In Thousands,Except Per Share Data)
<S> <C> <C> <C> <C> <C>
Numerator
Net income (loss)................... $(23,933) $11,515 $6,807 $(7,616) $4,407
-------- ------- ------ ------- ------
Denominator
Denominator for basic earnings per
share--weighted-average shares..... 27,210 26,820 22,211 15,582 12,250
Effect of dilutive employee stock
options............................ -- 20 202 -- 204
-------- ------- ------ ------- ------
Denominator for diluted earnings per
share--adjusted weighted-average
shares and assumed conversions..... 27,210 26,840 22,413 15,582 12,454
======== ======= ====== ======= ======
Net (loss) income per common share.. $ (0.88) $ 0.43 $ 0.31 $ (0.49) $ 0.36
======== ======= ====== ======= ======
Net (loss) income per common share--
assuming dilution.................. $ (0.88) $ 0.43 $ 0.30 $ (0.49) $ 0.35
======== ======= ====== ======= ======
</TABLE>
See "Note 20--Subsequent Events" for additional disclosure regarding
employee stock options, warrants and repurchase of outstanding shares.
12. Capital Stock
The Company has authorized 2,000,000 shares of preferred stock at a $10.00
par value. No shares of preferred stock had been issued at December 31, 1997.
The rights and preferences of the preferred stock will be fixed by the Board of
Directors at the time such shares are issued. The preferred stock, when issued,
will have dividend and liquidation preferences over those of the common
shareholders.
On March 28, 1995, the Company sold to H. Wayne Huizenga and an affiliated
family foundation 1,000,000 shares of its common stock and options for an
aggregate purchase price of $10,000,000, less issuance expenses of $25,000. The
options are exercisable over five years for the purchase of 620,000 shares of
common stock upon payment of $10.00 per share and 380,000 shares of common
stock upon payment of $12.00 per share. See "Note 20--Subsequent Events."
13. Stock Option Plans
The Company has elected to follow APB No. 25 and related interpretations in
accounting for its employee stock options because, as discussed below, the
alternative fair value accounting provided for under SFAS No. 123 requires use
of option valuation models that were not developed for use in valuing employee
stock options. Under APB No. 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.
The Company's 1986 Incentive Stock Option Plan ("1986 Plan") as amended by
vote of the shareholders at the 1994 and 1996 Annual Meetings, has authorized
the grant of options to officers and key employees for up to 3,850,000 shares
of the Company's common stock. All options granted have 10 year terms and vest
and become fully exercisable at the end of up to 6 years of continued
employment. The number of shares available for grants of additional options
under the 1986 Plan were 666,441 and 1,161,674 at December 31, 1997 and 1996,
respectively.
F-53
<PAGE>
OHM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
December 31, 1997
On August 6, 1992, the Company's Board of Directors approved a stock option
plan for the Board of Directors (the "Directors' Plan"), which was
subsequently approved by the Company's shareholders at the 1993 Annual
Meeting. The Directors' Stock Option Plan provides for the immediate grant to
each non- employee director a stock option for 15,000 shares of the Company's
common stock, less the number of shares held by any such director under the
1986 Stock Option Plan. Additionally, the Directors' Plan provides for
additional grants of stock options for 5,000 shares of the Company's common
stock, at prices not less than the fair value, to each non-employee director
annually. Options granted under the Directors' Plan may not be exercised for a
period of six months following the date of grant and terminate up to eleven
years after the date of grant or eighteen months after the holder ceases to be
a member of the Board of Directors, whichever occurs earlier. The total number
of shares available for grants of additional options under the Directors' Plan
at December 31, 1997 and 1996 was 785,000 and 805,000, respectively.
On August 15, 1996, the Board of Directors of the Company approved the OHM
Corporation Incentive Stock Plan ("ISP") which permits the Board to grant
shares of common stock of the Company to officers of the Company under
restrictions set forth with the grant. Shares issued under the ISP are subject
to substantial risk of forfeiture within the meaning of Section 83 of the
Internal Revenue Code of 1986. There have been 105,000 shares of common stock
issued under the ISP with a vesting date of August 15, 2001 for 100% of the
shares. Total expense recognized for the year ended December 31, 1997 in
connection with shares issued under this plan is $226,844.
See "Note 20--Subsequent Events" for disclosure of disposition of shares in
the aforementioned plans.
Pro forma information regarding net income and earnings per share is
required by SFAS No. 123, which also requires that the information be
determined as if the Company had accounted for its employee stock options
granted subsequent to December 31, 1994 under the fair value method of that
Statement. The fair value for these options was estimated at the date of grant
using a Black-Scholes option pricing model. The following assumptions were
used in the valuation, and no dividends were assumed:
<TABLE>
<CAPTION>
1997 1996 1995
----- ----- -----
<S> <C> <C> <C>
Average expected life (years)......................... 6 7 7
Expected volatility................................... 0.41 0.46 0.46
Risk free interest rate............................... 6% 6% 6%
Weighted average fair value of options granted during
the year............................................. $3.83 $4.20 $5.40
</TABLE>
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 transferable. 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.
For purposes of pro forma disclosures of net income and earnings per share,
the estimated fair value of the options is amortized to expense over the
options' vesting period. The Company's pro forma information follows:
<TABLE>
<CAPTION>
Pro Forma
Years Ended December 31,
----------------------------------------
1997 1996 1995
------------- ------------ ------------
(In Thousands, Except Per Share Data)
<S> <C> <C> <C>
Net (loss) income................... $(25,020) $10,901 $6,428
Net (loss) income per share......... $ (0.92) $ 0.41 $ 0.29
</TABLE>
F-54
<PAGE>
OHM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
December 31, 1997
The following is a summary of the stock option activity:
<TABLE>
<CAPTION>
Number Weighted Average
of Shares Exercise Price
---------- ----------------
<S> <C> <C>
1986 Plan
Outstanding at January 1, 1995.................. 1,765,350 $9.41
Granted....................................... 632,750 9.89
Exercised..................................... (249,545) 7.74
Canceled...................................... (134,735) 9.81
----------
Outstanding at December 31, 1995................ 2,013,820 9.74
Granted....................................... 1,097,569 8.33
Exercised..................................... -- --
Canceled...................................... (1,004,399) 11.06
----------
Outstanding at December 31, 1996................ 2,106,990 8.38
Granted....................................... 807,000 8.20
Exercised..................................... (106,195) 7.69
Canceled...................................... (311,767) 8.28
----------
Outstanding at December 31, 1997................ 2,496,028 8.36
==========
Exercisable at December 31, 1996................ 1,037,008 8.44
==========
Exercisable at December 31, 1997................ 1,221,738 8.54
==========
Directors' Plan
Outstanding at January 1, 1995.................. 85,000 $10.16
Granted....................................... 65,000 11.83
----------
Outstanding at December 31, 1995................ 150,000 10.88
Granted....................................... 60,000 7.94
Canceled...................................... (15,000) 10.50
----------
Outstanding at December 31, 1996................ 195,000 10.01
Granted....................................... 35,000 7.50
Canceled...................................... (15,000) 11.75
----------
Outstanding at December 31, 1997................ 215,000 9.48
==========
Exercisable at December 31, 1996................ 180,000 10.20
==========
Exercisable at December 31, 1997................ 215,000 9.48
==========
</TABLE>
Exercise prices for options outstanding as of December 31, 1997 for the 1986
Plan and the Director's Plan ranged from $6.38 to $11.88 and $7.38 to $15.63,
respectively. The weighted-average remaining contractual life of those options
is 7.2 and 7.5 years, respectively.
14. Retirement and Profit-Sharing Plans
The Company has a Retirement Savings Plan (the "Plan") which allows each of
its eligible employees to make contributions, up to a certain limit, to the
Plan on a tax-deferred basis under Section 401(k) of the Internal Revenue Code
of 1986, as amended. Eligible employees are those who are employed full-time,
are over twenty-one years of age, and have one year of service with the
Company. The Company may, at its discretion, make matching contributions and
profit sharing contributions to the Plan out of its profits for the
F-55
<PAGE>
OHM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
December 31, 1997
plan year. The Company made matching contributions of $2,718,000, $2,691,000
and $1,643,000 to the Plan for the years ended December 31, 1997, 1996 and
1995, respectively.
Effective January 1, 1996, the Board of Directors of the Company approved
the Retirement and Incentive Compensation Plan ("RICP") which provides eligible
employees an election to defer a specified percentage of their cash
compensation. The obligations of the Company under the RICP will be unsecured
general obligations to pay the deferred compensation under the terms of the
RICP. Participants may elect under the plan to invest deferrals in an OHM
Common Stock Deferral Account for which contributions will be treated as if
such amounts had been used to purchase shares of the Company's stock and not as
actual purchases of the Company's stock. At the discretion of the compensation
committee of the Board of Directors, contributions to the plan will be matched
by the Company and all amounts invested in the plan will earn interest at the
prime rate published by the Wall Street Journal if not invested in the OHM
Common Stock Deferral Account.
The Company's contributions to the plan, for both the match and the earnings
on amounts invested are expensed as incurred including market value
appreciation in the OHM Common Stock Deferral Account. A monthly average per
share price of OHM common stock is used to calculate the contributions to the
Stock Deferral Account. No dividends have been declared on the common stock.
Total expense was $564,000 and $154,000 for the years ended December 31, 1997
and 1996, respectively.
15. Litigation and Contingencies
The Company is currently 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. The Company's work was
substantially delayed and its costs of performance were substantially increased
as a result of conditions at the site which the Company believes were
materially different than as represented by Occidental. In December 1994,
Occidental filed suit against the Company. 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. The Company's
counterclaim seeks an amount in excess of $9,200,000 for damages arising from
Occidental's breach of contract, misrepresentation and failure to pay
outstanding contract amounts.
The Company is in litigation with General Motors Corp. In the U.S. District
Court for the Northern District of New York. GM filed suit in January 1996
alleging that the Company 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 $3.8 million. The Company in turn filed suit
against HESI and ERM Northeast, Inc. In U.S. District Court in Northern New
York seeking $3.6 million in damages for breach of contract. The GM suit was
later consolidated with the Company's suit against HESI and ERM. GM alleges
that the Company abandoned the contract through inability to perform while the
Company claims that performance was impacted by conditions at the site that
were not as represented.
Litigation and claims involving the Company relate primarily to the
collection of outstanding accounts receivable of the Company. The Company
regularly evaluates the need to establish accounts receivable reserves for such
litigation and claims. Total accounts receivable reserves for such litigation
and claims were $7,665,000 and $17,596,000 for the years ended December 31,
1997 and 1996, respectively. In addition, the Company has established a general
litigation reserve of $2,015,000 and $3,494,000 for the years ended December
31, 1997 and 1996, respectively to cover litigation and claims costs as well as
other matters not impacting accounts receivable.
F-56
<PAGE>
OHM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
December 31, 1997
Management believes that it has established adequate reserves should the
resolution of the above matter be lower than the amounts recorded and for other
matters in litigation or other claims and disputes. There is, however, always
risk and uncertainty in pursuing and defending litigation and arbitration
proceedings in the course of the Company's remediation business and,
notwithstanding the reserves currently established, adverse future results in
litigation or other proceedings could have a material adverse impact upon the
Company's consolidated future results of operations or financial condition. In
addition to the above, the Company is subject to a number of claims and
lawsuits in the ordinary course of its business. In the opinion of management,
the outcome of these actions, which are not clearly determinable at the present
time, are either adequately covered by insurance, or if not insured, will not,
in the aggregate, have a material adverse impact upon the Company's
consolidated financial position or the results of future operations.
16. Major Customers
Revenue from federal government agencies accounted for 72%, 72% and 71% of
total revenue from continuing operations for the years ended December 31, 1997,
1996 and 1995, respectively. Revenue from state and local government agencies
accounted for 7%, 5% and 5% of total revenue from continuing operations for the
years ended December 31, 1997, 1996 and 1995, respectively. There were no
industrial customers which accounted for more than 10% of total revenue for the
years ended December 31, 1997, 1996 and 1995.
17. Special Charges
During the second quarter of 1997, the Company settled litigation and
received an unfavorable binding arbitration decision that established a need to
write-down claims receivable previously recorded by the Company. These actions
together with a thorough analysis by management of other claims, litigation and
the related receivables and a decision by management to establish reserves for
the consolidation of certain laboratory and operational functions resulted in
the Company recording a $22,726,000 (net of $15,151,000 income tax benefit),
charge during the second quarter of 1997.
The following discussion details the various elements of the charge:
Separation and Recovery Systems, Inc. ("SRS"). In June 1997, the Company
received an unfavorable binding arbitration decision in a dispute between the
Company and SRS. SRS's subcontract with the Company to provide thermal
desorption treatment services at the Hilton Davis chemical site in Cincinnati,
Ohio was terminated by the Company in the second quarter of 1996 due to failure
to perform. The Company subsequently attempted to perform the treatment process
with the SRS equipment and was unsuccessful. The inability of SRS to perform
caused the Company to incur significant expense to complete the required
treatment process. The Company's total claim in arbitration against SRS for the
resulting expense of failed performance was $18,500,000 and included deferred
cost of $9,814,000 recorded by the Company as a receivable from SRS. In
addition to not collecting the receivable, the arbitration decision required
the Company to pay SRS $2,400,000 in damages for their counterclaim for
wrongful termination. The Company also established a loss reserve of $2,800,000
to complete the treatment effort required as a result of the above. Prior to
the arbitration decision the Company had concluded that it was not probable
that a loss had occurred based on the opinion of counsel, consequently the
write-off was taken in the same period that the decision was rendered.
Citgo Petroleum Corporation ("Citgo"). In June 1997, the Company settled
litigation with Citgo and Occidental Oil & Gas (Oxy) relating to a project
which was performed by the Company for Citgo at its Lake Charles, Louisiana
refinery in 1993 and 1994. This litigation resulted from the Company filing a
request for equitable adjustment in April 1994 based on deficient project
specifications provided by Citgo, the subsequent
F-57
<PAGE>
OHM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
December 31, 1997
lawsuit filed by Citgo in April 1994 and the counterclaims filed by the Company
in July 1994. In 1995 Citgo and the Company brought separate actions against
Oxy as a third party with previous involvement at the site. Extensive discovery
by all parties prior to a scheduled trial in 1997 led to settlement discussions
in the second quarter of 1997. Under the terms of the settlement with Citgo and
Oxy, the Company received a cash payment of $14,346,000 against outstanding
receivables of $22,609,000 resulting in a write-off of accounts receivable of
$8,263,000. Prior to accepting the settlement offer, the Company had concluded
that it was not probable that a loss had occurred based on the opinion of legal
counsel that there existed a reasonable basis to support the Company's claim in
litigation. The settlement and resulting write down of accounts receivable
occurred after management completed its assessment of the litigation, the
determination of the maximum amount of settlement that could be obtained and
its review of the disadvantages of continuing litigation which would divert the
attention of company management and resources.
Other Litigation and Accounts Receivable. In addition to the aforementioned
disputes, the Company made a decision to resolve other significant legal
matters involving outstanding accounts receivable. In June 1997, the Company
settled outstanding litigation with B&V Construction, Inc. ("B&V") for
$1,550,000 pertaining to a dispute involving subcontracted services at a
General Motors project in Flint, Michigan during late 1994. Payment to B&V was
made in July 1997. Accounts receivable involving disputes primarily related to
two additional contracts were also written down to facilitate settlement. These
decisions resulted from management's analysis of the unfavorable SRS
arbitration decision and the protracted Citgo litigation and subsequent
settlement and concluded that the risk associated with continued pursuit of
legal remedies was not acceptable and the further diversion of management's
attention to effect favorable outcomes was not appropriate. Prior to that time,
the Company had concluded that it was not probable that a loss had occurred
based on the opinion of counsel.
Litigation Costs. As a result of the above discussed legal matters and the
significant expense of resolving such matters, the Company has accrued
$2,100,000 for the expenses of the litigation such as attorney's fees. This
accrual includes costs associated with those matters included in the special
charge discussed above including those that expect to be settled. The Company
concluded that due to the timing of the settlements discussed above, the
related expense of settlement should also be accrued.
Region Reorganization, Laboratory Closure & Severance. In May 1997,
management of the Company made a decision to consolidate certain regional
operations, close certain offices and cease commercial laboratory operations.
These decisions were made as part of a comprehensive plan completed in the
second quarter of 1997 to restructure operations of the company. Thus,
resulting expense was recognized as a special charge at that time. Employees of
the Company were notified of the reduction in force at that time and
substantially all of the reserve requiring a cash settlement was paid prior to
the end of 1997. The components of this special charge were:
<TABLE>
<CAPTION>
(In Thousands)
--------------
<S> <C>
Cash items:
Severance................................................... $1,500
Lease termination and facility closure...................... 1,139
Other....................................................... 388
------
Subtotal.................................................. 3,027
Non cash items:
Fixed Assets................................................ 773
------
Total..................................................... $3,800
======
</TABLE>
F-58
<PAGE>
OHM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
December 31, 1997
NSC Divestiture. During its second quarter of 1997, the Company decided to
sell its 40% share of NSC Corporation. As a result, the Company recorded a
$12,089,000 (net of $2,860,000 income tax benefit), charge during the second
quarter of 1997, to reduce the carrying value of its NSC investment to reflect
the likely value to be realized given the Company's current intentions. See
"Note 5--Investment in Affiliated Company" and "Note 20--Subsequent Events".
The following table summarizes the detailed components of the charge:
<TABLE>
<CAPTION>
Tax Net
Charge Benefit Loss
------------ -------------------------
(In Thousands, Except Per Share Data)
<S> <C> <C> <C>
SRS Settlement and Project Loss
Accrual............................ $ 15,014 $ 6,006 $ 9,008
Citgo Settlement (Net of $14.3
million)........................... 8,263 3,305 4,958
Other Litigation and Accounts
Receivable......................... 8,700 3,480 5,220
Litigation Costs.................... 2,100 840 1,260
Region Reorganization & Other....... 3,800 1,520 2,280
------------ ------------ ------------
Total Claims Settlement & Other... 37,877 15,151 22,726
Total Write-down of Investment in
NSC.............................. 14,949 2,860 12,089
------------ ------------ ------------
Total Charge...................... $ 52,826 $ 18,011 $ 34,815
============ ============ ============
</TABLE>
The Company's consolidated statement of operations for the year ended
December 31, 1995 includes a $2,312,000 (net of $1,542,000 income tax benefit)
charge for integration costs related to the acquisition of the Division. The
charge was recorded as a selling, general and administrative expense and was
primarily for severance and relocation costs for certain of the Company's
personnel and the closing of certain of the Company's offices as a result of
combining the operations of the Division and the Company.
18. Quarterly Financial Information (Unaudited)
The following table sets forth the Company's condensed consolidated
statements of operations by quarter for 1997 and 1996.
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter
-------- -------- -------- --------
(In Thousands, Except Per Share Data)
<S> <C> <C> <C> <C> <C>
1997
Revenue....................... $108,498 $129,313 $143,656 $145,224
Gross profit.................. 13,851 17,874 20,909 19,501
Selling, general and
administrative expenses...... 10,409 49,368 11,972 12,188
Operating income (loss)....... 3,442 (31,494) 8,937 7,313
Net income (loss) (1)......... $ 1,438 $(31,609) $ 4,062 $ 2,176
-------- -------- -------- --------
Basic and diluted net income
(loss) per share............. $ 0.05 $ (1.16) $ 0.15 $ 0.08
======== ======== ======== ========
1996
Revenue....................... $118,963 $129,177 $158,272 $144,572
Gross profit.................. 15,030 17,560 20,638 18,832
Selling, general and
administrative expenses...... 11,176 11,943 13,124 13,007
Operating income.............. 3,854 5,617 7,514 5,825
Net income.................... $ 1,330 $ 2,379 $ 3,996 $ 3,810
-------- -------- -------- --------
Basic and diluted net income
per share.................... $ 0.05 $ 0.09 $ 0.15 $ 0.14
======== ======== ======== ========
</TABLE>
- --------
(1) During the second quarter of 1997, the Company recorded a $34,815,000
charge (net of income tax benefit of $18,011,000) or $1.28 per share,
charge for the settlement and write-down of certain claims and litigation,
establishment of reserves for the consolidation of certain laboratory and
operational functions, and the reduction of the carrying value of its NSC
investment.
F-59
<PAGE>
OHM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
December 31, 1997
19. Segment Information
The Company operates in two industry segments. The first includes
environmental and hazardous waste remediation services. The second, which
consists solely of Beneco Enterprises, Inc., includes project, program and
construction management services. Both segments provide services to primarily
federal government agencies such as the Department of Defense.
<TABLE>
<CAPTION>
Environmental Construction
Consolidated Remediation Management
------------ ------------- ------------
(In Thousands)
<S> <C> <C> <C>
1997
Net sales........................... $469,396 $57,295 $526,691
Operating income.................... (19,185) 7,383 (11,802)
Assets employed at year end......... 285,694 31,349 317,043
Depreciation and amortization....... 16,233 37 16,270
Capital Expenditures................ 17,891 145 18,036
</TABLE>
Prior to the acquisition of Beneco in 1997, the Company operated in only one
segment, Environmental Remediation. There were no intersegment sales. The
operating loss in the Environmental Remediation segment for 1997 is due to the
special charges recorded in the second quarter, all of which related to that
segment. See "Note 17--Special Charges."
20. Subsequent Events (Unaudited)
The Company has entered into an Agreement and Plan of Merger (the "Merger
Agreement"), dated January 15, 1998, by and among the Company, International
Technology Corporation ("Parent") and IT-Ohio, Inc. ("Purchaser"). Pursuant to
the Merger Agreement, on February 25, 1998 Purchaser, a wholly owned subsidiary
of Parent, completed a tender offer (the "Offer") for 13,933,000 shares of
Common Stock (each, a "Share" and collectively, the "Shares") by purchasing
such Shares at a price of $11.50 per Share, net to the tendering shareholder in
cash. The Offer was described in the Tender Offer Statement on Schedule 14D-1
filed by Purchaser on January 16, 1998 with the Securities and Exchange
Commission (the "Commission").
The Merger Agreement provides that, subject to the satisfaction or waiver of
certain conditions precedent (including the approval of the Merger Agreement by
holders of a majority of the outstanding Shares), Purchaser will merge with and
into the Company (the "Merger"), and the Company will be the surviving
corporation in the Merger, with the result that the Company will become a
wholly owned subsidiary of Parent. Based upon the preliminary results of the
Offer and on the number of shares of Common Stock outstanding on
February 24, 1998, at the effective time of the Merger, each remaining Share
outstanding will be converted into the right to receive approximately 1.077
shares of the common stock of Parent and approximately $2.61 in cash.
James L. Kirk, Joseph R. Kirk, H. Wayne Huizenga and The Huizenga Family
Foundation, all shareholders of the Company, have entered into voting
agreements whereby they agree to vote their shares of Common Stock in favor of
the Merger.
Pursuant to the Merger Agreement and the Share Repurchase Agreement, dated
as of January 15, 1998 and as amended and restated as of February 11, 1998 and
as amended and restated as of February 17, 1998 (the "Repurchase Agreement"),
by and among the Company, Parent, WMX, Rust and Rust Remedial Services Holding
Company Inc., an affiliate of WMX, the Company repurchased from WMX and its
affiliates 2,535,381 Shares for $11.50 per Share, concurrently with the payment
for Shares pursuant to the Offer (the "Repurchase"), and WMX and its affiliates
tendered 7,111,543 Shares in the Offer. Pursuant to the Repurchase
F-60
<PAGE>
OHM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
December 31, 1997
Agreement, WMX and its affiliates also agreed to vote all Shares held by them
in favor of the Merger. WMX also agreed to cancel, without payment of any
separate consideration, the Warrants and any rights it may have to purchase
additional shares of Common Stock. In addition, the Guaranty Agreement and
related guarantees as well as key provisions of the Standstill Agreement will
terminate upon consummation of the Merger.
The Company also has an approximately 40% interest in NSC Corporation
("NSC"), a provider of asbestos abatement and specialty contracting services.
Pursuant to the Merger Agreement, the Company will pay a pro rata distribution
(the "NSC Distribution") to holders of record of the Shares as of the close of
business on February 24, 1998, of all of the shares of Common Stock, par value
$0.01 per share, of NSC held by the Company (the "NSC Shares"). The payment
date for the NSC Distribution is March 6, 1998, which is the earliest date on
which the NSC Distribution may be paid under the Company's Regulations. It is
anticipated that the NSC Distribution will be treated as a pro rata taxable
redemption that qualifies as a sale or exchange for tax purposes.
In connection with the Company's entry into the Merger Agreement and by
resolution of the Company's Board of Directors, the Company's 1986 Stock Option
Plan and the Company's Nonqualified Stock Option Plan for Directors were
amended to immediately vest each non-vested stock option issued under such
plans and to give each of the option holders the right to cancel their options
in exchange for a cash payment equal to the difference between $11.50 per share
and the respective exercise price of each option. In addition, the Company's
Board of Directors took action to allow holders of the restricted stock issued
under the Company's Incentive Stock Plan to tender such stock in the Offer. As
a result of the above actions, the Company will incur up to $9,400,000 of
compensation expense during the first quarter of 1998 if all of the stock
option holders elect to receive the cash payment for their outstanding options.
In addition, pursuant to that certain letter agreement, dated as of January 15,
1998, by and between H. Wayne Huizenga and the Company, all of the outstanding
options held by H. Wayne Huizenga were canceled as of February 25, 1998 in
consideration of $1,500,000.
The consummation of the transactions contemplated by the Merger Agreement is
subject to the satisfaction of various conditions, including, without
limitation: (i) the approval by the stockholders of Parent for the issuance of
shares of Parent Common Stock pursuant to the Merger Agreement, and (ii) the
approval of the Merger Agreement and the Merger by the shareholders of the
Company. The Company received early termination of the waiting period required
under the Hart-Scott-Rodino Antitrust Improvements Act during January 1998.
The accompanying financial statements were prepared assuming the Company
would continue operations independently and do not anticipate adjustments which
may be required as a result of the Merger. The Merger will be accounted for
using the purchase method and as a result may impact the carrying value of
certain of the Company's assets and liabilities.
F-61
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors and Stockholders of
FLUOR DANIEL GTI, Inc.
We have audited the accompanying consolidated statement of operations and
consolidated statement of cash flows of Fluor Daniel GTI, Inc. (the Company)
for the year ended October 31, 1998. These statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the statements. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall presentation of the statements. We believe that
our audit provides a reasonable basis for our opinion.
In our opinion, the statements referred to above present fairly, in all
material respects, the consolidated results of operations and cash flows of
Fluor Daniel GTI, Inc. for the year ended October 31, 1998 in conformity with
generally accepted accounting principles.
Boston, Massachusetts
November 20, 1998,
except for Note 8, as to which
the date is December 3, 1998.
F-62
<PAGE>
FLUOR DANIEL GTI, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Year
Ended
October 31,
1998
-----------
<S> <C>
Revenues............................................................ $200,245
Operating cost of revenues.......................................... 163,382
--------
Gross profit........................................................ 36,863
Selling, general and administrative expenses........................ 31,609
License and other income............................................ 288
Loss on sale of company assets, net................................. (913)
--------
Income before investment and interest income........................ 4,629
Investment and interest income, net................................. 721
--------
Income before provision for income taxes............................ 5,350
Provision for income taxes.......................................... 4,261
--------
Net income.......................................................... $ 1,089
========
Net income per share--basic and diluted............................. $ 0.13
Weighted average shares outstanding--basic.......................... 8,388
Weighted average share outstanding--diluted......................... 8,403
</TABLE>
See accompanying notes to partial financial presentation.
F-63
<PAGE>
FLUOR DANIEL GTI, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
Year
Ended
October 31,
1998
-----------
<S> <C>
Cash flows from operating activities:
Net income........................................................ $ 1,089
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization.................................... 3,539
Deferred income taxes............................................ (98)
Write-off of investment.......................................... 178
Changes in operating assets and liabilities, net of effects of
acquisitions:
Accounts receivable and unbilled revenues ...................... 1,978
Other current assets and prepaid expenses....................... 837
Other assets.................................................... 244
Accounts payable................................................ 3,778
Accrued salaries and benefits................................... 1,875
Advance billings on contract.................................... 49
Other accrued liabilities....................................... 1,851
Income taxes payable............................................ 1,889
--------
Net cash provided for operating activities......................... 17,210
Cash flows from investing activities:
Expenditures for property, plant and equipment.................... (5,219)
Sale of fixed assets.............................................. 3,087
Purchase of marketable securities................................. (16,200)
Sale of marketable securities..................................... 9,345
Investments in and advances to joint ventures..................... 33
--------
Net cash used in investing activities.............................. (8,954)
Cash flows from financing activities:
Proceeds from sale of stock under employee stock plans............ 554
--------
Net cash provided by financing activities.......................... 554
--------
Effect of exchange rate changes on cash and cash equivalents....... (273)
--------
Net increase in cash and cash equivalents.......................... 8,537
Cash and cash equivalents at beginning of year..................... 3,588
Cash and cash equivalents at end of year........................... $ 12,125
========
Supplemental disclosures of cash flow information:
Income taxes paid................................................. $ 1,435
</TABLE>
See accompanying notes to partial financial presentation.
F-64
<PAGE>
FLUOR DANIEL GTI, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies
Description of Business. Fluor Daniel GTI, Inc. provides a broad range of
environmental consulting, engineering and construction management services.
These services currently focus on the assessment and remediation of
contaminated soil and groundwater using a broad range of techniques and
technologies. These services are provided separately or in combination for
customers in a variety of industries and for federal and state governments.
Accordingly, the Company operates in one industry segment.
Basis of Presentation. As discussed in Note 8, the Company was acquired by
the IT Group, Inc. on December 3, 1998. The accompanying consolidated statement
of operations and consolidated statement of cash flows were prepared for
purposes of inclusion in an Offering Memorandum for the placement of $200
million of aggregate principal amount of Senior Subordinated Notes due 2009 to
be issued by the IT Group. These statements are not intended to be a complete
presentation of the Company's financial position. A consolidated balance sheet
and related footnotes have been purposely omitted from this presentation.
On May 10, 1996, the Company closed a series of transactions (the "Change of
Control Transactions") pursuant to which it became a majority-owned subsidiary
of Fluor Daniel, Inc. ("Fluor Daniel"), a global construction, engineering,
maintenance and services company. In addition, the Company entered into a
Marketing Agreement with Fluor Daniel, and the Company changed its name from
"Groundwater Technology, Inc." to "Fluor Daniel GTI, Inc." to emphasize the new
relationship.
Principles of Consolidation. The consolidated financial statements include
the accounts of Fluor Daniel GTI, Inc. and its wholly-owned subsidiaries (the
"Company"). All material intercompany transactions and accounts have been
eliminated. The Company accounts for its investments in unconsolidated
affiliated companies under the equity method.
Translation of Foreign Currencies and Foreign Exchange Transactions. For
non-U.S. operations, the functional currency is the applicable local currency.
The translation of the functional currencies into U.S. dollars is performed for
balance sheet accounts using current exchange rates in effect at the balance
sheet date and for revenue and expense accounts using average rates of exchange
prevailing during the reporting period. Adjustments resulting from the
translation of foreign currency financial statements are accumulated in a
separate component of stockholders' equity until the entity is sold or
substantially liquidated. Gains or losses resulting from foreign currency
transactions are included in the results of operations.
Earnings per Common Share. In 1997, the Financial Accounting Standards Board
issued Statement No. 128, Earnings per share. Statement 128 was effective for
the fiscal year ending October 31, 1998 and replaced the calculation of primary
and fully diluted earnings per share with basic and diluted earnings per share.
Unlike primary earnings per share, basic earnings per share excludes any
dilutive effects of options, warrants and convertible securities. Diluted
earnings per share is very similar to the previously reported fully diluted
earnings per share. All earnings per share amounts have been presented to
conform to the Statement 128 requirements.
F-65
<PAGE>
FLUOR DANIEL GTI, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The following table sets forth the computation of basic and diluted earnings
per share for the year ended October 31, 1998:
<TABLE>
<S> <C>
Numerator:
Numerator for basic and diluted earnings per share--Net
Income........................................................ 1,089,000
Denominator:
Denominator for basic earnings per share--weighted average
shares........................................................ 8,388,000
Effect of dilutive employee stock options........................ 15,000
----------
Denominator for diluted earnings per share....................... 8,403,000
----------
Basic and diluted earnings per share............................. $ 0.13
==========
</TABLE>
Options to purchase 1,164,000 shares of the company stock were excluded from
the calculation above because their effect would have been antidilutive.
Employee Stock Plans. The Company's stock plans are accounted for under
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees" (APB25), and related interpretations.
Revenue Recognition. Revenue is recognized when services are performed.
Certain projects are accounted for on the percentage-of-completion method,
primarily based on contract costs incurred to date compared with total
estimated contract costs. Changes to total estimated contract costs and losses,
if any, are recognized in the period in which they are determined. Revenues
recognized in excess of amounts billed are classified as current assets under
unbilled revenues. Amounts billed to clients in excess of revenues recognized
to date are classified as advance billings on contracts.
As of October 31, 1998, the Company was in the process of submitting change
orders against one of its customers of approximately $5,800,000 in excess of
the agreed contract price.
License and Other Income. License and other income includes license and
royalty income earned on the Company's intellectual property and income from
equity investments in the environmental industry.
Depreciation. Depreciation is calculated on the straight-line method over
the estimated useful lives of the assets. Depreciation expense for the fiscal
year ending October 31, 1998 was $2,900,000.
Risk and Uncertainties. Credit is extended based on an evaluation of the
customer's financial condition, with terms consistent in the industry and
normally collateral is not required. Losses from credit sales are provided for
in the financial statements and have been generally within the allowance
provided. The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Significant estimates include collectability of accounts
receivable and unbilled revenues and recovery of intangible assets and deferred
tax assets. Actual results could differ from those estimates and would impact
future results of operations and cash flows.
F-66
<PAGE>
FLUOR DANIEL GTI, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
2. Income Taxes
The provision for income taxes consisted of the following:
<TABLE>
<CAPTION>
Year Ended
October 31,
1998
--------------
(In thousands)
<S> <C>
Current:
Federal..................................................... $3,655
State....................................................... 727
Foreign..................................................... 60
------
4,442
Deferred (prepaid):
Federal..................................................... (305)
State....................................................... (83)
Foreign..................................................... 207
------
(181)
------
$4,261
======
</TABLE>
The provisions for income taxes were at rates other than the U.S. federal
statutory income tax rate for the following reasons:
<TABLE>
<CAPTION>
Year Ended
October 31,
1998
--------------
(In thousands)
<S> <C>
U.S. federal statutory income tax rate %.................... 34.0%
State income taxes net of federal income tax benefit........ 7.7
Foreign income taxes........................................ 2.4
Meals and entertainment..................................... 2.0
Goodwill.................................................... 2.0
Interest income exempt from federal tax..................... (3.1)
Non-benefitable loss on the sale of Canadian subsidiary..... 1.3
Provision for income tax contingencies and other tax
matters.................................................... 33.3
----
79.6%
</TABLE>
The net change in the total valuation allowance during the fiscal year
ended October 31, 1998 was $30,000.
The Company is currently contesting issues before the Internal Revenue
Service for the tax years 1991 and 1992, primarily relating to issues of
substantiation of certain deductions. The Company has been cooperating with
the IRS to resolve these issues and is currently awaiting a report from the
IRS regarding the Company's efforts on these issues. In the opinion of
management, adequate provision has been recorded for taxes that may arise from
IRS adjustments, penalties and interest.
3. Related Parties
The Company provides certain environmental consulting services to Fluor
Daniel and other affiliated entities. Revenues from these consulting services
have been reflected in the accompanying statements in accordance with a
Marketing Agreement (the "Agreement") signed in conjunction with the
Investment Agreement between the Company and Fluor Daniel. Under the terms of
the Agreement, affiliates are charged for
F-67
<PAGE>
FLUOR DANIEL GTI, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
labor cost plus established multipliers on base compensation. Due to the
variable and often unpredictable nature of the Company's work load, consulting
services are provided to Fluor Daniel as conditions allow. Revenues from Fluor
Daniel and other affiliated entities were $4,184,000 for the fiscal year ended
October 31, 1998.
4. Commitments and Contingencies
Lease Commitments. The Company leases virtually all of its facilities under
operating leases. Most of these leases have renewal options, and certain of
them require increasing rent payments over the term of the lease and payments
for additional expenses such as taxes and maintenance. One of the leases also
contains a purchase option. Additionally, the Company leases equipment and
vehicles under operating leases.
Future minimum payments under all noncancelable leases are as follows:
<TABLE>
<CAPTION>
(In thousands)
--------------
<S> <C>
1999.......................................................... $3,262
2000.......................................................... 2,585
2001.......................................................... 2,097
2002.......................................................... 1,074
2003 and thereafter........................................... 249
------
$9,267
======
</TABLE>
Rent expense charged to operations was $4,658,000 for the fiscal year ended
October 31, 1998.
Other Commitments. A substantial number of the Company's contracts with its
customers require the Company to indemnify the customer for claims, damages or
losses for personal injury or property damage relating to the Company's
performance of the contracts unless such injury or damage is solely the result
of the customer's negligent or willful acts or omissions. A number of the
insurance policies maintained by the Company for this purpose are provided
through arrangements which require the Company to indemnify the insurance
carrier for all losses and expenses under the policies and to support its
indemnity commitments with letters of credit. At October 31, 1998, such letters
of credit aggregated $7,848,155. Management believes an adequate level of
insurance coverage has been provided. The Company has guaranteed a $700,000
line of credit for Enterprise Environmental and Earthworks, Inc., an investee
accounted for under the equity method.
Contingencies. In the ordinary course of conducting its business, the
Company becomes involved in a number of lawsuits and administrative
proceedings, including environmentally related matters. Some of these
proceedings may result in fines, penalties or judgments being assessed against
the Company which, from time to time, may have an impact on earnings for a
particular quarter. The Company does not believe that these matters,
individually or in the aggregate, will have a material adverse effect on its
operations, cash flows or financial condition.
5. Employee Benefit Plans.
Profit Sharing Plan and Bonus Performance Plan. During the fiscal year ended
October 31, 1998, the Company had a profit sharing plan for the benefit of all
employees meeting certain minimum service requirements. The plan provided for
20% of adjusted pre-tax operating income to be distributed to employees at the
end of the fiscal year.
The Company has bonus performance programs covering eligible employees under
which awards are made at the discretion of the Compensation Committee of the
Board of Directors. Bonus expense was approximately $1,508,000, for the fiscal
year ended October 31, 1998.
F-68
<PAGE>
FLUOR DANIEL GTI, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Retirement Savings Plan. The Company has a Retirement Savings Plan under
Section 401(k) of the Internal Revenue Code for the benefit of all U.S.
employees meeting certain minimum service requirements. Eligible employees may
elect to contribute to the plan up to 12% of their cash compensation, subject
to limitations established by the Internal Revenue Code. The trustees of the
plan select investment opportunities from which participants may choose to
contribute.
The plan requires a matching contribution by the Company of 100% on the
first 1%, and 25% on the next 4% of each participant's contribution, but not
greater than the maximum allowable under the Internal Revenue Code. The Company
may also contribute a discretionary amount to the plan which may be allocated
to employees based upon employees' contributions to the plan. The Company's
matching contributions currently vest at a rate of 25% per year based upon
years of service. The Company's contributions to this plan were $949,000, for
the fiscal year ended October 31, 1998.
The Company has various defined contribution plans covering substantially
all non-U.S. employees. The Company's contributions to these plans were
approximately $224,000 for the fiscal year ended October 31, 1998.
6. Industry Segment Information
The Company provides a wide range of environmental services to both the
private and government sectors including scientific and engineering
applications from environmental assessment, permitting and remediation through
design and construction to operations and maintenance services. These services
are provided to a variety of different industries including petroleum,
chemical, power, pharmaceutical and others.
In fiscal year ending October 31, 1998, no single customer accounted for
more than 10% of the Company's revenues. Income before income taxes was
$4,750,000 and $600,000 from the Company's domestic and foreign operations,
respectively.
7. Special Charges
In the first quarter of fiscal 1998, the Company took a charge of $406,000
in other expense related to a write off for uncollectible advances made in
prior years to the current owner of the former Fluor Daniel GTI analytical
laboratory business.
In the third quarter of fiscal 1998, the Company recorded, within other
expense, a loss on the sale of its Wichita, Kansas laboratory building of
approximately $500,000 as well as a $206,000 loss on the sale of its Canadian
subsidiary. These losses in other expense were offset by a gain of $199,000 on
the sale of the Company's Australian laboratory assets.
8. Subsequent Events
On December 3, 1998, the Company agreed to be acquired by The IT Group, Inc.
("IT") at a per share price of $8.25. The Company became a wholly-owned
subsidiary of The IT Group, Inc. and changed its name to Groundwater
Technology, Inc.
In connection with the Company's entry into the Acquisition Agreement and by
resolution of the company's Board of Directors, the Company's Stock Option
Plans were amended to immediately vest each non-vested stock option issued
under such plans and to exchange such options for a cash payment equal to $0.10
per share if the exercise price of the option was greater than $8.25 per share
or the difference between $8.25 per share and the respective exercise price of
each option if the exercise price of the option was less than $8.25 per share.
F-69
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To ICF Kaiser International, Inc.
We have audited the accompanying statement of assets acquired and
liabilities assumed of the Environment and Facilities Management Group (the EFM
Group) of ICF Kaiser International, Inc. (the Company) as of December 31, 1998,
and the related statement of operating revenue and expenses, for the year then
ended. The Statement of Assets Acquired and Liabilities Assumed and the related
Statement of Operating Revenue and Expenses (the Statements) are the
responsibility of the Company's management. Our responsibility is to express an
opinion on the Statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the Statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the Statements. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall presentation of the Statements. We believe that
our audit provides a reasonable basis for our opinion.
As discussed in Note 1, pursuant to the terms of the Asset Purchase
Agreement dated March 8, 1999, the accompanying Statements have been prepared
solely to present the assets acquired and liabilities assumed of the EFM Group
as of December 31, 1998, and its operating revenue and expenses for the year
then ended, and are not intended to be a complete presentation of the financial
statements of the EFM Group.
In our opinion, the Statement of Assets Acquired and Liabilities Assumed and
the Statement of Operating Revenue and Expenses referred to above present
fairly, in all material respects, the assets acquired and liabilities assumed
of the EFM Group as of December 31, 1998, and its operating revenue and
expenses for the year then ended pursuant to the Asset Purchase Agreement
referred to in Note 1, in conformity with generally accepted accounting
principles.
PricewaterhouseCoopers LLP
McLean, Virginia
March 11, 1999
F-70
<PAGE>
ENVIRONMENT AND FACILITIES MANAGEMENT GROUP
Statement of Assets Acquired and Liabilities Assumed
(In thousands)
<TABLE>
<CAPTION>
December 31,
1998
------------
<S> <C>
Assets Acquired
Fixed Assets
Furniture and equipment........................................... 460
Less accumulated depreciation.................................... (225)
-----
235
Other Assets
Investments in and advances to affiliates......................... 155
-----
Total assets acquired.......................................... 390
Liabilities Assumed
Current Liabilities
Accrued vacation.................................................. 778
-----
Total liabilities assumed...................................... 778
-----
Commitments and Contingencies
Deficit of Assets Acquired
Over Liabilities Assumed.......................................... $(388)
=====
</TABLE>
See notes to financial statements
F-71
<PAGE>
ENVIRONMENT AND FACILITIES MANAGEMENT GROUP
STATEMENT OF OPERATING REVENUE AND EXPENSES
(In thousands)
<TABLE>
<CAPTION>
Year Ended
December 31,
1998
------------
<S> <C>
Gross Revenue
Third parties..................................................... $104,085
Related parties................................................... 1,221
Equity in income of joint ventures................................ 600
--------
105,906
--------
Operating Expenses
Subcontract and direct material costs............................. 53,362
Direct labor and fringe benefits.................................. 26,553
Group overhead.................................................... 18,863
Related parties................................................... 945
Depreciation and amortization..................................... 58
--------
99,781
--------
Operating Income................................................... $ 6,125
========
</TABLE>
See notes to financial statements
F-72
<PAGE>
NOTES TO THE STATEMENTS FOR
THE ENVIRONMENT AND FACILITIES MANAGEMENT GROUP
1. Basis of Presentation
The Environment and Facilities Management Group (the EFM Group) of ICF
Kaiser International, Inc (the Company) performs contracts for the oversight of
major program management and technical support activities for U.S. government
agencies, as well as private-sector environmental clients. Client contracts
generally fall into two categories, either environmental remediation, which
covers the spectrum of environmental consulting, characterization, remediation,
design, and construction or facilities management, which involves engineering,
environmental operations, and architecture.
The EFM Group is not a legal entity and the assets and liabilities
associated with the EFM Group are components of the larger business and other
legal entities of the Company. As a result, while separate financial
information is maintained for the EFM Group's operating revenue and operating
expenses as well as for certain of its asset and liability balances, no
complete set of separate financial statements is prepared or maintained. The
accompanying statements are presented pursuant to the terms of an Asset
Purchase Agreement dated March 8, 1999 between the Company and The IT Group,
Inc. (IT). The statements present the operating revenue and expenses of the EFM
Group for the year ended December 31, 1998, as well as the balances on December
31, 1998 of assets and liabilities that are subject to acquisition. This
information is not intended to be a complete presentation of the financial
statements of the EFM Group.
The accompanying statements have been prepared from the historical
accounting records of the Company and do not purport to reflect the assets and
liabilities or results of operations that would have resulted if the EFM Group
had operated as an unaffiliated independent company. The financial information
presented herein is based on the Company's historical costs and does not give
consideration to the adjustments that may result from acquisition by IT. Since
only certain assets and liabilities are subject to acquisition, a statement of
cash flows for the EFM Group is not applicable.
Certain expenses incurred by the Company, directly on behalf of the EFM
Group have been allocated to the EFM Group on various bases (See Note 8),
which, in the opinion of management, are reasonable. However, such allocated
expenses are not necessarily indicative of the EFM Group results had it been
operated as a separate company. Additionally, it is not practicable for
management to estimate the level of such expenses which might have been
incurred had the EFM Group been operated on a stand-alone basis for the year
ended December 31, 1998.
The accompanying Statement of Operating Revenue and Expenses does not
include allocations of the Company's overhead and general and administrative
expenses, which did not directly benefit the operations of the EFM Group.
Additionally, interest expense and income tax expense were not allocated to the
EFM Group as it is impracticable to arbitrarily allocate such expenses on a
retroactive basis.
2. Summary of Significant Accounting Policies
Principles of Consolidation: The Statement of Assets Acquired and
Liabilities Assumed and Statement of Operating Revenue and Expenses of the
Environment and Facilities Management Group of the Company are comprised of
several wholly-owned legal entities and investments as well as certain selected
assets, liabilities and operations of another of the Company's subsidiaries.
Investments in unconsolidated joint ventures and affiliated companies are
accounted for using the equity method. The difference between the cost of joint
venture investments and the EFM Group's underlying equity is amortized on a
straight-line basis over the estimated lives of the related investments. All
significant intercompany balances and transactions within the EFM Group have
been eliminated.
Use of Estimates: The preparation of these statements requires management to
make estimates and assumptions about the amounts that affect the reported
amounts of assets at the date of the statements and the
F-73
<PAGE>
NOTES TO THE STATEMENTS FOR
THE ENVIRONMENT AND FACILITIES MANAGEMENT GROUP--(Continued)
reported amounts of operating revenue and expenses during the reporting period.
Actual results may differ from those estimates.
Revenue Recognition: The EFM Group's revenue is derived principally from
long- term contracts of various types. Revenue on time-and-materials contracts
is recognized based on actual hours delivered times the contracted hourly
billing rate, plus the costs incurred for any materials. Revenue on fixed-
priced contracts is recognized using the percentage-of-completion method and is
comprised of the portion of expected total contract earnings represented by
actual costs incurred to date as a percentage of the contract's total estimated
costs at completion. Revenue on cost-reimbursable contracts is recognized to
the extent of costs incurred plus a proportionate amount of the contracted fee.
Certain cost-reimbursable contracts also include provisions for earning
performance-based incentive fees. Such incentive fees are included in revenue
at the time the amounts can be reasonably determined. Provisions for
anticipated contract losses are recognized at the time they become estimable.
Fixed Assets: Furniture and equipment are carried at cost and are
depreciated using the straight-line method over their estimated useful lives,
ranging from three to ten years.
3. Investments in Affiliates
The EFM Group has ownership interests in certain unconsolidated corporate
joint ventures. The EFM Group's net investments in and advances to these
corporate joint ventures totaled $155,000 at December 31, 1998. The ownership
percentages range from 20% to 50%. The EFM Group's share of the joint ventures'
operating results is reflected in the Statement of Operating Revenue and
Expense.
4. Contingencies and Commitments
In the course of the EFM Group's normal business activities:
. various claims or charges may be asserted and litigation commenced
against the EFM Group arising from or related to properties, injuries to
persons, and breaches of contract;
. the EFM Group may from time to time, either individually or in
conjunction with other government contractors operating in similar types
of businesses, be involved in U.S. government investigations for alleged
violations of procurement regulations or other federal laws and
regulations; and lastly, since
. the EFM Group has a substantial number of cost reimbursement contracts
with the U.S. government, the costs to execute such contracts will be
subject to audit by the U.S. government.
Any potential amounts claimed in the future, resulting from the risks
identified above, may not bear any reasonable relationship to the merits of
potential claims, final court awards, or investigation and audit results. No
provision has been included in these financial statements for any final results
that might be rendered against the EFM Group for any claims or matters existing
prior to December 31, 1998, because the Company has retained the risk of such
claims and contingencies.
One of the EFM Group subsidiaries, ICF Kaiser Remediation Company, along
with eleven of the Company's other subsidiaries, is a guarantor of the
Company's senior and subordinated indebtedness. This indebtedness consists of
$15 million and $125 million, respectively, of 12% notes due in 2003. As a
condition precedent to closing the sale transaction with IT (See Note 1), the
Company will need to secure the release of ICF Kaiser Remediation Company as a
guarantor to such indebtedness.
F-74
<PAGE>
NOTES TO THE STATEMENTS FOR
THE ENVIRONMENT AND FACILITIES MANAGEMENT GROUP--(Continued)
5. Lease Commitments
Future minimum payments on noncancelable operating leases, subject to
acquisition by IT, for office space and equipment with initial or remaining
terms in excess of one year were as follows at December 31, 1998 (in
thousands):
<TABLE>
<S> <C>
1999.................................................................. $4,138
2000.................................................................. 2,548
2001.................................................................. 1,257
2002.................................................................. 350
2003.................................................................. 285
Thereafter............................................................ 320
------
$8,898
======
</TABLE>
The total rent expense, included in Group Overhead in the accompanying
Statement of Operating Revenue and Expenses, for all of the acquired and
nonacquired EFM operating leases was $2,245,000 for the year ended December 31,
1998.
6. Employee Benefit Plans
The EFM Group's employees, meeting minimum length of service requirements,
participate in most of the Company's benefit plans. These plans included a
defined contribution retirement plan that provide for contributions by the
Company based on a percentage of covered compensation and a 401(k) Plan that
allows employees to defer portions of their salary, subject to certain
limitations, and receive a matching component from the Company. The total
expense charged to the EFM Group for these plans was $1,387,000 for the year
ended December 31, 1998.
7. Business Segment and Major Customers
Business Segment: The EFM Group operates predominantly in one industry in
which it oversees major program and technical support contracts for U.S.
government agencies, particularly the U.S. Departments of Energy (DOE) and
Defense (DOD), as well as for private-sector environmental concerns.
Major Customers: All of EFM Group's revenues are derived from customers
within the United States. Gross revenues for the year ended December 31, 1998
from various contracts with the U.S. Department of Energy and U.S. Department
of Defense were $13,049,000 and $61,489,000, respectively.
8. Allocations
The Company allocated costs for certain services provided on behalf of the
EFM Group which are included in the accompanying statements for the EFM Group.
General Services costs: The EFM Group uses office space, telecommunication
services and other office related items that are leased or purchased by the
Company. The Company allocates these costs ("location allocation") back to the
EFM Group based on dedicated square feet occupied by the EFM Group. Rent
expense, net of sublease income, allocated to the EFM Group totaled $2,011,000
for the year ended December 31, 1998. Additionally, the Company allocated the
EFM Group (as part of the "location allocation") other facility related
expenses such as, utilities, property taxes, furniture and office equipment
expense, telecommunications costs, office supplies, purchasing and facilities
management. The allocation basis for these other facility related costs is also
based on dedicated square feet occupied by the EFM Group. These other
F-75
<PAGE>
NOTES TO THE STATEMENTS FOR
THE ENVIRONMENT AND FACILITIES MANAGEMENT GROUP--(Continued)
facility related costs allocated to the EFM Group totaled $2,391,000 for the
year ended December 31, 1998. Lastly, the EFM Group used computers that were
leased by the Company and derived computing and network management services
from the Company. The costs allocated to the EFM Group, based on direct usage
of leased computer equipment, for the technology services totaled $1,239,000
for the year ended December 31, 1998. All of these allocated costs are included
in Group Overhead in the Statement of Operating Revenue and Expenses.
Depreciation expense: The EFM Group shares in certain fixed assets
maintained by the Company, primarily capitalized software costs and software
licenses. The Company allocated $58,000 in depreciation and amortization
expense related to the use of such assets during the year ended December 31,
1998.
In the opinion of management, these allocations of operating expenses were
made on a reasonable basis. However, such expenses are not necessarily
indicative of the level of expenses which might have been incurred had the EFM
Group been operated as a separate company.
F-76
<PAGE>
AUDITORS' REPORT
To the Directors of Roche ltee, Groupe conseil
We have audited the consolidated balance sheets of ROCHE LTEE, GROUPE
CONSEIL as at December 31, 1998, 1997 and 1996 and the consolidated statements
of operations, stockholders' equity and cash flows for the years then ended.
These financial statements are the responsibility of the corporation's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audits in accordance with generally accepted auditing
standards in Canada. Those standards require that we plan and perform an audit
to obtain reasonable assurance 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.
In our opinion, these consolidated financial statements present fairly, in
all material respects, the financial position of the corporation as at December
31, 1998, 1997 and 1996 and the results of its operations and the changes in
its financial position for the years then ended in accordance with generally
accepted accounting principles as set out in note 2 to the financial
statements.
On February 22, 1999, we reported separately to the stockholders of Roche
ltee, Groupe conseil on the same consolidated financial statements for the 1998
and 1997 periods (March 14, 1997 for 1996), prepared in accordance with
generally accepted accounting principles in Canada.
Mallette Maheu
General Partnership
Chartered Accountants
Quebec City, Canada
February 22, 1999
F-77
<PAGE>
ROCHE LTEE, GROUPE CONSEIL
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
December 31,
-------------------------------
1998 1997 1996
--------- --------- ---------
(in thousands of US dollars)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and short-term investments......... $ 587 $ 905 $ 721
Accounts receivable (note 5)............ 6,783 8,891 11,018
Income taxes receivable (note 3)........ 1,182 1,021 1,958
Contracts in process.................... 3,682 5,050 6,375
Prepaid expenses........................ 398 761 336
Future income taxes..................... -- 208 159
--------- --------- ---------
12,632 16,836 20,567
INVESTMENTS (note 6)...................... 3,175 4,190 4,435
FIXED ASSETS (note 7)..................... 1,805 2,150 2,442
FUTURE INCOME TAXES....................... 907 -- --
GOODWILL.................................. 43 56 176
--------- --------- ---------
$18,562 $23,232 $27,620
========= ========= =========
LIABILITIES
CURRENT LIABILITIES
Bank loan (note 8)...................... $ 887 $ 734 $ 1,503
Accounts payable (note 9)............... 11,143 12,619 12,949
Current portion of long-term debt (note
10).................................... 114 119 214
Deferred revenues....................... 1,690 1,185 1,801
Future income taxes..................... 110 -- --
--------- --------- ---------
13,944 14,657 16,467
LONG-TERM DEBT (note 10).................. 599 730 736
FUTURE INCOME TAXES....................... -- 21 --
MINORITY INTEREST......................... 65 12 77
--------- --------- ---------
14,608 15,420 17,280
--------- --------- ---------
STOCKHOLDERS' EQUITY
Capital stock (note 11)................. 7 7 7
Retained earnings....................... 4,772 8,220 10,385
Exchange adjustments.................... (825) (415) (52)
--------- --------- ---------
3,954 7,812 10,340
--------- --------- ---------
$18,562 $23,232 $27,620
========= ========= =========
COMMITMENTS AND CONTINGENCIES (note 13)
</TABLE>
F-78
<PAGE>
ROCHE LTEE, GROUPE CONSEIL
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Years ended December 31,
-------------------------------
1998 1997 1996
--------- --------- ---------
(in thousands of US dollars)
<S> <C> <C> <C>
GROSS REVENUES............................ $ 28,250 $ 49,829 $ 44,488
DIRECT COSTS (schedule A)................. 16,925 36,082 30,593
--------- --------- ---------
GROSS PROFIT.............................. 11,325 13,747 13,895
--------- --------- ---------
OTHER OPERATING EXPENSES
Selling (schedule B).................... 1,823 1,855 2,042
Administrative (schedule C)............. 9,738 11,379 12,173
--------- --------- ---------
11,561 13,234 14,215
--------- --------- ---------
INCOME (LOSS) FROM OPERATIONS............. (236) 513 (320)
FINANCIAL EXPENSES (schedule D)........... 271 323 197
OTHER EXPENSES (schedule E)............... 4,575 2,737 1,331
--------- --------- ---------
LOSS BEFORE INCOME TAXES AND MINORITY
INTEREST................................. (5,082) (2,547) (1,848)
--------- --------- ---------
INCOME TAXES
Recoverable............................. (989) (423) (1,315)
Future.................................. (660) 42 743
--------- --------- ---------
(1,649) (381) (572)
--------- --------- ---------
LOSS BEFORE SHARE OF MINORITY INTEREST.... (3,433) (2,166) (1,276)
MINORITY INTEREST......................... (15) 1 1
--------- --------- ---------
NET LOSS.................................. $ (3,448) $ (2,165) $ (1,275)
========= ========= =========
</TABLE>
F-79
<PAGE>
ROCHE LTEE, GROUPE CONSEIL
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Years ended December 31, 1998, 1997 and 1996
------------------------------------------------------
Capital Retained Exchange
stock earnings adjustments Total
---------- ------------ --------------- ------------
(in thousands of US dollars)
<S> <C> <C> <C> <C>
BALANCE RESTATED AT
DECEMBER 31, 1995...... $ 7 $ 13,056 $ -- $ 13,063
Net loss.............. -- (1,275) -- (1,275)
Exchange adjustments.. -- -- (52) (52)
Dividends............. -- (1,396) -- (1,396)
-------- ------------ ----------- ------------
BALANCE AT DECEMBER 31,
1996................... 7 10,385 (52) 10,340
Net loss.............. -- (2,165) -- (2,165)
Exchange adjustments.. -- -- (363) (363)
-------- ------------ ----------- ------------
BALANCE AT DECEMBER 31,
1997................... 7 8,220 (415) 7,812
Net loss.............. -- (3,448) -- (3,448)
Exchange adjustments.. -- -- (410) (410)
-------- ------------ ----------- ------------
BALANCE AT DECEMBER 31,
1998................... $ 7 $ 4,772 $ (825) $ 3,954
======== ============ =========== ============
</TABLE>
F-80
<PAGE>
ROCHE LTEE, GROUPE CONSEIL
CONSOLIDATED STATEMENTS OF CASH FLOW
<TABLE>
<CAPTION>
Years ended December 31,
-------------------------------
1998 1997 1996
--------- --------- ---------
(in thousands of US dollars)
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net loss................................ $ (3,448) $ (2,165) $ (1,275)
Operating items not involving cash (note
12).................................... 276 1,980 4,092
--------- --------- ---------
(3,172) (185) 2,817
Changes in non-cash operating working
capital items (note 12)................ 2,707 1,419 (6,737)
--------- --------- ---------
(465) 1,234 (3,920)
--------- --------- ---------
FINANCING ACTIVITIES
Short-term financing.................... 153 (769) 1,503
Long-term financing..................... 53 169 461
Repayment of long-term debt............. (132) (230) (796)
Redemption of non-controlling
stockholders........................... -- (62) --
Excluded net assets under the S.P.A..... 30 (38) 144
--------- --------- ---------
104 (930) 1,312
--------- --------- ---------
INVESTING ACTIVITIES
Acquisition of fixed assets............. (207) (322) (271)
Proceeds from disposal of fixed assets.. 73 39 55
Short-term investments.................. (82) 620 2,726
Acquisition of investments.............. (492) (1,148) (402)
Proceeds from investments............... 669 1,311 225
--------- --------- ---------
(39) 500 2,333
--------- --------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS.............................. (400) 804 (275)
CASH AND CASH EQUIVALENTS AT BEGINNING OF
YEAR..................................... 905 101 376
--------- --------- ---------
CASH AND CASH EQUIVALENTS AT END OF YEAR.. $ 505 $ 905 $ 101
========= ========= =========
Cash and cash equivalents consist of:
Cash...................................... $385 $904 $101
Term deposits............................. 297 1 --
Bank overdraft............................ (177) -- --
--------- --------- ---------
$ 505 $ 905 $ 101
========= ========= =========
</TABLE>
F-81
<PAGE>
ROCHE LTEE, GROUPE CONSEIL
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Statutes of Incorporation and Nature of Activities
The corporation, incorporated under the Canada Business Corporations Act, is
a wholly-owned subsidiary of Corporoche Canada Inc.
It is an integrated multidisciplinary firm that offers through its
subsidiaries services of studies, engineering and construction, projects'
management and supplying. These professional services cover most of the
specialties of engineering and many related activities of applied sciences.
2. Adjustments to United States Generally Accepted Accounting Principles
The consolidated financial statements of the corporation have been prepared
in accordance with generally accepted accounting principles in Canada (Canadian
GAAP) and adjusted to conform to generally accepted accounting principles in
the United States of America (US GAAP). The herein consolidated financial
statements are identical to those prepared in accordance with Canadian GAAP and
addressed to the corporation's stockholders on February 22, 1999, with the
exception of these changes:
. The herein consolidated financial statements were translated in United
States of America dollars using the current rate method. Under this
method, the assets and liabilities are translated at the rate of
exchange in effect at year- end and the earnings at average year rate.
The adjustments resulting from the exchange rate fluctuations are
accounted for in the "Exchange adjustments" account in the stockholders'
equity section.
. The investments in limited partnerships, joint ventures and real estate
venture are accounted for using the equity method instead of the
proportionate consolidation method that is used to prepare the financial
statements in accordance with Canadian GAAP. Notes 4 and 15, that
presents information about the consolidation policies and the effect of
the use of the proportionate consolidation under Canadian GAAP, have
been adjusted to present the information required under US GAAP about
the consolidated subsidiaries and the investments accounted for using
the equity method.
. The consolidated statements of retained earnings presented under
Canadian GAAP have been replaced, to conform to US GAAP, with the
consolidated statements of stockholders' equity that presents the
variation of all the stockholders' equity accounts.
The corporation's management considers that any other differences between
Canadian GAAP and US GAAP do not have a material impact on the herein
consolidated financial statements and has determined that no other adjustment
was necessary.
3. Important Subsequent Event
On February 5, 1999, the shareholders of Corporoche Canada inc. (hereafter
the "share vendors"), the parent corporation of Roche ltee, Groupe conseil, IT
Holdings Canada Inc. and The IT Group Inc., a public corporation in the United
States of America, signed a share purchase agreement (S.P.A.) committing the
share vendors to realize a corporate reorganization that will allow certain
assets, as described in the next paragraph, to be excluded from the
transaction. Following the reorganisation, the share vendors will dispose of
all shares of Roche ltee, Groupe conseil that they will then own.
The assets of Roche ltee, Groupe conseil excluded from the transaction under
the S.P.A. will be transferred, prior to the transaction, to a new corporation
to be owned by the share vendors. The investments of Roche ltee, Groupe conseil
in Solutions technologiques internationales STI inc., in Societe immobiliere
Metroplan, societe en commandite, in 2758-3525 Quebec inc. and in 174878 Canada
inc. and the related future
F-82
<PAGE>
ROCHE LTEE, GROUPE CONSEIL
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
income taxes have been aggregated and reclassified in Investments as "Excluded
net assets under the S.P.A.". In addition, the long-term debt payable to the
limited partners of Societe immobiliere Metroplan, societe en commandite has
been reclassified with the Excluded net assets under the S.P.A. as this debt
will be transferred to the new corporation. Finally, as the pension plan has
been terminated prior to the transaction, the deferred pension costs and the
related future income taxes have been reclassified as Excluded net assets under
the S.P.A.
A portion of the initial payment of the purchase price, that shall be
received no later than March 31, 1999, will be allocated to the settlement of
the engagements related to the RBW Group joint venture, as set out in note 13,
which will improve the corporation's working capital by an amount of
approximately $5,200,000.
The corporation has accounted for a tax benefit related to the RBW Group
project. This tax benefit of $1,174,000, is reserved to redeem a part of
Corporoche Canada inc. share capital.
To conclude the transaction, two conditions still have to be met: i)
shareholders of Corporoche Canada inc. shall unanimously agree to dispose of
their shares; ii) the corporation shall conduct its business in the ordinary
course and in a manner consistent with past practices. In corporation's
management opinion, these conditions will be respected and the transaction will
be concluded.
4. Significant Accounting Policies
Basis of consolidation
The consolidated financial statements include the accounts of the
corporation and its wholly-owned and majority-owned subsidiaries. The
corporation use the equity method to account for investments in corporations
subject to significant influence, limited partnerships, joint ventures and a
real estate venture. All significant intercompany balances and transactions are
eliminated in consolidation and in measuring the investments accounted for
using the equity method and the related earnings. Other investments are
accounted for at cost.
The consolidated subsidiaries are as follows:
. A.C.T. International inc. 80.0%
. CFCL Roche inc. 100.0%
. Evimbec ltee 97.5%
(and its subsidiaries, Evaluation J.M. Fournier inc., 100.0% and Chevalier
Hughes & Ass. (1992) inc., 100.0%)
. Impressions Integrales inc. 100.0%
. Les Consultants en environnement Argus 2000 inc. 100.0%
. Roche Construction inc. 100.0%
. Roche Gestion services publics inc. 70.0%
. Roche International inc. 100.0%
. Rosaire Despres et associes inc. 100.0%
(and its subsidiary, Groupe-conseil Forchemex inc., 70.0%)
. Soderoc Developpement ltee 100.0%
The investments accounted for using the equity method are as follows:
Corporations subject to significant influence
. Consortium BPA/Roche inc. 50.0%
. Consortium GLD-Roche inc. 50.0%
F-83
<PAGE>
ROCHE LTEE, GROUPE CONSEIL
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
. Consultants BPR/Roche inc. 50.0%
. Groupe-conseil TDA inc. 36.4%
. Poly-Energie inc. 50.0%
. Nouvelle technologie (Tekno) inc. 33.3%
. LID Experts Conseil (2000) inc. 50.0%
. Les Consultants Roche/Deluc ltee 50.0%
. 2644-0958 Quebec inc. (Energie Conseil inc.) 50.0%
. Groupe-conseil Saguenay inc. 29.8%
. Ressau Groupe conseil inc. 50.0%
. Canora Brunei Environnement Ltd 36.7%
. Pluritec ltee 50.0%
. Plaveco Gerance ltee 40.0%
Limited partnership
. Place du Commerce 50.0%
Joint ventures
. Consortium Burmex/Regie/Roche 43.0%
. Consortium Dmitrov 30.0%
. Consortium DPA/Roche 50.0%
. Consortium Dupont-Desmeules/Roche 48.0%
. Consortium PCRB 24.0%
. Consortium Roche/BPR 50.0%
. Consortium Roche/BPR (Saint-Raymond) 60.0%
. Consortium Roche/BPR (SEBJ) 60.0%
. Consortium Roche/BPR/Solivar 42.0%
. Consortium Roche/Cegir II 50.0%
. Consortium Roche/Deloitte/Sirtec 25.0%
. Consortium Roche/Lavalin 50.0%
. Consortium Roche/Uma/Intelec 80.0%
. Consortium Tecsult/Roche 50.0%
. Consortium Vaughan/Roche/EVS 42.5%
. RBW Group 50.0%
. RTCS Group 50.0%
. Societe Sert/Roche (Burkina) 80.0%
Real estate venture
. Megacentre Laurentien 5.0%
Use of estimates
The preparation of consolidated financial statements in accordance with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
the disclosure of contingencies at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting periods. Actual
results could differ from those estimates.
F-84
<PAGE>
ROCHE LTEE, GROUPE CONSEIL
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Contract accounting and contracts in process
The corporation performs its services under time-and-material and cost-
reimbursement, fixed-price and unit-bid contracts. Revenues from time-and-
material and cost-reimbursement contracts are recognized as costs are incurred.
Revenues from fixed-price and unit-bid contracts are recognized under the
percentage of completion method, computed using the ratio of total costs
incurred to date to total estimated costs at completion. When a terminal loss
on a contract is anticipated, the total estimated amount of loss is accounted
for as an expense of the period.
Contracts in process typically represents amounts earned under the
corporation's contracts but not billable according to the contracts terms,
which usually consider the passage of time, achievement of certain milestones
or completion of the projects. Contracts in process is valued at lesser of
invoiced value or net realizable value and are expected to be billed and
collected in the subsequent reporting year.
Fixed assets
Fixed assets are accounted for at cost.
Depreciation is based on their estimated useful lives using the following
methods and rates:
<TABLE>
<CAPTION>
Methods Rates
----------------- --------------
<S> <C> <C>
Buildings Declining balance 4%
Straight-line 2.5%
Furniture, tools and equipment Declining balance 15% and 20%
Computer hardware Declining balance 30%
Computer software Straight-line 25% and 33.33%
Leasehold improvements Straight-line 10%
Vehicles Declining balance 30%
</TABLE>
Goodwill
Goodwill is valued at cost and amortized over its estimated useful life
using the straight-line method over terms not exceeding ten years.
Income taxes
Income taxes are accounted for using the future income taxes method. Under
this method, future income taxes are recognized whenever recovery or settlement
of the carrying amount of an asset or liability would result in future income
tax outflow or reduction.
Cash and cash equivalents
Cash and cash equivalents include cash, bank overdraft representing
outstanding cheques and highly liquid financial instruments with an original
maturity of three months or less.
5. Accounts Receivable
<TABLE>
<CAPTION>
1998 1997 1996
--------- --------- ----------
(in thousands of US dollars)
<S> <C> <C> <C>
Trade......................................... $4,084 $5,916 $ 7,001
Affiliates.................................... 2,298 2,000 3,507
Retainage..................................... 254 294 341
Other......................................... 147 681 169
--------- --------- ----------
$6,783 $8,891 $11,018
========= ========= ==========
</TABLE>
F-85
<PAGE>
ROCHE LTEE, GROUPE CONSEIL
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
6. Investments
<TABLE>
<CAPTION>
1998 1997 1996
--------- --------- ---------
(in thousands of US dollars)
<S> <C> <C> <C>
Excluded net assets under the S.P.A.......... $ 504 $ 1,119 $ 787
Corporations subject to significant
influence................................... 1,520 1,807 2,120
Limited partnerships......................... 303 382 414
Joint ventures............................... 198 192 582
Real estate venture.......................... 370 390 403
Shares of private corporations............... 194 208 33
Other........................................ 86 92 96
--------- --------- ---------
$3,175 $4,190 $4,435
========= ========= =========
</TABLE>
7. Fixed Assets
<TABLE>
<CAPTION>
1998 1997 1996
-------------------------- ------ ------
Accumulated Net Net Net
Cost depreciation value value value
------ ------------ ------ ------ ------
(in thousands of US dollars)
<S> <C> <C> <C> <C> <C>
Land............................... $ 151 $ -- $ 151 $ 162 $ 140
Buildings.......................... 743 150 593 662 631
Furniture, tools and equipment..... 2,150 1,654 496 556 786
Computer........................... 1,650 1,430 220 292 316
Leasehold improvements............. 1,050 715 335 473 558
Vehicles........................... 15 5 10 5 11
------ ------ ------ ------ ------
$5,759 $3,954 $1,805 $2,150 $2,442
====== ====== ====== ====== ======
</TABLE>
Maintenance and repairs are expensed as incurred.
8. Bank Loan
The bank loan at December 31, 1998, authorized for an amount of $5,283,000
at the prime rate plus 1/2%, is secured by a mortgage without depossession on
receivables and a mortgage of $13,239,000 on non-pledged present and future
assets.
Under the terms of its bank loan agreement, the corporation must satisfy
certain covenants as to certain minimum financial ratios and must also satisfy
certain conditions prior to the payment of dividends.
At December 31, 1998, the corporation does not meet all of these
obligations.
9. Accounts Payable
<TABLE>
<CAPTION>
1998 1997 1996
--------- --------- ---------
(in thousands of US dollars)
<S> <C> <C> <C>
Trade......................................... $ 2,956 $ 4,305 $ 7,382
Affiliates.................................... 5,719 4,547 2,438
Retainage..................................... 52 832 771
Salaries and accrued vacation................. 1,528 1,351 1,460
Withholding taxes, taxes and contributions.... 608 654 716
Clients' deposits............................. 280 930 182
--------- --------- ---------
$11,143 $12,619 $12,949
========= ========= =========
</TABLE>
F-86
<PAGE>
ROCHE LTEE, GROUPE CONSEIL
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
10. Long-Term Debt
<TABLE>
<CAPTION>
1998 1997 1996
--------- --------- ---------
(in thousands of US dollars)
<S> <C> <C> <C>
Loans secured by mortgages on land and
buildings at rates ranging from 6.5% to 8.0%,
maturing from 2009 to 2016................... $588 $653 $637
Other loans, variable rates, maturing from
1997 to 2001................................. 125 196 313
--------- --------- ---------
713 849 950
Current portion............................... 114 119 214
--------- --------- ---------
$599 $730 $736
========= ========= =========
</TABLE>
Long-term debt principal repayments to be made during the next five years
are as follows:
<TABLE>
<S> <C>
1999--
$114,000 2002--$32,000
2000--$61,000 2003--$32,000
2001--$28,000
</TABLE>
11. Capital Stock
Authorized
Unlimited number of Class A voting, participating shares, without par
value
Unlimited number of Classes B, D and E shares, without par value,
preferential non-cumulative fixed trimestrial dividend of 2%, redeemable at
the price paid
Unlimited number of Class C shares, without par value, preferential non-
cumulative fixed trimestrial dividend of 2%, redeemable at the price paid
plus a premium determined at issue date
Unlimited number of Class F shares, without par value, giving right to a
dividend from the capital dividend account of life insurance policies,
redeemable at the price paid
<TABLE>
<CAPTION>
1998 1997 1996
--------- --------- ---------
(in thousands of US dollars)
<S> <C> <C> <C>
Issued
9,290 Class A shares...................... $7 $7 $7
========= ========= =========
</TABLE>
F-87
<PAGE>
ROCHE LTEE, GROUPE CONSEIL
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
12. Additional Information to the Statements of Cash Flows
<TABLE>
<CAPTION>
1998 1997 1996
--------- --------- ----------
(in thousands of US dollars)
<S> <C> <C> <C>
Items not involving cash
Depreciation............................... $ 386 $ 460 $ 549
Future income taxes........................ (660) 42 743
Loss (gain) on disposal of fixed assets.... (22) 53 13
Loss (gain) on sale of investments......... 42 (194) --
Share of net earnings and losses of joint
ventures.................................. 81 2,119 3,467
Share of net earnings of limited
partnerships.............................. (46) (34) --
Share of net earnings of corporations
subject to significant influence.......... 21 (55) (150)
Minority interest.......................... 15 (1) (1)
Share of net earnings of real estate
venture................................... (29) (30) (10)
Loss (revenue) from the excluded net assets
under the S.P.A........................... 526 (83) (121)
Exchange adjustements...................... (38) (297) (398)
--------- --------- ----------
$ 276 $ 1,980 $ 4,092
========= ========= ==========
Changes in non-cash working capital items
Accounts receivable........................ $2,108 $2,127 $ (288)
Contracts in process....................... 1,368 1,325 (793)
Prepaid expenses........................... 363 (425) (67)
Accounts payable........................... (1,476) (1,929) (2,692)
Deferred revenues.......................... 505 (616) (39)
Income taxes receivable.................... (161) 937 (2,858)
--------- --------- ----------
$2,707 $1,419 $(6,737)
========= ========= ==========
</TABLE>
F-88
<PAGE>
ROCHE LTEE, GROUPE CONSEIL
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
December 31, 1998, 1997 and 1996
13. Commitments and Contingencies
Leases
The corporation has lease commitments for terms originally ranging from two
to ten years. Total minimum rent payable is $9,770,000. At December 31, 1998,
the value of these commitments is $2,457,000 and minimum payments payable over
the next three years are as follows:
<TABLE>
<S> <C>
1999 -- $1,107,000
2000 -- $ 986,000
2001 -- $ 364,000
</TABLE>
Letters of surety and bonds
At December 31, 1998 the corporation has signed letters of surety amounting
to $1,353,000 in favor of organizations working in foreign countries. The
maturing dates range from 1999 to 2002.
RBW Group settlement
During the year ended December 31, 1998, the joint venture RBW Group, in
which the corporation was a 50% venturer, reached final agreements with its
client and major sub-contractors and vendors. The effects of those agreements
as well as all the other costs related to the completion of the joint venture
project are considered in the herein financial statements. The 1998 statement
of operations includes the corporation's share of the loss incurred by RBW
Group of approximately $4,218,000, including a bad debt expense of
approximately $2,448,000 on accounts receivable from RBW Group (1997--
$3,128,000, including bad debts for $962,000; 1996--$2,682,000 including bad
debts for $378,000). The corporations earnings also include direct and overhead
costs associated to the RBW Group project.
In February 1999, the venturers' insurance companies paid an amount of $
6,500,000, to a creditor of RBW Group to settle this sub-contractor's claims
against the corporation and the joint venture. An amount of $4,900,000 shall be
reimbursed by the corporation, no later than March 31, 1999 with the cash to be
injected by the purchaser of Roche ltee, Groupe conseil as discussed in note 3,
in accordance with the S.P.A. terms and the promissory notes issued by the
purchaser. This amount is included in the provision recorded as at December 31,
1998. The corporation has no further obligations with regards to the other
$1,600,000 paid by one of the insurers.
In the event that the corporation is unable to reimburse the $4,900,000 to
the insurance companies on March 31, 1999, the terms and conditions of the
repayment will have to be negotiated between the corporation's management and
the insurance companies.
Under the S.P.A., any liabilities arising from the RBW Group joint venture
that may have not been sufficiently provisioned for as at December 31, 1998
will be supported by the share vendors.
F-89
<PAGE>
ROCHE LTEE, GROUPE CONSEIL
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
December 31, 1998, 1997 and 1996
14. Related Party Transactions
During the year, the corporation has concluded the following transactions
with affiliated corporations. The transactions with these affiliates are as
follows:
<TABLE>
<CAPTION>
1998 1997 1996
--------- --------- ---------
(in thousands of US dollars)
<S> <C> <C> <C>
Gross revenues
Professional services........................... $1,762 $4,577 $3,529
Administrative expenses
Professional fees............................... 1,216 1,538 1,585
</TABLE>
These transactions are carried in the ordinary course of business and are
measured at the exchange amount.
15. Information About Investments Accounted for Using the Equity Method
The corporation has an important investment in the joint venture RBW Group,
accounted for using the equity method. Summarized financial information about
the financial statements of this investment is as follows:
<TABLE>
<CAPTION>
1998 1997 1996
------------------ ---------
(in thousands of US dollars)
<S> <C> <C> <C>
RBW Group
Assets, all of which are current............... $ 1,647 $ 5,719 $ 8,721
Liabilities, all of which are current.......... 6,834 14,057 12,457
Revenues....................................... -- 5,623 85,737
Expenses....................................... 1,771 9,954 89,150
Net loss....................................... 1,771 4,331 4,013
</TABLE>
The corporation has a 50% interest in this joint venture but has accounted
for more than its share of the losses as the other venturer was not able to
bear its share.
16. Uncertainty Due to the Year 2000 Issue
Most entities depend on computerized systems and therefore are exposed to
the Year 2000 conversion risk, which, if not properly addressed, could affect
an entity's ability to conduct normal business operations. Management is
addressing this issue, however, given the nature of this risk, it is not
possible to be certain that all aspects of the Year 2000 Issue affecting the
corporation and those with whom it deals such as clients, suppliers or other
third parties, will be fully resolved without adverse impact on the
corporation's operation.
17. Comparative Figures
Certain comparative figures have been reclassified to conform with the
presentation used in the current year.
F-90
<PAGE>
ROCHE LTEE, GROUPE CONSEIL
SCHEDULES A AND B--OTHER INFORMATION
December 31, 1998, 1997 and 1996
A. Direct Costs
<TABLE>
<CAPTION>
Years ended December 31,
-------------------------------
1998 1997 1996
--------- --------- ---------
(in thousands of US dollars)
<S> <C> <C> <C>
Direct salaries and fringe benefits......... $ 8,108 $ 9,708 $ 10,781
Costs of subcontractors..................... 466 16,014 11,134
Insurance................................... 73 105 117
Equipment expenses.......................... 245 334 209
Professional fees........................... 3,945 4,548 3,988
Telecommunications.......................... 313 452 286
Traveling expenses.......................... 2,555 3,407 2,609
Printing.................................... 423 473 479
Rent--building sites........................ 46 22 40
Products and supplies....................... 751 1,019 950
--------- --------- ---------
$ 16,925 $ 36,082 $ 30,593
========= ========= =========
B. Selling Expenses
<CAPTION>
Years ended December 31,
-------------------------------
1998 1997 1996
--------- --------- ---------
(in thousands of US dollars)
<S> <C> <C> <C>
Indirect salaries--proposals................ $ 705 $ 796 $ 767
Disbursements--proposals.................... 290 270 286
--------- --------- ---------
995 1,066 1,053
Cost of proposals recovered................. (46) (85) (9)
--------- --------- ---------
949 981 1,044
Salaries--business development.............. 628 618 722
Promotion................................... 246 256 276
--------- --------- ---------
$ 1,823 $ 1,855 $ 2,042
========= ========= =========
</TABLE>
F-91
<PAGE>
ROCHE LTEE, GROUPE CONSEIL
SCHEDULES C AND D--OTHER INFORMATION
December 31, 1998, 1997 and 1996
C. Administrative Expenses
<TABLE>
<CAPTION>
Years ended December 31,
------------------------------
1998 1997 1996
--------- --------- ---------
(in thousands of US dollars)
<S> <C> <C> <C>
Indirect salaries............................ $ 4,191 $ 4,320 $ 4,414
Fringe benefits.............................. 1,854 2,388 2,436
Insurance.................................... 235 338 324
Bad debts.................................... 201 359 833
Equipment expenses........................... 307 428 479
Communication and freight expenses........... 197 285 275
Traveling expenses........................... 430 561 593
Audit and legal fees......................... 173 194 222
Printing..................................... 8 10 7
Office rent and business taxes............... 1,245 1,411 1,479
Stationery and office expenses............... 295 374 346
Products and supplies........................ 23 34 23
Advertising.................................. 30 41 40
Property taxes............................... 52 43 31
Capital taxes................................ 111 133 122
Depreciation................................. 386 460 549
-------- --------- ---------
$ 9,738 $ 11,379 $ 12,173
======== ========= =========
D. Financial Expenses
<CAPTION>
Years ended December 31,
------------------------------
1998 1997 1996
--------- --------- ---------
(in thousands of US dollars)
<S> <C> <C> <C>
Interest and bank charges.................... $ 187 $ 254 $ 77
Interest on long-term debt................... 91 99 132
Interest income.............................. (7) (30) (12)
-------- --------- ---------
$ 271 $ 323 $ 197
======== ========= =========
</TABLE>
F-92
<PAGE>
ROCHE LTEE, GROUPE CONSEIL
SCHEDULE E--OTHER INFORMATION
December 31, 1998, 1997 and 1996
E. Other Expenses (Revenues)
<TABLE>
<CAPTION>
Years ended December 31,
-------------------------------
1998 1997 1996
--------- --------- ---------
(in thousands of US dollars)
<S> <C> <C> <C>
Share of net earnings and losses of joint
ventures (note 13)....................... $ 4,083 $ 3,080 $ 1,599
Share of net earnings of limited
partnerships............................. (46) (34) --
Share of net earnings of corporations
subject to significant influence......... 21 (55) (150)
Share of net earnings of real estate
venture.................................. (29) (30) (10)
Loss (revenue) from the excluded net
assets under the S.P.A................... 526 (83) (121)
Loss (gain) on sale of investments........ 42 (194) --
Loss (gain) on disposal of fixed assets... (22) 53 13
--------- --------- ---------
$ 4,575 $ 2,737 $ 1,331
========= ========= =========
</TABLE>
F-93
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
April , 1999 Confidential
[LOGO OF THE IT GROUP (SM)]
The IT Group, Inc.
$225,000,000
11 1/4% Series B Senior Subordinated Notes due 2009
----------------------------
PROSPECTUS
----------------------------
- --------------------------------------------------------------------------------
We have not authorized any dealer, salesperson or other person to give you
written information other than this prospectus or to make representations as to
matters not stated in this prospectus. You must not rely on unauthorized
information. This prospectus is not an offer to sell these securities or our
solicitation of your offer to buy these securities in any jurisdiction where
that would not be permitted or legal. Neither the delivery of this prospectus
nor any sales made hereunder after the date of this prospectus shall create an
implication that the information contained herein or the affairs have not
changed since the date hereof.
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers.
The General Corporation Law of the State of Delaware, our state of
incorporation, and our Bylaws provide for indemnification of our directors and
officers. Section 145 of the Delaware General Corporation Law provides
generally that a person sued as a director, officer, employee or agent of a
corporation may be indemnified by the corporation for reasonable expenses,
including attorneys' fees, if, in cases other than actions brought by or in the
right of the corporation, he or she has acted in good faith and in a manner he
or she reasonably believed to be in, or not opposed to, the best interests of
the corporation (and in the case of a criminal proceeding, had no reasonable
cause to believe that his or her conduct was unlawful). Section 145 provides
that no indemnification for any claim or matter may be made, in the case of an
action brought by or in the right of the corporation, if the person has been
adjudged to be liable, unless the Court of Chancery or other court determines
that indemnity is fair and reasonable despite the adjudication of liability.
Indemnification is mandatory in the case of a director, officer, employee or
agent who has been successful on the merits, or otherwise, in defense of a suit
against him or her. The determination of whether a director, officer, employee
or agent should be indemnified must be made by a majority of disinterested
directors, independent legal counsel or the stockholders.
Our directors and officers are covered under policies of directors' and
officers' liability insurance. The directors and all officers serving as Senior
Vice President or in a higher position as well as other officers are parties to
indemnity agreements. The indemnity agreements provide indemnification for the
directors and covered officers in the event the directors' and officers'
liability insurance does not cover a particular claim for indemnification or if
such a claim or claims exceed the limits of such coverage. The indemnity
agreements are generally intended to provide indemnification for any amounts a
director or covered officer is legally obligated to pay because of claims
arising out of the director's or officer's actions within the scope of his or
her employment.
Additionally, our certificate of incorporation provides that its directors
are not to be liable to us or our stockholders for monetary damages for breach
of fiduciary duty to the fullest extent permitted by law. This provision is
intended to allow our directors the benefit of the Delaware General Corporation
Law which provides that directors of Delaware corporations may be relieved of
monetary liabilities for breach of their fiduciary duty of care, except under
certain circumstances, including breach of the director's duty of loyalty, acts
or omissions riot in good faith or involving intentional misconduct or a
knowing violation of law or any transaction from which the director derived an
improper personal benefit.
Item 21. Exhibits.
(a) Exhibits
The following exhibits are filed herewith, unless otherwise indicated:
<TABLE>
<CAPTION>
Exhibit
No. Description
-------- -----------
<C> <S>
3.1 Certificate of Incorporation of the Registrant as amended by
Amendment to Certificate of Incorporation filed September 17, 1987
with the Delaware Secretary of State(l) and amended by Certificate
of Amendment to Certificate of Incorporation filed June 19, 1998
with the Delaware Secretary of State(2) and by Certificate of
Amendment of Certificate of Incorporation, dated as of December
21, 1998, filed with the Delaware Secretary of State on December
23, 1998.(3)
3.2 Amended and Restated Bylaws of the Registrant as amended through
June 12, 1998.(2)
</TABLE>
II-1
<PAGE>
<TABLE>
<CAPTION>
Exhibit
No. Description
-------- -----------
<C> <S>
3.3-3.70 Articles of incorporation and by-laws, or instruments corresponding
thereto, as currently in effect and any amendments thereto of the
Co-Registrants.*
4.1 Certificate of Designations with respect to the Registrant's 7%
Cumulative Convertible Exchangeable Preferred Stock, $100 par
value.(4)
4.2 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.(5)
4.3 Indenture for the Registrant's 7% Convertible Subordinated
Debentures Due 2008.(4)
4.4 Indenture dated as of October 1, 1986 between OHM Corporation and
United States Trust Company of New York, as Trustee, relating to
OHM Corporation's 8% Convertible Subordinated Debentures due
October 1, 2006.(6)
4.5 Specimen Debenture Certificate.(7)
4.6 First Supplemental Indenture dated as of May 20, 1994 by and among
OHM Corporation and United States Trust Company of New York.(8)
4.7 Second Supplemental Indenture dated as of June 11, 1998 among OHM
Corporation, the Registrant, as guarantor, and United States Trust
Company of New York.(2)
4.8 Indenture dated as of April 9, 1999 among the Registrant, the
Guarantors and The Bank of New York, as Trustee, relating to the
Registrant's 11 1/4% Senior Subordinated Notes due 2009.
5.1 Opinion of Gibson, Dunn & Crutcher LLP.
10.1 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, N.A., in its capacity as documentation agent.(9)
10.2 First Amendment dated September 16, 1998 to the 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, N.A., in its
capacity as documentation agent.(10)
10.3 Second Amendment dated October 26, 1998 to the 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. N.A., in its capacity as
documentation agent.(10)
10.4 Third Amendment dated March 5, 1999 to the Amended and Restated
Credit Agreement, dated as of June II, 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, N.A., in its capacity as
documentation agent.(35)
10.5 Agreement and Plan of Merger, dated as of January 15, 1998, among
OHM Corporation, the Registrant and IT-Ohio, Inc.(11)
10.6 Parent Voting Agreement dated January 15, 1998 among OHM
Corporation, the Registrant and the stockholders of Registrant
named therein.(11)
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
Exhibit
No. Description
-------- -----------
<C> <S>
10.7 Company Voting Agreement dated January 15, 1998 among OHM
Corporation, the Registrant and the shareholders of OHM
Corporation named therein.(11)
10.8 Option Termination Agreement dated January 15, 1998 between James
L. Kirk and OHM Corporation.(11)
10.9 Share Repurchase Agreement dated January 15, 1998 among OHM
Corporation, the Registrant, Rust International, Inc. and Waste
Management, Inc.(11)
10.10 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.(12)
10.11 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.(13)
10.12 Agreement and Plan of Merger, dated as of October 27, 1998, among
Fluor Daniel GTI, Inc., Tiger Acquisition Corporation and the
Registrant.(10)
10.13 Amended and Restated Marketing Agreement dated as of October 27,
1998 between Fluor Daniel GTI, Inc. and Fluor Daniel, Inc.(10)
10.14 Intercompany Services Agreement dated October 27, 1998 between the
Registrant, Fluor Daniel, Inc. and Fluor Daniel GTI, Inc.(10)
10.15 Share Purchase Agreement dated February 5, 1999 by and between the
Shareholders of Roche Limited, Consulting Group, IT Holdings
Canada, Inc. and the Registrant.(35)
10.16 Asset Purchase Agreement, dated as of March 8, 1999, between the
Registrant and ICF Kaiser International, Inc.(14)
10.17 Purchase Agreement among the Registrant, the subsidiary guarantors
signatory thereto, Donaldson, Lufkin & Jenrette Securities
Corporation and Salomon Smith Barney, dated as of April 6, 1999.
10.18 Registration Rights Agreement among the Registrant, the subsidiary
guarantors signatory thereto, Donaldson, Lufkin & Jenrette
Securities Corporation and Salomon Smith Barney, dated as of April
9, 1999.
10.19 Stock Redemption Agreement dated as of June 26, 1998, between
Quanterra Incorporated, the Registrant and IT Corporation.(15)
10.20 Securities Purchase Agreement dated as of August 28, 1996 between
the Registrant and certain Purchasers identified therein
affiliated with The Carlyle Group(5), including agreement by and
between The Carlyle Group and the Registrant re financial advisory
and investment banking fees.(16)
10.21 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.(17)
10.22 Form of Warrant Agreement by and among the Registrant and certain
Warrant Holders defined therein affiliated with The Carlyle Group,
dated as of November 20, 1996.(5)
10.23 Form of registration rights agreement by and among the Registrant
and certain Investors affiliated with The Carlyle Group, dated
November 20, 1996(5)
10.24 Master Loan and Security Agreement dated May 11, 1993, between OHM
Remediation Services Corp. and BOT Financial Corporation.(18)
10.25 Amendment No. 1 to Master Loan and Security Agreement dated as of
January 19, 1995 between BOT Financial Corporation and OHM
Remediation Services Corp.(19)
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
Exhibit
No. Description
--------- -----------
<C> <S>
10.26 Promissory Note dated December 23, 1993 executed by OHM
Remediation Services Corp. in favor of BOT Financial
Corporation.(20)
10.27 Promissory Note dated December 28, 1994 executed by OHM
Remediation Services Corp. in favor of BOT Financial
Corporation.(8)
10.28 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.(21)
10.29 Promissory Note dated August 31, 1994 executed by OHM Remediation
Services Corp. in favor of Internationale Nederlanden Lease
Structured Finance B.V.(21)
10.30 Continuing Corporate Guaranty dated as of August 1, 1994 executed
by OHM Corporation in favor of Internationale Nederlanden Lease
Structured Finance B.V.(21)
10.31 Non-Employee Directors' Retirement Plan, as amended and restated
June 2, 1994(22)(23), as amended by the Amended and Restated Non-
Employee Directors Retirement Plan, Amendment No. 5, dated
November 20, 1996.(22)(16)
10.32 Description of the Special Turn-a-Round Plan (Fiscal Year 1995
Management Incentive Plan) of the Registrant.(22)(24)
10.33 1983 Stock Incentive Plan, as amended.(22)(25)
10.34 1991 Stock Incentive Plan(22)(26) as modified by waiver dated
November 20, 1996, by certain former Non-Employee Directors, in
favor of the Registrant.(16)(22)
10.35 Form of Amendment dated October 23, 1998, to the Restricted Stock
and Escrow Agreement under the Registrant's 1991 Stock Incentive
Plan.(22)(27)
10.36 1996 Stock Incentive Plan, as amended and restated effective June
11, 1998.(22)(28)
10.37 OHM Corporation 1986 Stock Option Plan, as amended and restated as
of May 10, 1994.(22)(29)
10.38 OHM Corporation Nonqualified Stock Option Plan for
Directors.(22)(30)
10.39 OHM Corporation Directors' Deferred Fee Plan.(8)(22)
10.40 Amendment No. 1 to OHM Corporation Directors' Deferred Fee
Plan.(19)(22)
10.41 OHM Corporation Retirement Savings Plan, as amended and restated
as of January 1, 1994.(8)(22)
10.42 Amendment No. 1 to OHM Corporation Retirement Savings Plan, as
amended and restated as of January 1, 1994.(19)(22)
10.43 Amendment No. 2 to OHM Corporation Retirement Savings Plan, as
amended and restated as of January 1, 1994.(22)(31)
10.44 OHM Corporation Retirement Savings Plan Trust Agreement between
OHM Corporation and National City Bank, as Trustee, as amended
and restated effective July 1, 1994.(8)(22)
10.45 Fiscal Year 1997 Management Incentive Plan.(16)(22)
10.46 Fiscal Year 1998 Management Incentive Plan.(16)(22)
10.47 Retirement Agreement dated March 3, 1994 between Murray H.
Hutchison and the Registrant (24)(22) as amended by First
Amendment dated January 6, 1995 to the Retirement Agreement dated
March 3, 1994 between Murray H. Hutchison and the
Registrant.(22)(32)
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
Exhibit
No. Description
--------- -----------
<C> <S>
10.48 Retirement Plan of IT, 1993 Restatement.(22)(24)
10.49 Amendment Number One to IT Corporation Retirement Plan, dated as
of July 1,
1995.(22)(33)
10.50 Amendment Number Two to IT Corporation Retirement Plan, dated as
of October 1, 1995.(22)(33)
10.51 Amendment Number Three to IT Corporation Retirement Plan, dated as
of July 15, 1996.(22)(34)
10.52 Amendment Number Four to IT Corporation Retirement Plan, dated as
of February 1, 1997.(16)(22)
10.53 Amendment Number Five to IT Corporation Retirement Plan, dated as
of May 13,
1997.(16)(22)
10.54 Amendment Number Six to IT Corporation Retirement Plan dated as of
May 27,
1998.(2)(22)
10.55 Amendment Number Seven to IT Corporation Retirement plan dated as
of December 31, 1998.(22)
10.56 Executive Stock Purchase Interest Reimbursement Plan, approved
September 6,
1995.(22)(26)
10.57 Executive/Directors Deferred Compensation Plan, effective January
1, 1996.(22)(26)
10.58 Executive Restoration Plan, effective July 1, 1995 as amended
through May 13,
1997.(22)(26)
10.59 IT Corporation Deferred Compensation Plan (amended and restated
effective January 1,
1998). (2)(22)
10.60 IT Corporation Restoration Plan amended and restated effective
January 1, 1998.(2)(22)
10.61 1997 The IT Group, Inc. Non-Employee Directors Stock Plan--
Director Fees, dated as of February 26, 1997.(22)(34)
10.62 Employment Agreement, dated as of November 20, 1996, by and
between the Registrant, IT Corporation, and Anthony J.
DeLuca.(16)(22)
10.63 Separation Agreement, dated as of April 10, 1998, by and between
the Registrant, its subsidiaries and affiliates, and Franklin E.
Coffman.(2)(22)
10.64 Employment Agreement, dated as of November 20, 1996, by and
between the Registrant, IT Corporation, and James R.
Mahoney.(16)(22)
10.65 Employment Agreement, dated as of November 20, 1996, by and
between the Registrant, IT Corporation, and Raymond J.
Pompe.(16)(22)
10.66 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.(2)(22)
10.67 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.(2)(22)
10.68 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.(2)(22)
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
Exhibit
No. Description
--------- -----------
<C> <S>
10.69 Form of Employment Agreement by and between OHM Corporation, and
each of Pamela K.M. Beall, Robert I. 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.(2)(22)
10.70 The IT Group, Inc. Severance and Retention Bonus Plan dated March
5, 1998.(2)(22)
10.71 Executive Stock Ownership Program by and between the Registrant and
certain executive officers of the Registrant.(22)
10.72 The IT Group, Inc. Executive Bonus Plan effective November 17, 1998
(22)
21.1 List of Subsidiaries of the Registrant.(35)
23.1 Consent of Gibson, Dunn & Crutcher LLP (included in Exhibit 5.1).
23.2 Consent of Ernst & Young LLP, independent auditors.
23.3 Consent of PricewaterhouseCoopers LLP, independent accountants.
23.4 Consent of Mallette Maheu General Partnership Chartered
Accountants.
24.1 Power of Attorney (included on the signature pages hereto).
25.1 Statement of Eligibility and Qualification of The Bank of New York
on Form T-1.
99.1 Form of Letter of Transmittal.*
99.2 Form of Notice of Guaranteed Delivery.*
99.3 Form of Letter to Clients.*
99.4 Form of Letter to Brokers, Dealers, Commercial Banks, Trust
Companies and Other Nominees.*
</TABLE>
- --------
* To be filed by amendment.
(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 Annual Report on Form 10-K for the year ended March
27, 1998 and incorporated herein by reference.
(3) Previously filed with the Securities and Exchange Commission as an Exhibit
to the Registrant's Current Report on Form 8-K dated December 23, 1998 and
incorporated herein by reference.
(4) 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.
(5) Previously filed with the Securities and Exchange Commission as an Exhibit
to the Registrant's Current Report on Form 8-K dated September 20, 1996
and incorporated herein 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, 1986 and incorporated herein by reference.
(7) Previously filed with the Securities and Exchange Commission as an Exhibit
to OHM Corporation's Amendment No. 1 to Registration Statement on Form S-
l, No. 33-8296 and incorporated by reference.
(8) 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.
(9) Previously filed with the Securities and Exchange Commission as an Exhibit
to Registrant's Current Report on Form 8-K dated June 11, 1998 and
incorporated herein by reference.
II-6
<PAGE>
(10) Previously filed with the Securities and Exchange Commission as an Exhibit
to the Registrant's Schedule 14D-1 dated November 3, 1998 and incorporated
herein by reference.
(11) Previously filed with the Securities and Exchange Commission as an Exhibit
to the Registrant's Report on Form 8-K dated January 15, 1998.
(12) 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.
(13) Previously filed with the Securities and Exchange Commission as an Exhibit
to OHM Corporation's Current Report on Form 8-K filed on July 2, 1997 and
incorporated herein by reference.
(14) Previously filed with the Securities and Exchange Commission as an Exhibit
to the Registrant's Annual Report on Form 8-K dated March 12, 1999 and
incorporated herein by reference.
(15) Previously filed with the Securities and Exchange Commission as an Exhibit
to the Registrant's Quarterly Report on Form l0-Q for the quarter ended
June 26, 1998 and incorporated herein by reference.
(16) Previously filed with the Securities and Exchange Commission as an Exhibit
to Registrant's Annual Report on Form 10-K for the year ended March 28,
1997.
(17) Previously filed with the Securities and Exchange Commission as an Exhibit
to the Registrant's Quarterly Report on Form l0-Q for the quarter ended
December 27, 1996 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 l0-Q for the quarter ended
June 30, 1993 and incorporated herein by reference.
(19) 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.
(20) 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, 1993 and incorporated herein by reference.
(21) Previously filed with the Securities and Exchange Commission as an Exhibit
to OHM Corporation's Quarterly Report on Form l0-Q for the quarter ended
September 30, 1994 and incorporated herein by reference.
(22) Filed as a management compensation plan or arrangement per Item 14(a)(3)
of the Securities Exchange Act.
(23) 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.
(24) 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.
(25) 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.
(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 March
29, 1996 and incorporated herein by reference.
(27) 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
September 25, 1998 and incorporated herein by reference.
(28) 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.
(29) 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.
(30) 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.
(31) 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, 1995 and incorporated herein by reference.
II-7
<PAGE>
(32) 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.
(33) 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.
(34) 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.
(35) Previously filed with the Securities and Exchange Commission as an Exhibit
to the Registrant's Transition Report on Form 10-K for the nine months
ended December 25, 1998 and incorporated herein by reference.
(b) Financial Statement Schedules
<TABLE>
<CAPTION>
Schedule
Number Description of Schedule
-------- -----------------------
<C> <S>
II Valuation and Qualifying Accounts(1)
</TABLE>
--------
(1) Previously filed with the Securities and Exchange Commission as an
Exhibit to the Registrant's Transition Report on Form 10-K for the
nine months ended December 25, 1998 and incorporated herein by
reference.
All other schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission are not required under
the applicable instructions or are inapplicable and therefore have been
omitted.
Item 22. Undertakings.
(a) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to Section 15(d) of the Exchange Act) that is
incorporated by reference in the Registration Statement shall be deemed to be a
new Registration Statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(b) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter as been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
(c) The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 1l, or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the Registration Statement through
the date of responding to the request.
(d) The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the Registration Statement when it became effective.
II-8
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of
Monroeville, State of Pennsylvania, on this 22nd day of April, 1999.
THE IT GROUP, INC.
/s/ Anthony J. DeLuca
By: _________________________________
Anthony J. DeLuca
Chief Executive Officer and
President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints Anthony J. DeLuca and James G. Kirk, and
each of them, as his or her true and lawful attorney-in-fact and agent with
full power of substitution and resubstitution, for him or her and in his or her
name, place and stead, in any and all capacities, to sign any and all
amendments (including post-effective amendments) to this Registration
Statement, and to file the same, with exhibits thereto and other documents in
connection therewith, with the Securities and Exchange Commission, granting
unto said attorney-in-fact and agent full power and authority to do and perform
each and every act and thing requisite and necessary to be done in and about
the foregoing, as fully to all intents and purposes as he or she might or could
do in person, lawfully do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Daniel A. D'Aniello Chairman of the Board of April 22, 1999
____________________________________ Directors
Daniel A. D'Aniello
/s/ Anthony J. DeLuca Director, Chief Executive April 22, 1999
____________________________________ Officer and President
Anthony J. DeLuca (Principal Executive
Officer)
/s/ Richard R. Conte Vice President, Treasurer April 22, 1999
____________________________________ (Principal Financial and
Richard R. Conte Accounting Officer)
/s/ Philip B. Dolan Director April 22, 1999
____________________________________
Philip B. Dolan
/s/ E. Martin Gibson Director April 22, 1999
____________________________________
E. Martin Gibson
</TABLE>
II-9
<PAGE>
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ James C. McGill Director April 22, 1999
____________________________________
James C. McGill
/s/ Richard W. Pogue Director April 22, 1999
____________________________________
Richard W. Pogue
/s/ Robert F. Pugliese Director April 22, 1999
____________________________________
Robert F. Pugliese
/s/ Charles W. Schmidt Director April 22, 1999
____________________________________
Charles W. Schmidt
/s/ James David Watkins Director April 22, 1999
____________________________________
James David Watkins
</TABLE>
II-10
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Co-registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of
Monroeville, State of Pennsylvania, on this 22nd day of April, 1999.
ALASKA REMEDIATION SERVICES CORP.
/s/ James G. Kirk
By: _________________________________
James G. Kirk
Vice President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints James G. Kirk and Philip O. Strawbridge,
and each of them, as his or her true and lawful attorney-in-fact and agent with
full power of substitution and resubstitution, for him or her and in his or her
name, place and stead, in any and all capacities, to sign any and all
amendments (including post-effective amendments) to this Registration
Statement, and to file the same, with exhibits thereto and other documents in
connection therewith, with the Securities and Exchange Commission, granting
unto said attorney-in-fact and agent full power and authority to do and perform
each and every act and thing requisite and necessary to be done in and about
the foregoing, as fully to all intents and purposes as he or she might or could
do in person, lawfully do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Philip O. Strawbridge Sole Director, Chief April 22, 1999
____________________________________ Executive Officer and
Philip O. Strawbridge President (Principal
Executive Officer)
/s/ Richard R. Conte Treasurer (Principal April 22, 1999
____________________________________ Financial and Accounting
Richard R. Conte Officer)
</TABLE>
II-11
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Co-registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of
Monroeville, State of Pennsylvania, on this 22nd day of April, 1999.
IT CORPORATION
/s/ James G. Kirk
By: _________________________________
James G. Kirk
Vice President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints James G. Kirk and Philip O. Strawbridge,
and each of them, as his or her true and lawful attorney-in-fact and agent with
full power of substitution and resubstitution, for him or her and in his or her
name, place and stead, in any and all capacities, to sign any and all
amendments (including post-effective amendments) to this Registration
Statement, and to file the same, with exhibits thereto and other documents in
connection therewith, with the Securities and Exchange Commission, granting
unto said attorney-in-fact and agent full power and authority to do and perform
each and every act and thing requisite and necessary to be done in and about
the foregoing, as fully to all intents and purposes as he or she might or could
do in person, lawfully do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Anthony J. DeLuca Director, Chief Executive April 22, 1999
____________________________________ Officer and President
Anthony J. DeLuca (Principal Executive
Officer)
/s/ Richard R. Conte Treasurer (Principal April 22, 1999
____________________________________ Financial and Accounting
Richard R. Conte Officer)
/s/ Daniel A. D'Aniello Director April 22, 1999
____________________________________
Daniel A. D'Aniello
/s/ Philip B. Dolan Director April 22, 1999
____________________________________
Philip B. Dolan
/s/ E. Martin Gibson Director April 22, 1999
____________________________________
E. Martin Gibson
/s/ James C. McGill Director April 22, 1999
____________________________________
James C. McGill
</TABLE>
II-12
<PAGE>
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Robert F. Pugliese Director April 22, 1999
____________________________________
Robert F. Pugliese
/s/ James David Watkins Director April 22, 1999
____________________________________
James David Watkins
</TABLE>
II-13
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Co-registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of
Monroeville, State of Pennsylvania, on this 22nd day of April, 1999.
PACIFIC ENVIRONMENTAL GROUP, INC.
/s/ James G. Kirk
By: _________________________________
James G. Kirk
Vice President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints James G. Kirk and Philip O. Strawbridge,
and each of them, as his or her true and lawful attorney-in-fact and agent with
full power of substitution and resubstitution, for him or her and in his or her
name, place and stead, in any and all capacities, to sign any and all
amendments (including post-effective amendments) to this Registration
Statement, and to file the same, with exhibits thereto and other documents in
connection therewith, with the Securities and Exchange Commission, granting
unto said attorney-in-fact and agent full power and authority to do and perform
each and every act and thing requisite and necessary to be done in and about
the foregoing, as fully to all intents and purposes as he or she might or could
do in person, lawfully do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
/s/ Susan M. Willhite Director and President April 22, 1999
____________________________________ (Principal Executive Officer)
Susan M. Willhite
<S> <C> <C>
/s/ Richard R. Conte Chief Financial Officer and April 22, 1999
____________________________________ Treasurer (Principal
Richard R. Conte Financial and Accounting
Officer)
/s/ Robert K. Wenzlau Director April 22, 1999
____________________________________
Robert K. Wenzlau
/s/ Debra J. Moser Director April 22, 1999
____________________________________
Debra J. Moser
Director April , 1999
____________________________________
Erin Garner
/s/ Lance Geselbracht Director April 22, 1999
____________________________________
Lance Geselbracht
</TABLE>
II-14
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Co-registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of
Monroeville, State of Pennsylvania, on this 22nd day of April, 1999.
FLUOR DANIEL ENVIRONMENTAL
SERVICES, INC.
/s/ James G. Kirk
By: _________________________________
James G. Kirk
Vice President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints James G. Kirk and Philip O. Strawbridge,
and each of them, as his or her true and lawful attorney-in-fact and agent with
full power of substitution and resubstitution, for him or her and in his or her
name, place and stead, in any and all capacities, to sign any and all
amendments (including post-effective amendments) to this Registration
Statement, and to file the same, with exhibits thereto and other documents in
connection therewith, with the Securities and Exchange Commission, granting
unto said attorney-in-fact and agent full power and authority to do and perform
each and every act and thing requisite and necessary to be done in and about
the foregoing, as fully to all intents and purposes as he or she might or could
do in person, lawfully do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Ronald D. Conway Director, Chief Executive April 22, 1999
____________________________________ Officer and President
Ronald D. Conway (Principal Executive
Officer)
/s/ Richard R. Conte Treasurer (Principal April 22, 1999
____________________________________ Financial and Accounting
Richard R. Conte Officer)
/s/ Enzo M. Zoratto Director April 22, 1999
____________________________________
Enzo M. Zoratto
</TABLE>
II-15
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Co-registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of
Monroeville, State of Pennsylvania, on this 22nd day of April, 1999.
KATO ROAD LLC
/s/ James G. Kirk
By: _________________________________
James G. Kirk
Vice President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints James G. Kirk and Philip O. Strawbridge,
and each of them, as his or her true and lawful attorney-in-fact and agent with
full power of substitution and resubstitution, for him or her and in his or her
name, place and stead, in any and all capacities, to sign any and all
amendments (including post-effective amendments) to this Registration
Statement, and to file the same, with exhibits thereto and other documents in
connection therewith, with the Securities and Exchange Commission, granting
unto said attorney-in-fact and agent full power and authority to do and perform
each and every act and thing requisite and necessary to be done in and about
the foregoing, as fully to all intents and purposes as he or she might or could
do in person, lawfully do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ William Lynott Managing Member (Principal April 22, 1999
____________________________________ Executive Officer)
LandBank Environmental Properties
LLC by LandBank, Inc., (signed by
William Lynott, duly authorized
representative)
/s/ Richard R. Conte Treasurer (Principal April 22, 1999
____________________________________ Financial and Accounting
Richard R. Conte Officer)
/s/ Stuart Miner Managing Member April 22, 1999
_________________________________
LandBank Remediation Corporation
(signed by Stuart Miner, duly
authorized representative and sole
director)
</TABLE>
II-16
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Co-registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of
Monroeville, State of Pennsylvania, on this 22nd day of April, 1999.
JELLINEK, SCHWARTZ & CONNOLLY, INC.
/s/ James G. Kirk
By: _________________________________
James G. Kirk
Vice President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints James G. Kirk and Philip O. Strawbridge,
and each of them, as his or her true and lawful attorney-in-fact and agent with
full power of substitution and resubstitution, for him or her and in his or her
name, place and stead, in any and all capacities, to sign any and all
amendments (including post-effective amendments) to this Registration
Statement, and to file the same, with exhibits thereto and other documents in
connection therewith, with the Securities and Exchange Commission, granting
unto said attorney-in-fact and agent full power and authority to do and perform
each and every act and thing requisite and necessary to be done in and about
the foregoing, as fully to all intents and purposes as he or she might or could
do in person, lawfully do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Steven D. Jellinek Director and President April 22, 1999
____________________________________ (Principal Executive
Steven D. Jellinek Officer)
/s/ Stephen J. Connolly Director and Treasurer April 22, 1999
____________________________________ (Principal Financial and
Stephen J. Connolly Accounting Officer)
/s/ Jeffrey H. Schwartz Director April 22, 1999
____________________________________
Jeffrey H. Schwartz
</TABLE>
II-17
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Co-registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of
Monroeville, State of Pennsylvania, on this 22nd day of April, 1999.
JSC INTERNATIONAL, INC.
/s/ James G. Kirk
By: _________________________________
James G. Kirk
Vice President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints James G. Kirk and Philip O. Strawbridge,
and each of them, as his or her true and lawful attorney-in-fact and agent with
full power of substitution and resubstitution, for him or her and in his or her
name, place and stead, in any and all capacities, to sign any and all
amendments (including post-effective amendments) to this Registration
Statement, and to file the same, with exhibits thereto and other documents in
connection therewith, with the Securities and Exchange Commission, granting
unto said attorney-in-fact and agent full power and authority to do and perform
each and every act and thing requisite and necessary to be done in and about
the foregoing, as fully to all intents and purposes as he or she might or could
do in person, lawfully do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Steven D. Jellinek Director and President April 22, 1999
____________________________________ (Principal Executive
Steven D. Jellinek Officer)
/s/ Stephen J. Connolly Director and Treasurer April 22, 1999
____________________________________ (Principal Financial and
Stephen J. Connolly Accounting Officer)
/s/ Jeffrey H. Schwartz Director April 22, 1999
____________________________________
Jeffrey H. Schwartz
</TABLE>
II-18
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Co-registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of
Monroeville, State of Pennsylvania, on this 22nd day of April, 1999.
GROUNDWATER TECHNOLOGY, INC.
/s/ James G. Kirk
By: _________________________________
James G. Kirk
Vice President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints James G. Kirk and Philip O. Strawbridge,
and each of them, as his or her true and lawful attorney-in-fact and agent with
full power of substitution and resubstitution, for him or her and in his or her
name, place and stead, in any and all capacities, to sign any and all
amendments (including post-effective amendments) to this Registration
Statement, and to file the same, with exhibits thereto and other documents in
connection therewith, with the Securities and Exchange Commission, granting
unto said attorney-in-fact and agent full power and authority to do and perform
each and every act and thing requisite and necessary to be done in and about
the foregoing, as fully to all intents and purposes as he or she might or could
do in person, lawfully do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Anthony J. DeLuca Director, President and Chief April 22, 1999
____________________________________ Executive Officer (Principal
Anthony J. DeLuca Executive Officer)
/s/ Richard R. Conte Treasurer (Principal April 22, 1999
____________________________________ Financial and Accounting
Richard R. Conte Officer)
/s/ Philip O. Strawbridge Director April 22, 1999
____________________________________
Philip O. Strawbridge
/s/ James G. Kirk Director April 22, 1999
____________________________________
James G. Kirk
/s/ James R. Mahoney Director April 22, 1999
____________________________________
James R. Mahoney
</TABLE>
II-19
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Co-registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of
Monroeville, State of Pennsylvania, on this 22nd day of April, 1999.
LANDBANK, INC.
/s/ James G. Kirk
By: _________________________________
James G. Kirk
Vice President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints James G. Kirk and Philip O. Strawbridge,
and each of them, as his or her true and lawful attorney-in-fact and agent with
full power of substitution and resubstitution, for him or her and in his or her
name, place and stead, in any and all capacities, to sign any and all
amendments (including post-effective amendments) to this Registration
Statement, and to file the same, with exhibits thereto and other documents in
connection therewith, with the Securities and Exchange Commission, granting
unto said attorney-in-fact and agent full power and authority to do and perform
each and every act and thing requisite and necessary to be done in and about
the foregoing, as fully to all intents and purposes as he or she might or could
do in person, lawfully do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ David C. McMurty Director, Chairman of the April 22, 1999
___________________________________ Board
David C. McMurty
/s/ William P. Lynott Director, President and April 22, 1999
___________________________________ Chief Executive Officer
William P. Lynott (Principal Executive
Officer)
/s/ Richard R. Conte Treasurer (Principal April 22, 1999
___________________________________ Financial and Accounting
Richard R. Conte Officer)
/s/ Susan Hollingshead Director April 22, 1999
___________________________________
Susan Hollingshead
/s/ Stuart Miner Director April 22, 1999
___________________________________
Stuart Miner
/s/ James M. Redwine Director April 22, 1999
___________________________________
James M. Redwine
</TABLE>
II-20
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Co-registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of
Monroeville, State of Pennsylvania, on this 22nd day of April, 1999.
LANDBANK REMEDIATION CORP.
/s/ James G. Kirk
By: _________________________________
James G. Kirk
Vice President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints James G. Kirk and Philip O. Strawbridge,
and each of them, as his or her true and lawful attorney-in-fact and agent with
full power of substitution and resubstitution, for him or her and in his or her
name, place and stead, in any and all capacities, to sign any and all
amendments (including post-effective amendments) to this Registration
Statement, and to file the same, with exhibits thereto and other documents in
connection therewith, with the Securities and Exchange Commission, granting
unto said attorney-in-fact and agent full power and authority to do and perform
each and every act and thing requisite and necessary to be done in and about
the foregoing, as fully to all intents and purposes as he or she might or could
do in person, lawfully do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
/s/ Stuart Miner Sole Director, President and April 22, 1999
____________________________________ Chief Executive Officer
Stuart Miner (Principal Executive Officer)
<S> <C> <C>
/s/ Richard R. Conte Treasurer (Principal April 22, 1999
____________________________________ Financial and Accounting
Richard R. Conte Officer)
</TABLE>
II-21
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Co-registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of
Monroeville, State of Pennsylvania, on this 22nd day of April, 1999.
LANDBANK ENVIRONMENTAL
PROPERTIES LLC
/s/ James G. Kirk
By: _________________________________
James G. Kirk
Vice President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints James G. Kirk and Philip O. Strawbridge,
and each of them, as his or her true and lawful attorney-in-fact and agent with
full power of substitution and resubstitution, for him or her and in his or her
name, place and stead, in any and all capacities, to sign any and all
amendments (including post-effective amendments) to this Registration
Statement, and to file the same, with exhibits thereto and other documents in
connection therewith, with the Securities and Exchange Commission, granting
unto said attorney-in-fact and agent full power and authority to do and perform
each and every act and thing requisite and necessary to be done in and about
the foregoing, as fully to all intents and purposes as he or she might or could
do in person, lawfully do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ William P. Lynott Director, President and April 22, 1999
____________________________________ Chief Executive Officer
William P. Lynott (Principal Executive
Officer)
/s/ Richard R. Conte Treasurer (Principal April 22, 1999
____________________________________ Financial and Accounting
Richard R. Conte Officer)
/s/ Susan Hollingshead Director April 22, 1999
____________________________________
Susan Hollingshead
/s/ Stuart Miner Director April 22, 1999
____________________________________
Stuart Miner
</TABLE>
II-22
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Co-registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of
Monroeville, State of Pennsylvania, on this 22nd day of April, 1999.
IT ENVIRONMENTAL AND FACILITIES,
INC.
/s/ James G. Kirk
By: _________________________________
James G. Kirk
Vice President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints James G. Kirk and Philip O. Strawbridge,
and each of them, as his or her true and lawful attorney-in-fact and agent with
full power of substitution and resubstitution, for him or her and in his or her
name, place and stead, in any and all capacities, to sign any and all
amendments (including post-effective amendments) to this Registration
Statement, and to file the same, with exhibits thereto and other documents in
connection therewith, with the Securities and Exchange Commission, granting
unto said attorney-in-fact and agent full power and authority to do and perform
each and every act and thing requisite and necessary to be done in and about
the foregoing, as fully to all intents and purposes as he or she might or could
do in person, lawfully do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Anthony J. DeLuca Director and President April 22, 1999
____________________________________ (Principal Executive
Anthony J. DeLuca Officer)
/s/ Richard R. Conte Treasurer (Principal April 22, 1999
____________________________________ Financial and Accounting
Richard R. Conte Officer)
/s/ Daniel A. D'Aniello Director April 22, 1999
____________________________________
Daniel A. D'Aniello
/s/ Philip B. Dolan Director April 22, 1999
____________________________________
Philip B. Dolan
</TABLE>
II-23
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Co-registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of
Monroeville, State of Pennsylvania, on this 22nd day of April, 1999.
IT INTERNATIONAL INVESTMENTS, INC.
/s/ James G. Kirk
By: _________________________________
James G. Kirk
Vice President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints James G. Kirk and Philip O. Strawbridge,
and each of them, as his or her true and lawful attorney-in-fact and agent with
full power of substitution and resubstitution, for him or her and in his or her
name, place and stead, in any and all capacities, to sign any and all
amendments (including post-effective amendments) to this Registration
Statement, and to file the same, with exhibits thereto and other documents in
connection therewith, with the Securities and Exchange Commission, granting
unto said attorney-in-fact and agent full power and authority to do and perform
each and every act and thing requisite and necessary to be done in and about
the foregoing, as fully to all intents and purposes as he or she might or could
do in person, lawfully do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
/s/ James M. Redwine Sole Director, President and April 22, 1999
____________________________________ Chief Executive Officer
James M. Redwine (Principal Executive Officer)
<S> <C> <C>
/s/ Richard R. Conte Treasurer (Principal April 22, 1999
____________________________________ Financial and Accounting
Richard R. Conte Officer)
</TABLE>
II-24
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Co-registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of
Monroeville, State of Pennsylvania, on this 22nd day of April, 1999.
IT INTERNATIONAL OPERATIONS, INC.
/s/ James G. Kirk
By: _________________________________
James G. Kirk
Vice President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints James G. Kirk and Philip O. Strawbridge,
and each of them, as his or her true and lawful attorney-in-fact and agent with
full power of substitution and resubstitution, for him or her and in his or her
name, place and stead, in any and all capacities, to sign any and all
amendments (including post-effective amendments) to this Registration
Statement, and to file the same, with exhibits thereto and other documents in
connection therewith, with the Securities and Exchange Commission, granting
unto said attorney-in-fact and agent full power and authority to do and perform
each and every act and thing requisite and necessary to be done in and about
the foregoing, as fully to all intents and purposes as he or she might or could
do in person, lawfully do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Anthony J. DeLuca Sole Director and President April 22, 1999
____________________________________ (Principal Executive
Anthony J. DeLuca Officer)
/s/ Richard R. Conte Treasurer (Principal April 22, 1999
____________________________________ Financial and Accounting
Richard R. Conte Officer)
</TABLE>
II-25
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Co-registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of
Monroeville, State of Pennsylvania, on this 22nd day of April, 1999.
IT INTERNATIONAL HOLDINGS, INC.
/s/ James G. Kirk
By: _________________________________
James G. Kirk
Vice President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints James G. Kirk and Philip O. Strawbridge,
and each of them, as his or her true and lawful attorney-in-fact and agent with
full power of substitution and resubstitution, for him or her and in his or her
name, place and stead, in any and all capacities, to sign any and all
amendments (including post-effective amendments) to this Registration
Statement, and to file the same, with exhibits thereto and other documents in
connection therewith, with the Securities and Exchange Commission, granting
unto said attorney-in-fact and agent full power and authority to do and perform
each and every act and thing requisite and necessary to be done in and about
the foregoing, as fully to all intents and purposes as he or she might or could
do in person, lawfully do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Anthony J. DeLuca President (Principal April 22, 1999
____________________________________ Executive Officer)
Anthony J. DeLuca
/s/ Richard R. Conte Treasurer (Principal April 22, 1999
____________________________________ Financial and Accounting
Richard R. Conte Officer)
/s/ James M. Redwine Director April 22, 1999
____________________________________
James M. Redwine
</TABLE>
II-26
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Co-registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of
Monroeville, State of Pennsylvania, on this 22nd day of April, 1999.
IT E & C OPERATIONS, INC.
/s/ James G. Kirk
By: _________________________________
James G. Kirk
Vice President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints James G. Kirk and Philip O. Strawbridge,
and each of them, as his or her true and lawful attorney-in-fact and agent with
full power of substitution and resubstitution, for him or her and in his or her
name, place and stead, in any and all capacities, to sign any and all
amendments (including post-effective amendments) to this Registration
Statement, and to file the same, with exhibits thereto and other documents in
connection therewith, with the Securities and Exchange Commission, granting
unto said attorney-in-fact and agent full power and authority to do and perform
each and every act and thing requisite and necessary to be done in and about
the foregoing, as fully to all intents and purposes as he or she might or could
do in person, lawfully do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Alan D. Husak President (Principal April 22, 1999
____________________________________ Executive Officer)
Alan D. Husak
/s/ Richard R. Conte Chief Financial Officer and April 22, 1999
____________________________________ Treasurer (Principal
Richard R. Conte Financial and Accounting
Officer)
/s/ James M. Redwine Sole Director April 22, 1999
____________________________________
James M. Redwine
</TABLE>
II-27
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Co-registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of
Monroeville, State of Pennsylvania, on this 22nd day of April, 1999.
IT C & V OPERATIONS, INC.
/s/ James G. Kirk
By: _________________________________
James G. Kirk
Vice President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints James G. Kirk and Philip O. Strawbridge,
and each of them, as his or her true and lawful attorney-in-fact and agent with
full power of substitution and resubstitution, for him or her and in his or her
name, place and stead, in any and all capacities, to sign any and all
amendments (including post-effective amendments) to this Registration
Statement, and to file the same, with exhibits thereto and other documents in
connection therewith, with the Securities and Exchange Commission, granting
unto said attorney-in-fact and agent full power and authority to do and perform
each and every act and thing requisite and necessary to be done in and about
the foregoing, as fully to all intents and purposes as he or she might or could
do in person, lawfully do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ James R. Mahoney Sole Director and President April 22, 1999
____________________________________ (Principal Executive
James R. Mahoney Officer)
/s/ Richard R. Conte Treasurer (Principal April 22, 1999
____________________________________ Financial and Accounting
Richard R. Conte Officer)
</TABLE>
II-28
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Co-registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of
Monroeville, State of Pennsylvania, on this 22nd day of April, 1999.
IT INVESTMENT HOLDINGS, INC.
/s/ James G. Kirk
By: _________________________________
James G. Kirk
Vice President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints James G. Kirk and Philip O. Strawbridge,
and each of them, as his or her true and lawful attorney-in-fact and agent with
full power of substitution and resubstitution, for him or her and in his or her
name, place and stead, in any and all capacities, to sign any and all
amendments (including post-effective amendments) to this Registration
Statement, and to file the same, with exhibits thereto and other documents in
connection therewith, with the Securities and Exchange Commission, granting
unto said attorney-in-fact and agent full power and authority to do and perform
each and every act and thing requisite and necessary to be done in and about
the foregoing, as fully to all intents and purposes as he or she might or could
do in person, lawfully do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ James R. Mahoney President (Principal April 22, 1999
____________________________________ Executive Officer)
James R. Mahoney
/s/ Richard R. Conte Treasurer (Principal April 22, 1999
____________________________________ Financial and Accounting
Richard R. Conte Officer)
/s/ Anthony J. DeLuca Sole Director April 22, 1999
____________________________________
Anthony J. DeLuca
</TABLE>
II-29
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Co-registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of
Monroeville, State of Pennsylvania, on this 22nd day of April, 1999.
GCAP SERVICES, INC.
/s/ James G. Kirk
By: _________________________________
James G. Kirk
Vice President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints James G. Kirk and Philip O. Strawbridge,
and each of them, as his or her true and lawful attorney-in-fact and agent with
full power of substitution and resubstitution, for him or her and in his or her
name, place and stead, in any and all capacities, to sign any and all
amendments (including post-effective amendments) to this Registration
Statement, and to file the same, with exhibits thereto and other documents in
connection therewith, with the Securities and Exchange Commission, granting
unto said attorney-in-fact and agent full power and authority to do and perform
each and every act and thing requisite and necessary to be done in and about
the foregoing, as fully to all intents and purposes as he or she might or could
do in person, lawfully do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Edward Salcedo, Jr. President (Principal April 22, 1999
____________________________________ Executive Officer)
Edward Salcedo, Jr.
/s/ Richard R. Conte Chief Financial Officer and April 22, 1999
____________________________________ Treasurer (Principal
Richard R. Conte Financial and Accounting
Officer)
/s/ James R. Mahoney Sole Director April 22, 1999
____________________________________
James R. Mahoney
</TABLE>
II-30
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Co-registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of
Monroeville, State of Pennsylvania, on this 22nd day of April, 1999.
IT KOREA SERVICES, INC.
/s/ James G. Kirk
By: _________________________________
James G. Kirk
Vice President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints James G. Kirk and Philip O. Strawbridge,
and each of them, as his or her true and lawful attorney-in-fact and agent with
full power of substitution and resubstitution, for him or her and in his or her
name, place and stead, in any and all capacities, to sign any and all
amendments (including post-effective amendments) to this Registration
Statement, and to file the same, with exhibits thereto and other documents in
connection therewith, with the Securities and Exchange Commission, granting
unto said attorney-in-fact and agent full power and authority to do and perform
each and every act and thing requisite and necessary to be done in and about
the foregoing, as fully to all intents and purposes as he or she might or could
do in person, lawfully do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ David L. Hill President (Principal April 22, 1999
____________________________________ Executive Officer)
David L. Hill
/s/ Richard R. Conte Treasurer (Principal April 22, 1999
____________________________________ Financial and Accounting
Richard R. Conte Officer)
/s/ James M. Redwine Sole Director April 22, 1999
____________________________________
James M. Redwine
</TABLE>
II-31
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Co-registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of
Monroeville, State of Pennsylvania, on this 22nd day of April, 1999.
IT JAPAN SERVICES, INC.
/s/ James G. Kirk
By: _________________________________
James G. Kirk
Vice President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints James G. Kirk and Philip O. Strawbridge,
and each of them, as his or her true and lawful attorney-in-fact and agent with
full power of substitution and resubstitution, for him or her and in his or her
name, place and stead, in any and all capacities, to sign any and all
amendments (including post-effective amendments) to this Registration
Statement, and to file the same, with exhibits thereto and other documents in
connection therewith, with the Securities and Exchange Commission, granting
unto said attorney-in-fact and agent full power and authority to do and perform
each and every act and thing requisite and necessary to be done in and about
the foregoing, as fully to all intents and purposes as he or she might or could
do in person, lawfully do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ David L. Hill President (Principal April 22, 1999
____________________________________ Executive Officer)
David L. Hill
/s/ Richard R. Conte Treasurer (Principal April 22, 1999
____________________________________ Financial and Accounting
Richard R. Conte Officer)
/s/ James M. Redwine Sole Director April 22, 1999
____________________________________
James M. Redwine
</TABLE>
II-32
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Co-registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of
Monroeville, State of Pennsylvania, on this 22nd day of April, 1999.
PHR ENVIRONMENTAL CONSULTANTS, INC.
/s/ James G. Kirk
By: _________________________________
James G. Kirk
Vice President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints James G. Kirk and Philip O. Strawbridge,
and each of them, as his or her true and lawful attorney-in-fact and agent with
full power of substitution and resubstitution, for him or her and in his or her
name, place and stead, in any and all capacities, to sign any and all
amendments (including post-effective amendments) to this Registration
Statement, and to file the same, with exhibits thereto and other documents in
connection therewith, with the Securities and Exchange Commission, granting
unto said attorney-in-fact and agent full power and authority to do and perform
each and every act and thing requisite and necessary to be done in and about
the foregoing, as fully to all intents and purposes as he or she might or could
do in person, lawfully do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ David C. McMurty President (Principal April 22, 1999
____________________________________ Executive Officer)
David C. McMurty
/s/ Richard R. Conte Treasurer (Principal April 22, 1999
____________________________________ Financial and Accounting
Richard R. Conte Officer)
/s/ Ronald D. Conway Sole Director April 22, 1999
____________________________________
Ronald D. Conway
</TABLE>
II-33
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Co-registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of
Monroeville, State of Pennsylvania, on this 22nd day of April, 1999.
NORTHEAST RESTORATION COMPANY, LLC
/s/ James G. Kirk
By: _________________________________
James G. Kirk
Vice President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints James G. Kirk and Philip O. Strawbridge,
and each of them, as his or her true and lawful attorney-in-fact and agent with
full power of substitution and resubstitution, for him or her and in his or her
name, place and stead, in any and all capacities, to sign any and all
amendments (including post-effective amendments) to this Registration
Statement, and to file the same, with exhibits thereto and other documents in
connection therewith, with the Securities and Exchange Commission, granting
unto said attorney-in-fact and agent full power and authority to do and perform
each and every act and thing requisite and necessary to be done in and about
the foregoing, as fully to all intents and purposes as he or she might or could
do in person, lawfully do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ William Lynott Managing Member (Principal April 22, 1999
____________________________________ Executive Officer)
LandBank Environmental Properties
LLC by LandBank, Inc., (signed by
William Lynott, duly authorized
representative)
/s/ Richard R. Conte Treasurer (Principal April 22, 1999
____________________________________ Financial and Accounting
Richard R. Conte Officer)
</TABLE>
II-34
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Co-registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of
Monroeville, State of Pennsylvania, on this 22nd day of April, 1999.
EMPIRE STATE I, LLC
/s/ James G. Kirk
By: _________________________________
James G. Kirk
Vice President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints James G. Kirk and Philip O. Strawbridge,
and each of them, as his or her true and lawful attorney-in-fact and agent with
full power of substitution and resubstitution, for him or her and in his or her
name, place and stead, in any and all capacities, to sign any and all
amendments (including post-effective amendments) to this Registration
Statement, and to file the same, with exhibits thereto and other documents in
connection therewith, with the Securities and Exchange Commission, granting
unto said attorney-in-fact and agent full power and authority to do and perform
each and every act and thing requisite and necessary to be done in and about
the foregoing, as fully to all intents and purposes as he or she might or could
do in person, lawfully do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ William Lynott Managing Member (Principal April 22, 1999
____________________________________ Executive Officer)
LandBank Environmental Properties
LLC by LandBank, Inc., (signed by
William Lynott, duly authorized
representative)
/s/ Richard R. Conte Treasurer (Principal April 22, 1999
____________________________________ Financial and Accounting
Richard R. Conte Officer)
</TABLE>
II-35
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Co-registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of
Monroeville, State of Pennsylvania, on this 22nd day of April, 1999.
EMPIRE STATE II, LLC
/s/ James G. Kirk
By: _________________________________
James G. Kirk
Vice President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints James G. Kirk and Philip O. Strawbridge,
and each of them, as his or her true and lawful attorney-in-fact and agent with
full power of substitution and resubstitution, for him or her and in his or her
name, place and stead, in any and all capacities, to sign any and all
amendments (including post-effective amendments) to this Registration
Statement, and to file the same, with exhibits thereto and other documents in
connection therewith, with the Securities and Exchange Commission, granting
unto said attorney-in-fact and agent full power and authority to do and perform
each and every act and thing requisite and necessary to be done in and about
the foregoing, as fully to all intents and purposes as he or she might or could
do in person, lawfully do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ William Lynott Managing Member (Principal April 22, 1999
____________________________________ Executive Officer)
LandBank Environmental Properties
LLC by LandBank, Inc., (signed by
William Lynott, duly authorized
representative)
/s/ Richard R. Conte Treasurer (Principal April 22, 1999
____________________________________ Financial and Accounting
Richard R. Conte Officer)
</TABLE>
II-36
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Co-registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of
Monroeville, State of Pennsylvania, on this 22nd day of April, 1999.
THE DORCHESTER GROUP, LLC
/s/ James G. Kirk
By: _________________________________
James G. Kirk
Vice President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints James G. Kirk and Philip O. Strawbridge,
and each of them, as his or her true and lawful attorney-in-fact and agent with
full power of substitution and resubstitution, for him or her and in his or her
name, place and stead, in any and all capacities, to sign any and all
amendments (including post-effective amendments) to this Registration
Statement, and to file the same, with exhibits thereto and other documents in
connection therewith, with the Securities and Exchange Commission, granting
unto said attorney-in-fact and agent full power and authority to do and perform
each and every act and thing requisite and necessary to be done in and about
the foregoing, as fully to all intents and purposes as he or she might or could
do in person, lawfully do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ William Lynott Managing Member (Principal April 22, 1999
____________________________________ Executive Officer)
LandBank Environmental Properties
LLC by LandBank, Inc., (signed by
William Lynott, duly authorized
representative)
/s/ Richard R. Conte Treasurer (Principal April 22, 1999
____________________________________ Financial and Accounting
Richard R. Conte Officer)
</TABLE>
II-37
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Co-registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of
Monroeville, State of Pennsylvania, on this 22nd day of April, 1999.
37-02 COLLEGE POINT BOULEVARD, LLC
/s/ James G. Kirk
By: _________________________________
James G. Kirk
Vice President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints James G. Kirk and Philip O. Strawbridge,
and each of them, as his or her true and lawful attorney-in-fact and agent with
full power of substitution and resubstitution, for him or her and in his or her
name, place and stead, in any and all capacities, to sign any and all
amendments (including post-effective amendments) to this Registration
Statement, and to file the same, with exhibits thereto and other documents in
connection therewith, with the Securities and Exchange Commission, granting
unto said attorney-in-fact and agent full power and authority to do and perform
each and every act and thing requisite and necessary to be done in and about
the foregoing, as fully to all intents and purposes as he or she might or could
do in person, lawfully do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ William Lynott Managing Member (Principal April 22, 1999
____________________________________ Executive Officer)
LandBank Environmental Properties
LLC by LandBank, Inc., (signed by
William Lynott, duly authorized
representative)
/s/ Richard R. Conte Treasurer (Principal April 22, 1999
____________________________________ Financial and Accounting
Richard R. Conte Officer)
</TABLE>
II-38
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Co-registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of
Monroeville, State of Pennsylvania, on this 22nd day of April, 1999.
GRADIENT CORPORATION
/s/ James G. Kirk
By: _________________________________
James G. Kirk
Vice President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints James G. Kirk and Philip O. Strawbridge,
and each of them, as his or her true and lawful attorney-in-fact and agent with
full power of substitution and resubstitution, for him or her and in his or her
name, place and stead, in any and all capacities, to sign any and all
amendments (including post-effective amendments) to this Registration
Statement, and to file the same, with exhibits thereto and other documents in
connection therewith, with the Securities and Exchange Commission, granting
unto said attorney-in-fact and agent full power and authority to do and perform
each and every act and thing requisite and necessary to be done in and about
the foregoing, as fully to all intents and purposes as he or she might or could
do in person, lawfully do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Neil S. Shifrin President (Principal April 22, 1999
____________________________________ Executive Officer)
Neil S. Shifrin
/s/ Richard R. Conte Treasurer (Principal April 22, 1999
____________________________________ Financial and Accounting
Richard R. Conte Officer)
/s/ Joseph K. Register, Jr. Sole Director April 22, 1999
____________________________________
Joseph K. Register, Jr.
</TABLE>
II-39
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Co-registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of
Monroeville, State of Pennsylvania, on this 22nd day of April, 1999.
IT CORPORATION OF NORTH CAROLINA,
INC.
/s/ James G. Kirk
By: _________________________________
James G. Kirk
Vice President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints James G. Kirk and Philip O. Strawbridge,
and each of them, as his or her true and lawful attorney-in-fact and agent with
full power of substitution and resubstitution, for him or her and in his or her
name, place and stead, in any and all capacities, to sign any and all
amendments (including post-effective amendments) to this Registration
Statement, and to file the same, with exhibits thereto and other documents in
connection therewith, with the Securities and Exchange Commission, granting
unto said attorney-in-fact and agent full power and authority to do and perform
each and every act and thing requisite and necessary to be done in and about
the foregoing, as fully to all intents and purposes as he or she might or could
do in person, lawfully do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Richard L. Giannelli Director, President and Chief April 22, 1999
____________________________________ Executive Officer (Principal
Richard L. Giannelli Executive Officer)
/s/ Richard R. Conte Treasurer (Principal April 22, 1999
____________________________________ Financial and Accounting
Richard R. Conte Officer)
/s/ Anthony J. DeLuca Director April 22, 1999
____________________________________
Anthony J. DeLuca
</TABLE>
II-40
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Co-registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of
Monroeville, State of Pennsylvania, on this 22nd day of April, 1999.
OHM CORPORATION
/s/ James G. Kirk
By: _________________________________
James G. Kirk
Vice President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints James G. Kirk and Philip O. Strawbridge,
and each of them, as his or her true and lawful attorney-in-fact and agent with
full power of substitution and resubstitution, for him or her and in his or her
name, place and stead, in any and all capacities, to sign any and all
amendments (including post-effective amendments) to this Registration
Statement, and to file the same, with exhibits thereto and other documents in
connection therewith, with the Securities and Exchange Commission, granting
unto said attorney-in-fact and agent full power and authority to do and perform
each and every act and thing requisite and necessary to be done in and about
the foregoing, as fully to all intents and purposes as he or she might or could
do in person, lawfully do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Anthony J. DeLuca Director, President and April 22, 1999
____________________________________ Chief Executive Officer
Anthony J. DeLuca (Principal Executive
Officer)
/s/ Richard R. Conte Treasurer (Principal April 22, 1999
____________________________________ Financial and Accounting
Richard R. Conte Officer)
/s/ Daniel A. D'Aniello Director April 22, 1999
____________________________________
Daniel A. D'Aniello
/s/ Philip B. Dolan Director April 22, 1999
____________________________________
Philip B. Dolan
/s/ Richard W. Pogue Director April 22, 1999
____________________________________
Richard W. Pogue
/s/ Charles W. Schmidt Director April 22, 1999
____________________________________
Charles W. Schmidt
</TABLE>
II-41
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Co-registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of
Monroeville, State of Pennsylvania, on this 22nd day of April, 1999.
OHM REMEDIATION SERVICES CORP.
/s/ James G. Kirk
By: _________________________________
James G. Kirk
Vice President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints James G. Kirk and Philip O. Strawbridge,
and each of them, as his or her true and lawful attorney-in-fact and agent with
full power of substitution and resubstitution, for him or her and in his or her
name, place and stead, in any and all capacities, to sign any and all
amendments (including post-effective amendments) to this Registration
Statement, and to file the same, with exhibits thereto and other documents in
connection therewith, with the Securities and Exchange Commission, granting
unto said attorney-in-fact and agent full power and authority to do and perform
each and every act and thing requisite and necessary to be done in and about
the foregoing, as fully to all intents and purposes as he or she might or could
do in person, lawfully do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Anthony J. DeLuca Director, President and Chief April 22, 1999
____________________________________ Executive Officer (Principal
Anthony J. DeLuca Executive Officer)
/s/ Richard R. Conte Treasurer (Principal April 22, 1999
____________________________________ Financial and Accounting
Richard R. Conte Officer)
/s/ Raymond J. Pompe Director April 22, 1999
____________________________________
Raymond J. Pompe
/s/ Philip O. Strawbridge Director April 22, 1999
____________________________________
Philip O. Strawbridge
</TABLE>
II-42
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of
Monroeville, State of Pennsylvania, on this 22nd day of April, 1999.
IT-TULSA HOLDINGS, INC.
/s/ James G. Kirk
By: _________________________________
James G. Kirk
Vice President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints James G. Kirk and Philip O. Strawbridge,
and each of them, as his or her true and lawful attorney-in-fact and agent with
full power of substitution and resubstitution, for him or her and in his or her
name, place and stead, in any and all capacities, to sign any and all
amendments (including post-effective amendments) to this Registration
Statement, and to file the same, with exhibits thereto and other documents in
connection therewith, with the Securities and Exchange Commission, granting
unto said attorney-in-fact and agent full power and authority to do and perform
each and every act and thing requisite and necessary to be done in and about
the foregoing, as fully to all intents and purposes as he or she might or could
do in person, lawfully do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Anthony J. DeLuca Sole Director and President April 22, 1999
____________________________________ (Principal Executive
Anthony J. DeLuca Officer)
/s/ Richard R. Conte Treasurer (Principal April 22, 1999
____________________________________ Financial and Accounting
Richard R. Conte Officer)
</TABLE>
II-43
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Co-registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of
Monroeville, State of Pennsylvania, on this 22nd day of April, 1999.
SIELKEN, INC.
/s/ James G. Kirk
By: _________________________________
James G. Kirk
Vice President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints James G. Kirk and Philip O. Strawbridge,
and each of them, as his or her true and lawful attorney-in-fact and agent with
full power of substitution and resubstitution, for him or her and in his or her
name, place and stead, in any and all capacities, to sign any and all
amendments (including post-effective amendments) to this Registration
Statement, and to file the same, with exhibits thereto and other documents in
connection therewith, with the Securities and Exchange Commission, granting
unto said attorney-in-fact and agent full power and authority to do and perform
each and every act and thing requisite and necessary to be done in and about
the foregoing, as fully to all intents and purposes as he or she might or could
do in person, lawfully do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Robert L. Sielken, Jr. Director, President and Chief April 22, 1999
____________________________________ Executive Officer (Principal
Robert L. Sielken, Jr. Executive Officer)
/s/ Richard R. Conte Treasurer (Principal April 22, 1999
____________________________________ Financial and Accounting
Richard R. Conte Officer)
/s/ Robert F. Campbell Director April 22, 1999
____________________________________
Robert F. Campbell
/s/ Stephen J. Connolly Director April 22, 1999
____________________________________
Stephen J. Connolly
</TABLE>
II-44
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Co-registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of
Monroeville, State of Pennsylvania, on this 22nd day of April, 1999.
BENECO ENTERPRISES, INC.
/s/ James G. Kirk
By: _________________________________
James G. Kirk
Vice President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints James G. Kirk and Philip O. Strawbridge,
and each of them, as his or her true and lawful attorney-in-fact and agent with
full power of substitution and resubstitution, for him or her and in his or her
name, place and stead, in any and all capacities, to sign any and all
amendments (including post-effective amendments) to this Registration
Statement, and to file the same, with exhibits thereto and other documents in
connection therewith, with the Securities and Exchange Commission, granting
unto said attorney-in-fact and agent full power and authority to do and perform
each and every act and thing requisite and necessary to be done in and about
the foregoing, as fully to all intents and purposes as he or she might or could
do in person, lawfully do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Bennie Smith, Jr. Director and President April 22, 1999
____________________________________ (Principal Executive Officer)
Bennie Smith, Jr.
/s/ Richard R. Conte Treasurer (Principal April 22, 1999
____________________________________ Financial and Accounting
Richard R. Conte Officer)
/s/ Robert Newberry Director April 22, 1999
____________________________________
Robert Newberry
/s/ Raymond J. Pompe Director April 22, 1999
____________________________________
Raymond J. Pompe
/s/ Philip O. Strawbridge Director April 22, 1999
____________________________________
Philip O. Strawbridge
/s/ Enzo Zoratto Director April 22, 1999
____________________________________
Enzo Zoratto
</TABLE>
II-45
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
No. Description
-------- -----------
<C> <S>
3.1 Certificate of Incorporation of the Registrant as amended by
Amendment to Certificate of Incorporation filed September 17, 1987
with the Delaware Secretary of State(l) and amended by Certificate
of Amendment to Certificate of Incorporation filed June 19, 1998
with the Delaware Secretary of State(2) and by Certificate of
Amendment of Certificate of Incorporation, dated as of December
21, 1998, filed with the Delaware Secretary of State on December
23, 1998.(3)
3.2 Amended and Restated Bylaws of the Registrant as amended through
June 12, 1998.(2)
3.3-3.70 Articles of incorporation and by-laws, or instruments corresponding
thereto, as currently in effect and any amendments thereto of the
Co-Registrants.*
4.1 Certificate of Designations with respect to the Registrant's 7%
Cumulative Convertible Exchangeable Preferred Stock, $100 par
value.(4)
4.2 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.(5)
4.3 Indenture for the Registrant's 7% Convertible Subordinated
Debentures Due 2008.(4)
4.4 Indenture dated as of October 1, 1986 between OHM Corporation and
United States Trust Company of New York, as Trustee, relating to
OHM Corporation's 8% Convertible Subordinated Debentures due
October 1, 2006.(6)
4.5 Specimen Debenture Certificate.(7)
4.6 First Supplemental Indenture dated as of May 20, 1994 by and among
OHM Corporation and United States Trust Company of New York.(8)
4.7 Second Supplemental Indenture dated as of June 11, 1998 among OHM
Corporation, the Registrant, as guarantor, and United States Trust
Company of New York.(2)
4.8 Indenture dated as of April 9, 1999 among the Registrant, the
Guarantors and The Bank of New York, as Trustee, relating to the
Registrant's 11 1/4% Senior Subordinated Notes due 2009.
5.1 Opinion of Gibson, Dunn & Crutcher LLP.
10.1 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, N.A., in its capacity as documentation agent.(9)
10.2 First Amendment dated September 16, 1998 to the 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, N.A., in its
capacity as documentation agent.(10)
10.3 Second Amendment dated October 26, 1998 to the 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. N.A., in its capacity as
documentation agent.(10)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit
No. Description
------- -----------
<C> <S>
10.4 Third Amendment dated March 5, 1999 to the Amended and Restated
Credit Agreement, dated as of June II, 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, N.A., in its capacity as
documentation agent.
10.5 Agreement and Plan of Merger, dated as of January 15, 1998, among
OHM Corporation, the Registrant and IT-Ohio, Inc.(11)
10.6 Parent Voting Agreement dated January 15, 1998 among OHM
Corporation, the Registrant and the stockholders of Registrant
named therein.(11)
10.7 Company Voting Agreement dated January 15, 1998 among OHM
Corporation, the Registrant and the shareholders of OHM Corporation
named therein.(11)
10.8 Option Termination Agreement dated January 15, 1998 between James L.
Kirk and OHM Corporation.(11)
10.9 Share Repurchase Agreement dated January 15, 1998 among OHM
Corporation, the Registrant, Rust International, Inc. and Waste
Management, Inc.(11)
10.10 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.(12)
10.11 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.(13)
10.12 Agreement and Plan of Merger, dated as of October 27, 1998, among
Fluor Daniel GTI, Inc., Tiger Acquisition Corporation and the
Registrant.(10)
10.13 Amended and Restated Marketing Agreement dated as of October 27,
1998 between Fluor Daniel GTI, Inc. and Fluor Daniel, Inc.(10)
10.14 Intercompany Services Agreement dated October 27, 1998 between the
Registrant, Fluor Daniel, Inc. and Fluor Daniel GTI, Inc.(10)
10.15 Share Purchase Agreement dated February 5, 1999 by and between the
Shareholders of Roche Limited, Consulting Group, IT Holdings
Canada, Inc. and the Registrant.(35)
10.16 Asset Purchase Agreement, dated as of March 8, 1999, between the
Registrant and ICF Kaiser International, Inc.(14)
10.17 Purchase Agreement among the Registrant, the subsidiary guarantors
signatory thereto, Donaldson, Lufkin & Jenrette Securities
Corporation and Salomon Smith Barney, dated as of April 6, 1999.
10.18 Registration Rights Agreement among the Registrant, the subsidiary
guarantors signatory thereto, Donaldson, Lufkin & Jenrette
Securities Corporation and Salomon Smith Barney, dated as of April
9, 1999.
10.19 Stock Redemption Agreement dated as of June 26, 1998, between
Quanterra Incorporated, the Registrant and IT Corporation.(15)
10.20 Securities Purchase Agreement dated as of August 28, 1996 between
the Registrant and certain Purchasers identified therein affiliated
with The Carlyle Group(5), including agreement by and between The
Carlyle Group and the Registrant re financial advisory and
investment banking fees.(16)
10.21 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.(17)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit
No. Description
------- -----------
<C> <S>
10.22 Form of Warrant Agreement by and among the Registrant and certain
Warrant Holders defined therein affiliated with The Carlyle Group,
dated as of November 20, 1996.(5)
10.23 Form of registration rights agreement by and among the Registrant
and certain Investors affiliated with The Carlyle Group, dated
November 20, 1996(5)
10.24 Master Loan and Security Agreement dated May 11, 1993, between OHM
Remediation Services Corp. and BOT Financial Corporation.(18)
10.25 Amendment No. 1 to Master Loan and Security Agreement dated as of
January 19, 1995 between BOT Financial Corporation and OHM
Remediation Services Corp.(19)
10.26 Promissory Note dated December 23, 1993 executed by OHM Remediation
Services Corp. in favor of BOT Financial Corporation.(20)
10.27 Promissory Note dated December 28, 1994 executed by OHM Remediation
Services Corp. in favor of BOT Financial Corporation.(8)
10.28 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.(21)
10.29 Promissory Note dated August 31, 1994 executed by OHM Remediation
Services Corp. in favor of Internationale Nederlanden Lease
Structured Finance B.V.(21)
10.30 Continuing Corporate Guaranty dated as of August 1, 1994 executed by
OHM Corporation in favor of Internationale Nederlanden Lease
Structured Finance B.V.(21)
10.31 Non-Employee Directors' Retirement Plan, as amended and restated
June 2, 1994(22)(23), as amended by the Amended and Restated Non-
Employee Directors Retirement Plan, Amendment No. 5, dated November
20, 1996.(22)(16)
10.32 Description of the Special Turn-a-Round Plan (Fiscal Year 1995
Management Incentive Plan) of the Registrant.(22)(24)
10.33 1983 Stock Incentive Plan, as amended.(22)(25)
10.34 1991 Stock Incentive Plan(22)(26) as modified by waiver dated
November 20, 1996, by certain former Non-Employee Directors, in
favor of the Registrant.(16)(22)
10.35 Form of Amendment dated October 23, 1998, to the Restricted Stock
and Escrow Agreement under the Registrant's 1991 Stock Incentive
Plan.(22)(27)
10.36 1996 Stock Incentive Plan, as amended and restated effective June
11, 1998.(22)(28)
10.37 OHM Corporation 1986 Stock Option Plan, as amended and restated as
of May 10, 1994.(22)(29)
10.38 OHM Corporation Nonqualified Stock Option Plan for
Directors.(22)(30)
10.39 OHM Corporation Directors' Deferred Fee Plan.(8)(22)
10.40 Amendment No. 1 to OHM Corporation Directors' Deferred Fee
Plan.(19)(22)
10.41 OHM Corporation Retirement Savings Plan, as amended and restated as
of January 1, 1994.(8)(22)
10.42 Amendment No. 1 to OHM Corporation Retirement Savings Plan, as
amended and restated as of January 1, 1994.(19)(22)
10.43 Amendment No. 2 to OHM Corporation Retirement Savings Plan, as
amended and restated as of January 1, 1994.(22)(31)
10.44 OHM Corporation Retirement Savings Plan Trust Agreement between OHM
Corporation and National City Bank, as Trustee, as amended and
restated effective July 1, 1994.(8)(22)
10.45 Fiscal Year 1997 Management Incentive Plan.(16)(22)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit
No. Description
------- -----------
<C> <S>
10.46 Fiscal Year 1998 Management Incentive Plan.(16)(22)
10.47 Retirement Agreement dated March 3, 1994 between Murray H. Hutchison
and the Registrant (24)(22) as amended by First Amendment dated
January 6, 1995 to the Retirement Agreement dated March 3, 1994
between Murray H. Hutchison and the Registrant.(22)(32)
10.48 Retirement Plan of IT, 1993 Restatement.(22)(24)
10.49 Amendment Number One to IT Corporation Retirement Plan, dated as of
July 1, 1995.(22)(33)
10.50 Amendment Number Two to IT Corporation Retirement Plan, dated as of
October 1, 1995.(22)(33)
10.51 Amendment Number Three to IT Corporation Retirement Plan, dated as
of July 15, 1996.(22)(34)
10.52 Amendment Number Four to IT Corporation Retirement Plan, dated as of
February 1, 1997.(16)(22)
10.53 Amendment Number Five to IT Corporation Retirement Plan, dated as of
May 13, 1997.(16)(22)
10.54 Amendment Number Six to IT Corporation Retirement Plan dated as of
May 27, 1998.(2)(22)
10.55 Amendment Number Seven to IT Corporation Retirement plan dated as of
December 31, 1998.(22)
10.56 Executive Stock Purchase Interest Reimbursement Plan, approved
September 6, 1995.(22)(26)
10.57 Executive/Directors Deferred Compensation Plan, effective January 1,
1996.(22)(26)
10.58 Executive Restoration Plan, effective July 1, 1995 as amended
through May 13, 1997.(22)(26)
10.59 IT Corporation Deferred Compensation Plan (amended and restated
effective January 1, 1998).(2)(22)
10.60 IT Corporation Restoration Plan amended and restated effective
January 1, 1998.(2)(22)
10.61 1997 The IT Group, Inc. Non-Employee Directors Stock Plan--Director
Fees, dated as of February 26, 1997.(22)(34)
10.62 Employment Agreement, dated as of November 20, 1996, by and between
the Registrant, IT Corporation, and Anthony J. DeLuca.(16)(22)
10.63 Separation Agreement, dated as of April 10, 1998, by and between the
Registrant, its subsidiaries and affiliates, and Franklin E.
Coffman.(2)(22)
10.64 Employment Agreement, dated as of November 20, 1996, by and between
the Registrant, IT Corporation, and James R. Mahoney.(16)(22)
10.65 Employment Agreement, dated as of November 20, 1996, by and between
the Registrant, IT Corporation, and Raymond J. Pompe.(16)(22)
10.66 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.(2)(22)
10.67 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.(2)(22)
10.68 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.(2)(22)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit
No. Description
------- -----------
<C> <S>
10.69 Form of Employment Agreement by and between OHM Corporation, and each
of Pamela K.M. Beall, Robert I. 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.(2)(22)
10.70 The IT Group, Inc. Severance and Retention Bonus Plan dated March 5,
1998.(2)(22)
10.71 Executive Stock Ownership Program by and between the Registrant and
certain executive officers of the Registrant.(22)
10.72 The IT Group, Inc. Executive Bonus Plan effective November 17, 1998
(22)
21.1 List of Subsidiaries of the Registrant.(35)
23.1 Consent of Gibson, Dunn & Crutcher LLP (included in Exhibit 5.1).
23.2 Consent of Ernst & Young LLP, independent auditors.
23.3 Consent of PricewaterhouseCoopers LLP, independent accountants.
23.4 Consent of Mallette Maheu General Partnership Chartered Accountants.
24.1 Power of Attorney (included on the signature pages hereto).
25.1 Statement of Eligibility and Qualification of The Bank of New York on
Form T-1.
99.1 Form of Letter of Transmittal.*
99.2 Form of Notice of Guaranteed Delivery.*
99.3 Form of Letter to Clients.*
99.4 Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies
and Other Nominees.*
</TABLE>
- --------
* To be filed by amendment.
(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 Annual Report on Form 10-K for the year ended March
27, 1998 and incorporated herein by reference.
(3) Previously filed with the Securities and Exchange Commission as an Exhibit
to the Registrant's Current Report on Form 8-K dated December 23, 1998 and
incorporated herein by reference.
(4) 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.
(5) Previously filed with the Securities and Exchange Commission as an Exhibit
to the Registrant's Current Report on Form 8-K dated September 20, 1996
and incorporated herein 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, 1986 and incorporated herein by reference.
(7) Previously filed with the Securities and Exchange Commission as an Exhibit
to OHM Corporation's Amendment No. 1 to Registration Statement on Form S-
l, No. 33-8296 and incorporated by reference.
(8) 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.
(9) Previously filed with the Securities and Exchange Commission as an Exhibit
to Registrant's Current Report on Form 8-K dated June 11, 1998 and
incorporated herein by reference.
<PAGE>
(10) Previously filed with the Securities and Exchange Commission as an Exhibit
to the Registrant's Schedule 14D-1 dated November 3, 1998 and incorporated
herein by reference.
(11) Previously filed with the Securities and Exchange Commission as an Exhibit
to the Registrant's Report on Form 8-K dated January 15, 1998.
(12) 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.
(13) Previously filed with the Securities and Exchange Commission as an Exhibit
to OHM Corporation's Current Report on Form 8-K filed on July 2, 1997 and
incorporated herein by reference.
(14) Previously filed with the Securities and Exchange Commission as an Exhibit
to the Registrant's Annual Report on Form 8-K dated March 12, 1999 and
incorporated herein by reference.
(15) Previously filed with the Securities and Exchange Commission as an Exhibit
to the Registrant's Quarterly Report on Form l0-Q for the quarter ended
June 26, 1998 and incorporated herein by reference.
(16) Previously filed with the Securities and Exchange Commission as an Exhibit
to Registrant's Annual Report on Form 10-K for the year ended March 28,
1997.
(17) Previously filed with the Securities and Exchange Commission as an Exhibit
to the Registrant's Quarterly Report on Form l0-Q for the quarter ended
December 27, 1996 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 l0-Q for the quarter ended
June 30, 1993 and incorporated herein by reference.
(19) 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.
(20) 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, 1993 and incorporated herein by reference.
(21) Previously filed with the Securities and Exchange Commission as an Exhibit
to OHM Corporation's Quarterly Report on Form l0-Q for the quarter ended
September 30, 1994 and incorporated herein by reference.
(22) Filed as a management compensation plan or arrangement per Item 14(a)(3)
of the Securities Exchange Act.
(23) 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.
(24) 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.
(25) 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.
(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 March
29, 1996 and incorporated herein by reference.
(27) 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
September 25, 1998 and incorporated herein by reference.
(28) 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.
(29) 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.
(30) 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.
(31) 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, 1995 and incorporated herein by reference.
<PAGE>
(32) 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.
(33) 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.
(34) 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.
(35) Previously filed with the Securities and Exchange Commission as an Exhibit
to the Registrant's Transition Report on Form 10-K for the nine months
ended December 25, 1998 and incorporated herein by reference.
<PAGE>
EXHIBIT 4.8
EXECUTION COPY
- --------------------------------------------------------------------------------
THE IT GROUP, INC.
11 1/4% SENIOR SUBORDINATED NOTES DUE 2009
--------------------------
INDENTURE
Dated as of April 9, 1999
--------------------------
The Bank of New York
Trustee
---------------------------
- --------------------------------------------------------------------------------
<PAGE>
CROSS-REFERENCE TABLE*
<TABLE>
<CAPTION>
Trust Indenture
Act Section Indenture Section
<S> <C>
310(a)(1)................................................................................ 7.10
(a)(2)................................................................................ 7.10
(a)(3)................................................................................ N.A.
(a)(4)................................................................................ N.A.
(a)(5)................................................................................ 7.10
(b)................................................................................... 7.10
(c)................................................................................... N.A.
311(a)................................................................................... 7.11
(b)................................................................................... 7.11
(c)................................................................................... N.A.
312(a)................................................................................... 2.05
(b)................................................................................... 12.03
(c)................................................................................... 12.03
313(a)................................................................................... 7.06
(b)(1)................................................................................ N.A.
(b)(2)................................................................................ 7.07
(c)................................................................................... 7.06;12.02
(d)................................................................................... 7.06
314(a)................................................................................... 4.03;12.02
(b)................................................................................... N.A.
(c)(1)................................................................................ 12.04
(c)(2)................................................................................ 12.04
(c)(3)................................................................................ N.A.
(d)................................................................................... N.A.
(e)................................................................................... 12.05
(f)................................................................................... N.A.
315(a)................................................................................... 7.01
(b)................................................................................... 7.05,12.02
(c)................................................................................... 7.01
(d)................................................................................... 7.01
(e)................................................................................... 6.11
316(a)(last sentence).................................................................... 2.09
(a)(1)(A)............................................................................. 6.05
(a)(1)(B)............................................................................. 6.04
(a)(2)................................................................................ N.A.
(b)................................................................................... 6.07
(c)................................................................................... 2.12
317(a)(1)................................................................................ 6.08
(a)(2)................................................................................ 6.09
(b)................................................................................... 2.04
318(a)................................................................................... 12.01
(b)................................................................................... N.A.
(c)................................................................................... 12.01
</TABLE>
N.A. means not applicable.
* This Cross Reference Table is not part of the Indenture.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE 1. DEFINITIONS AND INCORPORATION BY REFERENCE
Section 1.01. Definitions...................................................................................... 1
Section 1.02. Other Definitions................................................................................ 15
Section 1.03. Incorporation by Reference of Trust Indenture Act................................................ 15
Section 1.04. Rules of Construction............................................................................ 15
ARTICLE 2. THE NOTES
Section 2.01. Form and Dating.................................................................................. 16
Section 2.02. Execution and Authentication..................................................................... 17
Section 2.03. Registrar and Paying Agent....................................................................... 17
Section 2.04. Paying Agent to Hold Money in Trust.............................................................. 17
Section 2.05. Holder Lists..................................................................................... 18
Section 2.06. Transfer and Exchange............................................................................ 18
Section 2.07. Replacement Notes................................................................................ 28
Section 2.08. Outstanding Notes................................................................................ 29
Section 2.09. Treasury Notes................................................................................... 29
Section 2.10. Temporary Notes.................................................................................. 29
Section 2.11. Cancellation..................................................................................... 29
Section 2.12. Defaulted Interest............................................................................... 30
Section 2.13. CUSIP Numbers.................................................................................... 30
ARTICLE 3. REDEMPTION AND PREPAYMENT
Section 3.01. Notices to Trustee............................................................................... 30
Section 3.02. Selection of Notes to Be Redeemed................................................................ 30
Section 3.03. Notice of Redemption............................................................................. 31
Section 3.04. Effect of Notice of Redemption................................................................... 31
Section 3.05. Deposit of Redemption Price...................................................................... 32
Section 3.06. Notes Redeemed in Part........................................................................... 32
Section 3.07. Optional Redemption.............................................................................. 32
Section 3.08. Mandatory Redemption............................................................................. 33
Section 3.09. Offer to Purchase................................................................................ 33
ARTICLE 4. COVENANTS
Section 4.01. Payment of Notes................................................................................. 34
Section 4.02. Maintenance of Office or Agency.................................................................. 35
Section 4.03. Reports.......................................................................................... 35
Section 4.04. Compliance Certificate........................................................................... 36
Section 4.05. Taxes............................................................................................ 36
Section 4.06. Stay, Extension and Usury Laws................................................................... 36
Section 4.07. Restricted Payments.............................................................................. 36
Section 4.08. Dividend and Other Payment Restrictions Affecting Subsidiaries................................... 38
Section 4.09. Incurrence of Indebtedness and Issuance of Preferred Stock....................................... 39
Section 4.10. Asset Sales...................................................................................... 41
Section 4.11. Transactions with Affiliates..................................................................... 42
Section 4.12. Liens............................................................................................ 43
Section 4.13. Business Activities.............................................................................. 43
Section 4.14. Corporate Existence.............................................................................. 43
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
Section 4.15. Offer to Repurchase Upon Change of Control....................................................... 43
Section 4.16. No Senior Subordinated Debt...................................................................... 44
Section 4.17. Payments for Consent............................................................................. 45
Section 4.18. Additional Subsidiary Guarantees................................................................. 45
ARTICLE 5. SUCCESSORS
Section 5.01. Merger, Consolidation, or Sale of Assets......................................................... 45
Section 5.02. Successor Corporation Substituted................................................................ 45
ARTICLE 6. DEFAULTS AND REMEDIES
Section 6.01. Events of Default................................................................................ 46
Section 6.02. Acceleration..................................................................................... 47
Section 6.03. Other Remedies................................................................................... 48
Section 6.04. Waiver of Past Defaults.......................................................................... 48
Section 6.05. Control by Majority.............................................................................. 48
Section 6.06. Limitation on Suits.............................................................................. 48
Section 6.07. Rights of Holders of Notes to Receive Payment.................................................... 49
Section 6.08. Collection Suit by Trustee....................................................................... 49
Section 6.09. Trustee May File Proofs of Claim................................................................. 49
Section 6.10. Priorities....................................................................................... 49
Section 6.11. Undertaking for Costs............................................................................ 50
ARTICLE 7. TRUSTEE
Section 7.01. Duties of Trustee................................................................................ 50
Section 7.02. Rights of Trustee................................................................................ 51
Section 7.03. Individual Rights of Trustee..................................................................... 51
Section 7.04. Trustee's Disclaimer............................................................................. 52
Section 7.05. Notice of Defaults............................................................................... 52
Section 7.06. Reports by Trustee to Holders of the Notes....................................................... 52
Section 7.07. Compensation and Indemnity....................................................................... 52
Section 7.08. Replacement of Trustee........................................................................... 53
Section 7.09. Successor Trustee by Merger, etc................................................................. 54
Section 7.10. Eligibility; Disqualification.................................................................... 54
Section 7.11. Preferential Collection of Claims Against Company................................................ 54
ARTICLE 8. LEGAL DEFEASANCE AND COVENANT DEFEASANCE
Section 8.01. Option to Effect Legal Defeasance or Covenant Defeasance......................................... 54
Section 8.02. Legal Defeasance and Discharge................................................................... 54
Section 8.03. Covenant Defeasance.............................................................................. 55
Section 8.04. Conditions to Legal or Covenant Defeasance....................................................... 55
Section 8.05. Deposited Money and Government Securities to be Held in Trust; Other Miscellaneous Provisions.... 56
Section 8.06. Repayment to Company............................................................................. 57
Section 8.07. Reinstatement.................................................................................... 57
ARTICLE 9. AMENDMENT, SUPPLEMENT AND WAIVER
Section 9.01. Without Consent of Holders of Notes.............................................................. 58
Section 9.02. With Consent of Holders of Notes................................................................. 58
Section 9.03. Compliance with Trust Indenture Act.............................................................. 60
Section 9.04. Revocation and Effect of Consents................................................................ 60
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
Section 9.05. Notation on or Exchange of Notes................................................................. 60
Section 9.06. Trustee to Sign Amendments, etc.................................................................. 60
ARTICLE 10. SUBORDINATION
Section 10.01. Agreement to Subordinate........................................................................ 60
Section 10.02. Liquidation; Dissolution; Bankruptcy............................................................ 61
Section 10.03. Default on Designated Senior Debt............................................................... 61
Section 10.04. Acceleration of Notes........................................................................... 62
Section 10.05. When Distribution Must Be Paid Over............................................................. 62
Section 10.06. Notice by Company............................................................................... 62
Section 10.07. Subrogation..................................................................................... 63
Section 10.08. Relative Rights................................................................................. 63
Section 10.09. Subordination May Not Be Impaired by Company.................................................... 63
Section 10.10. Distribution or Notice to Representative........................................................ 64
Section 10.11. Rights of Trustee and Paying Agent.............................................................. 64
Section 10.12. Authorization to Effect Subordination........................................................... 64
Section 10.13. Amendments...................................................................................... 65
ARTICLE 11. SUBSIDIARY GUARANTEES
Section 11.01. Guarantee....................................................................................... 65
Section 11.02. Subordination of Subsidiary Guarantee.......................................................... 66
Section 11.03. Limitation on Guarantor Liability............................................................... 66
Section 11.04. Execution and Delivery of Subsidiary Guarantee.................................................. 66
Section 11.05. Guarantors May Consolidate, etc., on Certain Terms.............................................. 67
Section 11.06. Releases Following Sale of Assets............................................................... 67
ARTICLE 12. MISCELLANEOUS
Section 12.01. Trust Indenture Act Controls.................................................................... 68
Section 12.02. Notices......................................................................................... 68
Section 12.03. Communication by Holders of Notes with Other Holders of Notes................................... 69
Section 12.04. Certificate and Opinion as to Conditions Precedent.............................................. 69
Section 12.05. Statements Required in Certificate or Opinion................................................... 69
Section 12.06. Rules by Trustee and Agents..................................................................... 70
Section 12.07. No Personal Liability of Directors, Officers, Employees and Stockholders........................ 70
Section 12.08. Governing Law................................................................................... 70
Section 12.09. No Adverse Interpretation of Other Agreements................................................... 70
Section 12.10. Successors...................................................................................... 70
Section 12.11. Severability.................................................................................... 70
Section 12.12. Counterpart Originals........................................................................... 70
Section 12.13. Table of Contents, Headings, etc................................................................ 71
</TABLE>
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EXHIBITS
Exhibit A FORM OF NOTE
Exhibit B FORM OF CERTIFICATE OF TRANSFER
Exhibit C FORM OF CERTIFICATE OF EXCHANGE
Exhibit D FORM OF CERTIFICATE OF ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR
Exhibit E FORM OF NOTATION OF SUBSIDIARY GUARANTEE
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INDENTURE, dated as of April 9, 1999, among The IT Group, Inc., a Delaware
corporation (the "Company"), the Guarantors listed on the signature pages hereto
and The Bank of New York, a New York banking corporation, as trustee (the
"Trustee").
The Company, the Guarantors and the Trustee agree as follows for the
benefit of each other and for the equal and ratable benefit of the Holders of
the 11 1/4% Series A Senior Subordinated Notes due 2009 (the "Series A Notes")
and the 11 1/4% Series B Senior Subordinated Notes due 2009 (the "Series B
Notes" and, together with the Series A Notes, the "Notes"):
ARTICLE 1.
DEFINITIONS AND INCORPORATION
BY REFERENCE
Section 1.01. Definitions.
"144A Global Note" means a global note substantially in the form of Exhibit
A hereto bearing the Global Note Legend and the Private Placement Legend and
deposited with or on behalf of, and registered in the name of, the Depositary or
its nominee that will be issued in a denomination equal to the outstanding
principal amount of the Series A Notes sold in reliance on Rule 144A.
"Acquired Debt" means, with respect to any specified Person, (i)
Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Subsidiary of such specified Person, whether or
not such Indebtedness is incurred in connection with, or in contemplation of,
such other Person merging with or into, or becoming a Subsidiary of, such
specified Person and (ii) Indebtedness secured by a Lien encumbering any asset
acquired by such specified Person.
"Additional Notes" means up to $175.0 million aggregate principal amount of
Notes (other than the Initial Notes) issued under this Indenture in accordance
with Sections 2.02 and 4.09 hereof, as part of the same series as the Initial
Notes.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise; provided, however,
that beneficial ownership of 10% or more of the Voting Stock of a Person shall
be deemed to be control.
"Agent" means any Registrar, Paying Agent or co-registrar.
"Applicable Procedures" means, with respect to any transfer or exchange of
or for beneficial interests in any Global Note, the rules and procedures of the
Depositary, Euroclear and Cedel that apply to such transfer or exchange.
"Bankruptcy Law" means Title 11, U.S. Code or any similar federal or state
law for the relief of debtors.
"Beneficial Owner" has the meaning assigned to such term in Rule 13d-3 and
Rule 13d-5 under the Exchange Act, except that in calculating the beneficial
ownership of any particular "person" (as that term is used in Section 13(d)(3)
of the Exchange Act), such "person" shall be deemed to have beneficial ownership
of all securities that such "person" has the right to acquire by conversion or
exercise of other
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securities, whether such right is currently exercisable or is exercisable only
upon the occurrence of a subsequent condition. The terms "Beneficially Owns" and
"Beneficially Owned" shall have a corresponding meaning.
"Board of Directors" means (i) with respect to a corporation, the board of
directors of the corporation; (ii) with respect to a partnership, the board of
directors of the general partner of the partnership; and (iii) with respect to
any other Person, the board or committee of such Person serving a similar
function.
"Broker-Dealer" has the meaning set forth in the Registration Rights
Agreement.
"Business Day" means any day other than a Legal Holiday.
"Capital Lease Obligation" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that would
at such time be required to be capitalized on a balance sheet in accordance with
GAAP.
"Capital Stock" means (i) in the case of a corporation, corporate stock;
(ii) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
corporate stock; (iii) in the case of a partnership or limited liability
company, partnership or membership interests (whether general or limited); and
(iv) any other interest or participation that confers on a Person the right to
receive a share of the profits and losses of, or distributions of assets of, the
issuing Person.
"Cash Equivalents" means (i) United States dollars; (ii) securities issued
or directly and fully guaranteed or insured by the United States government or
any agency or instrumentality thereof (provided that the full faith and credit
of the United States is pledged in support thereof) having maturities of not
more than six months from the date of acquisition; (iii) certificates of deposit
and eurodollar time deposits with maturities of six months or less from the date
of acquisition, bankers' acceptances with maturities not exceeding six months
and overnight bank deposits, in each case, with any lender party to the Credit
Agreement or with any domestic commercial bank having capital and surplus in
excess of $500.0 million and a Thompson Bank Watch Rating of "B" or better; (iv)
repurchase obligations with a term of not more than seven days for underlying
securities of the types described in clauses (ii) and (iii) above entered into
with any financial institution meeting the qualifications specified in clause
(iii) above; (v) commercial paper having the highest rating obtainable from
either Moody's Investors Service, Inc. or Standard & Poor's Ratings Services
and, in each case, maturing within six months after the date of acquisition; and
(vi) money market funds at least 95% of the assets of which constitute Cash
Equivalents of the kinds described in clauses (i) through (v) of this
definition.
"Cedel" means Cedel Bank, SA.
"Change of Control" means the occurrence of any of the following:
(i) the direct or indirect sale, transfer, conveyance or other
disposition (other than by way of merger or consolidation), in one or a
series of related transactions, of all or substantially all of the
properties or assets of the Company and its Restricted Subsidiaries taken
as a whole to any "person" (as that term is used in Section 13(d)(3) of the
Exchange Act) other than a Principal or a Related Party of a Principal;
(ii) the adoption of a plan relating to the liquidation or
dissolution of the Company;
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(iii) the consummation of any transaction (including, without
limitation, any merger or consolidation) the result of which is that any
"person" (as defined above), other than the Principals and their Related
Parties, becomes the Beneficial Owner, directly or indirectly, of more than
50% of the Voting Stock of the Company, measured by voting power rather
than number of shares; or
(iv) the first day on which a majority of the members of the Board of
Directors of the Company are not Continuing Directors.
"Company" means The IT Group, Inc., and any and all successors thereto.
"Consolidated Cash Flow" means, with respect to any specified Person for
any period, the Consolidated Net Income of such Person for such period plus (i)
an amount equal to any extraordinary loss plus any net loss realized by such
Person or any of its Restricted Subsidiaries in connection with an Asset Sale,
to the extent such losses were deducted in computing such Consolidated Net
Income; plus (ii) provision for taxes based on income or profits of such Person
and its Restricted Subsidiaries for such period, to the extent that such
provision for taxes was deducted in computing such Consolidated Net Income; plus
(iii) consolidated interest expense of such Person and its Restricted
Subsidiaries for such period, whether paid or accrued and whether or not
capitalized (including, without limitation, amortization of debt issuance costs
and original issue discount, non-cash interest payments, the interest component
of any deferred payment obligations, the interest component of all payments
associated with Capital Lease Obligations, commissions, discounts and other fees
and charges incurred in respect of letter of credit or bankers' acceptance
financings, and net of the effect of all payments made or received pursuant to
Hedging Obligations), to the extent that any such expense was deducted in
computing such Consolidated Net Income; plus (iv) depreciation, amortization
(including amortization of goodwill and other intangibles but excluding
amortization of prepaid cash expenses that were paid in a prior period) and
other non-cash expenses (excluding any such non-cash expense to the extent that
it represents an accrual of or reserve for cash expenses in any future period or
amortization of a prepaid cash expense that was paid in a prior period) of such
Person and its Restricted Subsidiaries for such period to the extent that such
depreciation, amortization and other non-cash expenses were deducted in
computing such Consolidated Net Income; minus (v) non-cash items increasing such
Consolidated Net Income for such period, other than the accrual of revenue in
the ordinary course of business, in each case, on a consolidated basis and
determined in accordance with GAAP.
Notwithstanding the preceding, the provision for taxes based on the income
or profits of, and the depreciation and amortization and other non-cash expenses
of, a Subsidiary of the Company, unless such Subsidiary is a Guarantor and its
Subsidiary Guarantee continues to be in full force and effect, shall be added to
Consolidated Net Income to compute Consolidated Cash Flow of the Company only to
the extent that a corresponding amount would be permitted at the date of
determination to be distributed as a dividend to the Company by such Subsidiary
without prior governmental approval (that has not been obtained), and without
direct or indirect restriction pursuant to the terms of its charter and all
agreements, instruments, judgments, decrees, orders, statutes, rules and
governmental regulations applicable to that Subsidiary or its stockholders.
"Consolidated Net Income" means with respect to any specified Person for
any period, the aggregate of the Net Income of such Person and its Restricted
Subsidiaries for such period, on a consolidated basis, determined in accordance
with GAAP; provided that (i) the (a) Net Income of any Person that is not a
Subsidiary or that is accounted for by the equity method of accounting shall be
included only to the extent of the amount of dividends or distributions paid in
cash to the specified Person or a Wholly Owned Subsidiary thereof and (b) the
Net Income of any Unrestricted Subsidiary shall be excluded, whether or not
distributed to the specified Person or one of its Subsidiaries; (ii) the Net
Income of any Restricted Subsidiary, unless such Restricted Subsidiary is a
Guarantor and its
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Subsidiary Guarantee continues to be in full force and effect, shall be excluded
to the extent that the declaration or payment of dividends or similar
distributions by that Restricted Subsidiary of that Net Income is not at the
date of determination permitted without any prior governmental approval (that
has not been obtained) or, directly or indirectly, by operation of the terms of
its charter or any agreement, instrument, judgment, decree, order, statute, rule
or governmental regulation applicable to that Subsidiary or its stockholders,
provided, that, only for purposes of Section 4.07 hereof, the aggregate amount
of such Net Income that could be paid to the Company or a Restricted Subsidiary
by loans or advances or repayments of loans or advances, intercompany transfer
or otherwise will be included in Consolidated Net Income; (iii) the Net Income
of any Person acquired in a pooling of interests transaction for any period
prior to the date of such acquisition shall be excluded; and (iv) the cumulative
effect of a change in accounting principles shall be excluded.
"Continuing Directors" means, as of any date of determination, any member
of the Board of Directors of the Company who (i) was a member of such Board of
Directors on the date of this Indenture or (ii) was nominated for election or
elected to such Board of Directors with the approval of a majority of the
Continuing Directors who were members of such Board at the time of such
nomination or election.
"Corporate Trust Office of the Trustee" shall be at the address of the
Trustee specified in Section 12.02 hereof or such other address as to which the
Trustee may give notice to the Company.
"Credit Agreement" means that certain Credit Agreement dated as of February
25, 1998, as amended and restated as of June 11, 1998, by and among the Company
and the lenders party thereto from time to time and Citicorp USA, Inc., as
Administrative Agent, BankBoston, N.A., as Documentation Agent and Royal Bank of
Canada and Credit Lyonnais New York Branch, as Co-Agents, including any related
notes, guarantees, collateral documents, instruments and agreements executed in
connection therewith, and in each case as amended, modified, renewed, refunded,
replaced or refinanced from time to time.
"Credit Facilities" means, one or more debt facilities (including, without
limitation, the Credit Agreement) or commercial paper facilities, in each case
with banks or other institutional lenders providing for revolving credit loans,
term loans, receivables financing (including through the sale of receivables to
such lenders or to special purpose entities formed to borrow from such lenders
against such receivables) or letters of credit, in each case, as amended,
restated, modified, renewed, refunded, replaced or refinanced in whole or in
part from time to time.
"Custodian" means the Trustee, as custodian with respect to the Notes in
global form, or any successor entity thereto.
"Default" means any event that is, or with the passage of time or the
giving of notice or both would be, an Event of Default.
"Definitive Note" means a certificated Note registered in the name of the
Holder thereof and issued in accordance with Section 2.06 hereof, substantially
in the form of Exhibit A hereto except that such Note shall not bear the Global
Note Legend and shall not have the "Schedule of Exchanges of Interests in the
Global Note" attached thereto.
"Depositary" means, with respect to the Notes issuable or issued in whole
or in part in global form, the Person specified in Section 2.03 hereof as the
Depositary with respect to the Notes, and any and all successors thereto
appointed as depositary hereunder and having become such pursuant to the
applicable provision of this Indenture.
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"Designated Senior Debt" means (i) any Indebtedness outstanding under the
Credit Agreement and (ii) after payment in full of all Obligations under the
Credit Agreement, any other Senior Debt permitted under this Indenture the
principal amount of which is $25.0 million or more and that has been designated
by the Company as "Designated Senior Debt."
"Disqualified Stock" means any Capital Stock that, by its terms (or by the
terms of any security into which it is convertible, or for which it is
exchangeable, in each case at the option of the holder thereof), or upon the
happening of any event, matures or is mandatorily redeemable, pursuant to a
sinking fund obligation or otherwise, or redeemable at the option of the holder
thereof, in whole or in part, on or prior to the date that is 91 days after the
date on which the Notes mature. Notwithstanding the preceding sentence, any
Capital Stock that would constitute Disqualified Stock solely because the
holders thereof have the right to require the Company to repurchase such Capital
Stock upon the occurrence of a change of control or an asset sale shall not
constitute Disqualified Stock if the terms of such Capital Stock provide that
the Company may not repurchase or redeem any such Capital Stock pursuant to such
provisions unless such repurchase or redemption complies with the provisions of
Section 4.07 hereof.
"Domestic Subsidiary" means any Restricted Subsidiary that was formed under
the laws of the United States or any state thereof or the District of Columbia
or that guarantees or otherwise provides direct credit support for any
Indebtedness of the Company.
"Equity Interests" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Euroclear" means Morgan Guaranty Trust Company of New York, Brussels
office, as operator of the Euroclear system.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange Notes" means the Notes issued in the Exchange Offer pursuant to
Section 2.06(f) hereof.
"Exchange Offer" has the meaning set forth in the Registration Rights
Agreement.
"Exchange Offer Registration Statement" has the meaning set forth in the
Registration Rights Agreement.
"Existing Indebtedness" means Indebtedness of the Company and its
Subsidiaries (other than Indebtedness under the Credit Agreement) in existence
on the date hereof, until such amounts are repaid.
"Existing Preferred Stock" means shares of the Company's 7% cumulative
convertible exchangeable preferred stock issued and outstanding on the date of
this Indenture and the Company's 6% convertible preferred stock issued and
outstanding on the date of this Indenture.
"Fixed Charges" means, with respect to any specified Person or any of its
Restricted Subsidiaries for any period, the sum, without duplication, of (i) the
consolidated cash interest expense of such Person and its Restricted
Subsidiaries for such period, including, without limitation, amortization of
debt issuance costs and original issue discount, non cash interest payments, the
interest component of any deferred payment obligations, the interest component
of all payments associated with Capital Lease Obligations, commissions,
discounts and other fees and charges incurred in respect of letter of credit or
bankers' acceptance financings, and net of the effect of all payments made or
received pursuant to Hedging Obligations; plus (ii) the consolidated interest of
such Person and its Restricted Subsidiaries that
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was capitalized during such period; plus (iii) any interest expense on
Indebtedness of another Person that is Guaranteed by such Person or one of its
Restricted Subsidiaries or secured by a Lien on assets of such Person or one of
its Restricted Subsidiaries, whether or not such Guarantee or Lien is called
upon; plus (iv) the product of (a) all dividends, paid in cash, on any series of
preferred stock of such Person or any of its Restricted Subsidiaries, other than
dividends on Equity Interests payable solely in Equity Interests of the Company
(other than Disqualified Stock) or to the Company or a Restricted Subsidiary of
the Company, times (b) a fraction, the numerator of which is one and the
denominator of which is one minus the then current combined federal, state and
local statutory tax rate of such Person, expressed as a decimal, in each case,
on a consolidated basis and in accordance with GAAP.
"Fixed Charge Coverage Ratio" means with respect to any specified Person
and its Restricted Subsidiaries for any period, the ratio of the Consolidated
Cash Flow of such Person and its Restricted Subsidiaries for such period to the
Fixed Charges of such Person for such period and its Restricted Subsidiaries. In
the event that the specified Person or any of its Restricted Subsidiaries
incurs, assumes, Guarantees, repays, repurchases or redeems any Indebtedness
(other than ordinary working capital borrowings) or issues, repurchases or
redeems preferred stock subsequent to the commencement of the period for which
the Fixed Charge Coverage Ratio is being calculated and on or prior to the date
on which the event for which the calculation of the Fixed Charge Coverage Ratio
is made (the "Calculation Date"), then the Fixed Charge Coverage Ratio shall be
calculated giving pro forma effect to such incurrence, assumption, Guarantee,
repayment, repurchase or redemption of Indebtedness, or such issuance,
repurchase or redemption of preferred stock, and the use of the proceeds
therefrom as if the same had occurred at the beginning of the applicable four-
quarter reference period.
In addition, for purposes of calculating the Fixed Charge Coverage Ratio:
(i) acquisitions that have been made by the specified Person or any
of its Subsidiaries, including through mergers or consolidations and
including any related financing transactions, during the four-quarter
reference period or subsequent to such reference period and on or prior to
the Calculation Date shall be given pro forma effect as if they had
occurred on the first day of the four-quarter reference period and
Consolidated Cash Flow for such reference period shall be calculated on a
pro forma basis in accordance with Regulation S-X under the Securities Act,
but without giving effect to clause (iii) of the proviso set forth in the
definition of Consolidated Net Income;
(ii) the Consolidated Cash Flow attributable to discontinued
operations, as determined in accordance with GAAP, and operations or
businesses disposed of prior to the Calculation Date, shall be excluded;
and
(iii) the Fixed Charges attributable to discontinued operations, as
determined in accordance with GAAP, and operations or businesses disposed
of prior to the Calculation Date, shall be excluded, but only to the extent
that the obligations giving rise to such Fixed Charges will not be
obligations of the specified Person or any of its Subsidiaries following
the Calculation Date.
"Foreign Subsidiary" means any Restricted Subsidiary that was organized
under the laws of a jurisdiction outside the United States.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect on the date of this Indenture.
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"Global Notes" means, individually and collectively, each of the Restricted
Global Notes and the Unrestricted Global Notes, substantially in the form of
Exhibit A hereto issued in accordance with Section 2.01, 2.06(b)(iv),
2.06(d)(ii) or 2.06(f) hereof.
"Global Note Legend" means the legend set forth in Section 2.06(g)(ii),
which is required to be placed on all Global Notes issued under this Indenture.
"Government Securities" means direct obligations of, or obligations
guaranteed by, the United States of America, and the payment for which the
United States pledges its full faith and credit.
"Guarantee" means a guarantee of payment of Indebtedness of another Person
other than by endorsement of negotiable instruments for collection in the
ordinary course of business, direct or indirect, in any manner including,
without limitation, by way of a pledge of assets or through letters of credit or
reimbursement agreements in respect thereof, of all or any part of any
Indebtedness.
"Guarantors" means each of (i) the Company's Domestic Subsidiaries, except
for Universal Professional Insurance Company, a Vermont corporation, and (ii)
any other subsidiary that executes a Subsidiary Guarantee in accordance with the
provisions of this Indenture; and their respective successors and assigns.
"Hedging Obligations" means, with respect to any Person, the obligations of
such Person under (i) interest rate swap agreements, interest rate cap
agreements and interest rate collar agreements and (ii) other agreements or
arrangements designed solely to protect such Person against fluctuations in
interest rates.
"Holder" means a Person in whose name a Note is registered.
"IAI Global Note" means the Global Note substantially in the form of
Exhibit A hereto bearing the Global Note Legend and the Private Placement Legend
and deposited with or on behalf of and registered in the name of the Depositary
or its nominee that will be issued in a denomination equal to the outstanding
principal amount of the Notes sold to Institutional Accredited Investors.
"Indebtedness" means with respect to any specified Person, any indebtedness
of such Person, whether or not contingent, in respect of (i) borrowed money,
(ii) evidenced by bonds, notes, debentures or similar instruments, (iii)
banker's acceptances and letters of credit (or reimbursement agreements in
respect thereof), (iv) Capital Lease Obligations; (v) the balance deferred and
unpaid of the purchase price of any property, except any such balance that
constitutes an accrued expense or trade payable, or (vi) Hedging Obligations, if
and to the extent any of the preceding items (other than letters of credit and
Hedging Obligations) would appear as a liability upon a balance sheet of the
specified Person prepared in accordance with GAAP. In addition, the term
"Indebtedness" includes all Indebtedness of others secured by a Lien on any
asset of the specified Person (whether or not such Indebtedness is assumed by
the specified Person) and, to the extent not otherwise included, the Guarantee
by the specified Person of any Indebtedness of any other Person. The term
"Indebtedness" shall not include the incurrence of any indebtedness in respect
of bid, performance or surety bonds issued for the account of the Company or any
of its Restricted Subsidiaries in the ordinary course of business, including
guarantees or obligations of the Company or any Restricted Subsidiary thereof
with respect to letters of credit supporting such bid, performance or surety
obligations, and guarantees made in the ordinary course of business by the
Company or any of its Restricted Subsidiaries of performance of any contractual
obligation by the Company, a Restricted Subsidiary or any other entity in which
the Company or a Subsidiary owns an Equity Interest (in each case other than for
an obligation for money borrowed). The amount of any Indebtedness outstanding
as of any date shall be (1) the accreted value thereof, in the case of any
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Indebtedness issued with original issue discount and (2) the principal amount
thereof, together with any interest thereon that is more than 30 days past due,
in the case of any other Indebtedness.
"Indenture" means this Indenture, as amended or supplemented from time to
time.
"Indirect Participant" means a Person who holds a beneficial interest in a
Global Note through a Participant.
"Initial Notes" means the first $225.0 million aggregate principal amount
of Notes issued under this Indenture on the date hereof.
"Institutional Accredited Investor" means an institution that is an
"accredited investor" as defined in Rule 501(a)(1), (2), (3) or (7) under the
Securities Act, who are not also QIBs.
"Investments" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including Guarantees or other obligations), advances or capital
contributions (excluding commission, travel and similar advances to officers and
employees made in the ordinary course of business), purchases or other
acquisitions for consideration of Indebtedness, Equity Interests or other
securities, together with all items that are or would be classified as
investments on a balance sheet prepared in accordance with GAAP. If the Company
or any Subsidiary of the Company sells or otherwise disposes of any Equity
Interests of any direct or indirect Subsidiary of the Company such that, after
giving effect to any such sale or disposition, such Person is no longer a
Subsidiary of the Company, the Company shall be deemed to have made an
Investment on the date of any such sale or disposition equal to the fair market
value of the Equity Interests of such Subsidiary not sold or disposed of in an
amount determined as provided in the final paragraph of Section 4.07 hereof.
"Legal Holiday" means a Saturday, a Sunday or a day on which banking
institutions in the City of New York or at a place of payment are authorized by
law, regulation or executive order to remain closed. If a payment date is a
Legal Holiday at a place of payment, payment may be made at that place on the
next succeeding day that is not a Legal Holiday, and no interest shall accrue on
such payment for the intervening period.
"Letter of Transmittal" means the letter of transmittal to be prepared by
the Company and sent to all Holders of the Notes for use by such Holders in
connection with the Exchange Offer.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law
(including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement under
the Uniform Commercial Code (or equivalent statutes) of any jurisdiction).
"Liquidated Damages" means all liquidated damages then owing pursuant to
Section 5 of the Registration Rights Agreement.
"Management Agreement" means the agreement, dated August 28, 1996, between
the Company and Carlyle, as amended, modified, supplemented, extended, renewed
or restated from time to time, provided, that any such amendment, modification,
supplement, extension, renewal or restatement does not materially disadvantage
the Holders of the Notes.
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"Net Income" means, with respect to any Person, the net income (loss) of
such Person, determined in accordance with GAAP and before any reduction in
respect of preferred stock dividends, excluding, however, (i) any gain or loss,
together with any related provision for taxes on such gain (but not loss),
realized in connection with (a) any Asset Sale or (b) the disposition of any
securities by such Person or any of its Subsidiaries or the extinguishment of
any Indebtedness of such Person or any of its Restricted Subsidiaries, and (ii)
any extraordinary gain or loss, together with any related provision for taxes on
such extraordinary gain or loss.
"Net Proceeds" means the aggregate cash proceeds received by the Company or
any of its Restricted Subsidiaries in respect of any Asset Sale (including,
without limitation, any cash received upon the sale or other disposition of any
non-cash consideration received in any Asset Sale), net of the direct costs
relating to such Asset Sale, including, without limitation, legal, accounting
and investment banking fees, and sales commissions, and any relocation expenses
incurred as a result thereof, taxes paid or payable as a result thereof, in each
case, after taking into account any available tax credits or deductions and any
tax sharing arrangements, and amounts required to be applied to the repayment of
Indebtedness, other than Senior Debt, secured by a Lien on the asset or assets
that were the subject of such Asset Sale.
"Non-Recourse Debt" means Indebtedness (i) as to which neither the Company
nor any of its Restricted Subsidiaries (a) provides credit support of any kind
(including any undertaking, agreement or instrument that would constitute
Indebtedness), (b) is directly or indirectly liable as a guarantor or otherwise,
or (c) constitutes the lender; (ii) no default with respect to which (including
any rights that the holders thereof may have to take enforcement action against
an Unrestricted Subsidiary) would permit upon notice, lapse of time or both any
holder of any other Indebtedness (other than the Notes) of the Company or any of
its Restricted Subsidiaries to declare a default on such other Indebtedness or
cause the payment thereof to be accelerated or payable prior to its stated
maturity; and (iii) as to which the lenders have been notified in writing that
they will not have any recourse to the stock or assets of the Company or any of
its Restricted Subsidiaries.
"Non-U.S. Person" means a Person who is not a U.S. Person.
"Notes" has the meaning assigned to it in the preamble to this Indenture.
The Initial Notes and the Additional Notes shall be treated as a single class
for all purposes under this Indenture.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Offering" means the offering of the Notes by the Company.
"Officer" means, with respect to any Person, the Chairman of the Board, the
Chief Executive Officer, the President, the Chief Operating Officer, the Chief
Financial Officer, the Treasurer, any Assistant Treasurer, the Controller, the
Secretary or any Vice-President of such Person.
"Officers' Certificate" means a certificate signed on behalf of the Company
by two Officers of the Company, one of whom must be the principal executive
officer, the principal financial officer or the principal accounting officer of
the Company, that meets the requirements of Section 12.05 hereof.
"Opinion of Counsel" means an opinion from legal counsel who is reasonably
acceptable to the Trustee, that meets the requirements of Section 12.05 hereof.
The counsel may be an employee of or counsel to the Company, any Subsidiary of
the Company or the Trustee.
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"Participant" means, with respect to the Depositary, Euroclear or Cedel, a
Person who has an account with the Depositary, Euroclear or Cedel, respectively
(and, with respect to DTC, shall include Euroclear and Cedel).
"Permitted Business" means the businesses conducted by the company and its
Subsidiaries on this date of this Indenture and reasonable extensions thereof
and such other business activities which are incidental or related thereto.
"Permitted Investments" means (i) any Investment in the Company or in a
Restricted Subsidiary of the Company or Permitted Joint Venture of the Company
that is engaged in a Permitted Business; (ii) any Investment in Cash
Equivalents; (iii) any Investment by the Company or any Subsidiary of the
Company in a Person, if as a result of such Investment (a) such Person becomes a
Restricted Subsidiary of the Company or a Permitted Joint Venture of the Company
and such Person is engaged in a Permitted Business or (b) such Person is merged,
consolidated or amalgamated with or into, or transfers or conveys substantially
all of its assets to, or is liquidated into, the Company or a Restricted
Subsidiary of the Company or a Permitted Joint Venture of the Company that is
engaged in a Permitted Business; (iv) any Investment made as a result of the
receipt of non-cash consideration from an Asset Sale that was made pursuant to
and in compliance with Section 4.10 hereof; (v) any acquisition of assets solely
in exchange for the issuance of Equity Interests (other than Disqualified Stock)
of the Company; (vi) Hedging Obligations; (vii) any Investment by the Company or
any of its Restricted Subsidiaries constituting a performance guaranty of
contractual obligations (other than any obligation for money borrowed) of any
entity in which the Company or a subsidiary owns an Equity Interest, which are
made in the ordinary course of business by the Company or such Restricted
Subsidiary; and (viii) other Investments in any Person having an aggregate fair
market value (measured on the date each such Investment was made and without
giving effect to subsequent changes in value), when taken together with all
other outstanding Investments made pursuant to this clause (viii) since the date
hereof not to exceed $40 million at any one time outstanding.
"Permitted Joint Venture" means, with respect to any Person, (i) any
corporation, association, or other business entity (other than a partnership) of
which 50% or more of the Voting Stock is at the time of determination owned or
controlled, directly or indirectly, by such Person or one or more of the
Restricted Subsidiaries of that Person or a combination thereof (collectively, a
"Group"), (ii) any corporation, association or other business entity (other than
a partnership) as to which the Group, at the time of initial Investment, has a
contractual right to acquire 50% or more of the Voting Stock, provided that such
Investment shall cease to be a Permitted Joint Venture if such Group fails to
acquire such 50% or more of such Voting Stock within six months of such initial
Investment and (iii) any partnership, joint venture, limited liability company
or similar entity of which (a) 50% of the capital accounts, distribution rights,
total equity and voting interests or general or limited partnership interests,
as applicable, are owned or controlled, directly or indirectly, by such Group,
whether in the form of membership, general, special or limited partnership
interests or otherwise and (b) such Person or any Restricted Subsidiary of such
Person is a controlling general partner or otherwise controls such entity, which
in the case of each of clauses (i), (ii) and (iii) is engaged in the Permitted
Business.
"Permitted Junior Securities" means (i) Equity Interests in the Company or
any Guarantor or (ii) debt securities that are subordinated to all Senior Debt
and any debt securities issued in exchange for Senior Debt to substantially the
same extent as, or to a greater extent than, the Notes and the Subsidiary
Guarantees are subordinated to Senior Debt under this Indenture and have a
stated maturity after (and not provide for scheduled principal payments prior
to) the stated maturity of any Senior Debt and any debt securities issued in
exchange for Senior Debt; provided, however, that, if such Equity Interests or
debt securities are distributed in a bankruptcy or insolvency proceeding, such
Equity Interests or debt securities are distributed pursuant to a plan of
reorganization consented to by each class of Designated Senior Debt.
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"Permitted Liens" means (i) Liens in favor of the Company or the
Guarantors; (ii)Liens on property of a Person existing at the time such Person
is merged with or into or consolidated with the Company or any Subsidiary of the
Company; provided that such Liens were in existence prior to the contemplation
of such merger or consolidation and do not extend to any assets other than those
of the Person merged into or consolidated with the Company or the Subsidiary;
(iii) Liens on property existing at the time of acquisition thereof by the
Company or any Subsidiary of the Company, provided that such Liens were in
existence prior to the contemplation of such acquisition; (iv) Liens to secure
the performance of statutory obligations, surety or appeal bonds, performance
bonds or other obligations of a like nature incurred in the ordinary course of
business; (v) Liens existing on the date of this Indenture; (vi) Liens for
taxes, assessments or governmental charges or claims that are not yet delinquent
or that are being contested in good faith by appropriate proceedings promptly
instituted and diligently concluded, provided that any reserve or other
appropriate provision as shall be required in conformity with GAAP shall have
been made therefor; (vii) Liens on assets of Unrestricted Subsidiaries that
secure Non-Recourse Debt of Unrestricted Subsidiaries; and (viii) Liens incurred
in the ordinary course of business of the Company or any Subsidiary of the
Company with respect to obligations that do not exceed $5.0 million at any one
time outstanding.
"Permitted Refinancing Indebtedness" means any Indebtedness of the Company
or any of its Restricted Subsidiaries issued in exchange for, or the net
proceeds of which are used to extend, refinance, repay, prepay, renew, replace,
defease or refund other Indebtedness of the Company or any of its Restricted
Subsidiaries (other than intercompany Indebtedness); provided that (i) the
principal amount (or accreted value, if applicable) of such Permitted
Refinancing Indebtedness does not exceed the principal amount (or accreted
value, if applicable), of the Indebtedness so extended, refinanced, repaid,
prepaid, renewed, replaced, defeased or refunded (plus all accrued interest
thereon and the amount of all customary expenses and premiums incurred in
connection therewith); (ii) if the Indebtedness being extended, refinanced,
renewed, replaced, defeased or refunded is equal in right of payment to or
subordinated in right of payment to the Notes, such Permitted Refinancing
Indebtedness has a final maturity date 91 days after the Stated Maturity of the
Notes, and is equal in right of payment to, in the case of pari passu
Indebtedness, or subordinated in right of payment to, in the case of
subordinated Indebtedness, to the Notes on terms at least as favorable to the
Holders of Notes as those contained in the documentation governing the
Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded; and (iii) such Indebtedness is incurred either by the Company or by
the Restricted Subsidiary who is the obligor on the Indebtedness being extended,
refinanced, renewed, replaced.
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization or
government or agency or political subdivision thereof (including any subdivision
or ongoing business of any such entity or substantially all of the assets of any
such entity, subdivision or business).
"Principals" means TC Group, L.L.C., a Delaware limited liability company,
and its Affiliates.
"Private Placement Legend" means the legend set forth in Section 2.06(g)(i)
to be placed on all Notes issued under this Indenture except where otherwise
permitted by the provisions of this Indenture.
"Public Equity Offering" means any issuance of common stock by the Company
that is registered pursuant to the Securities Act, other than issuances
registered on Form S-8 and excluding issuances of common stock pursuant to
employee benefit plans of the Company.
"QIB" means a "qualified institutional buyer" as defined in Rule 144A.
"Registration Rights Agreement" means the Registration Rights Agreement,
dated as of April 9, 1999, by and among the Company and the other parties named
on the signature pages thereof, as such
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agreement may be amended, modified or supplemented from time to time and, with
respect to any Additional Notes, one or more registration rights agreements
between the Company and the other parties thereto, as such agreement(s) may be
amended, modified or supplemented from time to time, relating to rights given by
the Company to the purchasers of Additional Notes to register such Additional
Notes under the Securities Act.
"Regulation S" means Regulation S promulgated under the Securities Act.
"Regulation S Global Note" means a Global Note bearing the Private
Placement Legend and deposited with or on behalf of the Depositary and
registered in the name of the Depositary or its nominee, issued in a
denomination equal to the outstanding principal amount of the Notes initially
sold in reliance on Rule 903 of Regulation S.
"Related Party" means (i) any controlling stockholder, 80% (or more) owned
Subsidiary, or immediate family member (in the case of an individual) of any
Principal or (ii) any trust, corporation, partnership or other entity, the
beneficiaries, stockholders, partners, owners or Persons beneficially holding an
80% or more controlling interest of which consist of any one or more Principals
and/or such other Persons referred to in the immediately preceding clause (i).
"Representative" means the indenture trustee or other trustee, agent or
representative for any Senior Debt.
"Responsible Officer," when used with respect to the Trustee, means any
officer within the corporate trust department of the Trustee (or any successor
group of the Trustee) or any other officer of the Trustee customarily performing
functions similar to those performed by any of the above designated officers and
also means, with respect to a particular corporate trust matter, any other
officer to whom such matter is referred because of such person's knowledge of
and familiarity with the particular subject.
"Restricted Definitive Note" means a Definitive Note bearing the Private
Placement Legend.
"Restricted Global Note" means a Global Note bearing the Private Placement
Legend.
"Restricted Investment" means any Investment other than a Permitted
Investment.
"Restricted Subsidiary" of a Person means any Subsidiary of the referent
Person that is not an Unrestricted Subsidiary.
"Rule 144" means Rule 144 promulgated under the Securities Act.
"Rule 144A" means Rule 144A promulgated under the Securities Act.
"Rule 903" means Rule 903 promulgated under the Securities Act.
"Rule 904" means Rule 904 promulgated the Securities Act.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Senior Debt" means (i) all Indebtedness of the Company or any Guarantor
outstanding under Credit Facilities and all Hedging Obligations with respect
thereto; (ii) any other Indebtedness of the Company or any Guarantor permitted
to be incurred under the terms of this Indenture, unless the
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<PAGE>
instrument under which such Indebtedness is incurred expressly provides that it
is on a parity with or subordinated in right of payment to the Notes or any
Subsidiary Guarantee; and (iii) all Obligations with respect to the items listed
in the preceding clauses (i) and (ii). Notwithstanding anything to the contrary
in the preceding, Senior Debt will not include (i) any liability for federal,
state, local or other taxes owed or owing by the Company; (ii) any Indebtedness
of the Company to any of its Subsidiaries or other Affiliates; (iii) any trade
payables; or (iv) the portion of any Indebtedness that is incurred in violation
of this Indenture.
"Senior Guarantees" means the Guarantees by the Guarantors of Obligations
under the Credit Facilities and any guarantees of a Subsidiary of other Senior
Debt.
"Shelf Registration Statement" means the Shelf Registration Statement as
defined in the Registration Rights Agreement.
"Significant Subsidiary" means any Subsidiary that would be a "significant
subsidiary" as defined in Article 1, Rule 102 of Regulation SX, promulgated
pursuant to the Securities Act, as such Regulation is in effect on the date of
this Indenture.
"Stated Maturity" means, with respect to any installment of interest or
principal on any series of Indebtedness, the date on which such payment of
interest or principal was scheduled to be paid in the original documentation
governing such Indebtedness, and shall not include any contingent obligations to
repay, redeem or repurchase any such interest or principal prior to the date
originally scheduled for the payment thereof.
"Subsidiary" means, with respect to any specified Person, (i) any
corporation, association or other business entity of which more than 50% of the
total voting power of shares of Capital Stock entitled (without regard to the
occurrence of any contingency) to vote in the election of directors, managers or
trustees thereof is at the time owned or controlled, directly or indirectly, by
such Person or one or more of the other Subsidiaries of that Person (or a
combination thereof) and (ii) any partnership (a) the sole general partner or
the managing general partner of which is such Person or a Subsidiary of such
Person or (b) the only general partners of which are such Person or one or more
Subsidiaries of such Person (or any combination thereof).
"Subsidiary Guarantee" means the Guarantee by each Guarantor of the
Company's payment obligations under this Indenture and on the Notes, executed
pursuant to the provisions of this Indenture.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. (S)(S) 77aaa-77bbbb)
as in effect on the date on which this Indenture is qualified under the TIA,
subject to Section 9.03 hereof.
"Trustee" means the party named as such above until a successor replaces it
in accordance with the applicable provisions of this Indenture and thereafter
means the successor serving hereunder.
"Unrestricted Global Note" means a permanent Global Note substantially in
the form of Exhibit A attached hereto that bears the Global Note Legend and that
has the "Schedule of Exchanges of Interests in the Global Note" attached
thereto, and that is deposited with or on behalf of and registered in the name
of the Depositary, representing a series of Notes that do not bear the Private
Placement Legend.
"Unrestricted Definitive Note" means one or more Definitive Notes that do
not bear and are not required to bear the Private Placement Legend.
"Unrestricted Subsidiary" means any Subsidiary of the Company that is
designated by the Board of Directors as an Unrestricted Subsidiary pursuant to a
Board Resolution, but only to the extent that
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such Subsidiary (i) has no Indebtedness other than Non-Recourse Debt; (ii) is
not party to any agreement, contract, arrangement or understanding with the
Company or any Restricted Subsidiary of the Company unless the terms of any such
agreement, contract, arrangement or understanding are no less favorable to the
Company or such Restricted Subsidiary than those that might be obtained at the
time from Persons who are not Affiliates of the Company; (iii) is a Person with
respect to which neither the Company nor any of its Restricted Subsidiaries has
any direct or indirect obligation (a) to subscribe for additional Equity
Interests or (b) to maintain or preserve such Person's financial condition or to
cause such Person to achieve any specified levels of operating results; and (iv)
has not guaranteed or otherwise directly or indirectly provided credit support
for any Indebtedness of the Company or any of its Restricted Subsidiaries. Any
designation of a Subsidiary of the Company as an Unrestricted Subsidiary shall
be evidenced to the Trustee by filing with the Trustee a certified copy of the
Board Resolution giving effect to such designation and an Officers' Certificate
certifying that such designation complied with the preceding conditions and was
permitted by Section 4.07 hereof. If, at any time, any Unrestricted Subsidiary
would fail to meet the preceding requirements as an Unrestricted Subsidiary, it
shall thereafter cease to be an Unrestricted Subsidiary for purposes of this
Indenture and any Indebtedness of such Subsidiary shall be deemed to be incurred
by a Restricted Subsidiary of the Company as of such date and, if such
Indebtedness is not permitted to be incurred as of such date under Section 4.09
hereof, the Company shall be in default of the provisions of Section 4.09. The
Board of Directors of the Company may at any time designate any Unrestricted
Subsidiary to be a Restricted Subsidiary; provided that such designation shall
be deemed to be an incurrence of Indebtedness by a Restricted Subsidiary of the
Company of any outstanding Indebtedness of such Unrestricted Subsidiary and such
designation shall only be permitted if (1) such Indebtedness is permitted under
Section 4.09 hereof, calculated on a pro forma basis as if such designation had
occurred at the beginning of the four-quarter reference period; and (2) no
Default or Event of Default would be in existence following such designation.
"U.S. Person" means a U.S. person as defined in Rule 902(o) under the
Securities Act.
"Voting Stock" of any Person as of any date means the Capital Stock of such
Person that is at the time entitled to vote in the election of the Board of
Directors of such Person.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (a) the sum of the
products obtained by multiplying (x) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (y) the
number of years (calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment, by (b) the then outstanding principal
amount of such Indebtedness.
"Wholly Owned Subsidiary" of any specified Person means a Subsidiary of
such Person all of the outstanding Capital Stock or other ownership interests of
which (other than directors' qualifying shares) shall at the time be owned by
such Person or by one or more Wholly Owned Subsidiaries of such Person or by
such Person and one or more Wholly Owned Subsidiaries of such Person.
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Section 1.02. Other Definitions.
<TABLE>
<CAPTION>
Defined in
Term Section
---- -------
<S> <C>
"Affiliate Transaction"..................................................... 4.11
"Asset Sale"................................................................ 4.10
"Asset Sale Offer".......................................................... 4.10
"Authentication Order"...................................................... 2.02
"Bankruptcy Law"............................................................ 4.01
"Change of Control Offer"................................................... 4.15
"Change of Control Payment"................................................. 4.15
"Change of Control Payment Date"............................................ 4.15
"Covenant Defeasance"....................................................... 8.03
"Event of Default".......................................................... 6.01
"Excess Proceeds"........................................................... 4.10
"incur"..................................................................... 4.09
"Legal Defeasance".......................................................... 8.02
"Offer Amount".............................................................. 3.09
"Offer Period".............................................................. 3.09
"Paying Agent".............................................................. 2.03
"Permitted Debt"............................................................ 4.09
"Purchase Date"............................................................. 3.09
"Registrar"................................................................. 2.03
"Repurchase Offer" 3.09
"Restricted Payments"....................................................... 4.07
</TABLE>
Section 1.03. Incorporation by Reference of Trust Indenture Act.
Whenever this Indenture refers to a provision of the TIA, the provision is
incorporated by reference in and made a part of this Indenture.
The following TIA terms used in this Indenture have the following meanings:
"indenture securities" means the Notes;
"indenture security Holder" means a Holder of a Note;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the Trustee; and
"obligor" on the Notes and the Subsidiary Guarantees means the Company and
the Guarantors, respectively, and any successor obligor upon the Notes and the
Subsidiary Guarantees, respectively.
All other terms used in this Indenture that are defined by the TIA, defined
by TIA reference to another statute or defined by SEC rule under the TIA have
the meanings so assigned to them.
Section 1.04. Rules of Construction.
Unless the context otherwise requires:
(a) a term has the meaning assigned to it;
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(b) an accounting term not otherwise defined has the meaning assigned to it
in accordance with GAAP;
(c) "or" is not exclusive;
(d) words in the singular include the plural, and in the plural include the
singular;
(e) provisions apply to successive events and transactions; and
(f) references to sections of or rules under the Securities Act shall be
deemed to include substitute, replacement of successor sections or rules adopted
by the SEC from time to time.
ARTICLE 2.
THE NOTES
Section 2.01. Form and Dating.
(a) General. The Notes and the Trustee's certificate of authentication
shall be substantially in the form of Exhibit A hereto. The Notes may have
notations, legends or endorsements required by law, stock exchange rule or
usage. Each Note shall be dated the date of its authentication. The Notes
shall be in denominations of $1,000 and integral multiples thereof.
The terms and provisions contained in the Notes shall constitute, and are
hereby expressly made, a part of this Indenture and the Company, the Guarantors
and the Trustee, by their execution and delivery of this Indenture, expressly
agree to such terms and provisions and to be bound thereby. However, to the
extent any provision of any Note conflicts with the express provisions of this
Indenture, the provisions of this Indenture shall govern and be controlling.
(b) Global Notes. Notes issued in global form shall be substantially in
the form of Exhibit A attached hereto (including the Global Note Legend thereon
and the "Schedule of Exchanges of Interests in the Global Note" attached
thereto). Each Global Note shall represent such of the outstanding Notes as
shall be specified therein and each shall provide that it shall represent the
aggregate principal amount of outstanding Notes from time to time endorsed
thereon and that the aggregate principal amount of outstanding Notes represented
thereby may from time to time be reduced or increased, as appropriate, to
reflect exchanges and redemptions. Any endorsement of a Global Note to reflect
the amount of any increase or decrease in the aggregate principal amount of
outstanding Notes represented thereby shall be made by the Trustee or the
Custodian, at the direction of the Trustee, in accordance with instructions
given by the Holder thereof as required by Section 2.06 hereof.
Notes issued in definitive form shall be substantially in the form of
Exhibit A attached hereto (but without the Global Note Legend thereon and
without the "Schedule of Exchanges of Interests in the Global Note" attached
thereto).
(c) Euroclear and Cedel Procedures Applicable. The provisions of the
"Operating Procedures of the Euroclear System" and "Terms and Conditions
Governing Use of Euroclear" and the "General Terms and Conditions of Cedel Bank"
and "Customer Handbook" of Cedel Bank shall be applicable to transfers of
beneficial interests in the Regulation S Global Notes that are held by
Participants through Euroclear or Cedel Bank.
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Section 2.02. Execution and Authentication.
One Officer shall sign the Notes for the Company by manual or facsimile
signature.
If an Officer whose signature is on a Note no longer holds that office at
the time a Note is authenticated, the Note shall nevertheless be valid.
A Note shall not be valid until authenticated by the manual signature of
the Trustee. The signature shall be conclusive evidence that the Note has been
authenticated under this Indenture.
The Trustee shall, upon a written order of the Company signed by an Officer
(an "Authentication Order"), authenticate Notes for original issue up to the
aggregate principal amount stated in paragraph 4 of the Notes. The aggregate
principal amount of Notes outstanding at any time may not exceed such amount
except as provided in Section 2.07 hereof.
The Trustee may appoint an authenticating agent acceptable to the Company
to authenticate Notes. An authenticating agent may authenticate Notes whenever
the Trustee may do so. Each reference in this Indenture to authentication by
the Trustee includes authentication by such agent. An authenticating agent has
the same rights as an Agent to deal with Holders or an Affiliate of the Company.
Section 2.03. Registrar and Paying Agent.
The Company shall maintain an office or agency where Notes may be presented
for registration of transfer or for exchange ("Registrar") and an office or
agency where Notes may be presented for payment ("Paying Agent"). The Registrar
shall keep a register of the Notes and of their transfer and exchange. The
Company may appoint one or more co-registrars and one or more additional paying
agents. The term "Registrar" includes any co-registrar and the term "Paying
Agent" includes any additional paying agent. The Company may change any Paying
Agent or Registrar without notice to any Holder. The Company shall notify the
Trustee in writing of the name and address of any Agent not a party to this
Indenture. If the Company fails to appoint or maintain another entity as
Registrar or Paying Agent, the Trustee shall act as such. The Company or any of
its Subsidiaries may act as Paying Agent or Registrar.
The Company initially appoints The Depository Trust Company ("DTC") to act
as Depositary with respect to the Global Notes.
The Company initially appoints the Trustee to act as the Registrar and
Paying Agent and to act as Custodian with respect to the Global Notes.
Section 2.04. Paying Agent to Hold Money in Trust.
The Company shall require each Paying Agent other than the Trustee to agree
in writing that the Paying Agent will hold in trust for the benefit of Holders
or the Trustee all money held by the Paying Agent for the payment of principal,
premium or Liquidated Damages, if any, or interest on the Notes, and will notify
the Trustee of any default by the Company in making any such payment. While any
such default continues, the Trustee may require a Paying Agent to pay all money
held by it to the Trustee. The Company at any time may require a Paying Agent
to pay all money held by it to the Trustee. Upon payment over to the Trustee,
the Paying Agent (if other than the Company or a Subsidiary) shall have no
further liability for the money. If the Company or a Subsidiary acts as Paying
Agent, it shall segregate and hold in a separate trust fund for the benefit of
the Holders all money held by it as Paying Agent. Upon any bankruptcy or
reorganization proceedings relating to the Company, the Trustee shall serve as
Paying Agent for the Notes.
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Section 2.05. Holder Lists.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
all Holders and shall otherwise comply with TIA (S) 312(a). If the Trustee is
not the Registrar, the Company shall furnish to the Trustee at least seven
Business Days before each interest payment date and at such other times as the
Trustee may request in writing, a list in such form and as of such date as the
Trustee may reasonably require of the names and addresses of the Holders of
Notes and the Company shall otherwise comply with TIA (S) 312(a).
Section 2.06. Transfer and Exchange.
(a) Transfer and Exchange of Global Notes. A Global Note may not be
transferred as a whole except by the Depositary to a nominee of the Depositary,
by a nominee of the Depositary to the Depositary or to another nominee of the
Depositary, or by the Depositary or any such nominee to a successor Depositary
or a nominee of such successor Depositary. All Global Notes will be exchanged
by the Company for Definitive Notes if (i) the Company delivers to the Trustee
notice from the Depositary that it is unwilling or unable to continue to act as
Depositary or that it is no longer a clearing agency registered under the
Exchange Act and, in either case, a successor Depositary is not appointed by the
Company within 120 days after the date of such notice from the Depositary or
(ii) the Company in its sole discretion determines that the Global Notes (in
whole but not in part) should be exchanged for Definitive Notes and delivers a
written notice to such effect to the Trustee. Upon the occurrence of either of
the preceding events in (i) or (ii) above, Definitive Notes shall be issued in
such names as the Depositary shall instruct the Trustee. Global Notes also may
be exchanged or replaced, in whole or in part, as provided in Sections 2.07 and
2.10 hereof. Every Note authenticated and delivered in exchange for, or in lieu
of, a Global Note or any portion thereof, pursuant to this Section 2.06 or
Section 2.07 or 2.10 hereof, shall be authenticated and delivered in the form
of, and shall be, a Global Note. A Global Note may not be exchanged for another
Note other than as provided in this Section 2.06(a), however, beneficial
interests in a Global Note may be transferred and exchanged as provided in
Section 2.06(b), (c) or (f) hereof.
(b) Transfer and Exchange of Beneficial Interests in the Global Notes. The
transfer and exchange of beneficial interests in the Global Notes shall be
effected through the Depositary, in accordance with the provisions of this
Indenture and the Applicable Procedures. Beneficial interests in the Restricted
Global Notes shall be subject to restrictions on transfer comparable to those
set forth herein to the extent required by the Securities Act. Transfers of
beneficial interests in the Global Notes also shall require compliance with
either subparagraph (i) or (ii) below, as applicable, as well as one or more of
the other following subparagraphs, as applicable:
(i) Transfer of Beneficial Interests in the Same Global Note.
Beneficial interests in any Restricted Global Note may be transferred to
Persons who take delivery thereof in the form of a beneficial interest in
the same Restricted Global Note in accordance with the transfer
restrictions set forth in the Private Placement Legend. Beneficial
interests in any Unrestricted Global Note may be transferred to Persons who
take delivery thereof in the form of a beneficial interest in an
Unrestricted Global Note. No written orders or instructions shall be
required to be delivered to the Registrar to effect the transfers described
in this Section 2.06(b)(i).
(ii) All Other Transfers and Exchanges of Beneficial Interests in
Global Notes. In connection with all transfers and exchanges of beneficial
interests that are not subject to Section 2.06(b)(i) above, the transferor
of such beneficial interest must deliver to the Registrar either (A) (1) a
written order from a Participant or an Indirect Participant given to the
Depositary in accordance with the Applicable Procedures directing the
Depositary to credit or cause to be
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credited a beneficial interest in another Global Note in an amount equal to
the beneficial interest to be transferred or exchanged and (2) instructions
given in accordance with the Applicable Procedures containing information
regarding the Participant account to be credited with such increase or (B)
(1) a written order from a Participant or an Indirect Participant given to
the Depositary in accordance with the Applicable Procedures directing the
Depositary to cause to be issued a Definitive Note in an amount equal to
the beneficial interest to be transferred or exchanged and (2) instructions
given by the Depositary to the Registrar containing information regarding
the Person in whose name such Definitive Note shall be registered to effect
the transfer or exchange referred to in (1) above. Upon consummation of an
Exchange Offer by the Company in accordance with Section 2.06(f) hereof,
the requirements of this Section 2.06(b)(ii) shall be deemed to have been
satisfied upon receipt by the Registrar of the instructions contained in
the Letter of Transmittal delivered by the Holder of such beneficial
interests in the Restricted Global Notes. Upon satisfaction of all of the
requirements for transfer or exchange of beneficial interests in Global
Notes contained in this Indenture and the Notes or otherwise applicable
under the Securities Act, the Trustee shall adjust the principal amount of
the relevant Global Note(s) pursuant to Section 2.06(h) hereof.
(iii) Transfer of Beneficial Interests to Another Restricted Global
Note. A beneficial interest in any Restricted Global Note may be
transferred to a Person who takes delivery thereof in the form of a
beneficial interest in another Restricted Global Note if the transfer
complies with the requirements of Section 2.06(b)(ii) above and the
Registrar receives the following:
(A) if the transferee will take delivery in the form of a
beneficial interest in the 144A Global Note, then the transferor must
deliver a certificate in the form of Exhibit B hereto, including the
certifications in item (1) thereof;
(B) if the transferee will take delivery in the form of a
beneficial interest in the Regulation S Global Note, then the
transferor must deliver a certificate in the form of Exhibit B hereto,
including the certifications in item (2) thereof; and
(C) if the transferee will take delivery in the form of a
beneficial interest in the IAI Global Note, then the transferor must
deliver a certificate in the form of Exhibit B hereto, including the
certifications and certificates and Opinion of Counsel required by
item (3) thereof, if applicable.
(iv) Transfer and Exchange of Beneficial Interests in a Restricted
Global Note for Beneficial Interests in the Unrestricted Global Note. A
beneficial interest in any Restricted Global Note may be exchanged by any
holder thereof for a beneficial interest in an Unrestricted Global Note or
transferred to a Person who takes delivery thereof in the form of a
beneficial interest in an Unrestricted Global Note if the exchange or
transfer complies with the requirements of Section 2.06(b)(ii) above and:
(A) such exchange or transfer is effected pursuant to the
Exchange Offer in accordance with the Registration Rights Agreement
and the holder of the beneficial interest to be transferred, in the
case of an exchange, or the transferee, in the case of a transfer,
certifies in the applicable Letter of Transmittal that it is not (1) a
Broker-Dealer, (2) a Person participating in the distribution of the
Exchange Notes or (3) a Person who is an affiliate (as defined in Rule
144) of the Company;
(B) such transfer is effected pursuant to the Shelf Registration
Statement in accordance with the Registration Rights Agreement;
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(C) such transfer is effected by a Broker-Dealer pursuant to the
Exchange Offer Registration Statement in accordance with the
Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the holder of such beneficial interest in a
Restricted Global Note proposes to exchange such beneficial interest
for a beneficial interest in an Unrestricted Global Note, a
certificate from such holder in the form of Exhibit C hereto,
including the certifications in item (1)(a) thereof; or
(2) if the holder of such beneficial interest in a
Restricted Global Note proposes to transfer such beneficial interest
to a Person who shall take delivery thereof in the form of a
beneficial interest in an Unrestricted Global Note, a certificate from
such holder in the form of Exhibit B hereto, including the
certifications in item (4) thereof;
and, in each such case set forth in this subparagraph (D), if the
Registrar so requests or if the Applicable Procedures so require, an
Opinion of Counsel in form reasonably acceptable to the Registrar to the
effect that such exchange or transfer is in compliance with the Securities
Act and that the restrictions on transfer contained herein and in the
Private Placement Legend are no longer required in order to maintain
compliance with the Securities Act.
If any such transfer is effected pursuant to subparagraph (B) or (D)
above at a time when an Unrestricted Global Note has not yet been issued,
the Company shall issue and, upon receipt of an Authentication Order in
accordance with Section 2.02 hereof, the Trustee shall authenticate one or
more Unrestricted Global Notes in an aggregate principal amount equal to
the aggregate principal amount of beneficial interests transferred pursuant
to subparagraph (B) or (D) above.
Beneficial interests in an Unrestricted Global Note cannot be
exchanged for, or transferred to Persons who take delivery thereof in the
form of, a beneficial interest in a Restricted Global Note.
(c) Transfer or Exchange of Beneficial Interests for Definitive Notes.
(i) Beneficial Interests in Restricted Global Notes to Restricted
Definitive Notes. If any holder of a beneficial interest in a Restricted
Global Note proposes to exchange such beneficial interest for a Restricted
Definitive Note or to transfer such beneficial interest to a Person who
takes delivery thereof in the form of a Restricted Definitive Note, then,
upon receipt by the Registrar of the following documentation:
(A) if the holder of such beneficial interest in a Restricted
Global Note proposes to exchange such beneficial interest for a
Restricted Definitive Note, a certificate from such holder in the form
of Exhibit C hereto, including the certifications in item (2)(a)
thereof;
(B) if such beneficial interest is being transferred to a QIB in
accordance with Rule 144A under the Securities Act, a certificate to
the effect set forth in Exhibit B hereto, including the certifications
in item (1) thereof;
(C) if such beneficial interest is being transferred to a Non-
U.S. Person in an offshore transaction in accordance with Rule 903 or
Rule 904 under the Securities Act, a
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certificate to the effect set forth in Exhibit B hereto, including
the certifications in item (2) thereof;
(D) if such beneficial interest is being transferred pursuant to
an exemption from the registration requirements of the Securities Act
in accordance with Rule 144 under the Securities Act, a certificate to
the effect set forth in Exhibit B hereto, including the certifications
in item (3)(a) thereof;
(E) if such beneficial interest is being transferred to an
Institutional Accredited Investor in reliance on an exemption from the
registration requirements of the Securities Act other than those
listed in subparagraphs (B) through (D) above, a certificate to the
effect set forth in Exhibit B hereto, including the certifications,
certificates and Opinion of Counsel required by item (3) thereof, if
applicable;
(F) if such beneficial interest is being transferred to the
Company or any of its Subsidiaries, a certificate to the effect set
forth in Exhibit B hereto, including the certifications in item (3)(b)
thereof; or
(G) if such beneficial interest is being transferred pursuant to
an effective registration statement under the Securities Act, a
certificate to the effect set forth in Exhibit B hereto, including the
certifications in item (3)(c) thereof,
the Trustee shall cause the aggregate principal amount of the applicable
Global Note to be reduced accordingly pursuant to Section 2.06(h) hereof,
and the Company shall execute and the Trustee shall authenticate and
deliver to the Person designated in the instructions a Definitive Note in
the appropriate principal amount. Any Definitive Note issued in exchange
for a beneficial interest in a Restricted Global Note pursuant to this
Section 2.06(c) shall be registered in such name or names and in such
authorized denomination or denominations as the holder of such beneficial
interest shall instruct the Registrar through instructions from the
Depositary and the Participant or Indirect Participant. The Trustee shall
deliver such Definitive Notes to the Persons in whose names such Notes are
so registered. Any Definitive Note issued in exchange for a beneficial
interest in a Restricted Global Note pursuant to this Section 2.06(c)(i)
shall bear the Private Placement Legend and shall be subject to all
restrictions on transfer contained therein.
(ii) Beneficial Interests in Restricted Global Notes to Unrestricted
Definitive Notes. A holder of a beneficial interest in a Restricted Global
Note may exchange such beneficial interest for an Unrestricted Definitive
Note or may transfer such beneficial interest to a Person who takes
delivery thereof in the form of an Unrestricted Definitive Note only if:
(A) such exchange or transfer is effected pursuant to the
Exchange Offer in accordance with the Registration Rights Agreement
and the holder of such beneficial interest, in the case of an
exchange, or the transferee, in the case of a transfer, certifies in
the applicable Letter of Transmittal that it is not (1) a Broker-
Dealer, (2) a Person participating in the distribution of the Exchange
Notes or (3) a Person who is an affiliate (as defined in Rule 144) of
the Company;
(B) such transfer is effected pursuant to the Shelf Registration
Statement in accordance with the Registration Rights Agreement;
(C) such transfer is effected by a Broker-Dealer pursuant to the
Exchange Offer Registration Statement in accordance with the
Registration Rights Agreement; or
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(D) the Registrar receives the following:
(1) if the holder of such beneficial interest in a
Restricted Global Note proposes to exchange such beneficial interest
for a Definitive Note that does not bear the Private Placement Legend,
a certificate from such holder in the form of Exhibit C hereto,
including the certifications in item (1)(b) thereof; or
(2) if the holder of such beneficial interest in a
Restricted Global Note proposes to transfer such beneficial interest
to a Person who shall take delivery thereof in the form of a
Definitive Note that does not bear the Private Placement Legend, a
certificate from such holder in the form of Exhibit B hereto,
including the certifications in item (4) thereof;
and, in each such case set forth in this subparagraph (D), if the
Registrar so requests or if the Applicable Procedures so require, an
Opinion of Counsel in form reasonably acceptable to the Registrar to the
effect that such exchange or transfer is in compliance with the Securities
Act and that the restrictions on transfer contained herein and in the
Private Placement Legend are no longer required in order to maintain
compliance with the Securities Act.
(iii) Beneficial Interests in Unrestricted Global Notes to
Unrestricted Definitive Notes. If any holder of a beneficial interest in
an Unrestricted Global Note proposes to exchange such beneficial interest
for a Definitive Note or to transfer such beneficial interest to a Person
who takes delivery thereof in the form of a Definitive Note, then, upon
satisfaction of the conditions set forth in Section 2.06(b)(ii) hereof, the
Trustee shall cause the aggregate principal amount of the applicable Global
Note to be reduced accordingly pursuant to Section 2.06(h) hereof, and the
Company shall execute and the Trustee shall authenticate and deliver to the
Person designated in the instructions a Definitive Note in the appropriate
principal amount. Any Definitive Note issued in exchange for a beneficial
interest pursuant to this Section 2.06(c)(iii) shall be registered in such
name or names and in such authorized denomination or denominations as the
holder of such beneficial interest shall instruct the Registrar through
instructions from the Depositary and the Participant or Indirect
Participant. The Trustee shall deliver such Definitive Notes to the
Persons in whose names such Notes are so registered. Any Definitive Note
issued in exchange for a beneficial interest pursuant to this Section
2.06(c)(iii) shall not bear the Private Placement Legend.
(d) Transfer and Exchange of Definitive Notes for Beneficial Interests.
(i) Restricted Definitive Notes to Beneficial Interests in Restricted
Global Notes. If any Holder of a Restricted Definitive Note proposes to
exchange such Note for a beneficial interest in a Restricted Global Note or
to transfer such Restricted Definitive Notes to a Person who takes delivery
thereof in the form of a beneficial interest in a Restricted Global Note,
then, upon receipt by the Registrar of the following documentation:
(A) if the Holder of such Restricted Definitive Note proposes to
exchange such Note for a beneficial interest in a Restricted Global
Note, a certificate from such Holder in the form of Exhibit C hereto,
including the certifications in item (2)(b) thereof;
(B) if such Restricted Definitive Note is being transferred to a
QIB in accordance with Rule 144A under the Securities Act, a
certificate to the effect set forth in Exhibit B hereto, including the
certifications in item (1) thereof;
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(C) if such Restricted Definitive Note is being transferred to a
Non-U.S. Person in an offshore transaction in accordance with Rule 903
or Rule 904 under the Securities Act, a certificate to the effect set
forth in Exhibit B hereto, including the certifications in item (2)
thereof;
(D) if such Restricted Definitive Note is being transferred
pursuant to an exemption from the registration requirements of the
Securities Act in accordance with Rule 144 under the Securities Act, a
certificate to the effect set forth in Exhibit B hereto, including the
certifications in item (3)(a) thereof;
(E) if such Restricted Definitive Note is being transferred to an
Institutional Accredited Investor in reliance on an exemption from the
registration requirements of the Securities Act other than those
listed in subparagraphs (B) through (D) above, a certificate to the
effect set forth in Exhibit B hereto, including the certifications,
certificates and Opinion of Counsel required by item (3) thereof, if
applicable;
(F) if such Restricted Definitive Note is being transferred to
the Company or any of its Subsidiaries, a certificate to the effect
set forth in Exhibit B hereto, including the certifications in item
(3)(b) thereof; or
(G) if such Restricted Definitive Note is being transferred
pursuant to an effective registration statement under the Securities
Act, a certificate to the effect set forth in Exhibit B hereto,
including the certifications in item (3)(c) thereof,
the Trustee shall cancel the Restricted Definitive Note, increase or cause
to be increased the aggregate principal amount of, in the case of clause
(A) above, the appropriate Restricted Global Note, in the case of clause
(B) above, the 144A Global Note, in the case of clause (C) above, the
Regulation S Global Note, and in all other cases, the IAI Global Note.
(ii) Restricted Definitive Notes to Beneficial Interests in
Unrestricted Global Notes. A Holder of a Restricted Definitive Note may
exchange such Note for a beneficial interest in an Unrestricted Global Note
or transfer such Restricted Definitive Note to a Person who takes delivery
thereof in the form of a beneficial interest in an Unrestricted Global Note
only if:
(A) such exchange or transfer is effected pursuant to the
Exchange Offer in accordance with the Registration Rights Agreement
and the Holder, in the case of an exchange, or the transferee, in the
case of a transfer, certifies in the applicable Letter of Transmittal
that it is not (1) a Broker-Dealer, (2) a Person participating in the
distribution of the Exchange Notes or (3) a Person who is an affiliate
(as defined in Rule 144) of the Company;
(B) such transfer is effected pursuant to the Shelf Registration
Statement in accordance with the Registration Rights Agreement;
(C) such transfer is effected by a Broker-Dealer pursuant to the
Exchange Offer Registration Statement in accordance with the
Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the Holder of such Definitive Notes proposes to
exchange such Notes for a beneficial interest in the Unrestricted
Global Note, a certificate from
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such Holder in the form of Exhibit C hereto, including the
certifications in item (1)(c) thereof; or
(2) if the Holder of such Definitive Notes proposes to
transfer such Notes to a Person who shall take delivery thereof in the
form of a beneficial interest in the Unrestricted Global Note, a
certificate from such Holder in the form of Exhibit B hereto,
including the certifications in item (4) thereof;
and, in each such case set forth in this subparagraph (D), if the
Registrar so requests or if the Applicable Procedures so require, an
Opinion of Counsel in form reasonably acceptable to the Registrar to the
effect that such exchange or transfer is in compliance with the Securities
Act and that the restrictions on transfer contained herein and in the
Private Placement Legend are no longer required in order to maintain
compliance with the Securities Act.
Upon satisfaction of the conditions of any of the subparagraphs in
this Section 2.06(d)(ii), the Trustee shall cancel the Definitive Notes and
increase or cause to be increased the aggregate principal amount of the
Unrestricted Global Note.
(iii) Unrestricted Definitive Notes to Beneficial Interests in
Unrestricted Global Notes. A Holder of an Unrestricted Definitive Note may
exchange such Note for a beneficial interest in an Unrestricted Global Note
or transfer such Definitive Notes to a Person who takes delivery thereof in
the form of a beneficial interest in an Unrestricted Global Note at any
time. Upon receipt of a request for such an exchange or transfer, the
Trustee shall cancel the applicable Unrestricted Definitive Note and
increase or cause to be increased the aggregate principal amount of one of
the Unrestricted Global Notes.
If any such exchange or transfer from a Definitive Note to a
beneficial interest is effected pursuant to subparagraphs (ii)(B), (ii)(D)
or (iii) above at a time when an Unrestricted Global Note has not yet been
issued, the Company shall issue and, upon receipt of an Authentication
Order in accordance with Section 2.02 hereof, the Trustee shall
authenticate one or more Unrestricted Global Notes in an aggregate
principal amount equal to the principal amount of Definitive Notes so
transferred.
(e) Transfer and Exchange of Definitive Notes for Definitive Notes. Upon
request by a Holder of Definitive Notes and such Holder's compliance with the
provisions of this Section 2.06(e), the Registrar shall register the transfer or
exchange of Definitive Notes. Prior to such registration of transfer or
exchange, the requesting Holder shall present or surrender to the Registrar the
Definitive Notes duly endorsed or accompanied by a written instruction of
transfer in form satisfactory to the Registrar duly executed by such Holder or
by its attorney, duly authorized in writing. In addition, the requesting Holder
shall provide any additional certifications, documents and information, as
applicable, required pursuant to the following provisions of this Section
2.06(e).
(i) Restricted Definitive Notes to Restricted Definitive Notes. Any
Restricted Definitive Note may be transferred to and registered in the name
of Persons who take delivery thereof in the form of a Restricted Definitive
Note if the Registrar receives the following:
(A) if the transfer will be made pursuant to Rule 144A under the
Securities Act, then the transferor must deliver a certificate in the
form of Exhibit B hereto, including the certifications in item (1)
thereof;
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(B) if the transfer will be made pursuant to Rule 903 or Rule
904, then the transferor must deliver a certificate in the form of
Exhibit B hereto, including the certifications in item (2) thereof;
and
(C) if the transfer will be made pursuant to any other exemption
from the registration requirements of the Securities Act, then the
transferor must deliver a certificate in the form of Exhibit B hereto,
including the certifications, certificates and Opinion of Counsel
required by item (3) thereof, if applicable.
(ii) Restricted Definitive Notes to Unrestricted Definitive Notes.
Any Restricted Definitive Note may be exchanged by the Holder thereof for
an Unrestricted Definitive Note or transferred to a Person or Persons who
take delivery thereof in the form of an Unrestricted Definitive Note if:
(A) such exchange or transfer is effected pursuant to the
Exchange Offer in accordance with the Registration Rights Agreement
and the Holder, in the case of an exchange, or the transferee, in the
case of a transfer, certifies in the applicable Letter of Transmittal
that it is not (1) a broker-dealer, (2) a Person participating in the
distribution of the Exchange Notes or (3) a Person who is an affiliate
(as defined in Rule 144) of the Company;
(B) any such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration Rights
Agreement;
(C) any such transfer is effected by a Broker-Dealer pursuant to
the Exchange Offer Registration Statement in accordance with the
Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the Holder of such Restricted Definitive Notes
proposes to exchange such Notes for an Unrestricted Definitive Note, a
certificate from such Holder in the form of Exhibit C hereto,
including the certifications in item (1)(d) thereof; or
(2) if the Holder of such Restricted Definitive Notes
proposes to transfer such Notes to a Person who shall take delivery
thereof in the form of an Unrestricted Definitive Note, a certificate
from such Holder in the form of Exhibit B hereto, including the
certifications in item (4) thereof;
and, in each such case set forth in this subparagraph (D), if the
Registrar so requests, an Opinion of Counsel in form reasonably acceptable
to the Company to the effect that such exchange or transfer is in
compliance with the Securities Act and that the restrictions on transfer
contained herein and in the Private Placement Legend are no longer
required in order to maintain compliance with the Securities Act.
(iii) Unrestricted Definitive Notes to Unrestricted Definitive Notes.
A Holder of Unrestricted Definitive Notes may transfer such Notes to a
Person who takes delivery thereof in the form of an Unrestricted Definitive
Note. Upon receipt of a request to register such a transfer, the Registrar
shall register the Unrestricted Definitive Notes pursuant to the
instructions from the Holder thereof.
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(f) Exchange Offer. Upon the occurrence of the Exchange Offer in
accordance with the Registration Rights Agreement, the Company shall issue and,
upon receipt of an Authentication Order in accordance with Section 2.02, the
Trustee shall authenticate (i) one or more Unrestricted Global Notes in an
aggregate principal amount equal to the principal amount of the beneficial
interests in the Restricted Global Notes tendered for acceptance by Persons that
certify in the applicable Letters of Transmittal that (x) they are not Broker-
Dealers, (y) they are not participating in a distribution of the Exchange Notes
and (z) they are not affiliates (as defined in Rule 144) of the Company, and
accepted for exchange in the Exchange Offer and (ii) Definitive Notes in an
aggregate principal amount equal to the principal amount of the Restricted
Definitive Notes accepted for exchange in the Exchange Offer. Concurrently with
the issuance of such Notes, the Trustee shall cause the aggregate principal
amount of the applicable Restricted Global Notes to be reduced accordingly, and
the Company shall execute and the Trustee shall authenticate and deliver to the
Persons designated by the Holders of Definitive Notes so accepted Definitive
Notes in the appropriate principal amount.
(g) Legends. The following legends shall appear on the face of all Global
Notes and Definitive Notes issued under this Indenture unless specifically
stated otherwise in the applicable provisions of this Indenture.
(i) Private Placement Legend.
(A) Except as permitted by subparagraph (B) below, each Global
Note and each Definitive Note (and all Notes issued in exchange
therefor or substitution thereof) shall bear the legend in
substantially the following form:
"THIS NOTE HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED, SOLD,
PLEDGED OR OTHERWISE TRANSFERRED WITHIN THE UNITED STATES OR TO, OR FOR THE
ACCOUNT OR BENEFIT OF, U.S. PERSONS, EXCEPT AS SET FORTH IN THE NEXT SENTENCE.
BY ITS ACQUISITION HEREOF OR OF A BENEFICIAL INTEREST HEREIN, THE HOLDER (1)
REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE
144A UNDER THE SECURITIES ACT) (A "QIB"), (B) IT HAS ACQUIRED THIS NOTE IN AN
OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE SECURITIES ACT OR
(C) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(A)(1),
(2), (3) OR (7) OF REGULATION D UNDER THE SECURITIES ACT) (AN "IAI"), (2) AGREES
THAT IT WILL NOT RESELL OR OTHERWISE TRANSFER THIS NOTE EXCEPT (A) TO THE
COMPANY OR ANY OF ITS SUBSIDIARIES, (B) TO A PERSON WHOM THE HOLDER REASONABLY
BELIEVES IS A QIB PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QIB IN
A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (C) IN AN OFFSHORE
TRANSACTION MEETING THE REQUIREMENTS OF RULE 903 or 904 OF THE SECURITIES ACT,
(D) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER THE SECURITIES
ACT, (E) TO AN IAI THAT, PRIOR TO SUCH TRANSFER, FURNISHES THE TRUSTEE A SIGNED
LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE
TRANSFER OF THIS NOTE (THE FORM OF WHICH CAN BE OBTAINED FROM THE TRUSTEE) AND
AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY THAT SUCH TRANSFER IS IN
COMPLIANCE WITH THE SECURITIES ACT, (F) IN ACCORDANCE WITH ANOTHER EXEMPTION
FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN
OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY), OR (G) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE
JURISDICTION, AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS
NOTE OR AN INTEREST HEREIN IS
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TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. AS USED HEREIN,
THE TERMS "OFFSHORE TRANSACTION" AND "UNITED STATES" HAVE THE MEANINGS GIVEN TO
THEM BY RULE 902 OF REGULATION S UNDER THE SECURITIES ACT. THE INDENTURE
CONTAINS A PROVISION REQUIRING THE TRUSTEE TO REFUSE TO REGISTER ANY TRANSFER OF
THIS NOTE IN VIOLATION OF THE FOREGOING."
(B) Notwithstanding the foregoing, any Global Note or Definitive
Note issued pursuant to subparagraphs (b)(iv), (c)(ii), (c)(iii),
(d)(ii), (d)(iii), (e)(ii), (e)(iii) or (f) to this Section 2.06 (and
all Notes issued in exchange therefor or substitution thereof) shall
not bear the Private Placement Legend.
(ii) Global Note Legend. Each Global Note shall bear a legend in
substantially the following form:
"THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE
GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL
OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES
EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED
PURSUANT TO SECTION 2.07 OF THE INDENTURE, (II) THIS GLOBAL NOTE MAY BE
EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.06(a) OF THE INDENTURE,
(III) THIS GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT
TO SECTION 2.11 OF THE INDENTURE AND (IV) THIS GLOBAL NOTE MAY BE TRANSFERRED TO
A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF THE COMPANY."
(h) Cancellation and/or Adjustment of Global Notes. At such time as all
beneficial interests in a particular Global Note have been exchanged for
Definitive Notes or a particular Global Note has been redeemed, repurchased or
canceled in whole and not in part, such Global Note shall be returned to or
retained and canceled by the Trustee in accordance with Section 2.11 hereof. At
any time prior to such cancellation, if any beneficial interest in a Global Note
is exchanged for or transferred to a Person who will take delivery thereof in
the form of a beneficial interest in another Global Note or for Definitive
Notes, the principal amount of Notes represented by such Global Note shall be
reduced accordingly and an endorsement shall be made on such Global Note by the
Trustee or by the Depositary at the direction of the Trustee to reflect such
reduction; and if the beneficial interest is being exchanged for or transferred
to a Person who will take delivery thereof in the form of a beneficial interest
in another Global Note, such other Global Note shall be increased accordingly
and an endorsement shall be made on such Global Note by the Trustee or by the
Depositary at the direction of the Trustee to reflect such increase.
(i) General Provisions Relating to Transfers and Exchanges.
(i) To permit registrations of transfers and exchanges, the Company
shall execute and the Trustee shall authenticate Global Notes and
Definitive Notes upon the Company's order or at the Registrar's request.
(ii) No service charge shall be made to a holder of a beneficial
interest in a Global Note or to a Holder of a Definitive Note for any
registration of transfer or exchange, but the Company may require payment
of a sum sufficient to cover any transfer tax or similar governmental
charge payable in connection therewith (other than any such transfer taxes
or similar governmental charge payable upon exchange or transfer pursuant
to Sections 2.10, 3.06, 3.09, 4.10, 4.15 and 9.05 hereof).
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(iii) The Registrar shall not be required to register the transfer of
or exchange any Note selected for redemption in whole or in part, except
the unredeemed portion of any Note being redeemed in part.
(iv) All Global Notes and Definitive Notes issued upon any
registration of transfer or exchange of Global Notes or Definitive Notes
shall be the valid obligations of the Company, evidencing the same debt,
and entitled to the same benefits under this Indenture, as the Global Notes
or Definitive Notes surrendered upon such registration of transfer or
exchange.
(v) The Company shall not be required (A) to issue, to register the
transfer of or to exchange any Notes during a period beginning at the
opening of business 15 days before the day of the mailing of a notice of
redemption of Notes under Section 3.02 hereof and ending at the close of
business on the day of such mailing, (B) to register the transfer of or to
exchange any Note so selected for redemption in whole or in part, except
the unredeemed portion of any Note being redeemed in part or (C) to
register the transfer of or to exchange a Note between a record date and
the next succeeding Interest Payment Date.
(vi) Prior to due presentment for the registration of a transfer of
any Note, the Trustee, any Agent and the Company may deem and treat the
Person in whose name any Note is registered as the absolute owner of such
Note for the purpose of receiving payment of principal of and interest on
such Notes and for all other purposes, and none of the Trustee, any Agent
or the Company shall be affected by notice to the contrary.
(vii) The Trustee shall authenticate Global Notes and Definitive
Notes in accordance with the provisions of Section 2.02 hereof.
(viii) All certifications, certificates and Opinions of Counsel
required to be submitted to the Registrar pursuant to this Section 2.06 to
effect a registration of transfer or exchange may be submitted by
facsimile.
(ix) Each Holder of a Note agrees to indemnify the Company and the
Trustee against any liability that may result from the transfer, exchange
or assignment of such Holder's Note in violation of any provision of this
Indenture and/or applicable United States federal or state securities law.
(x) The Trustee shall have no obligation or duty to monitor, determine
or inquire as to compliance with any restrictions on transfer imposed under
this Indenture or under applicable law with respect to any transfer of any
interest in any Note (including any transfers between or among the
Depositary participants or beneficial owners of interests in any Global
Note) other than to require delivery of such certificates and other
documentation or evidence as are expressly required by, and to do so if and
when expressly required by the terms of, this Indenture, and to examine the
same to determine substantial compliance as to form with the express
requirements hereof.
Section 2.07. Replacement Notes.
If any mutilated Note is surrendered to the Trustee or the Company and the
Trustee receives evidence to its satisfaction of the destruction, loss or theft
of any Note, the Company shall issue and the Trustee, upon receipt of an
Authentication Order, shall authenticate a replacement Note if the Trustee's
requirements are met. An indemnity bond must be supplied by the Holder that is
sufficient in the judgment of the Trustee and the Company to protect the
Company, the Trustee, any Agent and any
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authenticating agent from any loss that any of them may suffer if a Note is
replaced. The Company may charge for its expenses in replacing a Note.
Every replacement Note is an additional obligation of the Company and shall
be entitled to all of the benefits of this Indenture equally and proportionately
with all other Notes duly issued hereunder.
Section 2.08. Outstanding Notes.
The Notes outstanding at any time are all the Notes authenticated by the
Trustee except for those canceled by it, those delivered to it for cancellation,
those reductions in the interest in a Global Note effected by the Trustee in
accordance with the provisions hereof, and those described in this Section as
not outstanding. Except as set forth in Section 2.09 hereof, a Note does not
cease to be outstanding because the Company or an Affiliate of the Company holds
the Note; however, Notes held by the Company or a Subsidiary of the Company
shall not be deemed to be outstanding for purposes of Section 3.07(b) hereof.
If a Note is replaced pursuant to Section 2.07 hereof, it ceases to be
outstanding unless the Trustee receives proof satisfactory to it that the
replaced Note is held by a bona fide purchaser.
If the principal amount of any Note is considered paid under Section 4.01
hereof, it ceases to be outstanding and interest on it ceases to accrue.
If the Paying Agent (other than the Company, a Subsidiary or an Affiliate
of any thereof) holds, on a redemption date or maturity date, money sufficient
to pay Notes payable on that date, then on and after that date such Notes shall
be deemed to be no longer outstanding and shall cease to accrue interest.
Section 2.09. Treasury Notes.
In determining whether the Holders of the required principal amount of
Notes have concurred in any direction, waiver or consent, Notes owned by the
Company, or by any Person directly or indirectly controlling or controlled by or
under direct or indirect common control with the Company, shall be considered as
though not outstanding, except that for the purposes of determining whether the
Trustee shall be protected in relying on any such direction, waiver or consent,
only Notes that a Responsible Officer of the Trustee knows are so owned shall be
so disregarded.
Section 2.10. Temporary Notes.
Until certificates representing Notes are ready for delivery, the Company
may prepare and the Trustee, upon receipt of an Authentication Order, shall
authenticate temporary Notes. Temporary Notes shall be substantially in the
form of certificated Notes but may have variations that the Company considers
appropriate for temporary Notes and as shall be reasonably acceptable to the
Trustee. Without unreasonable delay, the Company shall prepare and the Trustee
shall authenticate definitive Notes in exchange for temporary Notes.
Holders of temporary Notes shall be entitled to all of the benefits of this
Indenture.
Section 2.11. Cancellation.
The Company at any time may deliver Notes to the Trustee for cancellation.
The Registrar and Paying Agent shall forward to the Trustee any Notes
surrendered to them for registration of transfer, exchange or payment. The
Trustee and no one else shall cancel all Notes surrendered for registration of
transfer, exchange, payment, replacement or cancellation and shall be disposed
of in accordance with its
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customary procedures. The Company may not issue new Notes to replace Notes that
it has paid or that have been delivered to the Trustee for cancellation.
Section 2.12. Defaulted Interest.
If the Company defaults in a payment of interest on the Notes, it shall pay
the defaulted interest in any lawful manner plus, to the extent lawful, interest
payable on the defaulted interest, to the Persons who are Holders on a
subsequent special record date, in each case at the rate provided in the Notes
and in Section 4.01 hereof. The Company shall notify the Trustee in writing of
the amount of defaulted interest proposed to be paid on each Note and the date
of the proposed payment. The Company shall fix or cause to be fixed each such
special record date and payment date, provided that no such special record date
shall be less than 10 days prior to the related payment date for such defaulted
interest. At least 15 days before the special record date, the Company (or,
upon the written request of the Company, the Trustee in the name and at the
expense of the Company) shall mail or cause to be mailed to Holders a notice
that states the special record date, the related payment date and the amount of
such interest to be paid.
Section 2.13. CUSIP Numbers.
The Company in issuing the Notes may use "CUSIP" numbers (if then generally
in use), and if so, the Trustee shall use "CUSIP" numbers in notices of
redemption as a convenience to Holders; provided that any such notice may state
that no representation is made as to the correctness of such numbers either as
printed on the Notes or as contained in any notice of a redemption and that
reliance may be placed only on the other identification numbers printed on the
Notes, and any such redemption shall not be affected by any defect in or
omission of such numbers. The Company will promptly notify the Trustee of any
change in the "CUSIP" numbers.
ARTICLE 3.
REDEMPTION AND PREPAYMENT
Section 3.01. Notices to Trustee.
If the Company elects to redeem Notes pursuant to the optional redemption
provisions of Section 3.07 hereof, it shall furnish to the Trustee, at least 30
days but not more than 60 days before a redemption date, an Officers'
Certificate setting forth (i) the clause of this Indenture pursuant to which the
redemption shall occur, (ii) the redemption date, (iii) the principal amount of
Notes to be redeemed and (iv) the redemption price.
Section 3.02. Selection of Notes to Be Redeemed.
If less than all of the Notes are to be redeemed or purchased in an offer to
purchase at any time, the Trustee shall select the Notes to be redeemed or
purchased among the Holders of the Notes in compliance with the requirements of
the principal national securities exchange, if any, on which the Notes are
listed or, if the Notes are not so listed, on a pro rata basis, by lot or in
accordance with any other method the Trustee considers fair and appropriate. In
the event of partial redemption by lot, the particular Notes to be redeemed
shall be selected, unless otherwise provided herein, not less than 30 nor more
than 60 days prior to the redemption date by the Trustee from the outstanding
Notes not previously called for redemption.
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The Trustee shall promptly notify the Company in writing of the Notes
selected for redemption and, in the case of any Note selected for partial
redemption, the principal amount thereof to be redeemed. Notes and portions of
Notes selected shall be in amounts of $1,000 or whole multiples of $1,000;
except that if all of the Notes of a Holder are to be redeemed, the entire
outstanding amount of Notes held by such Holder, even if not a multiple of
$1,000, shall be redeemed. Except as provided in the preceding sentence,
provisions of this Indenture that apply to Notes called for redemption also
apply to portions of Notes called for redemption.
Section 3.03. Notice of Redemption.
Subject to the provisions of Section 3.09 hereof, at least 30 days but not
more than 60 days before a redemption date, the Company shall mail or cause to
be mailed, by first class mail, a notice of redemption to each Holder whose
Notes are to be redeemed at its registered address.
The notice shall identify the Notes to be redeemed (including CUSIP number)
and shall state:
(a) the redemption date;
(b) the redemption price;
(c) if any Note is being redeemed in part, the portion of the principal
amount of such Note to be redeemed and that, after the redemption date upon
surrender of such Note, a new Note or Notes in principal amount equal to the
unredeemed portion shall be issued upon cancellation of the original Note;
(d) the name and address of the Paying Agent;
(e) that Notes called for redemption must be surrendered to the Paying
Agent to collect the redemption price;
(f) that, unless the Company defaults in making such redemption payment,
interest on Notes called for redemption ceases to accrue on and after the
redemption date;
(g) the paragraph of the Notes and/or Section of this Indenture pursuant to
which the Notes called for redemption are being redeemed; and
(h) that no representation is made as to the correctness or accuracy of the
CUSIP number, if any, listed in such notice or printed on the Notes.
At the Company's request, the Trustee shall give the notice of redemption
in the Company's name and at its expense; provided, however, that the Company
shall have delivered to the Trustee, at least 45 days prior to the redemption
date, an Officers' Certificate requesting that the Trustee give such notice and
setting forth the information to be stated in such notice as provided in the
preceding paragraph.
Section 3.04. Effect of Notice of Redemption.
Once notice of redemption is mailed in accordance with Section 3.03 hereof,
Notes called for redemption become irrevocably due and payable on the redemption
date at the redemption price. A notice of redemption may not be conditional.
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Section 3.05. Deposit of Redemption Price.
One Business Day prior to the redemption date, the Company shall deposit
with the Trustee or with the Paying Agent money sufficient to pay the redemption
price of and accrued interest on all Notes to be redeemed on that date. The
Trustee or the Paying Agent shall promptly return to the Company any money
deposited with the Trustee or the Paying Agent by the Company in excess of the
amounts necessary to pay the redemption price of, and accrued interest on, all
Notes to be redeemed.
If the Company complies with the provisions of the preceding paragraph, on
and after the redemption date, interest shall cease to accrue on the Notes or
the portions of Notes called for redemption. If a Note is redeemed on or after
an interest record date but on or prior to the related interest payment date,
then any accrued and unpaid interest shall be paid to the Person in whose name
such Note was registered at the close of business on such record date. If any
Note called for redemption shall not be so paid upon surrender for redemption
because of the failure of the Company to comply with the preceding paragraph,
interest shall be paid on the unpaid principal, from the redemption date until
such principal is paid, and to the extent lawful on any interest not paid on
such unpaid principal, in each case at the rate provided in the Notes and in
Section 4.01 hereof.
Section 3.06. Notes Redeemed in Part.
Upon surrender of a Note that is redeemed in part, the Company shall issue
and, upon the Company's written request, the Trustee shall authenticate for the
Holder at the expense of the Company a new Note equal in principal amount to the
unredeemed portion of the Note surrendered.
Section 3.07. Optional Redemption.
(a) Except as set forth in clause (b) of this Section 3.07, the Company
shall not have the option to redeem the Notes pursuant to this Section 3.07
prior to April 1, 2004. Thereafter, the Company may redeem all or a part of the
Notes upon not less than 30 nor more than 60 days' notice, at the redemption
prices (expressed as percentages of principal amount) set forth below plus
accrued and unpaid interest and Liquidated Damages, if any, thereon, to the
applicable redemption date, if redeemed during the twelve-month period beginning
on April 1 of the years indicated below:
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
2004................................................. 106.625%
2005................................................. 104.750%
2006................................................. 102.875%
2007 and thereafter.................................. 100.000%
</TABLE>
(b) Notwithstanding the provisions of clause (a) of this Section 3.07, at
any time prior to April 1, 2002, the Company may on any one or more occasions
redeem up to 35% of the aggregate principal amount of Notes originally issued
under this Indenture at a redemption price of 111.250% of the principal amount
thereof, plus accrued and unpaid interest and Liquidated Damages, if any, to
this redemption date, with the net cash proceeds of one or more Public Equity
Offerings; provided that:
(i) at least 65% of the aggregate principal amount of Notes issued
under this Indenture remains outstanding immediately after the occurrence
of such redemption (excluding Notes held by the Company and its
Subsidiaries); and
(ii) the redemption must occur within 45 days of the date of the
closing of such Public Equity Offering.
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(c) Any redemption pursuant to this Section 3.07 shall be made pursuant to
the provisions of Section 3.01 through 3.06 hereof.
Section 3.08. Mandatory Redemption.
The Company shall not be required to make mandatory redemption or sinking
fund payments with respect to the Notes.
Section 3.09. Offer to Purchase.
In the event that, pursuant to Section 4.10 and 4.15 hereof, the Company
shall be required to commence an offer to all Holders to purchase Notes (a
"Repurchase Offer"), it shall follow the procedures specified below.
The Repurchase Offer shall remain open for a period of 20 Business Days
following its commencement and no longer, except to the extent that a longer
period is required by applicable law (the "Offer Period"). No later than five
Business Days after the termination of the Offer Period (the "Purchase Date"),
the Company shall purchase the principal amount of Notes required to be
purchased pursuant to Section 4.10 or 4.15 hereof (the "Offer Amount") or, if
less than the Offer Amount has been tendered, all Notes tendered in response to
the Repurchase Offer. Payment for any Notes so purchased shall be made in the
same manner as interest payments are made.
If the Purchase Date is on or after an interest record date and on or
before the related interest payment date, any accrued and unpaid interest shall
be paid to the Person in whose name a Note is registered at the close of
business on such record date, and no additional interest shall be payable to
Holders who tender Notes pursuant to the Repurchase Offer.
Upon the commencement of a Repurchase Offer, the Company shall send, by
first class mail, a notice to the Trustee and each of the Holders, with a copy
to the Trustee. The notice shall contain all instructions and materials
necessary to enable such Holders to tender Notes pursuant to the Repurchase
Offer. The Repurchase Offer shall be made to all Holders. The notice, which
shall govern the terms of the Repurchase Offer, shall state:
(a) that the Repurchase Offer is being made pursuant to this Section 3.09
and Section 4.10 or 4.15 hereof and the length of time the Repurchase Offer
shall remain open;
(b) the Offer Amount, the purchase price and the Purchase Date;
(c) that any Note not tendered or accepted for payment shall continue to
accrete or accrue interest;
(d) that, unless the Company defaults in making such payment, any Note
accepted for payment pursuant to the Repurchase Offer shall cease to accrete or
accrue interest after the Purchase Date;
(e) that Holders electing to have a Note purchased pursuant to a Repurchase
Offer may elect to have Notes purchased in integral multiples of $1,000 only;
(f) that Holders electing to have a Note purchased pursuant to any
Repurchase Offer shall be required to surrender the Note, with the form entitled
"Option of Holder to Elect Purchase" on the reverse of the Note completed, or
transfer by book-entry transfer, to the Company, a depositary, if
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appointed by the Company, or a Paying Agent at the address specified in the
notice at least three days before the Purchase Date;
(g) that Holders shall be entitled to withdraw their election if the
Company, the depositary or the Paying Agent, as the case may be, receives, not
later than the expiration of the Offer Period, a facsimile transmission or
letter setting forth the name of the Holder, the principal amount of the Note
the Holder delivered for purchase and a statement that such Holder is
withdrawing his election to have such Note purchased;
(h) that, if the aggregate principal amount of Notes surrendered by Holders
exceeds the Offer Amount, the Company shall select the Notes to be purchased on
a pro rata basis (with such adjustments as may be deemed appropriate by the
Company so that only Notes in denominations of $1,000, or integral multiples
thereof, shall be purchased); and
(i) that Holders whose Notes were purchased only in part shall be issued
new Notes equal in principal amount to the unpurchased portion of the Notes
surrendered (or transferred by book-entry transfer).
On or before the Purchase Date, the Company shall, to the extent lawful,
accept for payment, on a pro rata basis to the extent necessary, the Offer
Amount of Notes or portions thereof tendered pursuant to the Repurchase Offer,
or if less than the Offer Amount has been tendered, all Notes tendered, and
shall deliver to the Trustee an Officers' Certificate stating that such Notes or
portions thereof were accepted for payment by the Company in accordance with the
terms of this Section 3.09. The Company, the Depositary or the Paying Agent, as
the case may be, shall promptly (but in any case not later than five days after
the Purchase Date) mail or deliver to each tendering Holder an amount equal to
the purchase price of the Notes tendered by such Holder and accepted by the
Company for purchase, and the Company shall promptly issue a new Note, and the
Trustee, upon written request from the Company shall authenticate and mail or
deliver such new Note to such Holder, in a principal amount equal to any
unpurchased portion of the Note surrendered. Any Note not so accepted shall be
promptly mailed or delivered by the Company to the Holder thereof. The Company
shall publicly announce the results of the Repurchase Offer on the Purchase
Date.
Other than as specifically provided in this Section 3.09, any purchase
pursuant to this Section 3.09 shall be made pursuant to the provisions of
Sections 3.01 through 3.06 hereof.
ARTICLE 4.
COVENANTS
Section 4.01. Payment of Notes.
The Company shall pay or cause to be paid the principal of, premium, if
any, and interest on the Notes on the dates and in the manner provided in the
Notes. Principal, premium, if any, and interest shall be considered paid on the
date due if the Paying Agent, if other than the Company or a Subsidiary thereof,
holds as of 10:00 a.m. Eastern Time on the due date money deposited by the
Company in immediately available funds and designated for and sufficient to pay
all principal, premium, if any, and interest then due. The Company shall pay
all Liquidated Damages, if any, in the same manner on the dates and in the
amounts set forth in the Registration Rights Agreement.
The Company shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue principal at the rate equal to
1% per annum in excess of the then applicable interest rate on the Notes to the
extent lawful; it shall pay interest (including post-petition interest in any
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proceeding under any Bankruptcy Law) on overdue installments of interest and
Liquidated Damages (without regard to any applicable grace period) at the same
rate to the extent lawful.
Section 4.02. Maintenance of Office or Agency.
The Company shall maintain in the Borough of Manhattan, the City of New
York, an office or agency (which may be an office of the Trustee or an affiliate
of the Trustee, Registrar or co-registrar) where Notes may be surrendered for
registration of transfer or for exchange and where notices and demands to or
upon the Company in respect of the Notes and this Indenture may be served. The
Company shall give prompt written notice to the Trustee of the location, and any
change in the location, of such office or agency. If at any time the Company
shall fail to maintain any such required office or agency or shall fail to
furnish the Trustee with the address thereof, such presentations, surrenders,
notices and demands may be made or served at the Corporate Trust Office of the
Trustee.
The Company may also from time to time designate one or more other offices
or agencies where the Notes may be presented or surrendered for any or all such
purposes and may from time to time rescind such designations; provided, however,
that no such designation or rescission shall in any manner relieve the Company
of its obligation to maintain an office or agency in the Borough of Manhattan,
the City of New York for such purposes. The Company shall give prompt written
notice to the Trustee of any such designation or rescission and of any change in
the location of any such other office or agency.
The Company hereby designates the Corporate Trust Office of the Trustee as
one such office or agency of the Company in accordance with Section 2.03.
Section 4.03. Reports.
(a) Whether or not required by the rules and regulations of the SEC, so
long as any Notes are outstanding, the Company shall furnish to the Holders of
Notes (i) all quarterly and annual financial information that would be required
to be contained in a filing with the SEC on Forms 10-Q and 10-K if the Company
were required to file such forms, including a "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and, with respect to
the annual information only, a report thereon by the Company's certified
independent accountants and (ii) all current reports that would be required to
be filed with the SEC on Form 8-K if the Company were required to file such
reports, in each case, within the time periods specified in the SEC's rules and
regulations. In addition, following consummation of the Exchange Offer, whether
or not required by the rules and regulations of the SEC, the Company shall file
a copy of all such information and reports with the SEC for public availability
within the time periods specified in the SEC's rules and regulations (unless the
SEC will not accept such a filing) and make such information available to
securities analysts and prospective investors upon request. The Company shall
at all times comply with TIA (S) 314(a).
(b) For so long as any Notes remain outstanding, the Company and the
Guarantors shall furnish to the Holders and to securities analysts and
prospective investors, upon their request, the information required to be
delivered pursuant to Rule 144A(d)(4) under the Securities Act.
(c) Delivery of such reports, information and documents to the Trustee is
for informational purposes only and the Trustee's receipt of such shall not
constitute constructive notice of any information contained therein or
determinable from information contained therein, including the Company's
compliance with any of its covenants hereunder (as to which the Trustee is
entitled to rely exclusively on Officers' Certificates).
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Section 4.04. Compliance Certificate.
(a) The Company and each Guarantor (to the extent that such Guarantor is so
required under the TIA) shall deliver to the Trustee, within 90 days after the
end of each fiscal year, an Officers' Certificate stating that a review of the
activities of the Company and its Subsidiaries during the preceding fiscal year
has been made under the supervision of the signing Officers with a view to
determining whether the Company has kept, observed, performed and fulfilled its
obligations under this Indenture, and further stating, as to each such Officer
signing such certificate, that to the best of his or her knowledge the Company
has kept, observed, performed and fulfilled each and every covenant contained in
this Indenture and is not in default in the performance or observance of any of
the terms, provisions and conditions of this Indenture (or, if a Default or
Event of Default shall have occurred, describing all such Defaults or Events of
Default of which he or she may have knowledge and what action the Company is
taking or proposes to take with respect thereto) and that to the best of his or
her knowledge no event has occurred and remains in existence by reason of which
payments on account of the principal of or interest, if any, on the Notes is
prohibited or if such event has occurred, a description of the event and what
action the Company is taking or proposes to take with respect thereto.
(b) The Company shall, so long as any of the Notes are outstanding, deliver
to the Trustee, forthwith upon any Officer becoming aware of any Default or
Event of Default, an Officers' Certificate specifying such Default or Event of
Default and what action the Company is taking or proposes to take with respect
thereto.
Section 4.05. Taxes.
The Company shall pay, and shall cause each of its Subsidiaries to pay,
prior to delinquency, all material taxes, assessments, and governmental levies
except such as are contested in good faith and by appropriate proceedings or
where the failure to effect such payment is not adverse in any material respect
to the Holders of the Notes.
Section 4.06. Stay, Extension and Usury Laws.
The Company and each of the Guarantors covenants (to the extent that it may
lawfully do so) that it shall not at any time insist upon, plead, or in any
manner whatsoever claim or take the benefit or advantage of, any stay, extension
or usury law wherever enacted, now or at any time hereafter in force, that may
affect the covenants or the performance of this Indenture; and the Company and
each of the Guarantors (to the extent that it may lawfully do so) hereby
expressly waives all benefit or advantage of any such law, and covenants that it
shall not, by resort to any such law, hinder, delay or impede the execution of
any power herein granted to the Trustee, but shall suffer and permit the
execution of every such power as though no such law has been enacted.
Section 4.07. Restricted Payments.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly: (i) declare or pay any dividend or make
any other payment or distribution on account of the Company's or any of its
Restricted Subsidiaries' Equity Interests (including, without limitation, any
payment in connection with any merger or consolidation involving the Company or
any of its Restricted Subsidiaries) or to the direct or indirect holders of the
Company's or any of its Restricted Subsidiaries' Equity Interests in their
capacity as such (other than dividends or distributions payable in Equity
Interests (other than Disqualified Stock) of the Company or to the Company or a
Restricted Subsidiary of the Company); (ii) purchase, redeem or otherwise
acquire or retire for value (including, without limitation, in connection with
any merger or consolidation involving the Company) any Equity Interests of the
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Company or any direct or indirect parent of the Company; (iii) make any payment
on or with respect to, or purchase, redeem, defease or otherwise acquire or
retire for value any Indebtedness that is subordinated to the Notes or the
Subsidiary Guarantees, except a payment of interest or principal at the Stated
Maturity thereof; or (iv) make any Restricted Investment (all such payments and
other actions set forth in clauses (i) through (iv) being collectively referred
to as "Restricted Payments"), unless, at the time of and after giving effect to
such Restricted Payment:
(a) no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof; and
(b) the Company would, at the time of such Restricted Payment and
after giving pro forma effect thereto as if such Restricted Payment had
been made at the beginning of the applicable four-quarter period, have been
permitted to incur at least $1.00 of additional Indebtedness pursuant to
the Fixed Charge Coverage Ratio test set forth in the first paragraph of
Section 4.09 hereof; and
(c) such Restricted Payment, together with the aggregate amount of all
other Restricted Payments made by the Company and its Restricted
Subsidiaries after the date of this Indenture (excluding Restricted
Payments permitted by clauses (ii), (iii), (iv) and (v) of the next
succeeding paragraph) is less than the sum, without duplication, of (i) 50%
of the Consolidated Net Income of the Company for the period (taken as one
accounting period) from the beginning of the first fiscal quarter
commencing after the date of this Indenture to the end of the Company's
most recently ended fiscal quarter for which internal financial statements
are available at the time of such Restricted Payment (or, if such
Consolidated Net Income for such period is a deficit, less 100% of such
deficit), plus (ii) 100% of the aggregate net cash proceeds received by the
Company since the date of this Indenture as a contribution to its common
equity capital or from the issue or sale of Equity Interests of the Company
(other than Disqualified Stock) or from the issue or sale of convertible or
exchangeable Disqualified Stock or convertible or exchangeable debt
securities of the Company that have been converted into or exchanged for
such Equity Interests (other than Equity Interests (or Disqualified Stock
or debt securities) sold to a Subsidiary of the Company), plus (iii) the
amount by which indebtedness of the Company or its Restricted Subsidiaries
is reduced on the Company's balance sheet upon the conversion or exchange
subsequent to the issue date of any indebtedness of the Company convertible
or exchangeable for Equity Interests (other than Disqualified Stock) of the
Company (less the amount of any cash, or other property, distributed by the
Company or any Restricted Subsidiary upon such conversion or exchange),
plus (iv) without duplication, to the extent that any Restricted Investment
that was made after the date of this Indenture is sold for cash or
otherwise liquidated or repaid for cash, the lesser of (A) the cash return
of capital with respect to such Restricted Investment (less the cost of
disposition, if any) and (B) the initial amount of such Restricted
Investment.
So long as no Default has occurred and is continuing or would be caused
thereby, the preceding provisions shall not prohibit (i) the payment of any
dividend within 60 days after the date of declaration thereof, if at said date
of declaration such payment would have complied with the provisions of this
Indenture; (ii) the redemption, repurchase, retirement, defeasance or other
acquisition of any subordinated Indebtedness of the Company or any Guarantor or
of any Equity Interests of the Company in exchange for, or out of the net cash
proceeds of the substantially concurrent sale (other than to a Restricted
Subsidiary of the Company) of, Equity Interests of the Company (other than
Disqualified Stock); provided that the amount of any such net cash proceeds that
are utilized for any such redemption, repurchase, retirement, defeasance or
other acquisition shall be excluded from clause (c)(ii) of the preceding
paragraph; (iii) the defeasance, redemption, repurchase or other acquisition of
subordinated Indebtedness of the Company or any Guarantor with the net cash
proceeds from an incurrence of
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Permitted Refinancing Indebtedness; (iv) the payment of any dividend by the
Company on Existing Preferred Stock pursuant to the terms of such Existing
Preferred Stock as of the date of this Indenture; (v) the payment of any
dividend by a Restricted Subsidiary of the Company to the holders of its common
Equity Interests on a pro rata basis; (vi) the repurchase, redemption or other
acquisition or retirement for value of any Equity Interests of the Company or
any Restricted Subsidiary of the Company held by any member of the Company's (or
any of its Restricted Subsidiaries') management pursuant to any management
equity subscription agreement or stock option agreement; provided that the
aggregate price paid for all such repurchased, redeemed, acquired or retired
Equity Interests shall not exceed $1.5 million in any twelve-month period; and
(vii) Restricted Payments not to exceed $5.0 million since the date of this
Indenture.
The amount of all Restricted Payments (other than cash) shall be the fair
market value on the date of the Restricted Payment of the asset(s) or securities
proposed to be transferred or issued to or by the Company or such Restricted
Subsidiary, as the case may be, pursuant to the Restricted Payment. The fair
market value of any assets or securities that are required to be valued by this
covenant shall be determined by the Board of Directors whose resolution with
respect thereto shall be delivered to the Trustee. The Board of Directors'
determination must be based upon an opinion or appraisal issued by an
accounting, appraisal or investment banking firm of national standing if the
fair market value exceeds $10.0 million. Not later than the date of making any
Restricted Payment, the Company shall deliver to the Trustee an Officers'
Certificate stating that such Restricted Payment is permitted and setting forth
the basis upon which the calculations required by this Section 4.07 were
computed, together with a copy of any fairness opinion or appraisal required by
this Indenture.
Section 4.08. Dividend and Other Payment Restrictions Affecting Subsidiaries.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to
exist or become effective any encumbrance or restriction on the ability of any
Restricted Subsidiary to (a)(i) pay dividends or make any other distributions to
the Company or any of its Restricted Subsidiaries (A) on its Capital Stock or
(B) with respect to any other interest or participation in, or measured by, its
profits or (ii) pay any indebtedness owed to the Company or any of its
Restricted Subsidiaries, (b) make loans or advances to the Company or any of its
Restricted Subsidiaries or (c) transfer any of its properties or assets to the
Company or any of its Restricted Subsidiaries, except for such encumbrances or
restrictions existing under or by reasons of (i) Existing Indebtedness as in
effect on the date hereof and any amendments, modifications, restatements,
renewals, increases, supplements, refundings, replacements or refinancings
thereof, provided that such amendments, modifications, restatements, renewals,
increases, supplements, refundings, replacements and refinancings are no more
restrictive, taken as a whole, with respect to such dividend and other payment
restrictions than those contained in such Existing Indebtedness, as in effect on
the date hereof, (ii) this Indenture and the Notes, (iii) the Credit Agreement,
as in effect on the date hereof, and any amendments, modifications,
restatements, renewals, increases, supplements, refundings, replacements or
refinancings thereof, provided that such amendments, modifications,
restatements, renewals, increases, supplements, refundings, replacements and
refinancings are no more restrictive, taken as a whole, with respect to such
dividend and other payment restrictions than those contained in such Credit
Agreement, as in effect on the date hereof, (iv) applicable law, (v) any
instrument governing Indebtedness or Capital Stock of a Person acquired by the
Company or any of its Restricted Subsidiaries as in effect at the time of such
acquisition (except to the extent such Indebtedness was incurred in connection
with or in anticipation of such acquisition), which encumbrance or restriction
is not applicable to any Person, or the properties or assets of any Person,
other than the Person, or the property or assets of the Person, so acquired,
provided that, in the case of Indebtedness, such Indebtedness was permitted by
the terms hereof, (vi) customary non-assignment provisions in leases entered
into in the ordinary course of business, (vii) purchase money obligations for
property acquired that impose restrictions of the nature
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described in clause (c) above on the property so acquired, (viii) any agreement
for the sale or other disposition of a Restricted Subsidiary that restricts
distributions by that Restricted Subsidiary pending its sale or other
disposition, (ix) Permitted Refinancing Indebtedness, provided that the
restrictions contained in the agreements governing such Permitted Refinancing
Indebtedness are no more restrictive, taken as a whole, than those contained in
the agreements governing the Indebtedness being refinanced, (x) Liens securing
Indebtedness that limit the right of the debtor to dispose of the assets subject
to such Lien, (xi) provisions with respect to the disposition or distribution of
assets or property in joint venture agreements, assets sale agreements, stock
sale agreements and other similar agreements, and (xii) restrictions on cash or
other deposits or net worth imposed by customers under contracts entered into in
the ordinary course of business.
Section 4.09. Incurrence of Indebtedness and Issuance of Preferred Stock.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, issue, assume, guarantee
or otherwise become directly or indirectly liable, contingently or otherwise,
with respect to (collectively, "incur") any Indebtedness (including Acquired
Debt) and the Company shall not issue any Disqualified Stock and shall not
permit any of its Subsidiaries to issue any shares of preferred stock; provided,
however, that the Company may incur Indebtedness (including Acquired Debt) or
issue shares of Disqualified Stock, and the Company's Restricted Subsidiaries
may incur Indebtedness or issue preferred stock, if the Fixed Charge Coverage
Ratio for the Company's most recently ended four full fiscal quarters for which
internal financial statements are available immediately preceding the date on
which such additional Indebtedness is incurred or such Disqualified Stock is
issued would have been at least 2.0 to 1, determined on a pro forma basis
(including a pro forma application of the net proceeds therefrom), as if the
additional Indebtedness had been incurred, or the Preferred Stock or the
Disqualified Stock had been issued, as the case may be, at the beginning of such
four-quarter period;
The provisions of the first paragraph of this Section 4.09 shall not apply
to the incurrence of any of the following items of Indebtedness (collectively,
"Permitted Debt"):
(i) the incurrence by the Company and any Guarantors of additional
Indebtedness and letters of credit under Credit Facilities in an aggregate
principal amount at any one time outstanding under this clause (1) (with
letters of credit being deemed to have a principal amount equal to the
maximum potential liability of the Company and any Guarantors thereunder)
not to exceed an amount equal to $380.0 million less the aggregate amount
of all Net Proceeds of Asset Sales applied by the Company or any Guarantors
to repay Indebtedness under a Credit Facility pursuant to clause (1) of the
second paragraph of Section 4.10 hereof;
(ii) the incurrence by the Company and its Restricted Subsidiaries of
the Existing Indebtedness;
(iii) the incurrence by the Company of Indebtedness represented by
the Notes to be issued on the date hereof and the Exchange Notes to be
issued pursuant to the Registration Rights Agreement (including, in each
case, the Subsidiary Guarantees);
(iv) the incurrence by the Company or any of its Restricted
Subsidiaries of Indebtedness represented by Capital Lease Obligations,
mortgage financings or purchase money obligations, in each case, incurred
for the purpose of financing all or any part of the purchase price or cost
of construction or improvement of property, plant or equipment used in the
business of the Company or such Restricted Subsidiary, in an aggregate
principal amount, including all Permitted Refinancing Indebtedness incurred
to refund, refinance or replace any Indebtedness incurred pursuant to this
clause (iv), not to exceed $25.0 million at any time outstanding;
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(v) the incurrence by the Company or any of its Subsidiaries of
Permitted Refinancing Indebtedness in exchange for, or the net proceeds of
which are used to refund, refinance or replace Indebtedness (other than
intercompany Indebtedness) that was permitted by this Indenture to be
incurred under the first paragraph hereof or clauses (ii), (iii), (iv), (v)
or (xi) of this paragraph;
(vi) the incurrence by the Company or any of its Restricted
Subsidiaries of intercompany Indebtedness between or among the Company and
any of its Restricted Subsidiaries; provided, however, that (i) if the
Company or any Guarantor is the obligor on such Indebtedness, such
Indebtedness (other than Indebtedness owing to Universal Professional
Insurance Company, a Vermont corporation, and Indebtedness pledged as
security for any Senior Debt) is expressly subordinated to the prior
payment in full in cash of all Obligations with respect to the Notes, in
the case of the Company, or the Subsidiary Guarantee, in the case of a
Guarantor, and (ii)(A) any subsequent issuance or transfer of Equity
Interests (other than any pledge thereof as security for any Senior Debt)
that results in any such Indebtedness being held by a Person other than the
Company or a Restricted Subsidiary thereof and (B) any sale or other
transfer of any such Indebtedness to a Person that is not either the
Company or a Restricted Subsidiary (other than any pledge thereof as
security for any Senior Debt) thereof shall be deemed, in each case, to
constitute an incurrence of such Indebtedness by the Company or such
Subsidiary, as the case may be, that was not permitted by this clause (vi);
(vii) the incurrence by the Company or any of its Restricted
Subsidiaries of Hedging Obligations that are incurred for the purpose of
fixing or hedging interest rate risk with respect to any floating rate
Indebtedness that is permitted by the terms of this Indenture to be
outstanding;
(viii) the guarantee by the Company or any of the Guarantors of
Indebtedness of the Company or a Restricted Subsidiary of the Company that
was permitted to be incurred by another provision of this Section 4.09;
(ix) the incurrence by the Company's Unrestricted Subsidiaries of Non-
Recourse Debt, provided, however, that if any such Indebtedness ceases to
be Non- Recourse Debt of an Unrestricted Subsidiary, such event shall be
deemed to constitute an incurrence of Indebtedness by a Restricted
Subsidiary of the Company that was not permitted by this clause (ix);
(x) the accrual of interest, the accretion or amortization of original
issue discount, the payment of interest on any Indebtedness in the form of
additional Indebtedness with the same terms, and the payment of dividends
on Disqualified Stock in the form of additional shares of the same class of
Disqualified Stock shall not be deemed to be an incurrence of Indebtedness
or an issuance of Disqualified Stock for purposes of this Section 4.09;
provided, in each such case, that the amount thereof is included in Fixed
Charges of the Company as accrued;
(xi) the incurrence of Indebtedness by the Company's Foreign
Subsidiaries in an amount not to exceed $10.0 million at any time
outstanding; and
(xii) the incurrence by the Company or any of its Restricted
Subsidiaries of additional Indebtedness in an aggregate principal amount
(or accreted value, as applicable) at any time outstanding, including all
Permitted Refinancing Indebtedness incurred to refund, refinance or replace
any Indebtedness incurred pursuant to this clause (xii), not to exceed
$10.0 million.
For purposes of determining compliance with this Section 4.09, in the event
that an item of proposed Indebtedness meets the criteria of more than one of the
categories of Permitted Debt described in clauses (i) through (xii) above or is
entitled to be incurred pursuant to the first paragraph of this
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Section 4.09, the Company shall, in its sole discretion, classify such item of
Indebtedness on the date of its incurrence, or reclassify all or a portion of
such item of Indebtedness, in any manner that complies with this Section 4.09
and such item of Indebtedness shall be treated as having been incurred pursuant
to only one of such clauses or pursuant to the first paragraph of this Section
4.09. Accrual of interest shall not be deemed to be an incurrence of
Indebtedness for purposes of this Section 4.09. Indebtedness under Credit
Facilities outstanding on the date on which Notes are first issued and
authenticated under this Indenture shall be deemed to have been incurred on such
date in reliance on the exception provided by clause (i) of Section 4.09 hereof.
Section 4.10. Asset Sales.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, consummate an Asset Sale unless:
(i) the Company (or the Restricted Subsidiary, as the case may be)
receives consideration at the time of such Asset Sale at least equal to the
fair market value of the assets or Equity Interests issued or sold or
otherwise disposed of;
(ii) with respect to an Asset Sale involving consideration in excess
of $5.0 million, such fair market value is determined by the Company's
Board of Directors and evidenced by a resolution of the Board of Directors
set forth in an Officers' Certificate delivered to the Trustee; and
(iii) at least 75% of the consideration therefor received by the
Company or such Restricted Subsidiary is in the form of cash. For purposes
of this provision, each of the following shall be deemed to be cash:
(a) any liabilities (as shown on the Company's or such Restricted
Subsidiary's most recent balance sheet), of the Company or any
Restricted Subsidiary (other than contingent liabilities and
liabilities that are by their terms subordinated to the Notes or any
Subsidiary Guarantee) that are assumed by the transferee of any such
assets pursuant to a customary novation agreement that releases the
Company or such Restricted Subsidiary from further liability; and
(b) any securities, notes or other obligations received by the
Company or any such Restricted Subsidiary from such transferee that
are contemporaneously (subject to ordinary settlement periods)
converted by the Company or such Restricted Subsidiary into cash (to
the extent of the cash received in that conversion).
Within 365 days after the receipt of any Net Proceeds from an Asset Sale,
the Company may apply such Net Proceeds at its option:
(1) to repay Senior Debt and, if the Senior Debt repaid is revolving
credit Indebtedness, to correspondingly reduce commitments with respect
thereto;
(2) to acquire all or substantially all of the assets of, or a
majority of the Voting Stock of, another Permitted Business as long as such
Person becomes a Restricted Subsidiary;
(3) to make a capital expenditure; or
(4) to acquire other long-term assets that are used or useful in a
Permitted Business.
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"Asset Sale" means:
(1) the sale, lease, conveyance or other disposition of any assets or
rights, other than sales of inventory in the ordinary course of business;
provided that the sale, conveyance or other disposition of all or
substantially all of the assets of the Company and its Subsidiaries taken
as a whole will be governed by the provisions of Sections 4.15 and 5.01
hereof; and
(2) the issuance of Equity Interests in any of the Company's
Restricted Subsidiaries or the sale of Equity Interests in any of its
Subsidiaries.
Notwithstanding the preceding, the following items shall not be deemed to
be Asset Sales:
(1) any single transaction or series of related transactions that
involves assets having a fair market value of less than $1.0 million;
(2) a transfer of assets between or among the Company and its Wholly
Owned Subsidiaries,
(3) an issuance of Equity Interests by a Wholly Owned Subsidiary to
the Company or to another Wholly Owned Subsidiary;
(4) the sale or lease of equipment, inventory, accounts receivable or
other assets in the ordinary course of business;
(5) the sale or other disposition of cash or Cash Equivalents; and
(6) a Restricted Payment or Permitted Investment that is permitted by
Section 4.07 hereof.
Pending the final application of any such Net Proceeds, the Company may
temporarily reduce revolving credit borrowings or otherwise invest such Net
Proceeds in any manner that is not prohibited by this Indenture.
Any Net Proceeds from Asset Sales that are not applied or invested as
provided in the preceding paragraph shall constitute "Excess Proceeds". When the
aggregate amount of Excess Proceeds exceeds $10.0 million, the Company shall
make an offer to all Holders of Notes and all holders of other Indebtedness that
is pari passu with the Notes (an "Asset Sale Offer") in accordance with the
procedures set forth in Section 3.09 hereof. The offer price in any Asset Sale
Offer shall be equal to 100% of principal amount plus accrued and unpaid
interest and Liquidated Damages, if any, to the date of purchase, and shall be
payable in cash. If any Excess Proceeds remain after consummation of an Asset
Sale Offer, the Company may use such Excess Proceeds for any purpose not
otherwise prohibited by this Indenture. If the aggregate principal amount of
Notes and such other pari passu Indebtedness tendered into such Asset Sale Offer
exceeds the amount of Excess Proceeds, the Trustee shall select the Notes and
such other pari passu Indebtedness to be purchased on a pro rata basis based on
the principal amount of Notes and such other pari passu Indebtedness tendered.
Upon completion of each Asset Sale Offer, the amount of Excess Proceeds shall be
reset at zero.
Section 4.11. Transactions with Affiliates.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, make any payment to, or sell, lease, transfer or otherwise
dispose of any of its properties or assets to, or purchase any property or
assets from, or enter into or make any contract, agreement, understanding, loan,
advance
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or guarantee with, or for the benefit of, any Affiliate (each of the foregoing,
an "Affiliate Transaction"), unless (a) such Affiliate Transaction is on terms
that are no less favorable to the Company or the relevant Subsidiary than those
that would have been obtained in a comparable transaction by the Company or such
Subsidiary with an unrelated Person and (b) the Company delivers to the Trustee
(i) with respect to any Affiliate Transaction involving aggregate consideration
in excess of $1.0 million, a resolution of the Board of Directors set forth in
an Officers' Certificate certifying that such Affiliate Transaction complies
with clause (a) above and that such Affiliate Transaction has been approved by a
majority of the disinterested members of the Board of Directors and (ii) with
respect to any Affiliate Transaction involving aggregate consideration in excess
of $5.0 million, an opinion as to the fairness to the Company or such Subsidiary
from a financial point of view issued by an investment banking firm of national
standing; provided, however, that (i) any employment agreement entered into by
the Company or any of its Restricted Subsidiaries in the ordinary course of
business and consistent with the past practice of the Company or such
Subsidiary, (ii) transactions between or among the Company and/or its Restricted
Subsidiaries, (iii) transactions with a Person that is an Affiliate of the
Company solely because the Company owns an Equity Interest in such Person, (iv)
payment of reasonable directors fees to Persons who are not otherwise Affiliates
of the Company, (v) payments of annual management, consulting and advisory fees
and related expenses to the Principal and its Affiliates pursuant to the
Management Agreement; and (vi) transactions permitted under Section 4.07 hereof
shall not be deemed Affiliate Transactions.
Section 4.12. Liens.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly create, incur, assume or suffer to exist
any Lien of any kind securing Indebtedness that is pari passu or subordinated in
right of payment to the Notes on any asset now owned or hereafter acquired,
except Permitted Liens, unless the Notes are secured by such Lien on an equal
and ratable basis.
Section 4.13. Business Activities.
The Company shall not, and shall not permit any of its Subsidiaries to,
engage in any business other than Permitted Businesses, except to such extent as
would not be material to the Company and its Subsidiaries taken as a whole.
Section 4.14. Corporate Existence.
Subject to Article 5 hereof, the Company shall do or cause to be done all
things necessary to preserve and keep in full force and effect (i) its corporate
existence, and the corporate, partnership or other existence of each of its
Subsidiaries, in accordance with the respective organizational documents (as the
same may be amended from time to time) of the Company or any such Subsidiary and
(ii) the rights (charter and statutory), licenses and franchises of the Company
and its Subsidiaries; provided, however, that the Company shall not be required
to preserve any such right, license or franchise, or the corporate, partnership
or other existence of any of its Subsidiaries, if the Board of Directors shall
determine that the preservation thereof is no longer desirable in the conduct of
the business of the Company and its Subsidiaries, taken as a whole, and that the
loss thereof is not adverse in any material respect to the Holders of the Notes.
Section 4.15. Offer to Repurchase Upon Change of Control.
(a) Upon the occurrence of a Change of Control, the Company shall make an
offer (a "Change of Control Offer") to each Holder to repurchase all or any part
(equal to $1,000 or an integral multiple thereof) of each Holder's Notes at a
purchase price equal to 101% of the aggregate principal
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amount thereof plus accrued and unpaid interest and Liquidated Damages thereon,
if any, to the date of purchase (the "Change of Control Payment"). Within 10
days following any Change of Control, the Company shall mail a notice to each
Holder stating: (1) that the Change of Control Offer is being made pursuant to
this Section 4.15 and that all Notes tendered will be accepted for payment; (2)
the purchase price and the purchase date, which shall be no earlier than 30 days
and no later than 60 days from the date such notice is mailed (the "Change of
Control Payment Date"); (3) that any Note not tendered will continue to accrue
interest; (4) that, unless the Company defaults in the payment of the Change of
Control Payment, all Notes accepted for payment pursuant to the Change of
Control Offer shall cease to accrue interest after the Change of Control Payment
Date; (5) that Holders electing to have any Notes purchased pursuant to a Change
of Control Offer will be required to surrender the Notes, with the form entitled
"Option of Holder to Elect Purchase" on the reverse of the Notes completed, to
the Paying Agent at the address specified in the notice prior to the close of
business on the third Business Day preceding the Change of Control Payment Date;
(6) that Holders will be entitled to withdraw their election if the Paying Agent
receives, not later than the close of business on the second Business Day
preceding the Change of Control Payment Date, a facsimile transmission or letter
setting forth the name of the Holder, the principal amount of Notes delivered
for purchase, and a statement that such Holder is withdrawing his election to
have the Notes purchased; and (7) that Holders whose Notes are being purchased
only in part will be issued new Notes equal in principal amount to the
unpurchased portion of the Notes surrendered, which unpurchased portion must be
equal to $1,000 in principal amount or an integral multiple thereof. The Company
shall comply with the requirements of Rule 14e-1 under the Exchange Act and any
other securities laws and regulations thereunder to the extent such laws and
regulations are applicable in connection with the repurchase of Notes in
connection with a Change of Control.
(b) On the Change of Control Payment Date, the Company shall, to the extent
lawful, (1) accept for payment all Notes or portions thereof properly tendered
pursuant to the Change of Control Offer, (2) deposit with the Paying Agent an
amount equal to the Change of Control Payment in respect of all Notes or
portions thereof so tendered and (3) deliver or cause to be delivered to the
Trustee the Notes so accepted together with an Officers' Certificate stating the
aggregate principal amount of Notes or portions thereof being purchased by the
Company. The Paying Agent shall promptly mail to each Holder of Notes so
tendered the Change of Control Payment for such Notes, and the Trustee shall
promptly authenticate and mail (or cause to be transferred by book entry) to
each Holder a new Note equal in principal amount to any unpurchased portion of
the Notes surrendered by such Holder, if any; provided, that each such new Note
shall be in a principal amount of $1,000 or an integral multiple thereof. The
Company shall publicly announce the results of the Change of Control Offer on or
as soon as practicable after the Change of Control Payment Date.
(c) Notwithstanding anything to the contrary in this Section 4.15, the
Company shall not be required to make a Change of Control Offer upon a Change of
Control if a third party makes the Change of Control Offer in the manner, at the
times and otherwise in compliance with the requirements set forth in this
Section 4.15 and Section 3.09 hereof and all other provisions of this Indenture
applicable to a Change of Control Offer made by the Company and purchases all
Notes validly tendered and not withdrawn under such Change of Control Offer.
Section 4.16. No Senior Subordinated Debt.
Notwithstanding the provisions of Section 4.09 hereof, (i) the Company
shall not incur, create, issue, assume, guarantee or otherwise become liable for
any Indebtedness that is subordinate or junior in right of payment to any Senior
Debt of the Company and senior in any respect in right of payment to the Notes,
and (ii) no Guarantor shall incur, create, issue, assume, guarantee or otherwise
become liable for any Indebtedness that is subordinated or junior in right of
payment to any Senior Debt of such Guarantor and senior in any respect in right
of payment to its Subsidiary Guarantee.
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Section 4.17. Payments for Consent.
Neither the Company nor any of its Subsidiaries shall, directly or
indirectly, pay or cause to be paid any consideration to or for the benefit of
any Holder of Notes for or as an inducement to any consent, waiver or amendment
of any of the terms or provisions of this Indenture or the Notes unless such
consideration is offered to be paid or is paid to all Holders of the Notes that
consent, waive or agree to amend in the time frame set forth in the solicitation
documents relating to such consent, waiver or agreement.
Section 4.18. Additional Subsidiary Guarantees.
If the Company or any of its Subsidiaries acquires or creates another Domestic
Subsidiary after the date of this Indenture or if any Subsidiary becomes a
Domestic Subsidiary, then that Domestic Subsidiary shall become a Guarantor and
execute a supplemental indenture and deliver an Opinion of Counsel to the
Trustee within 10 Business Days of the date on which it was acquired or created.
This Section 4.18 shall not apply to any Subsidiary that has been properly
designated as an Unrestricted Subsidiary.
ARTICLE 5.
SUCCESSORS
Section 5.01. Merger, Consolidation, or Sale of Assets.
The Company shall not, directly or indirectly consolidate or merge with or
into another Person (whether or not the Company is the surviving corporation) or
sell, assign, transfer, convey or otherwise dispose of all or substantially all
of the properties or assets of the Company and its Restricted Subsidiaries taken
as a whole, in one or more related transactions, to another Person; unless (i)
the Company is the surviving corporation or the Person formed by or surviving
any such consolidation or merger (if other than the Company) or to which such
sale, assignment, transfer, conveyance or other disposition shall have been made
is a corporation organized or existing under the laws of the United States, any
state thereof or the District of Columbia; (ii) the Person formed by or
surviving any such consolidation or merger (if other than the Company) or the
Person to which such sale, assignment, transfer, conveyance or other disposition
shall have been made assumes all the obligations of the Company under the Notes,
this Indenture and the Registration Rights Agreement pursuant to agreements
reasonably satisfactory to the Trustee; (iii) immediately after such transaction
no Default or Event of Default exists; and (iv) the Company or the Person formed
by or surviving any such consolidation or merger (if other than the Company), or
to which such sale, assignment, transfer, conveyance or other disposition shall
have been made will, on the date of such transaction after giving pro forma
effect thereto and any related financing transactions as if the same had
occurred at the beginning of the applicable four-quarter period, be permitted to
incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge
Coverage Ratio test set forth in the first paragraph of Section 4.09 hereof.
In addition, the Company shall not, directly or indirectly, lease all or
substantially all of its properties or assets, in one or more related
transactions, to any other Person. The provisions of this Section 5.01 shall not
apply to a sale, assignment, transfer, conveyance or other disposition of assets
between or among the Company and any of its Wholly Owned Restricted
Subsidiaries.
Section 5.02. Successor Corporation Substituted.
Upon any consolidation or merger, or any sale, assignment, transfer, lease,
conveyance or other disposition of all or substantially all of the assets of the
Company in accordance with Section 5.01 hereof, the successor corporation formed
by such consolidation or into or with which the Company is
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merged or to which such sale, assignment, transfer, lease, conveyance or other
disposition is made shall succeed to, and be substituted for (so that from and
after the date of such consolidation, merger, sale, lease, conveyance or other
disposition, the provisions of this Indenture referring to the "Company" shall
refer instead to the successor corporation and not to the Company), and may
exercise every right and power of the Company under this Indenture with the same
effect as if such successor Person had been named as the Company herein;
provided, however, that the predecessor Company shall not be relieved from the
obligation to pay the principal of and interest on the Notes except in the case
of a sale of all of the Company's assets that meets the requirements of Section
5.01 hereof.
ARTICLE 6.
DEFAULTS AND REMEDIES
Section 6.01. Events of Default.
An "Event of Default" occurs if:
(a) the Company defaults in the payment when due of interest on, or
Liquidated Damages with respect to, the Notes and such default continues for a
period of 30 days;
(b) the Company defaults in the payment when due of principal of or
premium, if any, on the Notes when the same becomes due and payable at maturity,
upon redemption (including in connection with an offer to purchase) or
otherwise;
(c) the Company or any of the Guarantors fail to comply with any of the
provisions of Section 4.07, 4.09, 4.10, 4.15 or 5.01 hereof;
(d) the Company or any of its Restricted Subsidiaries fail to observe or
perform any other covenant, representation, warranty or other agreement in this
Indenture, the Notes for 60 days after notice to the Company by the Trustee or
the Holders of at least 25% in aggregate principal amount of the Notes
(including Additional Notes, if any) then outstanding voting as a single class;
(e) a default occurs under any mortgage, indenture or instrument under
which there may be issued or by which there may be secured or evidenced any
Indebtedness for money borrowed by the Company or any of its Restricted
Subsidiaries (or the payment of which is guaranteed by the Company or any of its
Restricted Subsidiaries), whether such Indebtedness or guarantee now exists, or
is created after the date of this Indenture, which default (i) is caused by a
failure to pay principal of, or interest or premium, if any, on such
Indebtedness prior to the expiration of the grace period provided in such
Indebtedness on the date of such default (a "Payment Default") or (ii) results
in the acceleration of such Indebtedness prior to its express maturity and, in
each case, the principal amount of such Indebtedness, together with the
principal amount of any other such Indebtedness under which there has been a
Payment Default or the maturity of which has been so accelerated, aggregates
$10.0 million or more;
(f) a final judgment or final judgments for the payment of money are
entered by a court or courts of competent jurisdiction against the Company or
any of its Restricted Subsidiaries or any group of Subsidiaries that, taken as a
whole, would constitute a Restricted Subsidiary and such judgment or judgments
remain undischarged for a period (during which execution shall not be
effectively stayed) of 60 days, provided that the aggregate of all such
undischarged judgments exceeds $10 million;
(g) the Company or any of its Restricted Subsidiaries or any group of
Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary
pursuant to or within the meaning of Bankruptcy Law:
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(i) commences a voluntary case,
(ii) consents to the entry of an order for relief against it in an
involuntary case,
(iii) consents to the appointment of a custodian of it or for all or
substantially all of its property,
(iv) makes a general assignment for the benefit of its creditors, or
(v) generally is not paying its debts as they become due;
(h) a court of competent jurisdiction enters an order or decree under any
Bankruptcy Law that:
(i) is for relief against the Company or any of its Significant
Subsidiaries or any group of Subsidiaries that, taken as a whole, would
constitute a Significant Subsidiary in an involuntary case;
(ii) appoints a custodian of the Company or any of its Significant
Subsidiaries or any group of Subsidiaries that, taken as a whole, would
constitute a Significant Subsidiary or for all or substantially all of the
property of the Company or any of its Significant Subsidiaries or any group
of Subsidiaries that, taken as a whole, would constitute a Significant
Subsidiary; or
(iii) orders the liquidation of the Company or any of its Significant
Subsidiaries or any group of Subsidiaries that, taken as a whole, would
constitute a Significant Subsidiary;
and the order or decree remains unstayed and in effect for 60 consecutive days;
or
(i) except as permitted by this Indenture, any Subsidiary Guarantee is held
in any judicial proceeding to be unenforceable or invalid or shall cease for any
reason to be in full force and effect or any Guarantor, or any Person acting on
behalf of any Guarantor, shall deny or disaffirm its obligations under such
Guarantor's Subsidiary Guarantee.
Section 6.02. Acceleration.
If any Event of Default (other than an Event of Default specified in clause
(g) or (h) of Section 6.01 hereof with respect to the Company, any Significant
Subsidiary or any group of Significant Subsidiaries that, taken as a whole,
would constitute a Significant Subsidiary) occurs and is continuing, the Trustee
or the Holders of at least 25% in principal amount of the then outstanding Notes
may declare all the Notes to be due and payable immediately. Upon any such
declaration, the Notes shall become due and payable immediately.
Notwithstanding the foregoing, if an Event of Default specified in clause (g) or
(h) of Section 6.01 hereof occurs with respect to the Company, any of its
Significant Subsidiaries or any group of Subsidiaries that, taken as a whole,
would constitute a Significant Subsidiary, all outstanding Notes shall be due
and payable immediately without further action or notice. The Holders of a
majority in aggregate principal amount of the then outstanding Notes by written
notice to the Trustee may on behalf of all of the Holders rescind an
acceleration and its consequences if the rescission would not conflict with any
judgment or decree and if all existing Events of Default (except nonpayment of
principal, interest or premium that has become due solely because of the
acceleration) have been cured or waived.
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Section 6.03. Other Remedies.
If an Event of Default occurs and is continuing, the Trustee may pursue any
available remedy to collect the payment of principal, premium, if any, and
interest on the Notes or to enforce the performance of any provision of the
Notes or this Indenture.
The Trustee may maintain a proceeding even if it does not possess any of
the Notes or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Holder of a Note in exercising any right or
remedy accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. All remedies
are cumulative to the extent permitted by law.
Section 6.04. Waiver of Past Defaults.
Holders of not less than a majority in aggregate principal amount of the
then outstanding Notes by notice to the Trustee may on behalf of the Holders of
all of the Notes waive an existing Default or Event of Default and its
consequences hereunder, except a continuing Default or Event of Default in the
payment of the principal of, premium and Liquidated Damages, if any, or interest
on, the Notes (including in connection with an offer to purchase) (provided,
however, that the Holders of a majority in aggregate principal amount of the
then outstanding Notes may rescind an acceleration and its consequences,
including any related payment default that resulted from such acceleration).
Upon any such waiver, such Default shall cease to exist, and any Event of
Default arising therefrom shall be deemed to have been cured for every purpose
of this Indenture; but no such waiver shall extend to any subsequent or other
Default or impair any right consequent thereon.
Section 6.05. Control by Majority.
Holders of a majority in principal amount of the then outstanding Notes may
direct the time, method and place of conducting any proceeding for exercising
any remedy available to the Trustee or exercising any trust or power conferred
on it. However, the Trustee may refuse to follow any direction that conflicts
with law or this Indenture that the Trustee determines may be unduly prejudicial
to the rights of other Holders of Notes or that may involve the Trustee in
personal liability.
Section 6.06. Limitation on Suits.
A Holder of a Note may pursue a remedy with respect to this Indenture or
the Notes only if:
(a) the Holder of a Note gives to the Trustee written notice of a
continuing Event of Default;
(b) the Holders of at least 25% in principal amount of the then outstanding
Notes make a written request to the Trustee to pursue the remedy;
(c) such Holder of a Note or Holders of Notes offer and, if requested,
provide to the Trustee indemnity satisfactory to the Trustee against any loss,
liability or expense;
(d) the Trustee does not comply with the request within 60 days after
receipt of the request and the offer and, if requested, the provision of
indemnity; and
(e) during such 60-day period the Holders of a majority in principal amount
of the then outstanding Notes do not give the Trustee a direction inconsistent
with the request.
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A Holder of a Note may not use this Indenture to prejudice the rights of
another Holder of a Note or to obtain a preference or priority over another
Holder of a Note.
Section 6.07. Rights of Holders of Notes to Receive Payment.
Notwithstanding any other provision of this Indenture, the right of any
Holder of a Note to receive payment of principal, premium and Liquidated
Damages, if any, and interest on the Note, on or after the respective due dates
expressed in the Note (including in connection with an offer to purchase), or to
bring suit for the enforcement of any such payment on or after such respective
dates, shall not be impaired or affected without the consent of such Holder.
Section 6.08. Collection Suit by Trustee.
If an Event of Default specified in Section 6.01(a) or (b) occurs and is
continuing, the Trustee is authorized to recover judgment in its own name and as
trustee of an express trust against the Company for the whole amount of
principal of, premium and Liquidated Damages, if any, and interest remaining
unpaid on the Notes and interest on overdue principal and, to the extent lawful,
interest and such further amount as shall be sufficient to cover the costs and
expenses of collection, including the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel.
Section 6.09. Trustee May File Proofs of Claim.
The Trustee is authorized to file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the claims of the
Trustee (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel) and the
Holders of the Notes allowed in any judicial proceedings relative to the Company
(or any other obligor upon the Notes), its creditors or its property and shall
be entitled and empowered to collect, receive and distribute any money or other
property payable or deliverable on any such claims and any custodian in any such
judicial proceeding is hereby authorized by each Holder to make such payments to
the Trustee, and in the event that the Trustee shall consent to the making of
such payments directly to the Holders, to pay to the Trustee any amount due to
it for the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel, and any other amounts due the Trustee under
Section 7.07 hereof. To the extent that the payment of any such compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel, and
any other amounts due the Trustee under Section 7.07 hereof out of the estate in
any such proceeding, shall be denied for any reason, payment of the same shall
be secured by a Lien on, and shall be paid out of, any and all distributions,
dividends, money, securities and other properties that the Holders may be
entitled to receive in such proceeding whether in liquidation or under any plan
of reorganization or arrangement or otherwise. Nothing herein contained shall
be deemed to authorize the Trustee to authorize or consent to or accept or adopt
on behalf of any Holder any plan of reorganization, arrangement, adjustment or
composition affecting the Notes or the rights of any Holder, or to authorize the
Trustee to vote in respect of the claim of any Holder in any such proceeding.
Section 6.10. Priorities.
If the Trustee collects any money pursuant to this Article, it shall pay
out the money in the following order:
First: to the Trustee, its agents and attorneys for amounts due under
Section 7.07 hereof, including payment of all compensation, expense and
liabilities incurred, and all advances made, by the Trustee and the costs
and expenses of collection;
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Second: to Holders of Notes for amounts due and unpaid on the Notes
for principal, premium and Liquidated Damages, if any, and interest,
ratably, without preference or priority of any kind, according to the
amounts due and payable on the Notes for principal, premium and Liquidated
Damages, if any and interest, respectively; and
Third: to the Company or to such party as a court of competent
jurisdiction shall direct.
The Trustee may fix a record date and payment date for any payment to
Holders of Notes pursuant to this Section 6.10.
Section 6.11. Undertaking for Costs.
In any suit for the enforcement of any right or remedy under this Indenture
or in any suit against the Trustee for any action taken or omitted by it as a
Trustee, a court in its discretion may require the filing by any party litigant
in the suit of an undertaking to pay the costs of the suit, and the court in its
discretion may assess reasonable costs, including reasonable attorneys' fees and
expenses, against any party litigant in the suit, having due regard to the
merits and good faith of the claims or defenses made by the party litigant.
This Section does not apply to a suit by the Trustee, a suit by a Holder of a
Note pursuant to Section 6.07 hereof, or a suit by Holders of more than 10% in
principal amount of the then outstanding Notes.
ARTICLE 7.
TRUSTEE
Section 7.01. Duties of Trustee.
(a) If an Event of Default has occurred and is continuing, the Trustee
shall exercise such of the rights and powers vested in it by this Indenture, and
use the same degree of care and skill in its exercise, as a prudent person would
exercise or use under the circumstances in the conduct of such person's own
affairs.
(b) Except during the continuance of an Event of Default:
(i) the duties of the Trustee shall be determined solely by the
express provisions of this Indenture and the Trustee need perform only
those duties that are specifically set forth in this Indenture and no
others, and no implied covenants or obligations shall be read into this
Indenture against the Trustee; and
(ii) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon certificates or opinions furnished to
the Trustee and conforming to the requirements of this Indenture. However,
in the case of any certificates or opinions which by any provision hereof
are specifically required to be furnished to the Trustee, the Trustee shall
examine the certificates and opinions to determine whether or not they
conform to the requirements of this Indenture.
(c) The Trustee may not be relieved from liabilities for its own negligent
action, its own negligent failure to act, or its own willful misconduct, except
that:
(i) this paragraph does not limit the effect of paragraph (b) of this
Section;
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(ii) the Trustee shall not be liable for any error of judgment made in
good faith by a Responsible Officer, unless it is proved that the Trustee
was negligent in ascertaining the pertinent facts; and
(iii) the Trustee shall not be liable with respect to any action it
takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 6.05 hereof.
(d) Whether or not therein expressly so provided, every provision of this
Indenture that in any way relates to the Trustee is subject to paragraphs (a),
(b), and (c) of this Section.
(e) No provision of this Indenture shall require the Trustee to expend or
risk its own funds or incur any liability. The Trustee shall be under no
obligation to exercise any of its rights and powers under this Indenture at the
request of any Holders, unless such Holder shall have offered to the Trustee
security and indemnity satisfactory to it against any loss, liability or
expense.
(f) The Trustee shall not be liable for interest on any money received by
it except as the Trustee may agree in writing with the Company. Money held in
trust by the Trustee need not be segregated from other funds except to the
extent required by law.
Section 7.02. Rights of Trustee.
(a) The Trustee may conclusively rely and shall be protected in acting or
refraining from acting upon any document believed by it to be genuine and to
have been signed or presented by the proper Person. The Trustee need not
investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may require an
Officers' Certificate or an Opinion of Counsel or both. The Trustee shall not
be liable for any action it takes or omits to take in good faith in reliance on
such Officers' Certificate or Opinion of Counsel. The Trustee may consult with
counsel of its selection and the advice of such counsel or any Opinion of
Counsel shall be full and complete authorization and protection from liability
in respect of any action taken, suffered or omitted by it hereunder in good
faith and in reliance thereon.
(c) Trustee may act through its attorneys and agents and shall not be
responsible for the misconduct or negligence of any agent appointed with due
care.
(d) The Trustee shall not be liable for any action it takes or omits to
take in good faith that it believes to be authorized or within the rights or
powers conferred upon it by this Indenture.
(e) Unless otherwise specifically provided in this Indenture, any demand,
request, direction or notice from the Company shall be sufficient if signed by
an Officer of the Company.
(f) The Trustee shall be under no obligation to exercise any of the rights
or powers vested in it by this Indenture at the request or direction of any of
the Holders unless such Holders shall have offered to the Trustee security or
indemnity satisfactory to it against the costs, expenses and liabilities that
might be incurred by it in compliance with such request or direction.
Section 7.03. Individual Rights of Trustee.
The Trustee in its individual or any other capacity may become the owner or
pledgee of Notes and may otherwise deal with the Company or any Affiliate of the
Company with the same rights it would have if it were not Trustee. However, in
the event that the Trustee acquires any conflicting interest it must eliminate
such conflict within 90 days, apply to the SEC for permission to continue as
trustee or
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resign. Any Agent may do the same with like rights and duties. The Trustee is
also subject to Sections 7.10 and 7.11 hereof.
Section 7.04. Trustee's Disclaimer.
The Trustee shall not be responsible for and makes no representation as to
the validity or adequacy of this Indenture or the Notes; it shall not be
accountable for the Company's use of the proceeds from the Notes or any money
paid to the Company or upon the Company's direction under any provision of this
Indenture; it shall not be responsible for the use or application of any money
received by any Paying Agent other than the Trustee; and it shall not be
responsible for any statement or recital herein or any statement in the Notes or
any other document in connection with the sale of the Notes or pursuant to this
Indenture other than its certificate of authentication.
Section 7.05. Notice of Defaults.
If a Default or Event of Default occurs and is continuing and if it is
known to a Responsible Officer of the Trustee, the Trustee shall mail to Holders
of Notes a notice of the Default or Event of Default within 90 days after it
occurs. Except in the case of a Default or Event of Default in payment of
principal of, premium, if any, or interest on any Note, the Trustee may withhold
the notice if and so long as a committee of its Responsible Officers in good
faith determines that withholding the notice is in the interests of the Holders
of the Notes.
Section 7.06. Reports by Trustee to Holders of the Notes.
Within 60 days after each March 15 beginning with the March 15 following
the date of this Indenture, and for so long as Notes remain outstanding, the
Trustee shall mail to the Holders of the Notes a brief report dated as of such
reporting date that complies with TIA (S) 313(a) (but if no event described in
TIA (S) 313(a) has occurred within the twelve months preceding the reporting
date, no report need be transmitted). The Trustee also shall comply with TIA
(S) 313(b)(2). The Trustee shall also transmit by mail all reports as required
by TIA (S) 313(c).
A copy of each report at the time of its mailing to the Holders of Notes
shall be mailed to the Company and filed with the SEC and each stock exchange on
which the Notes are listed in accordance with TIA (S) 313(d). The Company shall
promptly notify the Trustee when the Notes are listed on any stock exchange or
of any delisting thereof.
Section 7.07. Compensation and Indemnity.
The Company shall pay to the Trustee from time to time such compensation as
the Company and the Trustee shall from time to time agree in writing for its
acceptance of this Indenture and services rendered by it hereunder. The
Trustee's compensation shall not be limited by any law on compensation of a
trustee of an express trust. The Company shall reimburse the Trustee promptly
upon request for all reasonable disbursements, advances and expenses incurred or
made by it in addition to the compensation for its services. Such expenses
shall include the reasonable compensation, disbursements and expenses of the
Trustee's agents and counsel.
The Company shall indemnify the Trustee against any and all losses,
damages, claims, liabilities or expenses incurred by it arising out of or in
connection with the acceptance or administration of its duties under this
Indenture, including the costs and expenses of enforcing this Indenture against
the Company (including this Section 7.07) and defending itself against any claim
(whether asserted by the Company or any Holder or any other person) or liability
in connection with the acceptance, exercise or performance of any of its powers
or duties hereunder, except to the extent any such loss, damage, claim,
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liability or expense may be attributable to its negligence or bad faith. The
Trustee shall notify the Company promptly of any claim for which it may seek
indemnity. Failure by the Trustee to so notify the Company shall not relieve
the Company of its obligations hereunder. The Company shall defend the claim
and the Trustee shall cooperate in the defense. The Trustee may have separate
counsel and the Company shall pay the reasonable fees and expenses of such
counsel. The Company need not pay for any settlement made without its consent,
which consent shall not be unreasonably withheld.
The obligations of the Company under this Section 7.07 shall survive the
satisfaction and discharge of this Indenture.
To secure the Company's payment obligations in this Section, the Trustee
shall have a Lien prior to the Notes on all money or property held or collected
by the Trustee, except that held in trust to pay principal and interest on
particular Notes. Such Lien shall survive the satisfaction and discharge of
this Indenture.
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 6.01(g) or (h) hereof occurs, the expenses and the
compensation for the services (including the fees and expenses of its agents and
counsel) are intended to constitute expenses of administration under any
Bankruptcy Law.
The Trustee shall comply with the provisions of TIA (S) 313(b)(2) to the
extent applicable.
Section 7.08. Replacement of Trustee.
A resignation or removal of the Trustee and appointment of a successor
Trustee shall become effective only upon the successor Trustee's acceptance of
appointment as provided in this Section.
The Trustee may resign in writing at any time and be discharged from the
trust hereby created by so notifying the Company. The Holders of a majority in
principal amount of the then outstanding Notes may remove the Trustee by so
notifying the Trustee and the Company in writing. The Company may remove the
Trustee if:
(a) the Trustee fails to comply with Section 7.10 hereof;
(b) the Trustee is adjudged a bankrupt or an insolvent or an order for
relief is entered with respect to the Trustee under any Bankruptcy Law;
(c) a custodian or public officer takes charge of the Trustee or its
property; or
(d) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the office
of Trustee for any reason, the Company shall promptly appoint a successor
Trustee. Within one year after the successor Trustee takes office, the Holders
of a majority in principal amount of the then outstanding Notes may appoint a
successor Trustee to replace the successor Trustee appointed by the Company.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company, or
the Holders of at least 10% in principal amount of the then outstanding Notes
may petition any court of competent jurisdiction for the appointment of a
successor Trustee at the sole cost of the Company.
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If the Trustee, after written request by any Holder who has been a Holder
for at least six months, fails to comply with Section 7.10, such Holder may
petition any court of competent jurisdiction for the removal of the Trustee and
the appointment of a successor Trustee.
A successor Trustee shall deliver a written acceptance of its appointment
to the retiring Trustee and to the Company. Thereupon, the resignation or
removal of the retiring Trustee shall become effective, and the successor
Trustee shall have all the rights, powers and duties of the Trustee under this
Indenture. The successor Trustee shall mail a notice of its succession to
Holders. The retiring Trustee shall promptly transfer all property held by it
as Trustee to the successor Trustee, provided all sums owing to the Trustee
hereunder have been paid and subject to the Lien provided for in Section 7.07
hereof. Notwithstanding replacement of the Trustee pursuant to this Section
7.08, the Company's obligations under Section 7.07 hereof shall continue for the
benefit of the retiring Trustee.
Section 7.09. Successor Trustee by Merger, etc.
If the Trustee consolidates, merges or converts into, or transfers all or
substantially all of its corporate trust business to, another corporation, the
successor corporation without any further act shall be the successor Trustee.
Section 7.10. Eligibility; Disqualification.
There shall at all times be a Trustee hereunder that is a corporation
organized and doing business under the laws of the United States of America or
of any state thereof that is authorized under such laws to exercise corporate
trustee power, that is subject to supervision or examination by federal or state
authorities and that has a combined capital and surplus of at least $50 million
as set forth in its most recent published annual report of condition.
This Indenture shall always have a Trustee who satisfies the requirements
of TIA (S) 310(a)(1), (2) and (5). The Trustee is subject to TIA (S) 310(b).
Section 7.11. Preferential Collection of Claims Against Company.
The Trustee is subject to TIA (S) 311(a), excluding any creditor
relationship listed in TIA (S) 311(b). A Trustee who has resigned or been
removed shall be subject to TIA (S) 311(a) to the extent indicated therein.
ARTICLE 8.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
Section 8.01. Option to Effect Legal Defeasance or Covenant Defeasance.
The Company may, at the option of its Board of Directors evidenced by a
resolution set forth in an Officers' Certificate, at any time, elect to have
either Section 8.02 or 8.03 hereof be applied to all outstanding Notes and all
Subsidiary Guarantees upon compliance with the conditions set forth below in
this Article Eight.
Section 8.02. Legal Defeasance and Discharge.
Upon the Company's exercise under Section 8.01 hereof of the option
applicable to this Section 8.02, the Company shall, subject to the satisfaction
of the conditions set forth in Section 8.04 hereof, be deemed to have been
discharged from its obligations with respect to all outstanding Notes on the
date the
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conditions set forth below are satisfied (hereinafter, "Legal Defeasance"). For
this purpose, Legal Defeasance means that the Company shall be deemed to have
paid and discharged the entire Indebtedness represented by the outstanding
Notes, which shall thereafter be deemed to be "outstanding" only for the
purposes of Section 8.05 hereof and the other Sections of this Indenture
referred to in (a) and (b) below, and to have satisfied all its other
obligations under such Notes and this Indenture (and the Trustee, on demand of
and at the expense of the Company, shall execute proper instruments
acknowledging the same), except for the following provisions which shall survive
until otherwise terminated or discharged hereunder: (a) the rights of Holders of
outstanding Notes to receive solely from the trust fund described in Section
8.04 hereof, and as more fully set forth in such Section, payments in respect of
the principal of, premium, if any, interest, or Liquidated Damages, if any, on
such Notes when such payments are due, (b) the Company's obligations with
respect to such Notes under Article 2 and Section 4.02 hereof, (c) the rights,
powers, trusts, duties and immunities of the Trustee hereunder and the Company's
obligations in connection therewith and (d) this Article Eight. Subject to
compliance with this Article Eight, the Company may exercise its option under
this Section 8.02 notwithstanding the prior exercise of its option under Section
8.03 hereof.
Section 8.03. Covenant Defeasance.
Upon the Company's exercise under Section 8.01 hereof of the option
applicable to this Section 8.03, the Company shall, subject to the satisfaction
of the conditions set forth in Section 8.04 hereof, be released from its
obligations under the covenants contained in Sections 4.07, 4.08, 4.09, 4.10,
4.11, 4.12, 4.13, 4.15, 4.16, 4.17 and 4.18 hereof and clause (iv) of Section
5.01 hereof with respect to the outstanding Notes on and after the date the
conditions set forth in Section 8.04 are satisfied (hereinafter, "Covenant
Defeasance"), and the Notes shall thereafter be deemed not "outstanding" for the
purposes of any direction, waiver, consent or declaration or act of Holders (and
the consequences of any thereof) in connection with such covenants, but shall
continue to be deemed "outstanding" for all other purposes hereunder (it being
understood that such Notes shall not be deemed outstanding for accounting
purposes). For this purpose, Covenant Defeasance means that, with respect to
the outstanding Notes, the Company may omit to comply with and shall have no
liability in respect of any term, condition or limitation set forth in any such
covenant, whether directly or indirectly, by reason of any reference elsewhere
herein to any such covenant or by reason of any reference in any such covenant
to any other provision herein or in any other document and such omission to
comply shall not constitute a Default or an Event of Default under Section 6.01
hereof, but, except as specified above, the remainder of this Indenture and such
Notes shall be unaffected thereby. In addition, upon the Company's exercise
under Section 8.01 hereof of the option applicable to this Section 8.03 hereof,
subject to the satisfaction of the conditions set forth in Section 8.04 hereof,
Sections 6.01(c) through 6.01(f) hereof shall not constitute Events of Default.
Section 8.04. Conditions to Legal or Covenant Defeasance.
The following shall be the conditions to the application of either Section
8.02 or 8.03 hereof to the outstanding Notes:
In order to exercise either Legal Defeasance or Covenant Defeasance:
(a) the Company must irrevocably deposit with the Trustee, in trust, for
the benefit of the Holders, cash in United States dollars, non-callable
Government Securities, or a combination thereof, in such amounts as will be
sufficient, in the opinion of a nationally recognized firm of independent public
accountants, to pay the principal of, premium and Liquidated Damages, if any,
and interest on the outstanding Notes on the stated maturity or on the
applicable redemption date, as the case may be, and the Company shall specify
whether the Notes are being defeased to maturity or to a particular redemption
date;
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(b) in the case of an election under Section 8.02 hereof, the Company shall
have delivered to the Trustee an Opinion of Counsel reasonably acceptable to the
Trustee confirming that (A) the Company has received from, or there has been
published by, the Internal Revenue Service a ruling or (B) since the date of
this Indenture, there has been a change in the applicable federal income tax
law, in either case to the effect that, and based thereon such Opinion of
Counsel shall confirm that, the Holders of the outstanding Notes will not
recognize income, gain or loss for federal income tax purposes as a result of
such Legal Defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have been the case if
such Legal Defeasance had not occurred;
(c) in the case of an election under Section 8.03 hereof, the Company shall
have delivered to the Trustee an Opinion of Counsel reasonably acceptable to the
Trustee confirming that the Holders of the outstanding Notes will not recognize
income, gain or loss for federal income tax purposes as a result of such
Covenant Defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have been the case if
such Covenant Defeasance had not occurred;
(d) no Default or Event of Default shall have occurred and be continuing on
the date of such deposit (other than a Default or Event of Default resulting
from the incurrence of Indebtedness all or a portion of the proceeds of which
will be used to defease the Notes pursuant to this Article Eight concurrently
with such incurrence) or insofar as Sections 6.01(g) or 6.01(h) hereof is
concerned, at any time in the period ending on the 91st day after the date of
deposit;
(e) such Legal Defeasance or Covenant Defeasance shall not result in a
breach or violation of, or constitute a default under, any material agreement or
instrument (other than this Indenture) to which the Company or any of its
Subsidiaries is a party or by which the Company or any of its Subsidiaries is
bound;
(f) the Company shall have delivered to the Trustee an Opinion of Counsel
to the effect that, assuming no intervening bankruptcy of the Company or any
Guarantor between the date of deposit and the 91st day following the deposit and
assuming that no Holder is an "insider" of the Company under applicable
bankruptcy law, after the 91st day following the deposit, the trust funds will
not be subject to the effect of any applicable bankruptcy, insolvency,
reorganization or similar laws affecting creditors' rights generally;
(g) the Company shall deliver to the Trustee an Officers' Certificate
stating that the deposit was not made by the Company with the intent of
preferring the Holders of Notes over any other creditors of the Company or with
the intent of defeating, hindering, delaying or defrauding creditors of the
Company or others; and
(h) the Company shall deliver to the Trustee an Officers' Certificate and
an Opinion of Counsel, each stating that all conditions precedent relating to
the Legal Defeasance or the Covenant Defeasance have been complied with.
Section 8.05. Deposited Money and Government Securities to be Held in Trust;
Other Miscellaneous Provisions.
Subject to Section 8.06 hereof, all money and non-callable Government
Securities (including the proceeds thereof) deposited with the Trustee (or other
qualifying trustee, collectively for purposes of this Section 8.05, the
"Trustee") pursuant to Section 8.04 hereof in respect of the outstanding Notes
shall be held in trust and applied by the Trustee, in accordance with the
provisions of such Notes and this Indenture, to the payment, either directly or
through any Paying Agent (including the Company acting as Paying Agent) as the
Trustee may determine, to the Holders of such Notes of all sums due and to
become
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due thereon in respect of principal, premium, if any, and interest, but such
money need not be segregated from other funds except to the extent required by
law.
The Company shall pay and indemnify the Trustee against any tax, fee or
other charge imposed on or assessed against the cash or non-callable Government
Securities deposited pursuant to Section 8.04 hereof or the principal and
interest received in respect thereof other than any such tax, fee or other
charge which by law is for the account of the Holders of the outstanding Notes.
Anything in this Article Eight to the contrary notwithstanding, the Trustee
shall deliver or pay to the Company from time to time upon the request of the
Company any money or non-callable Government Securities held by it as provided
in Section 8.04 hereof which, in the opinion of a nationally recognized firm of
independent public accountants expressed in a written certification thereof
delivered to the Trustee (which may be the opinion delivered under Section
8.04(a) hereof), are in excess of the amount thereof that would then be required
to be deposited to effect an equivalent Legal Defeasance or Covenant Defeasance.
Section 8.06. Repayment to Company.
Any money deposited with the Trustee or any Paying Agent, or then held by
the Company, in trust for the payment of the principal of, premium, if any, or
interest on any Note and remaining unclaimed for two years after such principal,
and premium, if any, or interest has become due and payable shall be paid to the
Company on its written request or (if then held by the Company) shall be
discharged from such trust; and the Holder of such Note shall thereafter look
only to the Company for payment thereof, and all liability of the Trustee or
such Paying Agent with respect to such trust money, and all liability of the
Company as trustee thereof, shall thereupon cease; provided, however, that the
Trustee or such Paying Agent, before being required to make any such repayment,
may at the expense of the Company cause to be published once, in the New York
Times and The Wall Street Journal (national edition), notice that such money
remains unclaimed and that, after a date specified therein, which shall not be
less than 30 days from the date of such notification or publication, any
unclaimed balance of such money then remaining will be repaid to the Company.
Section 8.07. Reinstatement.
If the Trustee or Paying Agent is unable to apply any United States dollars
or non-callable Government Securities in accordance with Section 8.02 or 8.03
hereof, as the case may be, by reason of any order or judgment of any court or
governmental authority enjoining, restraining or otherwise prohibiting such
application, then the Company's obligations under this Indenture and the Notes
shall be revived and reinstated as though no deposit had occurred pursuant to
Section 8.02 or 8.03 hereof until such time as the Trustee or Paying Agent is
permitted to apply all such money in accordance with Section 8.02 or 8.03
hereof, as the case may be; provided, however, that, if the Company makes any
payment of principal of, premium, if any, or interest on any Note following the
reinstatement of its obligations, the Company shall be subrogated to the rights
of the Holders of such Notes to receive such payment from the money held by the
Trustee or Paying Agent.
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ARTICLE 9.
AMENDMENT, SUPPLEMENT AND WAIVER
Section 9.01. Without Consent of Holders of Notes.
Notwithstanding Section 9.02 of this Indenture, the Company, the Guarantors
and the Trustee may amend or supplement this Indenture, the Subsidiary
Guarantees or the Notes without the consent of any Holder of a Note:
(a) to cure any ambiguity, defect or inconsistency;
(b) to provide for uncertificated Notes in addition to or in place of
certificated Notes or to alter the provisions of Article 2 hereof (including the
related definitions) in a manner that does not materially adversely affect any
Holder;
(c) to provide for the assumption of the Company's or a Guarantor's
obligations to the Holders of the Notes by a successor to the Company pursuant
to Article 5 or Article 11 hereof;
(d) to make any change that would provide any additional rights or benefits
to the Holders of the Notes or that does not adversely affect the legal rights
hereunder of any Holder of the Note;
(e) to comply with requirements of the SEC in order to effect or maintain
the qualification of this Indenture under the TIA;
(f) to provide for the issuance of Additional Notes in accordance with the
limitations set forth in this Indenture as of the date hereof; or
(g) to release any Guarantee in accordance with the provisions of this
Indenture.
Upon the request of the Company accompanied by a resolution of its Board of
Directors authorizing the execution of any such amended or supplemental
Indenture, and upon receipt by the Trustee of the documents described in Section
9.06 hereof, the Trustee shall join with the Company and the Guarantors in the
execution of any amended or supplemental Indenture authorized or permitted by
the terms of this Indenture and to make any further appropriate agreements and
stipulations that may be therein contained, but the Trustee shall not be
obligated to enter into such amended or supplemental Indenture that affects its
own rights, duties or immunities under this Indenture or otherwise.
Section 9.02. With Consent of Holders of Notes.
Except as provided below in this Section 9.02, the Company and the Trustee
may amend or supplement this Indenture (including Section 3.09, 4.10 and 4.15
hereof) , the Subsidiary Guarantees and the Notes with the consent of the
Holders of at least a majority in principal amount of the Notes (including
Additional Notes, if any) then outstanding voting as a single class (including
consents obtained in connection with a tender offer or exchange offer for, or
purchase of, the Notes), and, subject to Sections 6.04 and 6.07 hereof, any
existing Default or Event of Default (other than a Default or Event of Default
in the payment of the principal of, premium, if any, or interest on the Notes,
except a payment default resulting from an acceleration that has been rescinded)
or compliance with any provision of this Indenture, the Subsidiary Guarantees or
the Notes may be waived with the consent of the Holders of a majority in
principal amount of the then outstanding Notes (including Additional Notes, if
any) voting as a single class (including consents obtained in connection with a
tender offer or exchange offer for, or purchase of, the Notes). Without the
consent of at least 75% in principal amount of the Notes then outstanding
(including consents obtained in connection with a tender offer or exchange offer
for, or
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purchase of, such Notes), no waiver or amendment to this Indenture may make any
change in the provisions of Section 4.16 hereof. Section 2.08 hereof shall
determine which Notes are considered to be "outstanding" for purposes of this
Section 9.02.
Upon the request of the Company accompanied by a resolution of its Board of
Directors authorizing the execution of any such amended or supplemental
Indenture, and upon the filing with the Trustee of evidence satisfactory to the
Trustee of the consent of the Holders of Notes as aforesaid, and upon receipt by
the Trustee of the documents described in Section 9.06 hereof, the Trustee shall
join with the Company in the execution of such amended or supplemental Indenture
unless such amended or supplemental Indenture directly affects the Trustee's own
rights, duties or immunities under this Indenture or otherwise, in which case
the Trustee may in its discretion, but shall not be obligated to, enter into
such amended or supplemental Indenture.
It shall not be necessary for the consent of the Holders of Notes under
this Section 9.02 to approve the particular form of any proposed amendment or
waiver, but it shall be sufficient if such consent approves the substance
thereof.
After an amendment, supplement or waiver under this Section becomes
effective, the Company shall mail to the Holders of Notes affected thereby a
notice briefly describing the amendment, supplement or waiver. Any failure of
the Company to mail such notice, or any defect therein, shall not, however, in
any way impair or affect the validity of any such amended or supplemental
Indenture or waiver. Subject to Sections 6.04 and 6.07 hereof, the Holders of a
majority in aggregate principal amount of the Notes (including Additional Notes,
if any) then outstanding voting as a single class may waive compliance in a
particular instance by the Company with any provision of this Indenture or the
Notes. However, without the consent of each Holder affected, an amendment or
waiver under this Section 9.02 may not (with respect to any Notes held by a non-
consenting Holder):
(a) reduce the principal amount of Notes whose Holders must consent to an
amendment, supplement or waiver;
(b) reduce the principal of or change the fixed maturity of any Note or
alter or waive any of the provisions with respect to the redemption of the
Notes, except as provided above with respect to Sections 3.09, 4.10 and 4.15
hereof;
(c) reduce the rate of or change the time for payment of interest,
including default interest, on any Note;
(d) waive a Default or Event of Default in the payment of principal of, or
premium, or interest, or Liquidated Damages, if any, on the Notes (except a
rescission of acceleration of the Notes by the Holders of at least a majority in
aggregate principal amount of the then outstanding Notes (including Additional
Notes, if any) and a waiver of the payment default that resulted from such
acceleration);
(e) make any Note payable in money other than that stated in the Notes;
(f) make any change in the provisions of this Indenture relating to waivers
of past Defaults or the rights of Holders of Notes to receive payments of
principal of, or interest or premium or Liquidated Damages, if any, on the
Notes;
(g) waive a redemption payment with respect to any Note (other than a
payment required by Sections 3.09, 4.10 or 4.15 hereof);
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(h) make any change in Section 6.04 or 6.07 hereof or in the foregoing
amendment and waiver provisions; or
(i) release any Guarantor from any of its obligations under its Subsidiary
Guarantee or this Indenture, except in accordance with the terms of this
Indenture.
Section 9.03. Compliance with Trust Indenture Act.
Every amendment or supplement to this Indenture or the Notes shall be set
forth in a amended or supplemental Indenture that complies with the TIA as then
in effect.
Section 9.04. Revocation and Effect of Consents.
Until an amendment, supplement or waiver becomes effective, a consent to it
by a Holder of a Note is a continuing consent by the Holder of a Note and every
subsequent Holder of a Note or portion of a Note that evidences the same debt as
the consenting Holder's Note, even if notation of the consent is not made on any
Note. However, any such Holder of a Note or subsequent Holder of a Note may
revoke the consent as to its Note if the Trustee receives written notice of
revocation before the date the waiver, supplement or amendment becomes
effective. An amendment, supplement or waiver becomes effective in accordance
with its terms and thereafter binds every Holder.
Section 9.05. Notation on or Exchange of Notes.
The Trustee may place an appropriate notation about an amendment,
supplement or waiver on any Note thereafter authenticated. The Company in
exchange for all Notes may issue and the Trustee shall, upon receipt of an
Authentication Order, authenticate new Notes that reflect the amendment,
supplement or waiver.
Failure to make the appropriate notation or issue a new Note shall not
affect the validity and effect of such amendment, supplement or waiver.
Section 9.06. Trustee to Sign Amendments, etc.
The Trustee shall sign any amended or supplemental Indenture authorized
pursuant to this Article 9 if the amendment or supplement does not adversely
affect the rights, duties, liabilities or immunities of the Trustee. The
Company may not sign an amendment or supplemental Indenture until the Board of
Directors approves it. In executing any amended or supplemental indenture, the
Trustee shall be entitled to receive and (subject to Section 7.01 hereof) shall
be fully protected in relying upon, in addition to the documents required by
Section 12.04 hereof, an Officers' Certificate and an Opinion of Counsel stating
that the execution of such amended or supplemental indenture is authorized or
permitted by this Indenture.
ARTICLE 10.
SUBORDINATION
Section 10.01. Agreement to Subordinate.
The Company agrees, and each Holder by accepting a Note agrees, that the
Indebtedness evidenced by the Notes is subordinated in right of payment, to the
extent and in the manner provided in this Article 10, to the prior payment in
full in cash or cash equivalents of all Senior Debt (whether
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outstanding on the date hereof or hereafter created, incurred, assumed or
guaranteed), and that the subordination is for the benefit of, and enforceable
by, the holders of Senior Debt.
Section 10.02. Liquidation; Dissolution; Bankruptcy.
Upon any payment or distribution of assets to creditors of the Company in a
liquidation or dissolution of the Company or in a bankruptcy, reorganization,
insolvency, receivership or similar proceeding relating to the Company or its
property, in an assignment for the benefit of creditors or any marshaling of the
Company's assets and liabilities:
(i) holders of Senior Debt shall be entitled to receive payment in
full in cash or cash equivalents of all Obligations due or to become due in
respect of such Senior Debt (including interest after the commencement of
any such proceeding at the rate specified in the applicable Senior Debt,
whether or not a claim for such interest is allowed in such proceeding)
before Holders of the Notes shall be entitled to receive any payment with
respect to the Notes (except that Holders may receive (A) Permitted Junior
Securities and (B) payments and other distributions made from any
defeasance trust created pursuant to Section 8.01 hereof); and
(ii) until all Obligations with respect to Senior Debt (as provided in
clause (i) above) are paid in full in cash or cash equivalents, any payment
or distribution of assets of the Company of any kind or character, whether
in cash, property or securities, to which Holders would be entitled but for
this Article 10 shall be made directly to holders of Senior Debt as their
interests may appear, or to their representatives as their interests may
appear (except that Holders of Notes may receive (A) Permitted Junior
Securities and (B) payments and other distributions made from any
defeasance trust created pursuant to Section 8.01 hereof).
To the extent any payment of Senior Debt (whether by or on behalf of the
Company, as proceeds of security or enforcement or any right of setoff or
otherwise) is declared to be fraudulent or preferential, set aside or required
to be paid to a trustee, receiver or other similar party under any bankruptcy,
insolvency, receivership or similar law, then if such payment is recovered by,
or paid over to, such trustee, receiver or other similar party, the Senior Debt
or part thereof originally intended to be satisfied shall be deemed to be
reinstated and outstanding as if such payment had not occurred.
Section 10.03. Default on Designated Senior Debt.
(a) The Company may not make any payment or distribution to the Trustee or
any Holder in respect of Obligations with respect to the Notes and may not
acquire from the Trustee or any Holder any Notes for cash or property (other
than (A) Permitted Junior Securities and (B) payments and other distributions
made from any defeasance trust created pursuant to Section 8.01 hereof) until
all principal and other Obligations with respect to the Senior Debt have been
paid in full if:
(i) a default in the payment of any principal or other Obligations
with respect to Designated Senior Debt occurs and is continuing beyond any
applicable grace period in the agreement, indenture or other document
governing such Designated Senior Debt; or
(ii) a default, other than a payment default, on Designated Senior
Debt occurs and is continuing that then permits holders of the Designated
Senior Debt to accelerate its maturity and the Trustee receives a notice of
the default (a "Payment Blockage Notice") from a Representative of any
Designated Senior Debt. If the Trustee receives any such Payment Blockage
Notice, no subsequent Payment Blockage Notice shall be effective for
purposes of this Section unless and until at least 360 days shall have
elapsed since the effectiveness of the immediately prior Payment Blockage
Notice. No nonpayment default that existed or was
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continuing on the date of delivery of any Payment Blockage Notice to the
Trustee shall be, or be made, the basis for a subsequent Payment Blockage
Notice unless such default shall have been cured or waived for a period of
not less than 90 days.
(b) The Company may and shall resume payments on and distributions in
respect of the Notes and may acquire them upon the earlier of:
(i) the date upon which the default is cured or waived in accordance
with the instruments governing such Designated Senior Debt, or
(ii) in the case of a default referred to in clause (ii) of Section
10.03(a) hereof, 179 days pass after notice is received if the maturity of
such Designated Senior Debt has not been accelerated,
if this Article 10 otherwise permits the payment, distribution or acquisition at
the time of such payment or acquisition.
Section 10.04. Acceleration of Notes.
If payment of the Notes is accelerated because of an Event of Default, the
Company shall promptly notify holders of Senior Debt of the acceleration.
Section 10.05. When Distribution Must Be Paid Over.
In the event that the Trustee or any Holder receives any payment of any
Obligations with respect to the Notes at a time when the Trustee or such Holder,
as applicable, has actual knowledge that such payment is prohibited by Section
10.02 or 10.03 hereof, such payment shall be held by the Trustee or such Holder,
in trust for the benefit of, and shall be paid forthwith over and delivered,
upon written request, to, the holders of Senior Debt as their interests may
appear or their Representative under the indenture or other agreement (if any)
pursuant to which Senior Debt may have been issued, as their respective
interests may appear, for application to the payment of all Obligations with
respect to Senior Debt remaining unpaid to the extent necessary to pay such
Obligations in full in cash or cash equivalents in accordance with their terms,
after giving effect to any concurrent payment or distribution to or for the
holders of Senior Debt.
With respect to the holders of Senior Debt, the Trustee undertakes to
perform only such obligations on the part of the Trustee as are specifically set
forth in this Article 10, and no implied covenants or obligations with respect
to the holders of Senior Debt shall be read into this Indenture against the
Trustee. The Trustee shall not be deemed to owe any fiduciary duty to the
holders of Senior Debt, and shall not be liable to any such holders if the
Trustee shall pay over or distribute to or on behalf of Holders or the Company
or any other Person money or assets to which any holders of Senior Debt shall be
entitled by virtue of this Article 10, except if such payment is made as a
result of the willful misconduct or gross negligence of the Trustee.
Section 10.06. Notice by Company.
The Company shall promptly notify the Trustee and the Paying Agent of any facts
known to the Company that would cause a payment of any Obligations with respect
to the Notes to violate this Article 10, but failure to give such notice shall
not affect the subordination of the Notes to the Senior Debt as provided in this
Article 10.
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Section 10.07. Subrogation.
After all Senior Debt is paid in full in cash or cash equivalents and until
the Notes are paid in full, Holders of Notes shall be subrogated (equally and
ratably with all other Indebtedness pari passu with the Notes) to the rights of
holders of Senior Debt to receive distributions applicable to Senior Debt to the
extent that distributions otherwise payable to the Holders of Notes have been
applied to the payment of Senior Debt. A distribution made under this Article
10 to holders of Senior Debt that otherwise would have been made to Holders of
Notes is not, as between the Company and Holders, a payment by the Company on
the Notes.
Section 10.08. Relative Rights.
This Article 10 defines the relative rights of Holders of Notes and holders
of Senior Debt. Nothing in this Indenture shall:
(a) impair, as between the Company and Holders of Notes, the
obligation of the Company, which is absolute and unconditional, to pay
principal of and interest on the Notes in accordance with their terms;
(b) affect the relative rights of Holders of Notes and creditors of
the Company other than their rights in relation to holders of Senior Debt;
or
(c) prevent the Trustee or any Holder of Notes from exercising its
available remedies upon a Default or Event of Default, subject to the
rights of holders and owners of Senior Debt to receive distributions and
payments otherwise payable to Holders of Notes.
If the Company fails because of this Article 10 to pay principal of or
interest on a Note on the due date, the failure is still a Default or Event of
Default.
Section 10.09. Subordination May Not Be Impaired by Company.
No right of any present or future holder of any Senior Debt to enforce
subordination as herein provided shall at any time in any way be prejudiced or
impaired by any act or failure to act on the part of the Company or by any act
or failure to act, in good faith, by any such holder, or by any noncompliance by
the Company with the terms, provisions and covenants of this Indenture,
regardless of any knowledge thereof any such holder may have or be otherwise
charged with.
Without in any way limiting the generality of the foregoing paragraph, the
holders of Senior Debt may, at any time and from time to time, without the
consent of or notice to the Trustee or the Holders of the Notes, without
incurring responsibility to the Holders of the Notes and without impairing or
releasing the subordination provided in this Article or the obligations
hereunder of the Holders of Notes to the holders of Senior Debt, even if any
right of reimbursement or subrogation or other right or remedy of any Holder is
affected, impaired or extinguished thereby, do any one or more of the following:
(i) change the manner, place or terms of payment or charge or extend
the time of payment of, or renew, exchange, amend, increase or alter, the
terms of any Senior Debt, any security or therefor or guaranty thereof or
any liability of any obligor thereon (including any guarantor) to such
holder, or any liability incurred directly or indirectly in respect thereof
or otherwise amend, renew, exchange, extend, modify, increase or supplement
in any manner any Senior Debt or any instrument evidencing or guaranteeing
or securing the same or any agreement under which Senior Debt is
outstanding;
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(ii) sell, exchange, release, surrender, realize upon, enforce or
otherwise deal with in any manner and in any order any property pledged,
mortgaged or otherwise securing Senior Debt or any liability of any obligor
thereon, to such holder, or any liability incurred directly or indirectly
in respect thereof;
(iii) settle or compromise any Senior Debt or any other liability of
any obligor of the Senior Debt to such holder or any security therefor or
any liability incurred directly or indirectly in respect thereof and apply
any sums by whomsoever paid and however realized to any liability
(including without limitation, Senior Debt) in any manner or order; and
(iv) fail to take or to record or otherwise perfect, for any reason
or for no reason, any lien or security interest securing Senior Debt by
whomsoever granted, exercise or delay in or refrain from exercising any
right or remedy against any obligor or any guarantor or any other person,
elect any remedy and otherwise deal freely with any obligor and any
security for the Senior Debt or any liability of any obligor to such holder
of any liability incurred directly or indirectly in respect thereof.
Section 10.10. Distribution or Notice to Representative.
Whenever a distribution is to be made or a notice given to holders of
Senior Debt, the distribution may be made and the notice given to their
Representative.
Upon any payment or distribution of assets of the Company referred to in
this Article 10, the Trustee and the Holders of Notes shall be entitled to rely
upon any order or decree made by any court of competent jurisdiction or upon any
certificate of such Representative or of the liquidating trustee or agent or
other Person making any distribution to the Trustee or to the Holders of Notes
for the purpose of ascertaining the Persons entitled to participate in such
distribution, the holders of the Senior Debt and other Indebtedness of the
Company, the amount thereof or payable thereon, the amount or amounts paid or
distributed thereon and all other facts pertinent thereto or to this Article 10.
Section 10.11. Rights of Trustee and Paying Agent.
Notwithstanding the provisions of this Article 10 or any other provision of
this Indenture, the Trustee shall not be charged with knowledge of the existence
of any facts that would prohibit the making of any payment or distribution by
the Trustee, and the Trustee and the Paying Agent may continue to make payments
on the Notes, unless the Trustee shall have received at its Corporate Trust
Office at least five Business Days prior to the date of such payment written
notice of facts that would cause the payment of any Obligations with respect to
the Notes to violate this Article 10. Only the Company or a Representative may
give the notice. Nothing in this Article 10 shall impair the claims of, or
payments to, the Trustee under or pursuant to Section 7.07 hereof.
The Trustee in its individual or any other capacity may hold Senior Debt
with the same rights it would have if it were not Trustee. Any Agent may do the
same with like rights.
Section 10.12. Authorization to Effect Subordination.
Each Holder of Notes, by the Holder's acceptance thereof, authorizes and
directs the Trustee on such Holder's behalf to take such action as may be
necessary or appropriate to effectuate the subordination as provided in this
Article 10, and appoints the Trustee to act as such Holder's attorney-in-fact
for any and all such purposes. If the Trustee does not file a proper proof of
claim or proof of debt in the form required in any proceeding referred to in
Section 6.09 hereof at least 30 days
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before the expiration of the time to file such claim, the Representatives of
Designated Senior Debt are hereby authorized to file an appropriate claim for
and on behalf of the Holders of the Notes.
Section 10.13. Amendments.
The provisions of this Article 10 shall not be amended or modified in any
manner adverse to holders of Senior Debt without the written consent of the
holders of all Senior Debt (or by any specified percentage of holders of Senior
Debt required to consent thereto).
ARTICLE 11.
SUBSIDIARY GUARANTEES
Section 11.01. Guarantee.
Subject to this Article 11, each of the Guarantors hereby, jointly and
severally, unconditionally guarantees to each Holder of a Note authenticated and
delivered by the Trustee and to the Trustee and its successors and assigns,
irrespective of the validity and enforceability of this Indenture, the Notes or
the obligations of the Company hereunder or thereunder, that: (a) the principal
of and interest on the Notes will be promptly paid in full when due, whether at
maturity, by acceleration, redemption or otherwise, and interest on the overdue
principal of and interest on the Notes, if any, if lawful, and all other
obligations of the Company to the Holders or the Trustee hereunder or thereunder
will be promptly paid in full or performed, all in accordance with the terms
hereof and thereof; and (b) in case of any extension of time of payment or
renewal of any Notes or any of such other obligations, that same will be
promptly paid in full when due or performed in accordance with the terms of the
extension or renewal, whether at stated maturity, by acceleration or otherwise.
Failing payment when due of any amount so guaranteed or any performance so
guaranteed for whatever reason, the Guarantors shall be jointly and severally
obligated to pay the same immediately. Each Guarantor agrees that this is a
guarantee of payment and not a guarantee of collection.
The Guarantors hereby agree that their obligations hereunder shall be
unconditional, irrespective of the validity, regularity or enforceability of the
Notes or this Indenture, the absence of any action to enforce the same, any
waiver or consent by any Holder of the Notes with respect to any provisions
hereof or thereof, the recovery of any judgment against the Company, any action
to enforce the same or any other circumstance which might otherwise constitute a
legal or equitable discharge or defense of a guarantor. Each Guarantor 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
proceeding first against the Company, protest, notice and all demands whatsoever
and covenant that this Subsidiary Guarantee shall not be discharged except by
complete performance of the obligations contained in the Notes and this
Indenture.
If any Holder or the Trustee is required by any court or otherwise to
return to the Company, the Guarantors or any custodian, trustee, liquidator or
other similar official acting in relation to either the Company or the
Guarantors, any amount paid by either to the Trustee or such Holder, this
Subsidiary Guarantee, to the extent theretofore discharged, shall be reinstated
in full force and effect.
Each Guarantor agrees that it shall not be entitled to any right of
subrogation in relation to the Holders in respect of any obligations guaranteed
hereby until payment in full of all obligations guaranteed hereby. Each
Guarantor further agrees that, as between the Guarantors, on the one hand, and
the Holders and the Trustee, on the other hand, (x) the maturity of the
obligations guaranteed hereby may be accelerated as provided in Article 6 hereof
for the purposes of this Subsidiary Guarantee, notwithstanding any stay,
injunction or other prohibition preventing such acceleration in respect of the
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obligations guaranteed hereby, and (y) in the event of any declaration of
acceleration of such obligations as provided in Article 6 hereof, such
obligations (whether or not due and payable) shall forthwith become due and
payable by the Guarantors for the purpose of this Subsidiary Guarantee. The
Guarantors shall have the right to seek contribution from any non-paying
Guarantor so long as the exercise of such right does not impair the rights of
the Holders under the Guarantee.
Section 11.02. Subordination of Subsidiary Guarantee.
The Obligations of each Guarantor under its Subsidiary Guarantee pursuant
to this Article 11 shall be junior and subordinated to the Senior Guarantee of
such Guarantor on the same basis as the Notes are junior and subordinated to
Senior Debt of the Company. For the purposes of the foregoing sentence, the
Trustee and the Holders shall have the right to receive and/or retain payments
by any of the Guarantors only at such times as they may receive and/or retain
payments in respect of the Notes pursuant to this Indenture, including Article
10 hereof.
Section 11.03. Limitation on Guarantor Liability.
Each Guarantor, and by its acceptance of Notes, each Holder, hereby
confirms that it is the intention of all such parties that the Subsidiary
Guarantee of such Guarantor not constitute a fraudulent transfer or conveyance
for purposes of Bankruptcy Law, the Uniform Fraudulent Conveyance Act, the
Uniform Fraudulent Transfer Act or any similar federal or state law to the
extent applicable to any Subsidiary Guarantee. To effectuate the foregoing
intention, the Trustee, the Holders and the Guarantors hereby irrevocably agree
that the obligations of such Guarantor will, after giving effect to such maximum
amount and all other contingent and fixed liabilities of such Guarantor that are
relevant under such laws, and after giving effect to any collections from,
rights to receive contribution from or payments made by or on behalf of any
other Guarantor in respect of the obligations of such other Guarantor under this
Article 11, result in the obligations of such Guarantor under its Subsidiary
Guarantee not constituting a fraudulent transfer or conveyance.
Section 11.04. Execution and Delivery of Subsidiary Guarantee.
To evidence its Subsidiary Guarantee set forth in Section 11.01, each
Guarantor hereby agrees that a notation of such Subsidiary Guarantee
substantially in the form included in Exhibit E shall be endorsed by an Officer
of such Guarantor on each Note authenticated and delivered by the Trustee and
that this Indenture shall be executed on behalf of such Guarantor by its
President or one of its Vice Presidents.
Each Guarantor hereby agrees that its Subsidiary Guarantee set forth in
Section 11.01 shall remain in full force and effect notwithstanding any failure
to endorse on each Note a notation of such Subsidiary Guarantee.
If an Officer whose signature is on this Indenture or on the Subsidiary
Guarantee no longer holds that office at the time the Trustee authenticates the
Note on which a Subsidiary Guarantee is endorsed, the Subsidiary Guarantee shall
be valid nevertheless.
The delivery of any Note by the Trustee, after the authentication thereof
hereunder, shall constitute due delivery of the Subsidiary Guarantee set forth
in this Indenture on behalf of the Guarantors.
In the event that the Company creates or acquires any new Subsidiaries
subsequent to the date of this Indenture, if required by Section 4.18 hereof,
the Company shall cause such Subsidiaries to execute
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supplemental indentures to this Indenture and Subsidiary Guarantees in
accordance with Section 4.18 hereof and this Article 11, to the extent
applicable.
Section 11.05. Guarantors May Consolidate, etc., on Certain Terms.
Except as otherwise provided in Section 11.06, no Guarantor may consolidate
with or merge with or into (whether or not such Guarantor is the surviving
Person) another Person whether or not affiliated with such Guarantor unless:
(a) subject to Section 11.06 hereof, the Person formed by or surviving any
such consolidation or merger (if other than a Guarantor or the Company)
unconditionally assumes all the obligations of such Guarantor, pursuant to a
supplemental indenture in form and substance reasonably satisfactory to the
Trustee, under the Notes, this Indenture and the Subsidiary Guarantee on the
terms set forth herein or therein; and
(b) immediately after giving effect to such transaction, no Default or
Event of Default exists.
In case of any such consolidation, merger, sale or conveyance and upon the
assumption by the successor Person, by supplemental indenture, executed and
delivered to the Trustee and satisfactory in form to the Trustee, of the
Subsidiary Guarantee endorsed upon the Notes and the due and punctual
performance of all of the covenants and conditions of this Indenture to be
performed by the Guarantor, such successor Person shall succeed to and be
substituted for the Guarantor with the same effect as if it had been named
herein as a Guarantor. Such successor Person thereupon may cause to be signed
any or all of the Subsidiary Guarantees to be endorsed upon all of the Notes
issuable hereunder which theretofore shall not have been signed by the Company
and delivered to the Trustee. All the Subsidiary Guarantees so issued shall in
all respects have the same legal rank and benefit under this Indenture as the
Subsidiary Guarantees theretofore and thereafter issued in accordance with the
terms of this Indenture as though all of such Subsidiary Guarantees had been
issued at the date of the execution hereof.
Except as set forth in Articles 4 and 5 hereof, and notwithstanding clauses
(a) and (b) above, nothing contained in this Indenture or in any of the Notes
shall prevent any consolidation or merger of a Guarantor with or into the
Company or another Guarantor, or shall prevent any sale or conveyance of the
property of a Guarantor as an entirety or substantially as an entirety to the
Company or another Guarantor.
Section 11.06. Releases Following Sale of Assets.
In the event of a sale or other disposition of all or substantially all of
the assets of any Guarantor, by way of merger, consolidation or otherwise, or a
sale or other disposition by the Company or any of its subsidiaries of all the
capital stock of any Guarantor, in each case to a Person that is not (either
before or after giving effect to such transactions) a Restricted Subsidiary of
the Company, then such Guarantor (in the event of a sale or other disposition,
by way of merger, consolidation or otherwise, of all of the capital stock of
such Guarantor) or the corporation acquiring the property (in the event of a
sale or other disposition of all or substantially all of the assets of such
Guarantor) will be released and relieved of any obligations under its Subsidiary
Guarantee; provided that the Net Proceeds of such sale or other disposition are
applied in accordance with the applicable provisions of this Indenture,
including without limitation Section 4.10 hereof, or the Company certifies its
intention to apply the Net Proceeds of such sale or other disposition in
accordance with the applicable provisions of this Indenture. Upon delivery by
the Company to the Trustee of an Officers' Certificate and an Opinion of Counsel
to the effect that such sale or other disposition was made by the Company in
accordance with the provisions of this Indenture, including without limitation
Section 4.10 hereof, the Trustee shall execute any documents reasonably
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required in order to evidence the release of any Guarantor from its obligations
under its Subsidiary Guarantee.
Any Guarantor not released from its obligations under its Subsidiary
Guarantee shall remain liable for the full amount of principal of and interest
on the Notes and for the other obligations of any Guarantor under this Indenture
as provided in this Article 11.
ARTICLE 12.
MISCELLANEOUS
Section 12.01. Trust Indenture Act Controls.
If any provision of this Indenture limits, qualifies or conflicts with the
duties imposed by TIA (S)318(c), the imposed duties shall control.
Section 12.02. Notices.
Any notice or communication by the Company, any Guarantor or the Trustee to
the others is duly given if in writing and delivered in Person or mailed by
first class mail (registered or certified, return receipt requested), telecopier
(promptly confirmed in writing) or overnight air courier guaranteeing next day
delivery, to the others' address:
If to the Company and/or any Guarantor:
The IT Group, Inc.
2790 Mosside Boulevard
Monroeville, PA 15146
Telecopier No.: (412) 373-7135
Attention: General Counsel
With a copy to:
Gibson, Dunn & Crutcher LLP
333 South Grand Avenue
Los Angeles, CA 90071
Telecopier No.: (213) 229-7500
Attention: Brian D. Kilb
If to the Trustee:
The Bank of New York
101 Barclay Street, 21W
New York, New York 10286
Telecopier No.: (212) 815-5915
Attention: Corporate Trust Trustee Administration
The Company, any Guarantor or the Trustee, by notice to the others may
designate additional or different addresses for subsequent notices or
communications.
All notices and communications (other than those sent to Holders) shall be
deemed to have been duly given: at the time delivered by hand, if personally
delivered; five Business Days after being
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deposited in the mail, postage prepaid, if mailed; when receipt acknowledged, if
telecopied; and the next Business Day after timely delivery to the courier, if
sent by overnight air courier guaranteeing next day delivery.
Any notice or communication to a Holder shall be mailed by first class
mail, certified or registered, return receipt requested, or by overnight air
courier guaranteeing next day delivery to its address shown on the register kept
by the Registrar. Any notice or communication shall also be so mailed to any
Person described in TIA (S) 313(c), to the extent required by the TIA. Failure
to mail a notice or communication to a Holder or any defect in it shall not
affect its sufficiency with respect to other Holders.
If a notice or 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 mails a notice or communication to Holders, it shall mail a
copy to the Trustee and each Agent at the same time.
Section 12.03. Communication by Holders of Notes with Other Holders of Notes.
Holders may communicate pursuant to TIA (S) 312(b) with other Holders with
respect to their rights under this Indenture or the Notes. The Company, the
Trustee, the Registrar and anyone else shall have the protection of TIA (S)
312(c).
Section 12.04. Certificate and Opinion as to Conditions Precedent.
Upon any request or application by the Company to the Trustee to take any
action under this Indenture, the Company shall furnish to the Trustee:
(a) an Officers' Certificate in form and substance reasonably satisfactory
to the Trustee (which shall include the statements set forth in Section 12.05
hereof) stating that, in the opinion of the signers, all conditions precedent
and covenants, if any, provided for in this Indenture relating to the proposed
action have been satisfied; and
(b) an Opinion of Counsel in form and substance reasonably satisfactory to
the Trustee (which shall include the statements set forth in Section 12.05
hereof) stating that, in the opinion of such counsel, all such conditions
precedent and covenants have been satisfied.
Section 12.05. Statements Required in Certificate or Opinion.
Each certificate or opinion with respect to compliance with a condition or
covenant provided for in this Indenture (other than a certificate provided
pursuant to TIA (S) 314(a)(4)) shall comply with the provisions of TIA (S)
314(e) and shall include:
(a) a statement that the Person making such certificate or opinion has read
such covenant or condition;
(b) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(c) a statement that, in the opinion of such Person, he or she has made
such examination or investigation as is necessary to enable him to express an
informed opinion as to whether or not such covenant or condition has been
satisfied; and
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(d) a statement as to whether or not, in the opinion of such Person, such
condition or covenant has been satisfied.
Section 12.06. Rules by Trustee and Agents.
The Trustee may make reasonable rules for action by or at a meeting of
Holders. The Registrar or Paying Agent may make reasonable rules and set
reasonable requirements for its functions.
Section 12.07. No Personal Liability of Directors, Officers, Employees and
Stockholders.
No director, officer, employee, incorporator or stockholder of the Company
or any Guarantor, as such, shall have any liability for any obligations of the
Company or the Guarantors under the Notes, this Indenture, the Subsidiary
Guarantees, or for any claim based on, in respect of, or by reason of, such
obligations or their creation. Each Holder of Notes by accepting a Note waives
and releases all such liability. The waiver and release are part of the
consideration for issuance of the Notes. The waiver may not be effective to
waive liabilities under the federal securities laws.
Section 12.08. Governing Law.
THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO
CONSTRUE THIS INDENTURE, THE NOTES AND THE SUBSIDIARY GUARANTEES WITHOUT GIVING
EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE
APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
Section 12.09. No Adverse Interpretation of Other Agreements.
This Indenture may not be used to interpret any other indenture, loan or
debt agreement of the Company or its Subsidiaries or of any other Person. Any
such indenture, loan or debt agreement may not be used to interpret this
Indenture.
Section 12.10. Successors.
All agreements of the Company in this Indenture and the Notes shall bind
its successors. All agreements of the Trustee in this Indenture shall bind its
successors. All agreements of each Guarantor in this Indenture shall bind its
successors, except as otherwise provided in Section 11.06.
Section 12.11. Severability.
In case any provision in this Indenture or in the Notes shall be invalid,
illegal or unenforceable, the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.
Section 12.12. Counterpart Originals.
The parties may sign any number of copies of this Indenture. Each signed
copy shall be an original, but all of them together represent the same
agreement.
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Section 12.13. Table of Contents, Headings, etc.
The Table of Contents, Cross-Reference Table and Headings of the Articles
and Sections of this Indenture have been inserted for convenience of reference
only, are not to be considered a part of this Indenture and shall in no way
modify or restrict any of the terms or provisions hereof.
[Signatures on following pages]
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SIGNATURES
Dated as of April 9, 1999
The IT Group, Inc.
By:_________________________________
Name:
Title:
Alaska Remediation Services Corp.
Beneco Enterprises, Inc.
Fluor Daniel Environmental Services, Inc.
GCAP Services, Inc.
Gradient Corporation
Groundwater Technology, Inc.
IT C&V Operations, Inc.
IT Corporation
IT Corporation of North Carolina
IT E&C Operations, Inc.
IT Environmental and Facilities, Inc.
IT International Holdings, Inc.
IT International Investments, Inc.
IT International Operations, Inc.
IT Investment Holdings, Inc.
IT Japan Services, Inc.
IT Korea Services, Inc.
IT Tulsa Holdings, Inc.
Jellinek, Schwartz and Connolly, Inc.
JSC International, Inc.
Landbank, Inc.
Landbank Remediation Corp.
Pacific Environmental Group Inc.
PHR Environmental Consultants, Inc.
Sielken, Inc.
OHM Corporation
OHM Remediation Services, Corp.
37-02 College Point Boulevard, LLC
Empire State I, LLC
Empire State II LLC
Kato Road LLC
Landbank Environmental Properties LLC
Northeast Restoration Company, LLC
The Dorchester Group
By:_________________________________
Name: James G. Kirk
Title: Vice President
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The Bank of New York, as Trustee
By:_____________________________
Name: Iliana A. Arciprete
Title: Assistant Treasurer
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[Face of Note]
EXHIBIT A
________________________________________________________________________________
CUSIP ____________
ISIN ______________
11 1/4% Senior Subordinated Notes due 2009
No. ___
$____________
THE IT GROUP, INC.
promises to pay to CEDE & CO.,
or registered assigns,
the principal sum of DOLLARS
on April 1, 2009.
Interest Payment Dates: April 1 and October 1, commencing October 1, 1999.
Record Dates: March 15 and September 15.
The IT Group, Inc.
By:_________________________________
Name:
Title:
Dated: April 9, 1999
This is one of the Notes referred to
in the within-mentioned Indenture:
The Bank of New York,
as Trustee
By:_________________________________
Authorized Signatory
================================================================================
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[Back of Note]
11 1/4% [Series A] [Series B] Senior Subordinated Notes due 2009
[Insert the Global Note Legend, if applicable pursuant to the provisions of the
Indenture]
[Insert the Private Placement Legend, if applicable pursuant to the provisions
of the Indenture]
Capitalized terms used herein shall have the meanings assigned to them in
the Indenture referred to below unless otherwise indicated.
1. Interest. The IT Group, Inc., a Delaware corporation (the "Company"),
promises to pay interest on the principal amount of this Note at 11 1/4% per
annum from April 9, 1999 until maturity and shall pay the Liquidated Damages
payable pursuant to Section 5 of the Registration Rights Agreement referred to
below. The Company will pay interest and Liquidated Damages semi-annually in
arrears on April 1 and October 1 of each year, or if any such day is not a
Business Day, on the next succeeding Business Day (each an "Interest Payment
Date"). Interest on the Notes will accrue from the most recent date to which
interest has been paid or, if no interest has been paid, from the date of
issuance; provided that if there is no existing Default in the payment of
interest, and if this Note is authenticated between a record date referred to on
the face hereof and the next succeeding Interest Payment Date, interest shall
accrue from such next succeeding Interest Payment Date; provided, further, that
the first Interest Payment Date shall be October 1, 1999. The Company shall pay
interest (including post-petition interest in any proceeding under any
Bankruptcy Law) on overdue principal and premium, if any, from time to time on
demand at a rate that is 1% per annum in excess of the rate then in effect; it
shall pay interest (including post-petition interest in any proceeding under any
Bankruptcy Law) on overdue installments of interest and Liquidated Damages
(without regard to any applicable grace periods) from time to time on demand at
the same rate to the extent lawful. Interest will be computed on the basis of a
360-day year of twelve 30-day months.
2. Method of Payment. The Company will pay interest on the Notes (except
defaulted interest) and Liquidated Damages to the Persons who are registered
Holders of Notes at the close of business on the March 15 or September 15 next
preceding the Interest Payment Date, even if such Notes are canceled after such
record date and on or before such Interest Payment Date, except as provided in
Section 2.12 of the Indenture with respect to defaulted interest. The Notes will
be payable as to principal, premium and Liquidated Damages, if any, and interest
at the office or agency of the Company maintained for such purpose within or
without the City and State of New York, or, at the option of the Company,
payment of interest and Liquidated Damages may be made by check mailed to the
Holders at their addresses set forth in the register of Holders, and provided
that payment by wire transfer of immediately available funds will be required
with respect to principal of and interest, premium and Liquidated Damages on,
all Global Notes and all other Notes the Holders of which shall have provided
wire transfer instructions to the Company or the Paying Agent prior to the
relevant Record Date. Such payment shall be in such coin or currency of the
United States of America as at the time of payment is legal tender for payment
of public and private debts.
3. Paying Agent and Registrar. Initially, The Bank of New York, the
Trustee under the Indenture, will act as Paying Agent and Registrar. The Company
may change any Paying Agent or Registrar without notice to any Holder. The
Company or any of its Subsidiaries may act in any such capacity.
4. Indenture. The Company issued the Notes under an Indenture dated as of
April 9, 1999 (the "Indenture") among the Company, the Guarantors listed on the
signature pages thereto and the
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Trustee. The terms of the Notes include those stated in the Indenture and those
made part of the Indenture by reference to the Trust Indenture Act of 1939, as
amended (15 U.S. Code (S)(S) 77aaa-77bbbb). The Notes are subject to all such
terms, and Holders are referred to the Indenture and such Act for a statement of
such terms. To the extent any provision of this Note conflicts with the express
provisions of the Indenture, the provisions of the Indenture shall govern and be
controlling. The Notes are obligations of the Company limited to $400.0 million
in aggregate principal amount.
5. Subordination. The Notes are subordinated to Senior Debt, as defined
in the Indenture. To the extent provided in the Indenture, Senior Debt must be
paid in full before any payment may be made in respect of the Notes or any other
Obligation in respect of Senior Debt. Each Holder by accepting a Note agrees to
the subordination provisions contained in the Indenture and authorizes the
Trustee to give it effect and appoints the Trustee as attorney-in-fact for such
purpose. The Indenture also provides that, under certain circumstances, the
Company will be prohibited from making any payments in respect of the Notes or
any other Obligation in respect of Senior Debt if the Company is in default on
any Senior Debt.
6. Optional Redemption.
(a) Except as set forth in subparagraph (b) of this Paragraph 6, the
Company shall not have the option to redeem the Notes prior to April 1, 2004.
Thereafter, the Company may redeem all or a part of the Notes upon not less than
30 nor more than 60 days' notice, at the redemption prices (expressed as
percentages of principal amount) set forth below plus accrued and unpaid
interest and Liquidated Damages, if any, thereon, to the applicable redemption
date, if redeemed during the twelve-month period beginning on April 1 of the
years indicated below:
Year Percentage
- ---- ----------
2004............................................................... 106.625%
2005............................................................... 104.750%
2006............................................................... 102.875%
2007 and thereafter............................................... 100.000%
(b) Notwithstanding the provisions of subparagraph (a) of this Paragraph
6, at any time prior to April 1, 2002, the Company may on any one or more
occasions redeem up to 35% of the aggregate principal amount of Notes originally
issued under this Indenture at a redemption price of 111.250% of the principal
amount thereof, plus accrued and unpaid interest and Liquidated Damages, if any,
to the redemption date, with the net cash proceeds of one or more Public Equity
Offerings; provided that at least 65% of the aggregate principal amount of Notes
issued under the Indenture remains outstanding immediately after the occurrence
of such redemption (excluding Notes held by the Company and its Subsidiaries);
and that such redemption occurs within 45 days of the date of the closing of
such Public Equity Offering.
7. Mandatory Redemption.
Except as set forth in paragraph 8 below, the Company shall not be required
to make mandatory redemption or sinking fund payments with respect to the Notes.
8. Repurchase at Option of Holder.
(a) If there is a Change of Control, the Company shall be required to make
an offer (a "Change of Control Offer") to each Holder to repurchase all or any
part (equal to $1,000 or an integral
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multiple thereof) of each Holder's Notes at a purchase price equal to 101% of
the aggregate principal amount thereof plus accrued and unpaid interest and
Liquidated Damages thereon, if any, to the date of purchase (the "Change of
Control Payment"). Within 10 days following any Change of Control, the Company
shall mail a notice to each Holder setting forth the procedures governing the
Change of Control Offer as required by the Indenture.
(b) If the Company or a Subsidiary consummates any Asset Sales, within
five days of each date on which the aggregate amount of Excess Proceeds exceeds
$10 million, the Company shall commence an offer to all Holders of Notes (a
"Repurchase Offer") pursuant to Section 3.09 of the Indenture to purchase the
maximum principal amount of Notes (including any Additional Notes) that may be
purchased out of the Excess Proceeds at an offer price in cash in an amount
equal to 100% of the principal amount thereof plus accrued and unpaid interest
and Liquidated Damages thereon, if any, to the date fixed for the closing of
such offer, in accordance with the procedures set forth in the Indenture. To the
extent that the aggregate amount of Notes tendered (including any Additional
Notes) pursuant to a Repurchase Offer is less than the Excess Proceeds, the
Company (or such Subsidiary) may use such deficiency for general corporate
purposes. If the aggregate principal amount of Notes surrendered by Holders
thereof exceeds the amount of Excess Proceeds, the Trustee shall select the
Notes to be purchased on a pro rata basis. Holders of Notes that are the subject
of an offer to purchase will receive a Repurchase Offer from the Company prior
to any related purchase date and may elect to have such Notes purchased by
completing the form entitled "Option of Holder to Elect Purchase" on the reverse
of the Notes.
9. Notice of Redemption. Notice of redemption will be mailed at least 30
days but not more than 60 days before the redemption date to each Holder whose
Notes are to be redeemed at its registered address. Notes in denominations
larger than $1,000 may be redeemed in part but only in whole multiples of
$1,000, unless all of the Notes held by a Holder are to be redeemed. On and
after the redemption date interest ceases to accrue on Notes or portions thereof
called for redemption.
10. Denominations, Transfer AND Exchange. The Notes are in registered
form without coupons in denominations of $1,000 and integral multiples of
$1,000. The transfer of Notes may be registered and Notes may be exchanged as
provided in the Indenture. The Registrar and the Trustee may require a Holder,
among other things, to furnish appropriate endorsements and transfer documents
and the Company may require a Holder to pay any taxes and fees required by law
or permitted by the Indenture. The Company need not exchange or register the
transfer of any Note or portion of a Note selected for redemption, except for
the unredeemed portion of any Note being redeemed in part. Also, the Company
need not exchange or register the transfer of any Notes for a period of 15 days
before the mailing of the notice of redemption of Notes to be redeemed or during
the period between a record date and the corresponding Interest Payment Date.
11. Persons Deemed Owners. The registered Holder of a Note may be treated
as its owner for all purposes.
12. Amendment, Supplement and Waiver. Subject to certain exceptions, the
Indenture, the Subsidiary Guarantees or the Notes may be amended or supplemented
with the consent of the Holders of at least a majority in principal amount of
the then outstanding (including any Additional Notes) Notes voting as a single
class, and any existing default or compliance with any provision of the
Indenture, the Subsidiary Guarantees or the Notes may be waived with the consent
of the Holders of a majority in principal amount of the then outstanding Notes
(including any Additional Notes) voting as a single class. Without the consent
of any Holder of a Note, the Indenture, the Subsidiary Guarantees or the Notes
may
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be amended or supplemented to cure any ambiguity, defect or inconsistency,
to provide for uncertificated Notes in addition to or in place of certificated
Notes, to provide for the assumption of the Company's or Guarantor's obligations
to Holders of the Notes in case of a merger or consolidation, to make any change
that would provide any additional rights or benefits to the Holders of the Notes
or that does not adversely affect the legal rights under the Indenture of any
such Holder, to comply with the requirements of the SEC in order to effect or
maintain the qualification of the Indenture under the Trust Indenture Act, to
provide for the issuance of Additional Notes in accordance with the limitations
set forth in the Indenture, or to allow any Guarantor to execute a supplemental
indenture to the Indenture and/or a Subsidiary Guarantee with respect to the
Notes.
13. Defaults and Remedies. Events of Default include: (i) default for 30
days in the payment when due of interest or Liquidated Damages on the Notes;
(ii) default in payment when due of principal of or premium, if any, on the
Notes when the same becomes due and payable at maturity, upon redemption
(including in connection with an offer to purchase) or otherwise, (iii) failure
by the Company to comply with Section 4.07, 4.09, 4.10, 4.15 or 5.01 of the
Indenture; (iv) failure by the Company for 60 days after notice to the Company
by the Trustee or the Holders of at least 25% in principal amount of the Notes,
(including Additional Notes, if any) then outstanding voting as a single class
to comply with certain other agreements in the Indenture, the Notes; (v) default
under certain other agreements relating to Indebtedness of the Company which
default results in the acceleration of such Indebtedness prior to its express
maturity; (vi) certain final judgments for the payment of money that remain
undischarged for a period of 60 days; (vii) certain events of bankruptcy or
insolvency with respect to the Company or any of its Restricted Subsidiaries;
and (viii) except as permitted by the Indenture, any Subsidiary Guarantee shall
be held in any judicial proceeding to be unenforceable or invalid or shall cease
for any reason to be in full force and effect or any Guarantor or any Person
acting on its behalf shall deny or disaffirm its obligations under such
Guarantor's Subsidiary Guarantee. If any Event of Default occurs and is
continuing, the Trustee or the Holders of at least 25% in principal amount of
the then outstanding Notes may declare all the Notes to be due and payable.
Notwithstanding the foregoing, in the case of an Event of Default arising from
certain events of bankruptcy or insolvency, all outstanding Notes will become
due and payable without further action or notice. Holders may not enforce the
Indenture or the Notes except as provided in the Indenture. Subject to certain
limitations, Holders of a majority in principal amount of the then outstanding
Notes may direct the Trustee in its exercise of any trust or power. The Trustee
may withhold from Holders of the Notes notice of any continuing Default or Event
of Default (except a Default or Event of Default relating to the payment of
principal or interest) if it determines that withholding notice is in their
interest. The Holders of a majority in aggregate principal amount of the Notes
then outstanding by notice to the Trustee may on behalf of the Holders of all of
the Notes waive any existing Default or Event of Default and its consequences
under the Indenture except a continuing Default or Event of Default in the
payment of interest on, or the principal of, the Notes. The Company is required
to deliver to the Trustee annually a statement regarding compliance with the
Indenture, and the Company is required upon becoming aware of any Default or
Event of Default, to deliver to the Trustee a statement specifying such Default
or Event of Default.
14. Trustee Dealings with Company. The Trustee, in its individual or any
other capacity, may make loans to, accept deposits from, and perform services
for the Company or its Affiliates, and may otherwise deal with the Company or
its Affiliates, as if it were not the Trustee.
15. No Recourse Against Others. A director, officer, employee,
incorporator or stockholder, of the Company, as such, shall not have any
liability for any obligations of the Company under the Notes or the Indenture or
for any claim based on, in respect of, or by reason of, such
A-5
<PAGE>
obligations or their creation. Each Holder by accepting a Note waives and
releases all such liability. The waiver and release are part of the
consideration for the issuance of the Notes.
16. Authentication. This Note shall not be valid until authenticated by
the manual signature of the Trustee or an authenticating agent.
17. Abbreviations. Customary abbreviations may be used in the name of a
Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
18. Additional Rights of Holders of Restricted Global Notes and Restricted
Definitive Notes. In addition to the rights provided to Holders of Notes under
the Indenture, Holders of Restricted Global Notes and Restricted Definitive
Notes shall have all the rights set forth in the Registration Rights Agreement
dated as of April 9, 1999, between the Company and the parties named on the
signature pages thereof or, in the case of Additional Notes, Holders of
Restricted Global Notes and Restricted Definitive Notes shall have the rights
set forth in one or more registration rights agreements, if any, between the
Company and the other parties thereto, relating to rights given by the Company
to the purchasers of any Additional Notes (collectively, the "Registration
Rights Agreement").
19. CUSIP Numbers. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Company has caused
CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP numbers
in notices of redemption as a convenience to Holders. No representation is made
as to the accuracy of such numbers either as printed on the Notes or as
contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
The Company will furnish to any Holder upon written request and without
charge a copy of the Indenture and/or the Registration Rights Agreement.
Requests may be made to:
The IT Group, Inc.
2790 Mosside Boulevard
Monroeville, PA 15146
Attention: Chief Financial Officer
A-6
<PAGE>
Assignment Form
To assign this Note, fill in the form below:
(I) or (we) assign and transfer this Note to:___________________________________
(Insert assignee's legal name)
________________________________________________________________________________
(Insert assignee's soc. sec. or tax I.D. no.)
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Print or type assignee's name, address and zip code)
and irrevocably appoint_________________________________________________________
to transfer this Note on the books of the Company. The agent may substitute
another to act for him.
Date:___________________
Your Signature:_______________________________
(Sign exactly as your name appears on the face of this Note)
Signature Guarantee*:______________________________
* Participant in a recognized Signature Guarantee Medallion Program (or other
signature guarantor acceptable to the Trustee).
A-7
<PAGE>
Option of Holder to Elect Purchase
If you want to elect to have this Note purchased by the Company pursuant
to Section 4.10 or 4.15 of the Indenture, check the appropriate box below:
[ ] Section 4.10 [ ] Section 4.15
If you want to elect to have only part of the Note purchased by the
Company pursuant to Section 4.10 or Section 4.15 of the Indenture, state the
amount you elect to have purchased:
$____________________
Date:___________________
Your Signature:____________________________________________
(Sign exactly as your name appears on the face of this Note)
Tax Identification No.:___________________________
Signature Guarantee*:
* Participant in a recognized Signature Guarantee Medallion Program (or other
signature guarantor acceptable to the Trustee).
A-8
<PAGE>
SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL NOTE*
The following exchanges of a part of this Global Note for an interest in
another Global Note or for a Definitive Note, or exchanges of a part of another
Global Note or Definitive Note for an interest in this Global Note, have been
made:
<TABLE>
<CAPTION>
Principal Amount
Amount of decrease Amount of increase of this Signature of
in in Global Note authorized
Principal Amount Principal Amount following such signatory of
of this of this decrease Trustee or Note
Date of Exchange Global Note Global Note (or increase) Custodian
- ----------------- ---------------- ----------------- --------------- ---------------
<S> <C> <C> <C> <C>
</TABLE>
* This schedule should be included only if the Note is issued in global form.
A-9
<PAGE>
EXHIBIT B
FORM OF CERTIFICATE OF TRANSFER
The IT Group, Inc.
2790 Mosside Boulevard
Monroeville, PA 15146
The Bank of New York
101 Barclay Street, Floor 21 West
New York, NY 10286
Attention: Corporate Trust Trustee Administration
Re: 11 1/4% Senior Subordinated Notes due 2009
------------------------------------------
Reference is hereby made to the Indenture, dated as of April 9, 1999 (the
"Indenture"), among The IT Group, Inc., as issuer (the "Company"), the
Guarantors listed on the signature pages thereto and The Bank of New York, as
trustee. Capitalized terms used but not defined herein shall have the meanings
given to them in the Indenture.
___________________, (the "Transferor") owns and proposes to transfer the
Note[s] or interest in such Note[s] specified in Annex A hereto, in the
principal amount of $___________ in such Note[s] or interests (the "Transfer"),
to ___________________________ (the "Transferee"), as further specified in
Annex A hereto. In connection with the Transfer, the Transferor hereby
certifies that:
[CHECK ALL THAT APPLY]
1. [ ] Check if Transferee will take delivery of a beneficial interest in
------------------------------------------------------------------
the 144A Global Note or a Definitive Note Pursuant to Rule 144A. The Transfer
- ---------------------------------------------------------------
is being effected pursuant to and in accordance with Rule 144A under the United
States Securities Act of 1933, as amended (the "Securities Act"), and,
accordingly, the Transferor hereby further certifies that the beneficial
interest or Definitive Note is being transferred to a Person that the Transferor
reasonably believed and believes is purchasing the beneficial interest or
Definitive Note for its own account, or for one or more accounts with respect to
which such Person exercises sole investment discretion, and such Person and each
such account is a "qualified institutional buyer" within the meaning of Rule
144A in a transaction meeting the requirements of Rule 144A and such Transfer is
in compliance with any applicable blue sky securities laws of any state of the
United States. Upon consummation of the proposed Transfer in accordance with
the terms of the Indenture, the transferred beneficial interest or Definitive
Note will be subject to the restrictions on transfer enumerated in the Private
Placement Legend printed on the 144A Global Note and/or the Definitive Note and
in the Indenture and the Securities Act.
2. [ ] Check if Transferee will take delivery of a beneficial interest in
------------------------------------------------------------------
the Regulation S Global Note or a Definitive Note pursuant to Regulation S. The
- --------------------------------------------------------------------------
Transfer is being effected pursuant to and in accordance with Rule 903 or Rule
904 under the Securities Act and, accordingly, the Transferor hereby further
certifies that (i) the Transfer is not being made to a person in the United
States and (x) at the time the buy order was originated, the Transferee was
outside the United States or such Transferor and any Person acting on its behalf
reasonably believed and believes that the Transferee was outside the United
States or (y) the transaction was executed in, on or through the facilities of a
designated offshore securities market and neither such Transferor nor any Person
acting on its behalf knows that the transaction was prearranged with a buyer in
the United States, (ii) no directed selling efforts have been made in
contravention of the requirements of Rule 903(b) or Rule 904(b) of Regulation S
under the
<PAGE>
EXHIBIT B
Securities Act, (iii) the transaction is not part of a plan or scheme to evade
the registration requirements of the Securities Act and (iv) if the proposed
transfer is being made prior to the expiration of the Restricted Period, the
transfer is not being made to a U.S. Person or for the account or benefit of a
U.S. Person (other than an Initial Purchaser). Upon consummation of the proposed
transfer in accordance with the terms of the Indenture, the transferred
beneficial interest or Definitive Note will be subject to the restrictions on
Transfer enumerated in the Private Placement Legend printed on the Regulation S
Global Note and/or the Definitive Note and in the Indenture and the Securities
Act.
3. [ ] Check and complete if Transferee will take delivery of a beneficial
-------------------------------------------------------------------
interest in the IAI Global Note or a Definitive Note pursuant to any provision
- ------------------------------------------------------------------------------
of the Securities Act other than Rule 144A or Regulation S. The Transfer is
- ----------------------------------------------------------
being effected in compliance with the transfer restrictions applicable to
beneficial interests in Restricted Global Notes and Restricted Definitive Notes
and pursuant to and in accordance with the Securities Act and any applicable
blue sky securities laws of any state of the United States, and accordingly the
Transferor hereby further certifies that (check one):
(a) [ ] such Transfer is being effected pursuant to and in accordance
with Rule 144 under the Securities Act;
or
(b) [ ] such Transfer is being effected to the Company or a subsidiary
thereof;
or
(c) [ ] such Transfer is being effected pursuant to an effective
registration statement under the Securities Act and in compliance with the
prospectus delivery requirements of the Securities Act;
or
(d) [ ] such Transfer is being effected to an Institutional Accredited
Investor and pursuant to an exemption from the registration requirements of
the Securities Act other than Rule 144A, Rule 144 or Rule 904, and the
Transferor hereby further certifies that it has not engaged in any general
solicitation within the meaning of Regulation D under the Securities Act
and the Transfer complies with the transfer restrictions applicable to
beneficial interests in a Restricted Global Note or Restricted Definitive
Notes and the requirements of the exemption claimed, which certification is
supported by (1) a certificate executed by the Transferee in the form of
Exhibit D to the Indenture and (2) an Opinion of Counsel provided by the
Transferor or the Transferee (a copy of which the Transferor has attached
to this certification), to the effect that such Transfer is in compliance
with the Securities Act. Upon consummation of the proposed transfer in
accordance with the terms of the Indenture, the transferred beneficial
interest or Definitive Note will be subject to the restrictions on transfer
enumerated in the Private Placement Legend printed on the IAI Global Note
and/or the Definitive Notes and in the Indenture and the Securities Act.
4. [ ] Check if Transferee will take delivery of a beneficial interest in
------------------------------------------------------------------
an Unrestricted Global Note or of an Unrestricted Definitive Note.
- -----------------------------------------------------------------
(a) [ ] Check if Transfer is pursuant to Rule 144. (i) The Transfer is
being effected pursuant to and in accordance with Rule 144 under the
Securities Act and in compliance with the transfer
B-2
<PAGE>
EXHIBIT B
restrictions contained in the Indenture and any applicable blue sky securities
laws of any state of the United States and (ii) the restrictions on transfer
contained in the Indenture and the Private Placement Legend are not required in
order to maintain compliance with the Securities Act. Upon consummation of the
proposed Transfer in accordance with the terms of the Indenture, the transferred
beneficial interest or Definitive Note will no longer be subject to the
restrictions on transfer enumerated in the Private Placement Legend printed on
the Restricted Global Notes, on Restricted Definitive Notes and in the
Indenture.
(b) [ ] Check if Transfer is Pursuant to Regulation S. (i) The Transfer
is being effected pursuant to and in accordance with Rule 903 or Rule 904 under
the Securities Act and in compliance with the transfer restrictions contained in
the Indenture and any applicable blue sky securities laws of any state of the
United States and (ii) the restrictions on transfer contained in the Indenture
and the Private Placement Legend are not required in order to maintain
compliance with the Securities Act. Upon consummation of the proposed Transfer
in accordance with the terms of the Indenture, the transferred beneficial
interest or Definitive Note will no longer be subject to the restrictions on
transfer enumerated in the Private Placement Legend printed on the Restricted
Global Notes, on Restricted Definitive Notes and in the Indenture.
(c) [ ] Check if Transfer is Pursuant to Other Exemption. (i) The
Transfer is being effected pursuant to and in compliance with an exemption from
the registration requirements of the Securities Act other than Rule 144, Rule
903 or Rule 904 and in compliance with the transfer restrictions contained in
the Indenture and any applicable blue sky securities laws of any State of the
United States and (ii) the restrictions on transfer contained in the Indenture
and the Private Placement Legend are not required in order to maintain
compliance with the Securities Act. Upon consummation of the proposed Transfer
in accordance with the terms of the Indenture, the transferred beneficial
interest or Definitive Note will not be subject to the restrictions on transfer
enumerated in the Private Placement Legend printed on the Restricted Global
Notes or Restricted Definitive Notes and in the Indenture.
This certificate and the statements contained herein are made for your
benefit and the benefit of the Company.
--------------------------------------------------
[Insert Name of Transferor]
By:_______________________________________________
Name:
Title:
Dated:____________
B-3
<PAGE>
EXHIBIT B
ANNEX A TO CERTIFICATE OF TRANSFER
1. The Transferor owns and proposes to transfer the following:
[CHECK ONE OF (a) OR (b)]
(a) [ ] a beneficial interest in the:
(i) [ ] 144A Global Note (CUSIP ), or
---------
(ii) [ ] Regulation S Global Note (CUSIP ), or
--------
(iii) [ ] IAI Global Note (CUSIP ); or
---------
(b) [ ] a Restricted Definitive Note.
2. After the Transfer the Transferee will hold:
[CHECK ONE]
(a) [ ] a beneficial interest in the:
(i) [ ] 144A Global Note (CUSIP ), or
--------
(ii) [ ] Regulation S Global Note (CUSIP ), or
--------
(iii) [ ] IAI Global Note (CUSIP ); or
--------
(iv) [ ] Unrestricted Global Note (CUSIP ); or
--------
(b) [ ] a Restricted Definitive Note; or
(c) [ ] an Unrestricted Definitive Note,
in accordance with the terms of the Indenture.
B-4
<PAGE>
EXHIBIT C
FORM OF CERTIFICATE OF EXCHANGE
The IT Group, Inc.
2790 Mosside Boulevard
Monroeville, PA 15146
The Bank of New York
101 Barclay Street, Floor 21 West
New York, NY 10286
Attention: Corporate Trust Trustee Administration
Re: 11 1/4% Senior Subordinated Notes due 2009
------------------------------------------
(CUSIP ____________)
Reference is hereby made to the Indenture, dated as of April 9, 1999 (the
"Indenture"), among The IT Group, Inc., as issuer (the "Company"), the
Guarantors listed on the signature pages thereto and The Bank of New York, as
trustee. Capitalized terms used but not defined herein shall have the meanings
given to them in the Indenture.
__________________________, (the "Owner") owns and proposes to exchange the
Note[s] or interest in such Note[s] specified herein, in the principal amount of
$____________ in such Note[s] or interests (the "Exchange"). In connection with
the Exchange, the Owner hereby certifies that:
1. Exchange of Restricted Definitive Notes or Beneficial Interests in a
--------------------------------------------------------------------
Restricted Global Note for Unrestricted Definitive Notes or Beneficial Interests
- --------------------------------------------------------------------------------
in an Unrestricted Global Note
- ------------------------------
(a) [ ] Check if Exchange is from beneficial interest in a Restricted
Global Note to beneficial interest in an Unrestricted Global Note. In
connection with the Exchange of the Owner's beneficial interest in a Restricted
Global Note for a beneficial interest in an Unrestricted Global Note in an equal
principal amount, the Owner hereby certifies (i) the beneficial interest is
being acquired for the Owner's own account without transfer, (ii) such Exchange
has been effected in compliance with the transfer restrictions applicable to the
Global Notes and pursuant to and in accordance with the United States Securities
Act of 1933, as amended (the "Securities Act"), (iii) the restrictions on
transfer contained in the Indenture and the Private Placement Legend are not
required in order to maintain compliance with the Securities Act and (iv) the
beneficial interest in an Unrestricted Global Note is being acquired in
compliance with any applicable blue sky securities laws of any state of the
United States.
(b) [ ] Check if Exchange is from beneficial interest in a Restricted
Global Note to Unrestricted Definitive Note. In connection with the Exchange of
the Owner's beneficial interest in a Restricted Global Note for an Unrestricted
Definitive Note, the Owner hereby certifies (i) the Definitive Note is being
acquired for the Owner's own account without transfer, (ii) such Exchange has
been effected in compliance with the transfer restrictions applicable to the
Restricted Global Notes and pursuant to and in accordance with the Securities
Act, (iii) the restrictions on transfer contained in the Indenture and the
Private Placement Legend are not required in order to maintain compliance with
the Securities Act and (iv) the Definitive Note is being acquired in compliance
with any applicable blue sky securities laws of any state of the United States.
C-1
<PAGE>
EXHIBIT C
(c) [ ] Check if Exchange is from Restricted Definitive Note to
beneficial interest in an Unrestricted Global Note. In connection with the
Owner's Exchange of a Restricted Definitive Note for a beneficial interest in an
Unrestricted Global Note, the Owner hereby certifies (i) the beneficial interest
is being acquired for the Owner's own account without transfer, (ii) such
Exchange has been effected in compliance with the transfer restrictions
applicable to Restricted Definitive Notes and pursuant to and in accordance with
the Securities Act, (iii) the restrictions on transfer contained in the
Indenture and the Private Placement Legend are not required in order to maintain
compliance with the Securities Act and (iv) the beneficial interest is being
acquired in compliance with any applicable blue sky securities laws of any state
of the United States.
(d) [ ] Check if Exchange is from Restricted Definitive Note to
Unrestricted Definitive Note. In connection with the Owner's Exchange of a
Restricted Definitive Note for an Unrestricted Definitive Note, the Owner hereby
certifies (i) the Unrestricted Definitive Note is being acquired for the Owner's
own account without transfer, (ii) such Exchange has been effected in compliance
with the transfer restrictions applicable to Restricted Definitive Notes and
pursuant to and in accordance with the Securities Act, (iii) the restrictions on
transfer contained in the Indenture and the Private Placement Legend are not
required in order to maintain compliance with the Securities Act and (iv) the
Unrestricted Definitive Note is being acquired in compliance with any applicable
blue sky securities laws of any state of the United States.
2. Exchange of Restricted Definitive Notes or Beneficial Interests in
------------------------------------------------------------------
Restricted Global Notes for Restricted Definitive Notes or Beneficial Interests
- -------------------------------------------------------------------------------
in Restricted Global Notes
- --------------------------
(a) [ ] Check if Exchange is from beneficial interest in a Restricted
Global Note to Restricted Definitive Note. In connection with the Exchange of
the Owner's beneficial interest in a Restricted Global Note for a Restricted
Definitive Note with an equal principal amount, the Owner hereby certifies that
the Restricted Definitive Note is being acquired for the Owner's own account
without transfer. Upon consummation of the proposed Exchange in accordance with
the terms of the Indenture, the Restricted Definitive Note issued will continue
to be subject to the restrictions on transfer enumerated in the Private
Placement Legend printed on the Restricted Definitive Note and in the Indenture
and the Securities Act.
(b) [ ] Check if Exchange is from Restricted Definitive Note to
beneficial interest in a Restricted Global Note. In connection with the Exchange
of the Owner's Restricted Definitive Note for a beneficial interest in the
[CHECK ONE] [ ] 144A Global Note, [ ] Regulation S Global Note, [ ] IAI Global
Note with an equal principal amount, the Owner hereby certifies (i) the
beneficial interest is being acquired for the Owner's own account without
transfer and (ii) such Exchange has been effected in compliance with the
transfer restrictions applicable to the Restricted Global Notes and pursuant to
and in accordance with the Securities Act, and in compliance with any applicable
blue sky securities laws of any state of the United States. Upon consummation of
the proposed Exchange in accordance with the terms of the Indenture, the
beneficial interest issued will be subject to the restrictions on transfer
enumerated in the Private Placement Legend printed on the relevant Restricted
Global Note and in the Indenture and the Securities Act.
C-2
<PAGE>
EXHIBIT C
This certificate and the statements contained herein are made for your
benefit and the benefit of the Company.
_________________________________________________
[Insert Name of Transferor]
By:______________________________________________
Name:
Title:
Dated:___________
C-3
<PAGE>
EXHIBIT D
FORM OF CERTIFICATE FROM
ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR
The IT Group, Inc.
2790 Mosside Boulevard
Monroeville, PA 15146
The Bank of New York
101 Barclay Street, Floor 21 West
New York, NY 10286
Attention: Corporate Trust Trustee Administration
Re: 11 1/4% Senior Subordinated Notes due 2009
------------------------------------------
Reference is hereby made to the Indenture, dated as of April 9, 1999 (the
"Indenture"), among The IT Group, Inc., as issuer (the "Company"), the
Guarantors listed on the signature pages thereto and The Bank of New York, as
trustee. Capitalized terms used but not defined herein shall have the meanings
given to them in the Indenture.
In connection with our proposed purchase of $____________ aggregate
principal amount of:
(a) [ ] a beneficial interest in a Global Note, or
(b) [ ] a Definitive Note,
we confirm that:
1. We understand that any subsequent transfer of the Notes or any interest
therein is subject to certain restrictions and conditions set forth in the
Indenture and the undersigned agrees to be bound by, and not to resell, pledge
or otherwise transfer the Notes or any interest therein except in compliance
with, such restrictions and conditions and the United States Securities Act of
1933, as amended (the "Securities Act").
2. We understand that the offer and sale of the Notes have not been
registered under the Securities Act, and that the Notes and any interest therein
may not be offered or sold except as permitted in the following sentence. We
agree, on our own behalf and on behalf of any accounts for which we are acting
as hereinafter stated, that if we should sell the Notes or any interest therein,
we will do so only (A) to the Company or any subsidiary thereof, (B) in
accordance with Rule 144A under the Securities Act to a "qualified institutional
buyer" (as defined therein), (C) to an institutional "accredited investor" (as
defined below) that, prior to such transfer, furnishes (or has furnished on its
behalf by a U.S. broker-dealer) to you and to the Company a signed letter
substantially in the form of this letter and an Opinion of Counsel in form
reasonably acceptable to the Company to the effect that such transfer is in
compliance with the Securities Act, (D) outside the United States in accordance
with Rule 904 of Regulation S under the Securities Act, (E) pursuant to the
provisions of Rule 144(k) under the Securities Act or (F) pursuant to an
effective registration statement under the Securities Act, and we further agree
to provide to any person purchasing the Definitive Note or beneficial interest
in a Global Note from us in a transaction
D-1
<PAGE>
EXHIBIT D
meeting the requirements of clauses (A) through (E) of this paragraph a notice
advising such purchaser that resales thereof are restricted as stated herein.
3. We understand that, on any proposed resale of the Notes or beneficial
interest therein, we will be required to furnish to you and the Company such
certifications, legal opinions and other information as you and the Company may
reasonably require to confirm that the proposed sale complies with the foregoing
restrictions. We further understand that the Notes purchased by us will bear a
legend to the foregoing effect.
4. We are an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and have
such knowledge and experience in financial and business matters as to be capable
of evaluating the merits and risks of our investment in the Notes, and we and
any accounts for which we are acting are each able to bear the economic risk of
our or its investment.
5. We are acquiring the Notes or beneficial interest therein purchased by
us for our own account or for one or more accounts (each of which is an
institutional "accredited investor") as to each of which we exercise sole
investment discretion.
You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceedings or official inquiry with
respect to the matters covered hereby.
_________________________________________________
[Insert Name of Accredited Investor]
By:______________________________________________
Name:
Title:
Dated:_________________
D-2
<PAGE>
EXHIBIT E
FORM OF NOTATION OF SUBSIDIARY GUARANTEE
For value received, each Guarantor (which term includes any successor
Person under the Indenture) has, jointly and severally, unconditionally
guaranteed, to the extent set forth in the Indenture and subject to the
provisions in the Indenture dated as of April 9, 1999 (the "Indenture") among
The IT Group, Inc., the Guarantors listed on signature pages thereto and The
Bank of New York, as trustee (the "Trustee"), (a) the due and punctual payment
of the principal of, premium, if any, and interest on the Notes (as defined in
the Indenture), whether at maturity, by acceleration, redemption or otherwise,
the due and punctual payment of interest on overdue principal and premium, and,
to the extent permitted by law, interest, and the due and punctual performance
of all other obligations of the Company to the Holders or the Trustee all in
accordance with the terms of the Indenture and (b) in case of any extension of
time of payment or renewal of any Notes or any of such other obligations, that
the same will be promptly paid in full when due or performed in accordance with
the terms of the extension or renewal, whether at stated maturity, by
acceleration or otherwise. The obligations of the Guarantors to the Holders of
Notes and to the Trustee pursuant to the Subsidiary Guarantee and the Indenture
are expressly set forth in Article 11 of the Indenture and reference is hereby
made to the Indenture for the precise terms of the Subsidiary Guarantee. Each
Holder of a Note, by accepting the same, (a) agrees to and shall be bound by
such provisions, (b) authorizes and directs the Trustee, on behalf of such
Holder, to take such action as may be necessary or appropriate to effectuate the
subordination as provided in the Indenture and (c) appoints the Trustee
attorney-in-fact of such Holder for such purpose; provided, however, that the
Indebtedness evidenced by this Subsidiary Guarantee shall cease to be so
subordinated and subject in right of payment upon any defeasance of this Note in
accordance with the provisions of the Indenture.
[Name of Guarantor(s)]
By:_____________________________________
Name:
Title:
E-1
<PAGE>
EXHIBIT 5.1
[Letterhead of Gibson, Dunn & Crutcher LLP]
April 22, 1999
(213) 229-7000 C 42208-00112
The IT Group, Inc.
2790 Mosside Boulevard
Monroeville, Pennsylvania 15146-2792
Re: The IT Group, Inc. -- Registration Statement on Form S-4
Ladies and Gentlemen:
We have acted as counsel for The IT Group, Inc., a Delaware corporation (the
"Company"), in connection with the registration by the Company of up to
$225,000,000 aggregate principal amount of the Company's 11 1/4% Series B
Senior Subordinated Notes due 2009 (the "Notes") with the Securities and
Exchange Commission on a Registration Statement on Form S-4 (the "Registration
Statement") under the Securities Act of 1933, as amended. The Notes will be
offered in exchange for a like principal amount of the Company's 11 1/4% Series
A Senior Subordinated Notes due 2009 (the "Old Notes") pursuant to that certain
Registration Rights Agreement dated as of April 9, 1999, between the Company,
the subsidiary guarantors thereof (the "Subsidiary Guarantors"), Donaldson,
Lufkin & Jenrette Securities Corporation and Salomon Smith Barney (the
"Registration Rights Agreement"). The Registration Rights Agreement was
executed in connection with the private placement of the Old Notes.
We have also acted as counsel for the Subsidiary Guarantors in connection
with the registration of the subsidiary guarantees of the Notes by the
Subsidiary Guarantors under the Registration Statement (the "Subsidiary
Guarantees").
The Notes will be issued pursuant to that certain Indenture dated as of
April 9, 1999, between the Company, the Subsidiary Guarantors and The Bank of
New York, as Trustee (the "Indenture").
We are familiar with the actions taken and to be taken by the Company and
the Subsidiary Guarantors in connection with the offering of the Notes and the
issuance of the Subsidiary Guarantees. On the basis of such knowledge and such
investigation as we have deemed necessary, we are of the opinion that: (i) the
Notes have been duly authorized by the Company and, when issued in exchange for
the Old Notes pursuant to the terms of the exchange offer described in the
Registration Statement and the Indenture, will be validly issued and will
constitute legal and binding obligations of the Company; and (ii) the
Subsidiary Guarantees have been duly authorized by the Subsidiary Guarantors
and, when issued along with the Notes in accordance with the terms of the
Indenture, will be validly issued and will constitute the legal and binding
obligations of the Subsidiary Guarantors.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to this firm under the heading
"Legal Matters" contained in the prospectus that forms a part of the
Registration Statement.
Very truly yours,
/s/ Gibson, Dunn & Crutcher LLP
GIBSON, DUNN & CRUTCHER LLP
<PAGE>
EXHIBIT 10.17
EXECUTION COPY
THE IT GROUP, INC.
THE GUARANTORS NAMED HEREIN
$225,000,000
11 1/4 % Senior Subordinated Notes due 2009
Purchase Agreement
April 6, 1999
DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION
SALOMON SMITH BARNEY
<PAGE>
$225,000,000
Series A Senior Subordinated Notes due 2009
The IT Group, Inc.
PURCHASE AGREEMENT
April 6, 1999
Donaldson, Lufkin & Jenrette Securities Corporation
Salomon Smith Barney
c/o Donaldson, Lufkin & Jenrette
Securities Corporation
277 Park Avenue
New York, New York 10172
Ladies and Gentlemen:
The IT Group, Inc., a Delaware corporation (the "Company"), proposes
-------
to issue and sell to Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ")
---
and Salomon Smith Barney (each, an "Initial Purchaser" and collectively, the
-----------------
"Initial Purchasers") an aggregate of $225,000,000 in principal amount of its 11
- -------------------
1/4 % Series A Senior Subordinated Notes due 2009 (the "Series A Notes"),
--------------
subject to the terms and conditions set forth herein. The Series A Notes are to
be issued pursuant to the provisions of an indenture (the "Indenture"), to be
---------
dated as of the Closing Date (as defined below), among the Company, the
Guarantors (as defined below) and The Bank of New York, N.A., as trustee (the
"Trustee"). The Series A Notes and the Series B Notes (as defined below)
- --------
issuable in exchange therefor are collectively referred to herein as the
"Notes." The Notes will be guaranteed (the "Subsidiary Guarantees") by each of
----- ---------------------
the entities listed on Schedule A hereto (each, a "Guarantor" and collectively
---------
the "Guarantors"). Capitalized terms used but not defined herein shall have the
----------
meanings given to such terms in the Indenture.
Pursuant to the terms of an Asset Purchase Agreement, dated as of
March 8, 1999 (the "Asset Purchase Agreement"), by and between the Company and
------------------------
ICF Kaiser International, Inc., ("ICFK") the Company agreed to purchase
specified assets and assume specified liabilities (including all of the issued
and outstanding stock of certain subsidiaries of ICFK (the "EFM
---
Subsidiaries"))("EFM") of ICFK Environment and Facilities Management Group (the
- ------------ ---
"EFM Acquisition"). In addition, pursuant to the terms of a Share Purchase
---------------
Agreement, dated February 5, 1999 (the "Roche Purchase Agreement" and, together
------------------------
with the Asset Purchase Agreement, the "Acquisition Agreements"), by and between
----------------------
the Company and the parties listed therein, the Company agreed to purchase all
of the issued and outstanding capital stock of Roche Limited, Consulting Group
(the "Roche Acquisition" and, together with the EFM Acquisition, the
-----------------
"Acquisitions"). Following the Acquisitions and subject to certain conditions
- -------------
and other provisions contained in the Acquisition Agreements, Roche Limited,
Consulting Group ("Roche") and the EFM Subsidiaries will be wholly-owned
-----
subsidiaries of the Company.
1. Offering Memorandum. The Series A Notes will be offered and sold to
----------------------
the Initial Purchasers pursuant to one or more exemptions from the registration
requirements under the Securities Act of 1933, as amended (the "Act"). The
---
Company and the Guarantors (other than Roche and the EFM Subsidiaries) have
prepared a preliminary offering memorandum, dated March 19, 1999 (together with
any information incorporated by reference therein, collectively, the
"Preliminary
-----------
<PAGE>
Offering Memorandum") and a final offering memorandum, dated April 6, 1999
- -------------------
(together with any information incorporated by reference therein, collectively,
the "Offering Memorandum"), relating to the Series A Notes and the Subsidiary
-------------------
Guarantees.
Upon original issuance thereof, and until such time as the same is no
longer required pursuant to the Indenture, the Series A Notes (and all
securities issued in exchange therefor, in substitution thereof or upon
conversion thereof) shall bear the following legend:
"THIS NOTE HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF
1933, AS AMENDED (the "ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED, SOLD,
PLEDGED OR OTHERWISE TRANSFERRED WITHIN THE UNITED STATES OR TO, OR FOR THE
ACCOUNT OR BENEFIT OF, ANY U.S. PERSON, EXCEPT AS SET FORTH IN THE NEXT
SENTENCE. BY ITS ACQUISITION HEREOF OR OF A BENEFICIAL INTEREST HEREIN,
THE HOLDER:
(1) REPRESENTS THAT (i) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (as
defined in Rule 144A under the Act)(a "QIB"), (ii) IT HAS ACQUIRED THIS
NOTE IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE
ACT OR (iii) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (as defined in
Rule 501(A)(1), (2), (3) OR (7) of Regulation D under the Act (an "IAI"),
(2) AGREES THAT IT WILL NOT RESELL OR OTHERWISE TRANSFER THIS NOTE EXCEPT
(i) TO THE COMPANY OR ANY OF ITS SUBSIDIARIES, (ii) TO A PERSON WHOM THE
SELLER REASONABLY BELIEVES IS A QIB PURCHASING FOR ITS OWN ACCOUNT OR FOR
THE ACCOUNT OF A QIB IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE
144A, (iii) IN AN OFFSHORE TRANSACTION MEETING THE REQUIREMENTS OF RULE
903 OR 904 OF THE ACT, (iv) IN A TRANSACTION MEETING THE REQUIREMENTS OF
RULE 144 UNDER THE ACT, (v) TO AN IAI THAT, PRIOR TO SUCH TRANSFER,
FURNISHES THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS
AND AGREEMENTS RELATING TO THE TRANSFER OF THIS NOTE (the form of which
can be obtained from the Trustee) AND AN OPINION OF COUNSEL ACCEPTABLE
TO THE COMPANY THAT SUCH TRANSFER IS IN COMPLIANCE WITH THE ACT, (vi) IN
ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF
THE ACT (AND BASED UPON AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY)
OR (vii) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AND, IN EACH
CASE, IN ACCORDANCE WITH THE APPLICABLE SECURITIES LAWS OF ANY STATE OF
THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND
(3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS NOTE OR AN
INTEREST HEREIN IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF
THIS LEGEND.
AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION" AND "UNITED STATES" HAVE
THE MEANINGS GIVEN TO THEM BY RULE 902 OF REGULATION S UNDER THE ACT. THE
INDENTURE CONTAINS A PROVISION REQUIRING THE TRUSTEE TO REFUSE TO REGISTER
ANY TRANSFER OF THIS NOTE IN VIOLATION OF THE FOREGOING."
2. Agreements to Sell and Purchase. On the basis of the
----------------------------------
representations, warranties and covenants contained in this Agreement, and
subject to the terms and conditions contained
2
<PAGE>
herein, the Company agrees to issue and sell to the Initial Purchasers, and each
Initial Purchaser agrees, severally and not jointly, to purchase from the
Company, the principal amount of Series A Notes set forth opposite the name of
such Initial Purchaser on Schedule B hereto at a purchase price equal to 11 1/4
% of the principal amount thereto (the "Purchase Price").
--------------
3. Terms of Offering. The Initial Purchasers have advised the Company
-----------------
that the Initial Purchasers will make offers (the "Exempt Resales") of the
--------------
Series A Notes purchased hereunder on the terms set forth in the Offering
Memorandum, as amended or supplemented, solely to (i) persons whom the Initial
Purchasers reasonably believe to be "qualified institutional buyers" as defined
in Rule 144A under the Act ("QIBs") and (ii) persons permitted to purchase the
----
Series A Notes in offshore transactions in reliance upon Regulation S under the
Act (each, a "Regulation S Purchaser") (such persons specified in clauses (i)
----------------------
and (ii) being referred to herein as the "Eligible Purchasers"). The Initial
-------------------
Purchasers will offer the Series A Notes to Eligible Purchasers initially at a
price equal to 100.0% of the principal amount thereof. Such price may be
changed at any time without notice.
Holders (including subsequent transferees) of the Series A Notes will
have the registration rights set forth in the registration rights agreement (the
"Registration Rights Agreement"), to be dated the Closing Date, in substantially
-----------------------------
the form of Exhibit A hereto, for so long as such Series A Notes constitute
"Transfer Restricted Securities" (as defined in the Registration Rights
- -------------------------------
Agreement). Pursuant to the Registration Rights Agreement, the Company and the
Guarantors will agree to file with the Securities and Exchange Commission (the
"Commission") under the circumstances set forth therein, (i) a registration
- -----------
statement under the Act (the "Exchange Offer Registration Statement") relating
-------------------------------------
to the Company's Series B Senior Subordinated Notes due 2009 (the "Series B
--------
Notes"), to be offered in exchange for the Series A Notes (such offer to
- -----
exchange being referred to as the "Exchange Offer") and the Subsidiary
--------------
Guarantees thereof or (ii) a shelf registration statement pursuant to Rule 415
under the Act (the "Shelf Registration Statement" and, together with the
----------------------------
Exchange Offer Registration Statement, the "Registration Statements") relating
-----------------------
to the resale by certain holders of the Series A Notes and to use its best
efforts to cause such Registration Statements to be declared and remain
effective and usable for the periods specified in the Registration Rights
Agreement and to consummate the Exchange Offer. This Agreement, the Indenture,
the Notes, the Subsidiary Guarantees, the Registration Rights Agreement, the
Asset Purchase Agreement and the Roche Purchase Agreement are hereinafter
sometimes referred to collectively as the "Operative Documents."
-------------------
4. Delivery and Payment.
---------------------
(a) Delivery of, and payment of the Purchase Price for, the Series A
Notes shall be made at the offices of Gibson, Dunn & Crutcher LLP, 1050
Connecticut Avenue, N.W., Washington, D.C. 20036 or such other location as may
be mutually acceptable. Such delivery and payment shall be made at 9:00 a.m.
New York City time, on April 9, 1999 or at such other time on the same date or
such other date as shall be agreed upon by the Initial Purchasers and the
Company in writing. The time and date of such delivery and the payment for the
Series A Notes are herein called the "Closing Date."
------------
(b) One or more of the Series A Notes in definitive global form,
registered in the name of Cede & Co., as nominee of the Depository Trust Company
("DTC"), having an aggregate principal amount corresponding to the aggregate
---
principal amount of the Series A Notes (collectively, the "Global Note"), shall
-----------
be delivered by the Company to the Initial Purchasers (or as the Initial
Purchasers direct) in each case with any transfer taxes thereon duly paid by the
Company against payment by the Initial Purchasers of the Purchase Price thereof
by wire transfer in same day funds to the order of the
3
<PAGE>
Company. The Global Note shall be made available to the Initial Purchasers for
inspection not later than 9:30 a.m., New York City time, on the business day
immediately preceding the Closing Date.
5. Agreements of the Company and the Guarantors. As of the date
-----------------------------------------------
hereof, each of the Company and the Guarantors (other than the EFM Subsidiaries)
and, as of the consummation of the EFM Acquisition, each of the EFM
Subsidiaries, hereby agrees with the Initial Purchasers as follows:
(a) To advise the Initial Purchasers promptly and, if requested by the
Initial Purchasers, confirm such advice in writing, (i) to the extent the
Company is aware, of the issuance by any state securities commission of any stop
order suspending the qualification or exemption from qualification of any Series
A Notes for offering or sale in any jurisdiction designated by the Initial
Purchasers pursuant to Section 5(e) hereof, or the initiation of any proceeding
by any state securities commission or any other federal or state regulatory
authority for such purpose and (ii) of the happening of any event during the
period referred to in Section 5(c) below that makes any statement of a material
fact made in the Preliminary Offering Memorandum or the Offering Memorandum
untrue or that requires any additions to or changes in the Preliminary Offering
Memorandum or the Offering Memorandum in order to make the statements therein
not misleading. The Company and the Guarantors shall use all commercially
reasonable efforts to prevent the issuance of any stop order or order suspending
the qualification or exemption of any Series A Notes under any state securities
or Blue Sky laws and, if at any time any state securities commission or other
federal or state regulatory authority shall issue an order suspending the
qualification or exemption of any Series A Notes under any state securities or
Blue Sky laws, the Company and the Guarantors shall use all commercially
reasonable efforts to obtain the withdrawal or lifting of such order at the
earliest possible time.
(b) To furnish the Initial Purchasers and those persons identified by
the Initial Purchasers to the Company as many copies of the Preliminary Offering
Memorandum and the Offering Memorandum, and any amendments or supplements
thereto, as the Initial Purchasers may reasonably request for the time period
specified in Section 5(c). Subject to the Initial Purchasers' compliance with
their respective representations and warranties and agreements set forth in
Section 7 hereof, the Company consents to the use of the Preliminary Offering
Memorandum and the Offering Memorandum, and any amendments and supplements
thereto required pursuant hereto, by the Initial Purchasers in connection with
Exempt Resales.
(c) During such period as in the opinion of counsel for the Initial
Purchasers an Offering Memorandum is required by law to be delivered in
connection with Exempt Resales by the Initial Purchasers and in connection with
market-making activities of the Initial Purchasers for so long as any Series A
Notes are outstanding, (i) not to make any amendment or supplement to the
Offering Memorandum of which the Initial Purchasers shall not previously have
been advised or to which the Initial Purchasers shall reasonably object after
being so advised and (ii) to prepare promptly upon the Initial Purchasers'
reasonable request, any amendment or supplement to the Offering Memorandum which
may be necessary or advisable in connection with such Exempt Resales or such
market-making activities.
(d) If, during the period referred to in Section 5(c) above, any event
shall occur or condition shall exist as a result of which, in the opinion of
counsel to the Initial Purchasers, it becomes necessary to amend or supplement
the Offering Memorandum in order to make the statements therein, in the light of
the circumstances when such Offering Memorandum is delivered to an Eligible
Purchaser, not misleading, or if, in the opinion of counsel to the Initial
Purchasers, it is necessary to amend or supplement the Offering Memorandum to
comply with any applicable law, and to prepare an appropriate amendment or
supplement to such Offering Memorandum so that the statements therein, as so
amended or supplemented, will not, in the light of the circumstances when it is
so delivered, be
4
<PAGE>
misleading, or so that such Offering Memorandum will comply with applicable law,
and to furnish to the Initial Purchasers and such other persons as the Initial
Purchasers may designate such number of copies thereof as the Initial Purchasers
may reasonably request.
(e) Prior to the sale of all Series A Notes pursuant to Exempt Resales
as contemplated hereby, to cooperate with the Initial Purchasers and counsel to
the Initial Purchasers in connection with the registration or qualification of
the Series A Notes for offer and sale to the Initial Purchasers and pursuant to
Exempt Resales under the securities or Blue Sky laws of such jurisdictions as
the Initial Purchasers may request and to continue such registration or
qualification in effect so long as required for Exempt Resales and to file such
consents to service of process or other documents as may be necessary in order
to effect such registration or qualification; provided, however, that neither
the Company nor any Guarantor shall be required in connection therewith to
qualify as a foreign corporation in any jurisdiction in which it is not now so
qualified or to take any action that would subject it to general consent to
service of process or taxation other than as to matters and transactions
directly relating to the Preliminary Offering Memorandum, the Offering
Memorandum or Exempt Resales, in any jurisdiction in which it is not now so
subject.
(f) For five years from the date hereof, to furnish to the Initial
Purchasers as soon as available copies of all reports or other communications
furnished by the Company or any of the Guarantors to its security holders or
furnished to or filed with the Commission or any national securities exchange on
which any class of securities of the Company or any of the Guarantors is listed
and such other publicly available information concerning the Company and/or its
subsidiaries, including without limitation, press releases, as the Initial
Purchasers may reasonably request.
(g) So long as any of the Series A Notes remain outstanding and during
any period in which the Company and the Guarantors are not subject to Section 13
or 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange
--------
Act"), to make available to any holder of Series A Notes in connection with any
- ---
sale thereof and any prospective purchaser of such Series A Notes from such
holder, the information ("Rule 144A Information") required by Rule 144A(d)(4)
---------------------
under the Act.
(h) Whether or not the transactions contemplated in this Agreement are
consummated or this Agreement is terminated, to pay or cause to be paid all
expenses incident to the performance of the obligations of the Company and the
Guarantors under this Agreement, including: (i) the fees, disbursements and
expenses of counsel to the Company and the Guarantors and accountants of the
Company and the Guarantors in connection with the sale and delivery of the
Series A Notes to the Initial Purchasers and pursuant to Exempt Resales, and all
other fees and expenses in connection with the preparation, printing, filing and
distribution of the Preliminary Offering Memorandum, the Offering Memorandum and
all amendments and supplements to any of the foregoing (including financial
statements), including the mailing and delivering of copies thereof to the
Initial Purchasers and persons designated by them in the quantities specified
herein, (ii) all costs and expenses related to the transfer and delivery of the
Series A Notes to the Initial Purchasers and pursuant to Exempt Resales,
including any transfer or other taxes payable thereon, (iii) all costs of
printing or producing this Agreement, the other Operative Documents and any
other agreements or documents in connection with the offering, purchase, sale or
delivery of the Series A Notes, (iv) all expenses in connection with the
registration or qualification of the Series A Notes and the Subsidiary
Guarantees for offer and sale under the securities or Blue Sky laws of the
several states and all costs of printing or producing any preliminary and
supplemental Blue Sky memoranda in connection therewith (including the filing
fees and reasonable fees and disbursements of counsel for the Initial Purchasers
in connection with such registration or qualification and memoranda relating
thereto), (v) the cost of printing certificates representing the Series A Notes
and the Subsidiary Guarantees, (vi) all expenses and listing fees in connection
with the application for quotation of the Series A Notes in the National
Association of Securities Dealers, Inc.
5
<PAGE>
("NASD") Automated Quotation System -PORTAL ("PORTAL"), (vii) the fees and
---- ------
expenses of the Trustee and the Trustee's counsel in connection with the
Indenture, the Notes and the Subsidiary Guarantees, (viii) the costs and charges
of any transfer agent, registrar and/or depositary (including DTC), (ix) any
fees charged by rating agencies for the rating of the Notes, (x) all costs and
expenses of the Exchange Offer and any Registration Statement, as set forth in
the Registration Rights Agreement, and (xi) and all other costs and expenses
incident to the performance of the obligations of the Company and the Guarantors
hereunder for which provision is not otherwise made in this Section.
(i) To use all commercially reasonable efforts to effect the inclusion
of the Series A Notes in PORTAL and to maintain the listing of the Series A
Notes on PORTAL for so long as the Series A Notes are outstanding.
(j) To use all commercially reasonable efforts to obtain the approval
of DTC for "book-entry" transfer of the Notes, and to comply with all of its
agreements set forth in the representation letters of the Company and the
Guarantors to DTC relating to the approval of the Notes by DTC for "book-entry"
transfer.
(k) During the period beginning on the date hereof and continuing to
and including the Closing Date, not to offer, sell, contract to sell or
otherwise transfer or dispose of any debt securities of the Company or any
Guarantor or any warrants, rights or options to purchase or otherwise acquire
debt securities of the Company or any Guarantor substantially similar to the
Notes and the Subsidiary Guarantees (other than (i) the Notes and the Subsidiary
Guarantees and (ii) commercial paper issued in the ordinary course of business),
without the prior written consent of the Initial Purchasers.
(l) Not to sell, offer for sale or solicit offers to buy or otherwise
negotiate in respect of any security (as defined in the Act) that would be
integrated with the sale of the Series A Notes to the Initial Purchasers or
pursuant to Exempt Resales in a manner that would require the registration of
any such sale of the Series A Notes under the Act.
(m) Not to voluntarily claim, and to actively resist any attempts to
claim, the benefit of any usury laws against the holders of any Notes and the
related Subsidiary Guarantees.
(n) To cause the Exchange Offer to be made in the appropriate form to
permit Series B Notes and guarantees thereof by the Guarantors registered
pursuant to the Act to be offered in exchange for the Series A Notes and the
Subsidiary Guarantees and to comply with all applicable federal and state
securities laws in connection with the Exchange Offer.
(o) To comply with all of its agreements set forth in the
Registration Rights Agreement.
(p) To use all commercially reasonable efforts to do and perform all
things required or necessary to be done and performed under this Agreement by it
prior to the Closing Date and to satisfy all conditions precedent to the
delivery of the Series A Notes and the Subsidiary Guarantees.
6. Representations, Warranties and Agreements of the Company and the
-----------------------------------------------------------------
Guarantors. As of the date hereof, each of the Company and the Guarantors (other
- ----------
than the EFM Subsidiaries) and, upon consummation of the EFM Acquisition, each
of the EFM Subsidiaries, represents and warrants to, and agrees with, the
Initial Purchasers that:
(a) The Preliminary Offering Memorandum and the Offering Memorandum do
not, and any supplement or amendment to them will not, contain any untrue
statement of a material
6
<PAGE>
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, except that the representations and
warranties contained in this paragraph (a) shall not apply to statements in or
omissions from the Preliminary Offering Memorandum or the Offering Memorandum
(or any supplement or amendment thereto) based upon information relating to the
Initial Purchasers furnished to the Company in writing by the Initial Purchasers
expressly for use therein. No stop order preventing the use of the Preliminary
Offering Memorandum or the Offering Memorandum, or any amendment or supplement
thereto, or any order asserting that any of the transactions contemplated by
this Agreement are subject to the registration requirements of the Act, has been
issued.
(b) Except as would not have a Material Adverse Effect (as defined
below), each of the Company and its subsidiaries has been, and immediately after
consummation of the Acquisitions will have been, duly incorporated, is, and
immediately after consummation of the Acquisitions will be, validly existing as
a corporation in good standing under the laws of its jurisdiction of
incorporation and has, and immediately after consummation of the Acquisitions
will have, the corporate power and authority to carry on its business as
described in the Preliminary Offering Memorandum and the Offering Memorandum and
to own, lease and operate its properties, and each is, and immediately after
consummation of the Acquisitions will be, duly qualified and in good standing as
a foreign corporation authorized to do business in each jurisdiction in which
the nature of its business or its ownership or leasing of property requires such
qualification, except where the failure to be so qualified would not have a
material adverse effect on the business, financial condition or results of
operations of the Company and its subsidiaries, taken as a whole, or draw into
question the validity of this Agreement or the other Operative Documents (a
"Material Adverse Effect").
- ------------------------
(c) All outstanding shares of capital stock of the Company have been
duly authorized and validly issued and are fully paid, non-assessable and not
subject to any preemptive or similar rights.
(d) Immediately following the consummation of the Acquisitions, the
entities listed on Schedule B hereto will be the only subsidiaries, direct or
indirect, of the Company. All of the outstanding shares of capital stock of
each of the Company's subsidiaries have been duly authorized and validly issued
and are fully paid and non-assessable, and, except as set forth in the Offering
Memorandum, are owned by the Company, directly or indirectly through one or more
subsidiaries, free and clear of any security interest, claim, lien, encumbrance
or adverse interest of any nature (each, a "Lien").
----
(e) This Agreement has been duly authorized, executed and delivered by
the Company and each of the Guarantors.
(f) The Indenture has been duly authorized by the Company and each of
the Guarantors and, on the Closing Date, will have been validly executed and
delivered by the Company and each of the Guarantors. When the Indenture has
been duly executed and delivered by the Company and each of the Guarantors, the
Indenture will be a valid and binding agreement of the Company and each
Guarantor, enforceable against the Company and each Guarantor in accordance with
its terms except as the enforceability thereof may be limited by (i) bankruptcy,
insolvency or similar laws affecting creditors' rights generally (including,
without limitation, the effects of bankruptcy or other laws regarding fraudulent
transfers or preferential transfers) and (ii) equitable principles of general
applicability. On the Closing Date, the Indenture will conform in all material
respects to the requirements of the Trust Indenture Act of 1939, as amended (the
"TIA" or "Trust Indenture Act"), and the rules and regulations of the Commission
--- --------------------
applicable to an indenture which is qualified thereunder.
7
<PAGE>
(g) The Series A Notes have been duly authorized and, on the Closing
Date, will have been validly executed and delivered by the Company. When the
Series A Notes have been issued, executed and authenticated in accordance with
the provisions of the Indenture and delivered to and paid for by the Initial
Purchasers in accordance with the terms of this Agreement, the Series A Notes
will be entitled to the benefits of the Indenture and will be valid and binding
obligations of the Company, enforceable in accordance with their terms except as
the enforceability thereof may be limited by (i) bankruptcy, insolvency or
similar laws affecting creditors' rights generally (including, without
limitation, the effects of bankruptcy or other laws regarding fraudulent
transfers or preferential transfers) and (ii) equity principles of general
applicability. On the Closing Date, the Series A Notes will conform as to legal
matters to the description thereof contained in the Offering Memorandum.
(h) On the Closing Date, the Series B Notes will have been duly
authorized by the Company. When the Series B Notes are issued, executed and
authenticated in accordance with the terms of the Exchange Offer and the
Indenture, the Series B Notes will be entitled to the benefits of the Indenture
and will be the valid and binding obligations of the Company, enforceable
against the Company in accordance with their terms, except as the enforceability
thereof may be limited by (i) bankruptcy, insolvency or similar laws affecting
creditors' rights generally and (ii) (including, without limitation, the effects
of bankruptcy or other laws regarding fraudulent transfers or preferential
transfers) equity principles of general applicability.
(i) The Subsidiary Guarantee to be endorsed on the Series A Notes by
each Guarantor has been duly authorized by such Guarantor and, on the Closing
Date, will have been duly executed and delivered by each such Guarantor. When
the Series A Notes have been issued, executed and authenticated in accordance
with the Indenture and delivered to and paid for by the Initial Purchasers in
accordance with the terms of this Agreement, the Subsidiary Guarantee of each
Guarantor endorsed thereon will be entitled to the benefits of the Indenture and
will be the valid and binding obligation of each such Guarantor, enforceable
against such Guarantor in accordance with its terms, except as the
enforceability thereof may be limited by (i) bankruptcy, insolvency or similar
laws affecting creditors' rights generally and (ii) (including, without
limitation, the effects of bankruptcy or other laws regarding fraudulent
transfers or preferential transfers) equitable principles of general
applicability. On the Closing Date, the Subsidiary Guarantees to be endorsed on
the Series A Notes will conform as to legal matters to the description thereof
contained in the Offering Memorandum.
(j) The Subsidiary Guarantee to be endorsed on the Series B Notes by
each Guarantor has been duly authorized by each such Guarantor and, when issued,
will have been duly executed and delivered by each such Guarantor. When the
Series B Notes have been issued, executed and authenticated in accordance with
the terms of the Exchange Offer and the Indenture, the Subsidiary Guarantee of
each Guarantor endorsed thereon will be entitled to the benefits of the
Indenture and will be the valid and binding obligation of such Guarantor,
enforceable against such Guarantor in accordance with its terms, except as the
enforceability thereof may be limited by (i) bankruptcy, insolvency or similar
laws affecting creditors' rights generally and (ii) (including, without
limitation, the effects of bankruptcy or other laws regarding fraudulent
transfers or preferential transfers) equitable principles of general
applicability. When the Series B Notes are issued, authenticated and delivered,
the Subsidiary Guarantees to be endorsed on the Series B Notes will conform as
to legal matters to the description thereof in the Offering Memorandum.
(k) The Registration Rights Agreement has been duly authorized by the
Company and each of the Guarantors and, on the Closing Date, will have been duly
executed and delivered by the Company and each of the Guarantors. When the
Registration Rights Agreement has been duly executed and delivered, the
Registration Rights Agreement will be a valid and binding agreement of the
Company and each of the Guarantors, enforceable against the Company and each
8
<PAGE>
Guarantor in accordance with its terms except as the enforceability thereof may
be limited by (i) bankruptcy, insolvency or similar laws affecting creditors'
rights generally (including, without limitation, the effects of bankruptcy or
other laws regarding fraudulent transfers or preferential transfers) and (ii)
equitable principles of general applicability. On the Closing Date, the
Registration Rights Agreement will conform as to legal matters to the
description thereof in the Offering Memorandum.
(l) The Acquisition Agreements have been duly authorized, executed and
delivered by the Company and are valid and binding agreements of the Company
enforceable against the Company in accordance with their terms except as the
enforceability thereof may be limited by (i) bankruptcy, insolvency or similar
laws affecting creditors' rights generally (including, without limitation, the
effects of bankruptcy or other laws regarding fraudulent transfers or
preferential transfers) and (ii) equitable principles of general applicability.
(m) Neither the Company nor any of its subsidiaries is, or after
consummation of the Acquisitions will be, in violation of its respective charter
or by-laws or, to the Company's knowledge, in default in the performance of any
obligation, agreement, covenant or condition contained in any indenture, loan
agreement, mortgage, lease or other agreement or instrument that in each case is
reasonably likely to be material to the Company and its subsidiaries, taken as a
whole, to which the Company or any of its subsidiaries is a party or by which
the Company or any of its subsidiaries or their respective property is bound.
(n) The execution, delivery and performance of this Agreement and the
other Operative Documents by the Company and each of the Guarantors, compliance
by the Company and each of the Guarantors with all provisions hereof and thereof
and the consummation of the transactions contemplated hereby and thereby will
not (i) require any consent, approval, authorization or other order of, or
qualification with, any court or governmental body or agency (except such as may
be required under the securities or Blue Sky laws of the various states or as
have otherwise been obtained), (ii) conflict with or constitute a breach of any
of the terms or provisions of, or a default under, the charter or by-laws of the
Company or any of its subsidiaries or any indenture, loan agreement, mortgage,
lease or other agreement or instrument that in each case is reasonably likely to
be material to the Company and its subsidiaries, taken as a whole, to which the
Company or any of its subsidiaries is a party or by which the Company or any of
its subsidiaries or their respective property is bound, (iii) violate or
conflict in any material respect with any applicable law or any rule,
regulation, judgment, order or decree of any court or any governmental body or
agency having jurisdiction over the Company, any of its subsidiaries or their
respective property, (iv) result in the imposition or creation of (or the
obligation to create or impose) a Lien under, any agreement or instrument to
which the Company or any of its subsidiaries is a party or by which the Company
or any of its subsidiaries or their respective property is bound, or (v) result
in the termination, suspension or revocation of any Authorization (as defined
below) of the Company or any of its subsidiaries or result in any other
impairment of the rights of the holder of any such Authorization that in each
case is reasonably likely to be material to the Company and its subsidiaries,
taken as a whole.
(o) Except as set forth in the Offering Memorandum, there are, and
immediately after consummation of the Acquisitions there will be, no legal or
governmental proceedings pending or, to the Company's knowledge, threatened to
which the Company or any of its subsidiaries is or could be a party or to which
any of their respective property is or could be subject, which might result,
singly or in the aggregate, in a Material Adverse Effect.
(p) Neither the Company nor any of its subsidiaries has, and, to the
Company's knowledge, immediately after consummation of the Acquisitions will
have, violated any foreign, federal, state or local law or regulation relating
to the protection of human health and safety, the environment or hazardous or
toxic substances or wastes, pollutants or contaminants ("Environmental
-------------
9
<PAGE>
Laws"), any provisions of the Employee Retirement Income Security Act of 1974,
- ----
as amended ("ERISA"), or any provisions of the Foreign Corrupt Practices Act or
-----
the rules and regulations promulgated thereunder, except for such violations
which, singly or in the aggregate, would not have a Material Adverse Effect.
(q) Except as set forth in the Offering Memorandum or as not
reasonably likely to have a Material Adverse Effect, in connection with the
Company's and its subsidiaries' contracts (including those contracts to be
assumed in connection with the Acquisitions) with the United States, any agency,
department or body thereof, or any state or local governmental entity (the
"Government"), or with any prime contractor or any upper-tier subcontractor
- -----------
relating to a program in which the Government is a party, there are (i) no
default notices, cure notices, notices of noncompliance, or known instances of
noncompliance, (ii) no subpoenas or Governmental investigations, (iii) no
internal investigations or voluntary disclosures by the Company or any of its
subsidiaries, (iv) no notices or indications of any pending or proposed
suspension or debarment and (v) no "whistleblower lawsuits."
(r) Except as set forth in the Offering Memorandum, there are no costs
or existing liabilities associated with Environmental Laws (including, without
limitation, any capital or operating expenditures required for clean-up, closure
of properties or compliance with Environmental Laws or any Authorization, any
related constraints on operating activities and any potential liabilities to
third parties) which are reasonably likely to have, singly or in the aggregate,
a Material Adverse Effect.
(s) Except for those contracts acquired in the EFM Acquisition and
listed on a schedule to the Asset Purchase Agreement, each of the Company and
its subsidiaries has, and immediately after consummation of the Acquisitions
will have, such permits, licenses, consents, exemptions, franchises,
authorizations and other approvals (each, an "Authorization") of, and has made
-------------
all filings with and notices to, all governmental or regulatory authorities and
self-regulatory organizations and all courts and other tribunals, including
without limitation, under any applicable Environmental Laws, as are necessary to
own, lease, license and operate its respective properties and to conduct its
business, except where the failure to have any such Authorization or to make any
such filing or notice would not, singly or in the aggregate, have a Material
Adverse Effect. Each such Authorization is, and, to the Company's knowledge,
after consummation of the Acquisitions will be, valid and in full force and
effect and each of the Company and its subsidiaries is, and after consummation
of the Acquisitions will be, in compliance with all the terms and conditions
thereof and with the rules and regulations of the authorities and governing
bodies having jurisdiction with respect thereto; and no event has occurred
(including, without limitation, the receipt of any notice from any authority or
governing body) which allows or, after notice or lapse of time or both, would
allow, revocation, suspension or termination of any such Authorization or
results or, after notice or lapse of time or both, would result in any other
impairment of the rights of the holder of any such Authorization; and such
Authorizations contain no restrictions that are burdensome to the Company or any
of its subsidiaries; except where such failure to be valid and in full force and
effect or to be in compliance, the occurrence of any such event or the presence
of any such restriction is not reasonably likely to have, singly or in the
aggregate, have a Material Adverse Effect.
(t) The accountants, Ernst & Young LLP, PricewaterhouseCoopers LLP and
Mallette Maheu General Partnership Chartered Accountants, that have certified
the financial statements and supporting schedules included in the Preliminary
Offering Memorandum and the Offering Memorandum, are independent public
accountants with respect to the Company and its subsidiaries (including EFM and
Roche), as required by the Act and the Exchange Act. The historical financial
statements, together with related schedules and notes, set forth in the
Preliminary Offering Memorandum and the Offering Memorandum comply as to form in
all material respects with the requirements applicable to registration
statements under the Act.
10
<PAGE>
(u) The historical financial statements, together with related
schedules and notes forming part of the Offering Memorandum (and any amendment
or supplement thereto), present fairly the consolidated financial position,
results of operations and changes in financial position of the Company and its
subsidiaries on the basis stated in the Offering Memorandum at the respective
dates or for the respective periods to which they apply; such statements and
related schedules and notes have been prepared in accordance with generally
accepted accounting principles consistently applied throughout the periods
involved, except as disclosed therein; and the other financial and statistical
information and data set forth in the Offering Memorandum (and any amendment or
supplement thereto) are, in all material respects, accurately presented and
prepared on a basis consistent with such financial statements and the books and
records of the Company.
(v) The pro forma financial statements included in the Preliminary
Offering Memorandum and the Offering Memorandum have been prepared on a basis
consistent with the historical financial statements of the Company and its
subsidiaries and give effect to assumptions used in the preparation thereof on a
reasonable basis and in good faith and present fairly the historical and
proposed transactions contemplated by the Preliminary Offering Memorandum and
the Offering Memorandum; and such pro forma financial statements comply as to
form in all material respects with the requirements applicable to pro forma
financial statements included in registration statements on Form S-1 under the
Act. The other pro forma financial and statistical information and data included
in the Offering Memorandum are, in all material respects, accurately presented
and prepared on a basis consistent with the pro forma financial statements.
(w) The Company is not and, after giving effect to the offering and
sale of the Series A Notes and the application of the net proceeds thereof as
described in the Offering Memorandum, will not be, an "investment company," as
such term is defined in the Investment Company Act of 1940, as amended.
(x) Except as disclosed in the Offering Memorandum or Schedule G,
there are no contracts, agreements or understandings between the Company or any
Guarantor and any person granting such person the right to require the Company
or such Guarantor to file a registration statement under the Act with respect to
any securities of the Company or such Guarantor or to require the Company or
such Guarantor to include such securities with the Notes and Subsidiary
Guarantees registered pursuant to any Registration Statement.
(y) Neither the Company nor any of its subsidiaries nor any agent
thereof acting on the behalf of them has taken, and none of them will take, any
action that might cause this Agreement or the issuance or sale of the Series A
Notes to violate Regulation T (12 C.F.R. Part 220), Regulation U (12 C.F.R. Part
221) or Regulation X (12 C.F.R. Part 224) of the Board of Governors of the
Federal Reserve System.
(z) No "nationally recognized statistical rating organization" as such
term is defined for purposes of Rule 436(g)(2) under the Act (i) has imposed (or
has informed the Company or any Guarantor that it is considering imposing) any
condition (financial or otherwise) on the Company's or any Guarantor's retaining
any rating assigned to the Company or any Guarantor, any securities of the
Company or any Guarantor or (ii) has indicated to the Company or any Guarantor
that it is considering (a) the downgrading, suspension, or withdrawal of, or any
review for a possible change that does not indicate the direction of the
possible change in, any rating so assigned or (b) any change in the outlook for
any rating of the Company, any Guarantor or any securities of the Company or any
Guarantor.
(aa) Since the respective dates as of which information is given in
the Offering Memorandum other than as set forth in the Offering Memorandum
(exclusive of any
11
<PAGE>
amendments or supplements thereto subsequent to the date of this Agreement), (i)
there has not occurred any material adverse change or any development that,
singly or in the aggregate, is reasonably likely to have a material adverse
effect on the condition, financial or otherwise, or the earnings, business,
management or operations of the Company and its subsidiaries, taken as a whole,
(ii) there has not been any material adverse change or any development that,
singly or in the aggregate, is reasonably likely to have a material adverse
effect on the capital stock or in the long term debt of the Company or any of
its subsidiaries and (iii) neither the Company nor any of its subsidiaries has
incurred any material liability or obligation, direct or contingent.
(bb) Each of the Preliminary Offering Memorandum and the Offering
Memorandum, as of its date, contains all the information specified in, and
meeting the requirements of, Rule 144A(d)(4) under the Act.
(cc) When the Series A Notes and the Subsidiary Guarantees are issued
and delivered pursuant to this Agreement, neither the Series A Notes nor the
Subsidiary Guarantees will be of the same class (within the meaning of Rule 144A
under the Act) as any security of the Company or the Guarantors that is listed
on a national securities exchange registered under Section 6 of the Exchange Act
or that is quoted in a United States automated inter-dealer quotation system.
(dd) No form of general solicitation or general advertising (as
defined in Regulation D under the Act) was used by the Company, the Guarantors
or any of their respective representatives (other than the Initial Purchasers,
as to whom the Company and the Guarantors make no representation) in connection
with the offer and sale of the Series A Notes contemplated hereby, including,
but not limited to, articles, notices or other communications published in any
newspaper, magazine, or similar medium or broadcast over television or radio, or
any seminar or meeting whose attendees have been invited by any general
solicitation or general advertising. No securities of the same class as the
Series A Notes have been issued and sold by the Company within the six-month
period immediately prior to the date hereof.
(ee) None of the Company, the Guarantors nor any of their respective
affiliates or any person acting on its or their behalf (other than the Initial
Purchasers, as to whom the Company and the Guarantors make no representation)
has engaged or will engage in any directed selling efforts within the meaning of
Regulation S under the Act ("Regulation S") with respect to the Series A Notes
------------
or the Subsidiary Guarantees.
(ff) The sale of the Series A Notes pursuant to Regulation S is not
part of a plan or scheme to evade the registration provisions of the Act.
(gg) The Company, the Guarantors and their respective affiliates and
all persons acting on their behalf (other than the Initial Purchaser, as to whom
the Company and the Guarantors make no representation) have complied with and
will comply with the offering restrictions requirements of Regulation S in
connection with the offering of the Series A Notes outside the United States
and, in connection therewith, the Offering Memorandum will contain the
disclosure required by Rule 902(g)(2).
(hh) Each of the Company and the Guarantors is a "reporting
issuer", as defined in Rule 902 under the Act.
(ii) No registration under the Act of the Series A Notes or the
Subsidiary Guarantees is required for the sale of the Series A Notes and the
Subsidiary Guarantees to the Initial
12
<PAGE>
Purchasers as contemplated hereby or for the Exempt Resales assuming the
accuracy of the Initial Purchasers' representations and warranties and
agreements set forth in Section 7 hereof.
(jj) Each certificate signed by any officer of the Company or any
Guarantor and delivered to the Initial Purchasers or counsel for the Initial
Purchasers shall be deemed to be a representation and warranty by the Company or
such Guarantor to the Initial Purchasers as to the matters covered thereby.
(kk) There is, and, to the Company's knowledge, immediately after
consummation of the Acquisitions will be, no (i) significant unfair labor
practice complaint, grievance or arbitration proceeding pending or threatened
against the Company or any of its subsidiaries before the National Labor
Relations Board or any state or local labor relations board, (ii) strike, labor
dispute, slowdown or stoppage pending or threatened against the Company or any
of its subsidiaries or (iii) union representation question existing with respect
to the employees of the Company or any of its subsidiaries, except in the case
of clauses (i), (ii) and (iii) for such actions which, singly or in the
aggregate, is not reasonably likely to have a Material Adverse Effect. To the
Company's knowledge, no collective bargaining organizing activities are taking
place with respect to the Company or any of its subsidiaries.
(ll) The Company and each of its subsidiaries maintains, and
immediately after consummation of the Acquisitions will maintain, a system of
internal accounting controls sufficient to provide reasonable assurance that (i)
transactions are executed in accordance with management's general or specific
authorizations; (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain asset accountability; (iii) access to
assets is permitted only in accordance with management's general or specific
authorization; and (iv) the recorded accountability for assets is compared with
the existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
(mm) All material tax returns required to be filed by the Company and
each of its subsidiaries in any jurisdiction have been, and immediately after
consummation of the Acquisitions will have been, filed, other than those filings
being contested in good faith, and all material taxes, including withholding
taxes, penalties and interest, assessments, fees and other charges due pursuant
to such returns or pursuant to any assessment received by the Company or any of
its subsidiaries have been paid, other than those being contested in good faith
and for which adequate reserves have been provided.
(nn) All indebtedness of the Company and the Guarantors that will be
repaid with the proceeds of the issuance and sale of the Series A Notes was
incurred, and the indebtedness represented by the Series A Notes is being
incurred, for proper purposes and in good faith and each of the Company and the
Guarantors was, at the time of the incurrence of such indebtedness that will be
repaid with the proceeds of the issuance and sale of the Series A Notes, and
will be on the Closing Date (after giving effect to the application of the
proceeds from the issuance of the Series A Notes) solvent, and had at the time
of the incurrence of such indebtedness that will be repaid with the proceeds of
the issuance and sale of the Series A Notes and will have on the Closing Date
(after giving effect to the application of the proceeds from the issuance of the
Series A Notes) sufficient capital for carrying on their respective business and
were, at the time of the incurrence of such indebtedness that will be repaid
with the proceeds of the issuance and sale of the Series A Notes, and will be on
the Closing Date (after giving effect to the application of the proceeds from
the issuance of the Series A Notes) able to pay their respective debts as they
mature.
(oo) No action has been taken and no law, statute, rule or regulation
or order has been enacted, adopted or issued by any governmental agency or body
which prevents the execution, delivery and performance of any of the Operative
Documents, the issuance of the Series A Notes or the
13
<PAGE>
Subsidiary Guarantees, or suspends the sale of the Series A Notes or the
Subsidiary Guarantees in any jurisdiction referred to in Section 5(e); and no
injunction, restraining order or other order or relief of any nature by a
federal or state court or other tribunal of competent jurisdiction has been
issued with respect to the Company or any of its subsidiaries which would
prevent or suspend the issuance or sale of the Series A Notes or the Subsidiary
Guarantees in any jurisdiction referred to in Section 5(e).
(pp) The jurisdictions listed on Schedule D attached hereto are the
----------
jurisdictions in which it is material for the Company and the Guarantors to be
qualified to do business. The Company and the Guarantors listed on Schedule D
are qualified to do business in each of the jurisdictions listed on Schedule D.
(qq) On the Closing Date, the EFM Subsidiaries shall be formally
dissolved under the Delaware General Corporation Law, and all of the assets and
liabilities of such subsidiaries shall be contributed to IT Environmental and
Facilities, Inc., a Delaware corporation.
The Company acknowledges that the Initial Purchasers and, for purposes
of the opinions to be delivered to the Initial Purchasers pursuant to Section 9
hereof, counsel to the Company and the Guarantors and counsel to the Initial
Purchasers will rely upon the accuracy and truth of the foregoing
representations and hereby consents to such reliance.
7. Initial Purchasers' Representations and Warranties. Each of the
--------------------------------------------------
Initial Purchasers, severally and not jointly, represents and warrants to the
Company and the Guarantors, and agrees that:
(a) Such Initial Purchaser is either a QIB or an Accredited
Institution, in either case, with such knowledge and experience in financial and
business matters as is necessary in order to evaluate the merits and risks of an
investment in the Series A Notes.
(b) Such Initial Purchaser (A) is not acquiring the Series A Notes
with a view to any distribution thereof or with any present intention of
offering or selling any of the Series A Notes in a transaction that would
violate the Act or the securities laws of any state of the United States or any
other applicable jurisdiction and (B) will be reoffering and reselling the
Series A Notes only to (x) QIBs in reliance on the exemption from the
registration requirements of the Act provided by Rule 144A or (y) in offshore
transactions in reliance upon Regulation S under the Act.
(c) Such Initial Purchaser agrees that no form of general solicitation
or general advertising (within the meaning of Regulation D under the Act) has
been or will be used by such Initial Purchaser or any of its representatives in
connection with the offer and sale of the Series A Notes pursuant hereto,
including, but not limited to, articles, notices or other communications
published in any newspaper, magazine or similar medium or broadcast over
television or radio, or any seminar or meeting whose attendees have been invited
by any general solicitation or general advertising.
(d) Such Initial Purchaser agrees that, in connection with Exempt
Resales, such Initial Purchaser will solicit offers to buy the Series A Notes
only from, and will offer to sell the Series A Notes only to, Eligible
Purchasers. Each Initial Purchaser further agrees that it will offer to sell
the Series A Notes only to, and will solicit offers to buy the Series A Notes
only from (A) Eligible Purchasers that the Initial Purchaser reasonably believes
are QIBs, and (B) Regulation S Purchasers, in each case, that agree that (x) the
Series A Notes purchased by them may be resold, pledged or otherwise transferred
within the time period referred to under Rule 144(k) (taking into account the
provisions of Rule 144(d) under the Act, if applicable) under the Act, as in
effect on the date of the transfer of such Series A Notes, only (I) to the
Company or any of its subsidiaries, (II) to a person whom the seller
14
<PAGE>
reasonably believes is a QIB purchasing for its own account or for the account
of a QIB in a transaction meeting the requirements of Rule 144A under the Act,
(III) in an offshore transaction (as defined in Rule 902 under the Act) meeting
the requirements of Rule 904 of the Act, (IV) in a transaction meeting the
requirements of Rule 144 under the Act, (V) to an Accredited Institution that,
prior to such transfer, furnishes the Trustee a signed letter containing certain
representations and agreements relating to the registration of transfer of such
Series A Note (the form of which can be obtained from the Trustee and an opinion
of counsel acceptable to the Company that such transfer is in compliance with
the Act, (VI) in accordance with another exemption from the registration
requirements of the Act (and based upon an opinion of counsel acceptable to the
Company) or (VII) pursuant to an effective registration statement and, in each
case, in accordance with the applicable securities laws of any state of the
United States or any other applicable jurisdiction and (y) they will deliver to
each person to whom such Series A Notes or an interest therein is transferred a
notice substantially to the effect of the foregoing.
(e) Such Initial Purchaser and its affiliates or any person acting on
its or their behalf have not engaged or will not engage in any directed selling
efforts within the meaning of Regulation S with respect to the Series A Notes or
the Subsidiary Guarantees.
(f) The Series A Notes offered and sold by such Initial Purchaser
pursuant hereto in reliance on Regulation S have been and will be offered and
sold only in offshore transactions.
(g) The sale of the Series A Notes offered and sold by such Initial
Purchaser pursuant hereto in reliance on Regulation S is not part of a plan or
scheme to evade the registration provisions of the Act.
(h) Such Initial Purchaser agrees that it has not offered or sold and
will not offer or sell the Series A Notes in the United States or to, or for the
benefit or account of, a U.S. Person (other than a distributor), in each case,
as defined in Rule 902 under the Act (i) as part of its distribution at any time
and (ii) otherwise until 40 days after the later of the commencement of the
offering of the Series A Notes pursuant hereto and the Closing Date, other than
in accordance with Regulation S of the Act or another exemption from the
registration requirements of the Act. Such Initial Purchaser agrees that,
during such 40-day distribution compliance period, it will not cause any
advertisement with respect to the Series A Notes (including any "tombstone"
advertisement) to be published in any newspaper or periodical or posted in any
public place and will not issue any circular relating to the Series A Notes,
except such advertisements as are permitted by and include the statements
required by Regulation S.
(i) Such Initial Purchaser agrees that, at or prior to confirmation of
a sale of Series A Notes by it to any distributor, dealer or person receiving a
selling concession, fee or other remuneration during the 40-day distribution
compliance period referred to in Rule 903(c)(2) under the Act, it will send to
such distributor, dealer or person receiving a selling concession, fee or other
remuneration a confirmation or notice to substantially the following effect:
"The Series A Notes covered hereby have not been registered under the U.S.
Securities Act of 1933, as amended (the "Securities Act"), and may not be
offered and sold within the United States or to, or for the account or
benefit of, U.S. persons (i) as part of your distribution at any time or
(ii) otherwise until 40 days after the later of the commencement of the
Offering and the Closing Date, except in either case in accordance with
Regulation S under the Securities Act (or Rule 144A or to Accredited
Institutions in transactions that are exempt from the registration
requirements of the Securities Act), and in connection with any subsequent
sale by you of the Series A Notes covered hereby in reliance on Regulation
S during the period referred to above to any distributor, dealer or person
receiving a selling concession, fee or other remuneration, you
15
<PAGE>
must deliver a notice to substantially the foregoing effect. Terms used
above have the meanings assigned to them in Regulation S."
Such Initial Purchaser acknowledges that the Company and the
Guarantors and, for purposes of the opinions to be delivered to each Initial
Purchaser pursuant to Section 9 hereof, counsel to the Company and the
Guarantors and counsel to the Initial Purchaser will rely upon the accuracy and
truth of the foregoing representations and Such Initial Purchaser hereby
consents to such reliance.
8. Indemnification.
----------------
(a) The Company and each Guarantor agree, jointly and severally, to
indemnify and hold harmless the Initial Purchasers, their directors, their
officers and each person, if any, who controls such Initial Purchaser within the
meaning of Section 15 of the Act or Section 20 of the Exchange Act, from and
against any and all losses, claims, damages, liabilities and judgments
(including, without limitation, any reasonable legal or other expenses incurred
in connection with investigating or defending any matter, including any action,
that could give rise to any such losses, claims, damages, liabilities or
judgments) caused by any untrue statement or alleged untrue statement of a
material fact contained in the Offering Memorandum (or any amendment or
supplement thereto), the Preliminary Offering Memorandum or any Rule 144A
Information provided by the Company or any Guarantor to any holder or
prospective purchaser of Series A Notes pursuant to Section 5(h) or caused by
any omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading,
except insofar as such losses, claims, damages, liabilities or judgments are
caused by any such untrue statement or omission or alleged untrue statement or
omission based upon information relating to an Initial Purchaser furnished in
writing to the Company by such Initial Purchaser; provided, however, that the
foregoing indemnity agreement with respect to any Preliminary Offering
Memorandum shall not inure to the benefit of any Initial Purchaser who failed to
deliver a Final Offering Memorandum, as then amended or supplemented, (so long
as the Offering Memorandum and any amendment or supplement thereto was provided
by the Company to the several Initial Purchasers in the requisite quantity and
on a timely basis to permit proper delivery on or prior to the Closing Date) to
the person asserting any losses, claims, damages, liabilities or judgments
caused by any untrue statement or alleged untrue statement of a material fact
contained in any Preliminary Offering Memorandum, or caused by any omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, if such material
misstatement or omission or alleged material misstatement or omission was cured
in the Offering Memorandum, as so amended or supplemented.
(b) Each of the Initial Purchasers, severally and not jointly, agrees
to indemnify and hold harmless the Company and the Guarantors, and their
respective directors and officers and each person, if any, who controls (within
the meaning of Section 15 of the Act or Section 20 of the Exchange Act) the
Company or the Guarantors, to the same extent as the foregoing indemnity from
the Company and the Guarantors to the Initial Purchaser but only with reference
to information relating to such Initial Purchaser furnished in writing to the
Company by such Initial Purchaser expressly for use in the Preliminary Offering
Memorandum or the Offering Memorandum, and not with respect to the information
provided by any other Initial Purchaser.
(c) In case any action shall be commenced involving any person in
respect of which indemnity may be sought pursuant to Section 8(a) or 8(b) (the
"indemnified party"), the indemnified party shall promptly notify the person
- ------------ -----
against whom such indemnity may be sought (the "indemnifying party") in writing
------------------
and the indemnifying party shall assume the defense of such action, including
the employment of counsel reasonably satisfactory to the indemnified party and
the payment of all fees and expenses of such counsel, as incurred (except that
in the case of any action in respect of
16
<PAGE>
which indemnity may be sought pursuant to both Sections 8(a) and 8(b), the
Initial Purchasers shall not be required to assume the defense of such action
pursuant to this Section 8(c), but may employ separate counsel and participate
in the defense thereof, but the reasonable fees and expenses of such counsel,
except as provided below, shall be at the expense of the Initial Purchasers).
Any indemnified party shall have the right to employ separate counsel in any
such action and participate in the defense thereof, but the fees and expenses of
such counsel shall be at the expense of the indemnified party unless (i) the
employment of such counsel shall have been specifically authorized in writing by
the indemnifying party, (ii) the indemnifying party shall have failed to assume
the defense of such action or employ counsel reasonably satisfactory to the
indemnified party or (iii) the named parties to any such action (including any
impleaded parties) include both the indemnified party and the indemnifying
party, and the indemnified party shall have been advised by such counsel that
there may be one or more legal defenses available to it which are different from
or additional to those available to the indemnifying party (in which case the
indemnifying party shall not have the right to assume the defense of such action
on behalf of the indemnified party). In any such case, the indemnifying party
shall not, in connection with any one action or separate but substantially
similar or related actions in the same jurisdiction arising out of the same
general allegations or circumstances, be liable for the fees and expenses of
more than one separate firm of attorneys (in addition to any local counsel) for
all indemnified parties and all such reasonable fees and expenses shall be
reimbursed as they are incurred. Such firm shall be designated in writing by
Donaldson, Lufkin & Jenrette Securities Corporation, in the case of the parties
indemnified pursuant to Section 8(a), and by the Company, in the case of parties
indemnified pursuant to Section 8(b). The indemnifying party shall indemnify and
hold harmless the indemnified party from and against any and all losses, claims,
damages, liabilities and judgments by reason of any settlement of any action (i)
effected with its written consent or (ii) effected without its written consent
if the settlement is entered into more than twenty business days after the
indemnifying party shall have received a request from the indemnified party for
reimbursement for the fees and expenses of counsel (in any case where such fees
and expenses are at the expense of the indemnifying party) and, prior to the
date of such settlement, the indemnifying party shall have failed to comply with
such reimbursement request. No indemnifying party shall, without the prior
written consent of the indemnified party, effect any settlement or compromise
of, or consent to the entry of judgment with respect to, any pending or
threatened action in respect of which the indemnified party is or could have
been a party and indemnity or contribution may be or could have been sought
hereunder by the indemnified party, unless such settlement, compromise or
judgment (i) includes an unconditional release of the indemnified party from all
liability on claims that are or could have been the subject matter of such
action and (ii) does not include a statement as to or an admission of fault,
culpability or a failure to act, by or on behalf of the indemnified party.
(d) To the extent the indemnification provided for in this Section 8
is unavailable to an indemnified party or insufficient in respect of any losses,
claims, damages, liabilities or judgments referred to therein, then each
indemnifying party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages, liabilities and judgments (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Company and the Guarantors, on the one hand, and the Initial Purchasers on the
other hand from the offering of the Series A Notes or (ii) if the allocation
provided by clause 8(d)(i) above is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits referred
to in clause 8(d)(i) above but also the relative fault of the Company and the
Guarantors, on the one hand, and the Initial Purchasers on the other hand, in
connection with the statements or omissions which resulted in such losses,
claims, damages, liabilities or judgments, as well as any other relevant
equitable considerations. The relative benefits received by the Company and the
Guarantors, on the one hand and the Initial Purchasers, on the other hand, shall
be deemed to be in the same proportion as the total net proceeds from the
offering of the Series A Notes (after underwriting discounts and commissions,
but before deducting expenses) received by the Company, and the total discounts
and commissions received by the Initial Purchasers bear to the total price to
investors of the
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Series A Notes, in each case as set forth in the table on the cover page of the
Offering Memorandum. The relative fault of the Company and the Guarantors, on
the one hand, and the Initial Purchasers, on the other hand, shall be determined
by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by the Company or the Guarantors,
on the one hand, or the Initial Purchasers, on the other hand, and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission.
The Company and the Guarantors, and the Initial Purchasers agree that
it would not be just and equitable if contribution pursuant to this Section 8(d)
were determined by pro rata allocation (even if the Initial Purchasers were
treated as one entity for such purpose) or by any other method of allocation
which does not take account of the equitable considerations referred to in the
immediately preceding paragraph. The amount paid or payable by an indemnified
party as a result of the losses, claims, damages, liabilities or judgments
referred to in the immediately preceding paragraph shall be deemed to include,
subject to the limitations set forth above, any legal or other expenses incurred
by such indemnified party in connection with investigating or defending any
matter, including any action, that could have given rise to such losses, claims,
damages, liabilities or judgments. Notwithstanding the provisions of this
Section 8, the Initial Purchasers shall not be required to contribute any amount
in excess of the amount by which the total discounts and commissions received by
such Initial Purchasers exceeds the amount of any damages which the Initial
Purchasers have otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Initial Purchasers' obligations to contribute
pursuant to this Section 8(d) are several in proportion to the respective
principal amount of Series A Notes purchased by each of the Initial Purchasers
hereunder and not joint.
(e) The remedies provided for in this Section 8 are not exclusive and
shall not limit any rights or remedies which may otherwise be available to any
indemnified party at law or in equity.
9. Conditions of Initial Purchaser's Obligations. The obligations of
---------------------------------------------
the Initial Purchasers to purchase the Series A Notes under this Agreement are
subject to the satisfaction of each of the following conditions:
(a) All the representations and warranties of the Company and the
Guarantors contained in this Agreement shall be true and correct on the Closing
Date with the same force and effect as if made on and as of the Closing Date.
(b) Subsequent to the execution and delivery of this Agreement and
prior to the Closing Date, (i) there shall not have occurred any downgrading,
suspension or withdrawal of, nor shall any notice have been given of any
potential or intended downgrading, suspension or withdrawal of, or of any review
(or of any potential or intended review) for a possible change that does not
indicate the direction of the possible change in, any rating accorded any
securities of the Company or any Guarantor (including, without limitation, the
placing of any of the foregoing ratings on credit watch with negative or
developing implications or under review with an uncertain direction) by any
"nationally recognized statistical rating organization" as such term is defined
for purposes of Rule 436(g)(2) under the Act, (ii) there shall not have occurred
any change, nor shall any notice have been given of any potential or intended
change, in the outlook for any rating of the Company or any Guarantor or any
securities of the Company or any Guarantor by any such rating organization and
(iii) no such rating organization shall
18
<PAGE>
have given notice that it has assigned (or is considering assigning) a lower
rating to the Notes than that on which the Notes were marketed.
(c) Since the respective dates as of which information is given in the
Offering Memorandum, other than as set forth in the Offering Memorandum
(exclusive of any amendments or supplements thereto subsequent to the date of
this Agreement), (i) there shall not have occurred any change or any development
that, singly or in the aggregate, is reasonably likely to have a material
adverse effect on the condition, financial or otherwise, or the earnings,
business, management or operations of the Company and its subsidiaries, taken as
a whole, (ii) there shall not have been any change or any development that,
singly or in the aggregate, is reasonably likely to have a material adverse
effect on the capital stock or in the long term debt of the Company or any of
its subsidiaries and (iii) neither the Company nor any of its subsidiaries shall
have incurred any liability or obligation, direct or contingent, the effect of
which, in any such case described in clause 9(c)(i), 9(c)(ii) or 9(c)(iii), in
your judgment, is material and adverse and, in your judgment, makes it
impracticable to market the Series A Notes on the terms and in the manner
contemplated in the Offering Memorandum.
(d) You shall have received on the Closing Date (a) a certificate
dated the Closing Date, signed by the Vice President and Treasurer of the
Company and (b) certificates dated the Closing Date, signed by the Vice
President and Treasurer of each of the Guarantors, which certificates shall
confirm the matters set forth in Sections 6(q), 6(aa), 9(a) and 9(b) and state
that each of the Company and the Guarantors has complied with all the agreements
and satisfied all of the conditions herein contained and required to be complied
with or satisfied on or prior to the Closing Date.
(e) You shall have received on the Closing Date an opinion
(satisfactory to you and counsel for the Initial Purchasers), dated the Closing
Date, of Gibson, Dunn & Crutcher LLP, counsel for the Company and the
Guarantors, to the effect that:
(i) the Company and IT Corporation and Groundwater
Technology, Inc. (together, the "Covered Entities"; and IT
----------------
Corporation and Groundwater Technology, Inc. together being the
"Covered Guarantors") have been duly incorporated, are validly
-------------------
existing as corporations in good standing under the laws of their
respective jurisdictions of incorporation and have the corporate
power and authority to carry on their respective businesses as
described in the Offering Memorandum and to own, lease and
operate their respective properties;
(ii) the Company is duly qualified and in good standing as a
foreign corporation authorized to do business in the
jurisdictions listed under its name on Schedule D attached
hereto;
(iii) the Series A Notes have been duly authorized and,
when executed and authenticated in accordance with the provisions
of the Indenture and delivered to and paid for by the Initial
Purchasers in accordance with the terms of this Agreement, will
be entitled to the benefits of the Indenture and will be valid
and binding obligations of the Company, enforceable in accordance
with their terms except as the enforceability thereof may be
limited by (x) bankruptcy, insolvency or similar laws affecting
creditors' rights generally (including, without limitation, the
effect of statutory or other laws regarding fraudulent transfers
or preferential transfers) and (y) equitable principles of
general applicability;
19
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(iv) the Indenture (including, without limitation, with
respect to each Subsidiary Guarantor, the Subsidiary Guarantee
set forth in Article 11 therein) has been duly authorized,
executed and delivered by the Company and each of the Covered
Entities and, assuming the due authorization, execution and
delivery by each of the Guarantors listed on Schedule A hereto
other than Covered Guarantors (collectively, the "Foreign
-------
Guarantors") (and that each Foreign Guarantor has requisite
----------
corporate power), is a valid and binding agreement of the Company
and the Guarantors that is enforceable against the Company, and
the Guarantors in accordance with its terms except as the
enforceability thereof may be limited by (x) bankruptcy,
insolvency or similar laws affecting creditors' rights generally
(including, without limitation, the effect of statutory or other
laws regarding fraudulent transfers or preferential transfers)
and (y) equitable principles of general applicability;
(v) this Agreement has been duly authorized, executed and
delivered by each of the Covered Entities;
(vi) the Registration Rights Agreement has been duly
authorized, executed and delivered by each of the Covered
Entities and, assuming the due authorization, execution and
delivery by each of the Foreign Guarantors, is a valid and
binding agreement of the Company, and the Guarantors (and that
each Foreign Guarantor has requisite corporate power),
enforceable against the Company and the Guarantors in accordance
with its terms, except as the enforceability thereof may be
limited by (x) bankruptcy, insolvency or similar laws affecting
creditors' rights generally (including, without limitation, the
effect of statutory or other laws regarding fraudulent transfers
or preferential transfers) and (y) equitable principles of
general applicability;
(vii) the Series B Senior Notes have been duly authorized
by the Company;
(viii) the statements under the captions "Description of
Capital Stock," "Federal Income Tax Considerations for Non-U.S.
Holders," and "Description of Notes" in the Offering Memorandum,
insofar as such statements constitute a summary of the legal
matters, documents or proceedings referred to therein, fairly
present in all material respects such legal matters, documents
and proceedings;
(ix) the execution, delivery and performance of this
Agreement and the other Operative Documents by the Covered
Entities, the compliance by each of the Covered Entities with all
provisions hereof and thereof and the consummation of the
transactions contemplated hereby and thereby will not (i) require
any consent, approval, authorization or other order of, or
qualification with, any court or governmental body or agency
(except such as may be required under the securities or Blue Sky
laws of the various states), (ii) conflict with or constitute a
breach of any of the terms or provisions of, or a default under,
the charter or by-laws of any of the Covered Entities or any
indenture, loan agreement, mortgage, lease or other agreement or
instrument that has been identified by the Company to such
counsel as being material to the Company and its subsidiaries,
taken as a whole, to which the Company or any of its subsidiaries
is a party or by which the Company's or any of its subsidiaries'
20
<PAGE>
respective property is bound, (iii) violate or conflict with any
applicable law or any rule, regulation, judgment, order or decree
of any court or any governmental body or agency having
jurisdiction over the Company, any of its subsidiaries or their
respective property, which is reasonably likely to have a
Material Adverse Effect, (iv) result in the imposition or
creation of (or the obligation to create or impose) a Lien under
any agreement or instrument to which the Company or any of its
subsidiaries is a party or by which the Company or any of its
subsidiaries or their respective property is bound, and that is
known to such counsel, which is reasonably likely to have a
Material Adverse Effect, or (v) result in the termination,
suspension or revocation of any Authorization (as defined below)
of the Company or any of its subsidiaries.
(x) the Company is not and, after giving effect to the
offering and sale of the Series A Notes and the application of
the net proceeds thereof as described in the Offering Memorandum,
will not be, an "investment company" as such term is defined in
the Investment Company Act of 1940, as amended;
(xi) the Indenture complies as to form in all material
respects with the requirements of the TIA, and the rules and
regulations of the Commission applicable to an indenture which is
qualified thereunder. It is not necessary in connection with the
offer, sale and delivery of the Series A Notes to the Initial
Purchasers in the manner contemplated by this Agreement or in
connection with the Exempt Resales to qualify the Indenture under
the TIA.
(xii) no registration under the Act of the Series A Notes
is required for the sale of the Series A Notes to the Initial
Purchasers as contemplated by this Agreement or for the Exempt
Resales assuming that (i) each Initial Purchaser is a QIB or a
Regulation S Purchaser, (ii) the accuracy of, and compliance
with, the Initial Purchasers' respective representations and
agreements contained in Section 7 of this Agreement and (iii) the
accuracy of the representations of the Company and the Guarantors
set forth in Sections 6(dd), (ee) and (ff) of this Agreement.
In addition, Gibson, Dunn & Crutcher LLP shall state that, in the
course of the preparation by the Company of the Offering Memorandum, such
counsel has participated in conferences and discussions with officers and other
representatives of the Company and others at which the contents of the Offering
Memorandum were discussed. Although such counsel has not independently
verified, is not passing upon and does not assume responsibility for the
accuracy, completeness or fairness of the statements and information included in
the Offering Memorandum, no facts have come to such counsel's attention which
cause such counsel to believe that the Offering Memorandum (except for any
financial statements and notes and schedules thereto, pro form financial
information or other financial or accounting data contained or incorporated by
reference therein, as to all of which such counsel makes no comment), as of the
date thereof and as of the Closing Date, contained any untrue statement of a
material fact or omitted to state any material fact necessary to make the
statements made therein, in light of the circumstances under which they are
made, not misleading.
The opinion of Gibson, Dunn & Crutcher LLP described in Section 9(e)
above shall be rendered to you at the request of the Company and the Guarantors
and shall so state therein.
21
<PAGE>
(f) You shall have received on the Closing Date an opinion
(satisfactory to you and counsel for the Initial Purchasers), dated the Closing
Date, of James M. Redwine, Senior Corporate Counsel of the Company and the
Guarantors, to the effect that:
(i) each of the Foreign Guarantors, other than the Covered
Guarantors, Beneco Enterprises Inc. ("Beneco") and OHM
------
Remediation Services Corp. ("OHM Remediation"), has been duly
---------------
incorporated, is validly existing as a corporation, is in good
standing under the laws of its jurisdiction of incorporation and
has the corporate power and authority to carry on its respective
businesses as described in the Offering Memorandum and to own,
lease and operate its respective properties;
(ii) each of the Guarantors is duly qualified and in good
standing as a foreign corporation authorized to do business in
the jurisdictions listed under its name on Schedule D attached
hereto;
(iii) all of the outstanding shares of capital stock of
each of the Guarantors has been duly authorized and validly
issued and are fully paid and non-assessable, and are owned by
the Company;
(iv) the Indenture (including without limitation, with
respect to each Subsidiary Guarantor, the Subsidiary Guarantees
set forth in Article 11 therein) has been duly authorized,
executed and delivered by the Foreign Guarantors, other than the
Covered Entities, Beneco and OHM Remediation;
(v) this Agreement has been duly authorized, executed and
delivered by the Foreign Guarantors, other than the Covered
Entities, Beneco and OHM Remediation;
(vi) the Registration Rights Agreement has been duly
authorized, executed and delivered by the Foreign Guarantors,
other than the Covered Entities, Beneco and OHM Remediation;
(vii) to the best of such counsel's knowledge, none of the
Guarantors is in violation of its respective charter or by-laws,
and none of the Guarantors is in default in the performance of
any obligation, agreement, covenant or condition contained in any
indenture, loan agreement, mortgage, lease or other agreement or
instrument that is listed as an Exhibit to the Company's Annual
Report on Form 10-K for the year ended December 25, 1998, which
default, individually or in the aggregate, would be reasonably
likely to have a Material Adverse Effect;
(viii) the execution, delivery and performance of this
Agreement and the other Operative Documents by the Guarantors,
other than the Covered Guarantors, the compliance by each of the
Guarantors, other than the Covered Guarantors, with all
provisions hereof and thereof and the consummation of the
transactions contemplated hereby and thereby will not (i) require
any consent, approval, authorization or other order of, or
qualification with, any court or governmental body or agency
(except such as may be required under the securities or Blue Sky
laws of the various states), (ii) conflict with or constitute a
breach of any of the terms or provisions of, or a default under,
the charter or by-
22
<PAGE>
laws of the Company or any of its subsidiaries or any indenture,
loan agreement, mortgage, lease or other agreement or instrument
that is material to the Company and its subsidiaries, taken as a
whole, to which the Company or any of its subsidiaries is a party
or by which the Company or any of its subsidiaries or their
respective property is bound, (iii) violate or conflict with any
applicable law or any rule, regulation, judgment, order or decree
of any court or any governmental body or agency having
jurisdiction over the Company, any of its subsidiaries or their
respective property, (iv) result in the imposition or creation of
(or the obligation to create or impose) a Lien under any
agreement or instrument to which the Company or any of its
subsidiaries is a party or by which the Company or any of its
subsidiaries or their respective property is bound, or (v) result
in the termination, suspension or revocation of any Authorization
(as defined below) of the Company or any of its subsidiaries or
result in any other impairment of the rights of the holder of any
such Authorization.
(ix) except as disclosed in the Offering Memorandum, after
due inquiry, such counsel does not know of any legal or
governmental proceedings pending or threatened to which the
Company or any of its subsidiaries is or could be a party or to
which any of their respective property is or could be subject,
which might result, singly or in the aggregate, in a Material
Adverse Effect.
(x) to the knowledge of such counsel, neither the Company
nor any of its subsidiaries has violated any Environmental Law or
any provisions of ERISA, any provisions of the Foreign Corrupt
Practices Act or the rules and regulations promulgated
thereunder, except for such violations which, singly or in the
aggregate, would not have a Material Adverse Effect;
(xi) each of the Company and its subsidiaries has such
Authorizations of, and has made all filings with and notices to,
all governmental or regulatory authorities and self-regulatory
organizations and all courts and other tribunals, including
without limitation, under any applicable Environmental Laws, as
are necessary to own, lease, license and operate its respective
properties and to conduct its business, except where the failure
to have any such Authorization or to make any such filing or
notice would not, singly or in the aggregate, have a Material
Adverse Effect. To the best of such counsel's knowledge, (a)
each such Authorization is valid and in full force and effect and
each of the Company and its subsidiaries is in compliance with
all the terms and conditions thereof and with the rules and
regulations of the authorities and governing bodies having
jurisdiction with respect thereto; (b) no event has occurred
(including the receipt of any notice from any authority or
governing body) which allows or, after notice or lapse of time or
both, would allow, revocation, suspension or termination of any
such Authorization or results or, after notice or lapse of time
or both, would result in any other impairment of the rights of
the holder of any such Authorization; (c) and such Authorizations
contain no restrictions that are burdensome to the Company or any
of its subsidiaries; except where such failure to comply with
clauses (a), (b) or (c) would not, singly or in the aggregate, be
reasonably expected to have a Material Adverse Effect;
23
<PAGE>
(xii) to the best of such counsel's knowledge after due
inquiry, and except as disclosed in the Offering Memorandum there
are no contracts, agreements or understandings between the
Company or any Guarantor and any person granting such person the
right to require the Company or such Guarantor to include such
securities with the Notes and Subsidiary Guarantees registered
pursuant to any Registration Statement;
In addition, such counsel shall state that, in the course of the
preparation by the Company and the Guarantors of the Offering Memorandum, such
counsel has participated in conferences and discussions with officers and other
representatives of the Company and others at which the contents of the Offering
Memorandum were discussed. Although such counsel has not independently
verified, is not passing upon and does not assume responsibility for the
accuracy, completeness or fairness of the statements and information included in
the Offering Memorandum, no facts have come to such counsel's attention which
cause such counsel to believe that the Offering Memorandum (except for any
financial statements and notes and schedules thereto, pro form financial
information or other financial or accounting data contained or incorporated by
reference therein, as to all of which such counsel make no comment), as of the
date thereof and as of the Closing Date, contained any untrue statement of a
material fact or omitted to state any material fact necessary to make the
statements made therein, in light of the circumstances under which they are
made, not misleading.
(g) You shall have received on the Closing Date an opinion
(satisfactory to counsel for the Initial Purchasers), dated the Closing Date, of
local counsel for each of Beneco and OHM Remediation to the effect that:
(i) Such Guarantor has been duly incorporated, is validly
existing as a corporation in good standing under the laws of its
respective jurisdiction of incorporation and has the corporate
power and authority to carry on its business as described in the
Offering Memorandum and to own, lease and operate its properties;
(ii) the Subsidiary Guarantees have been duly authorized,
executed and delivered by each of Beneco and OHM Remediation (as
applicable);
(iii) the Indenture has been duly authorized, executed and
delivered by each of Beneco and OHM Remediation (as applicable);
(iv) this Agreement and the Registration Rights Agreement
has been duly authorized, executed and delivered by each of
Beneco and OHM Remediation;
(v) the execution, delivery and performance of this
Agreement and the other Operative Documents (as applicable) by
each of Beneco and OHM Remediation (as applicable), the
compliance by Beneco and OHM Remediation with all provisions
hereof and thereof and the consummation of the transactions
contemplated hereby and thereby will not conflict with or
constitute a breach of any of the terms or provisions of, or a
default under, the charter or by-laws of Beneco and OHM
Remediation (as applicable), and
(vi) the Series B Notes have been duly authorized by each of
Beneco and OHM Remediation (as applicable).
24
<PAGE>
(h) The Initial Purchasers shall have received on the Closing
Date an opinion, dated the Closing Date, of Latham & Watkins, counsel for the
Initial Purchasers, in form and substance reasonably satisfactory to the Initial
Purchasers.
(i) The Initial Purchasers shall have received, at the time this
Agreement is executed and at the Closing Date, letters dated the date hereof or
the Closing Date, as the case may be, in form and substance satisfactory to the
Initial Purchasers from Ernst & Young LLP, Pricewaterhouse Coopers LLP and
Mallette Maheu General Partnership Chartered Accountants, independent public
accountants, containing the information and statements of the type ordinarily
included in accountants' "comfort letters" to the Initial Purchasers with
respect to the financial statements and certain financial information contained
in the Offering Memorandum.
(j) The Series A Notes shall have been approved by the NASD for
trading and duly listed in PORTAL.
(k) The Initial Purchasers shall have received a counterpart,
conformed as executed, of the Indenture which shall have been entered into by
the Company, the Guarantors and the Trustee.
(l) The Company and the Guarantors shall have executed the
Registration Rights Agreement and the Initial Purchasers shall have received an
original copy thereof, duly executed by the Company and the Guarantors.
(m) Neither the Company nor the Guarantors shall have failed at
or prior to the Closing Date to perform or comply with any of the agreements
herein contained and required to be performed or complied with by the Company or
the Guarantors, as the case may be, at or prior to the Closing Date.
(n) Any defaults or violations under or in connection with any
Credit Facilities (as such term is defined in the Offering Memorandum) to which
Roche or any of its subsidiaries is a party shall be waived or cured, except for
such defaults or violations that would not, singly or in the aggregate, have a
Material Adverse Effect.
(o) Any guarantees of any indebtedness to which any of the EFM
Subsidiaries are a party shall have been released.
(p) The Credit Agreement (as such term is defined in the Offering
Memorandum) shall have been amended in a manner satisfactory to the Initial
Purchasers.
(q) Each condition to the closing of the Acquisitions shall have
been satisfied or waived. There shall exist at and as of the Closing Date no
conditions that would constitute a default under the Acquisition Agreements. On
the Closing Date, the Acquisitions shall have been consummated on terms that
conform in all material respects to the description thereof in the Offering
Memorandum and the Initial Purchasers shall have received evidence satisfactory
to the Initial Purchasers of the consummation thereof.
10. Effectiveness of Agreement and Termination. This Agreement shall
------------------------------------------
become effective upon the execution and delivery of this Agreement by the
parties hereto.
This Agreement may be terminated at any time on or prior to the
Closing Date by the Initial Purchasers by written notice to the Company if any
of the following has occurred: (i) any
25
<PAGE>
outbreak or escalation of hostilities or other national or international
calamity or crisis or change in economic conditions or in the financial markets
of the United States or elsewhere that, in the Initial Purchasers' judgment, is
material and adverse and, in the Initial Purchasers' judgment, makes it
impracticable to market the Series A Notes on the terms and in the manner
contemplated in the Offering Memorandum, (ii) the suspension or material
limitation of trading in securities or other instruments on the New York Stock
Exchange, the American Stock Exchange, the Chicago Board of Options Exchange,
the Chicago Mercantile Exchange, the Chicago Board of Trade or the Nasdaq
National Market or limitation on prices for securities or other instruments on
any such exchange or the Nasdaq National Market, (iii) the suspension of trading
of any securities of the Company or any Guarantor on any exchange or in the
over-the-counter market, (iv) the enactment, publication, decree or other
promulgation of any federal or state statute, regulation, rule or order of any
court or other governmental authority that in the opinion of the Initial
Purchasers materially and adversely affects, or will materially and adversely
affect, the business, financial condition or results of operations of the
Company and its subsidiaries, taken as a whole, (v) the declaration of a banking
moratorium by either federal or New York State authorities or (vi) the taking of
any action by any federal, state or local government or agency in respect of its
monetary or fiscal affairs that in the opinion of the Initial Purchasers has a
material adverse effect on the financial markets in the United States.
If on the Closing Date any one or more of the Initial Purchasers shall
fail or refuse to purchase the Series A Notes which it or they have agreed to
purchase hereunder on such date and the aggregate principal amount of the Series
A Notes which such defaulting Initial Purchaser or Initial Purchasers, as the
case may be, agreed but failed or refused to purchase is not more than one-tenth
of the aggregate principal amount of the Series A Notes to be purchased on such
date by all Initial Purchasers, each non-defaulting Initial Purchaser shall be
obligated severally, in the proportion which the principal amount of the Series
A Notes set forth opposite its name in Schedule B bears to the aggregate
principal amount of the Series A Notes which all the non-defaulting Initial
Purchasers, as the case may be, have agreed to purchase, or in such other
proportion as you may specify, to purchase the Series A Notes which such
defaulting Initial Purchaser or Initial Purchasers, as the case may be, agreed
but failed or refused to purchase on such date; provided that in no event shall
the aggregate principal amount of the Series A Notes which any Initial Purchaser
has agreed to purchase pursuant to Section 2 hereof be increased pursuant to
this Section 10 by an amount in excess of one-ninth of such principal amount of
the Series A Notes without the written consent of such Initial Purchaser. If on
the Closing Date any Initial Purchaser or Initial Purchasers shall fail or
refuse to purchase the Series A Notes and the aggregate principal amount of the
Series A Notes with respect to which such default occurs is more than one-tenth
of the aggregate principal amount of the Series A Notes to be purchased by all
Initial Purchasers and arrangements satisfactory to the Initial Purchasers and
the Company for purchase of such the Series A Notes are not made within 48 hours
after such default, this Agreement will terminate without liability on the part
of any non-defaulting Initial Purchaser and the Company. In any such case
which does not result in termination of this Agreement, either you or the
Company shall have the right to postpone the Closing Date, but in no event for
longer than seven days, in order that the required changes, if any, in the
Offering Memorandum or any other documents or arrangements may be effected. Any
action taken under this paragraph shall not relieve any defaulting Initial
Purchaser from liability in respect of any default of any such Initial Purchaser
under this Agreement.
11. Dissolution of Certain Subsidiaries. The Company shall use all
-----------------------------------
commercially reasonable efforts to dissolve the subsidiaries listed on Schedule
E attached hereto as soon as practicable after the date hereof.
12. Miscellaneous. Notices given pursuant to any provision of this
-------------
Agreement shall be addressed as follows: (i) if to the Company or any Guarantor,
to The IT Group, Inc., 2790 Mosside Boulevard, Monroeville, Pennsylvania 15146-
2792, Attention: General Counsel and (ii) if to the Initial
26
<PAGE>
Purchasers, Donaldson, Lufkin & Jenrette Securities Corporation, 277 Park
Avenue, New York, New York 10172, Attention: Syndicate Department, or in any
case to such other address as the person to be notified may have requested in
writing.
The respective indemnities, contribution agreements, representations,
warranties and other statements of the Company, the Guarantors and the Initial
Purchases set forth in or made pursuant to this Agreement shall remain operative
and in full force and effect, and will survive delivery of and payment for the
Series A Notes, regardless of (i) any investigation, or statement as to the
results thereof, made by or on behalf of the Initial Purchasers, the officers or
directors of the Initial Purchasers, any person controlling the Initial
Purchasers, the Company, any Guarantor, the officers or directors of the Company
or any Guarantor, or any person controlling the Company or any Guarantor, (ii)
acceptance of the Series A Notes and payment for them hereunder and (iii)
termination of this Agreement.
If for any reason the Series A Notes are not delivered by or on behalf
of the Company as provided herein (other than as a result of any termination of
this Agreement pursuant to Section 10), the Company and each Guarantor, jointly
and severally, agree to reimburse the Initial Purchasers for all reasonable out-
of-pocket expenses (including the reasonable fees and disbursements of counsel)
incurred by them. Notwithstanding any termination of this Agreement, the
Company shall be liable for all expenses which it has agreed to pay pursuant to
Section 5(i) hereof. The Company and each Guarantor also agree, jointly and
severally, to reimburse the Initial Purchasers and their respective officers,
directors and each person, if any, who controls such Initial Purchasers within
the meaning of Section 15 of the Act or Section 20 of the Exchange Act for any
and all reasonable fees and expenses (including without limitation the
reasonable fees and expenses of counsel) incurred by them in connection with
enforcing their rights under this Agreement (including without limitation its
rights under Section 8).
Except as otherwise provided, this Agreement has been and is made
solely for the benefit of and shall be binding upon the Company, the Guarantors,
the Initial Purchasers, the Initial Purchasers' respective directors and
officers, any controlling persons referred to herein, the directors of the
Company and the Guarantors and their respective successors and assigns, all as
and to the extent provided in this Agreement, and no other person shall acquire
or have any right under or by virtue of this Agreement. The term "successors
and assigns" shall not include a purchaser of any of the Series A Notes from the
Initial Purchasers merely because of such purchase.
This Agreement shall be governed and construed in accordance with the
laws of the State of New York.
This Agreement may be signed in various counterparts which together
shall constitute one and the same instrument.
Please confirm that the foregoing correctly sets forth the agreement
among the Company, the Guarantors and the Initial Purchasers.
27
<PAGE>
Very truly yours,
THE IT GROUP, INC.
By:
-----------------------------------------------
Name: James G. Kirk
Title: Vice President, General Counsel and
Secretary
ALASKA REMEDIATION SERVICES CORP.
BENECO ENTERPRISES, INC.
FLUOR DANIEL ENVIRONMENTAL SERVICES, INC.
GCAP SERVICES, INC.
GRADIENT CORPORATION
GROUNDWATER TECHNOLOGY, INC.
IT C&V OPERATIONS, INC.
IT CORPORATION
IT CORPORATION OF NORTH CAROLINA
IT E&C OPERATIONS, INC.
IT ENVIRONMENTAL AND FACILITIES, INC.
IT INTERNATIONAL HOLDINGS, INC.
IT INTERNATIONAL INVESTMENTS, INC.
IT INTERNATIONAL OPERATIONS, INC.
IT INVESTMENT HOLDINGS, INC.
IT JAPAN SERVICES, INC.
IT KOREA SERVICES, INC.
IT TULSA HOLDINGS, INC.
JELLINEK, SCHWARTZ AND CONNOLLY, INC.
JSC INTERNATIONAL, INC.
LANDBANK, INC.
LANDBANK REMEDIATION CORP.
PACIFIC ENVIRONMENTAL GROUP INC.
PHR ENVIRONMENTAL CONSULTANTS, INC.
SIELKEN, INC.
OHM CORPORATION.
OHM REMEDIATION SERVICES, CORP.
37-02 COLLEGE POINT BOULEVARD, LLC
EMPIRE STATE I, LLC
EMPIRE STATE II, LLC
KATO ROAD LLC
LANDBANK ENVIRONMENTAL PROPERTIES LLC
NORTHEAST RESTORATION COMPANY, LLC
THE DORCHESTER GROUP
28
<PAGE>
By:
-----------------------------------------------
Name: James G. Kirk
Title: Vice President and General Counsel
29
<PAGE>
The foregoing Agreement is hereby
confirmed and accepted as of the
date first above written.
Donaldson, Lufkin & Jenrette Securities Corporation
By:
-------------------------------------
Name:
Title:
Salomon Smith Barney
By:
-------------------------------------
Name:
Title:
30
<PAGE>
SCHEDULE A
Guarantors
ALASKA REMEDIATION SERVICES CORP., an Alaska corporation
BENECO ENTERPRISES, INC., a Utah corporation
FLUOR DANIEL ENVIRONMENTAL SERVICES, INC., a California corporation (name to be
changed)
GCAP SERVICES, INC., a Delaware corporation
GRADIENT CORPORATION, a Massachusetts corporation
GROUNDWATER TECHNOLOGY, INC., a Delaware corporation
IT C&V OPERATIONS, INC., a Delaware corporation
IT CORPORATION, a California corporation
IT CORPORATION OF NORTH CAROLINA, a North Carolina corporation
IT E&C OPERATIONS, INC., a Delaware corporation
IT ENVIRONMENTAL AND FACILITIES, INC., a Delaware corporation
IT INTERNATIONAL HOLDINGS, INC., a Delaware corporation
IT INTERNATIONAL INVESTMENTS, INC., a Delaware corporation
IT INTERNATIONAL OPERATIONS, INC., a Delaware corporation
IT INVESTMENT HOLDINGS, INC., a Delaware corporation
IT JAPAN SERVICES, INC., a Delaware corporation
IT KOREA SERVICES, INC., a Delaware corporation
IT TULSA HOLDINGS, INC., an Oklahoma corporation
JELLINEK, SCHWARTZ AND CONNOLLY, INC., a District Columbia corporation
JSC INTERNATIONAL, INC., a District of Columbia corporation
LANDBANK, INC., a Delaware corporation
LANDBANK REMEDIATION CORP., a Delaware corporation
PACIFIC ENVIRONMENTAL GROUP INC., a California corporation
31
<PAGE>
PHR ENVIRONMENTAL CONSULTANTS, INC., a Delaware corporation
SIELKEN, INC., a Texas corporation
OHM CORPORATION., an Ohio corporation
OHM REMEDIATION SERVICES, CORP., an Ohio corporation
37-02 COLLEGE POINT BOULEVARD, LLC, a Delaware LLC
EMPIRE STATE I, LLC, a Delaware LLC
EMPIRE STATE II, LLC, a Delaware LLC
KATO ROAD LLC, a California LLC
LANDBANK ENVIRONMENTAL PROPERTIES LLC, a Delaware LLC
NORTHEAST RESTORATION COMPANY, LLC, a Delaware LLC
THE DORCHESTER GROUP, a Delaware LLC
32
<PAGE>
SCHEDULE B
Subsidiaries
OHM Corporation (Ohio)
Beneco Enterprises Inc.
OHM Remediation Services Corp.
OHM Remediation Services of Canada, Ltd.
Alaska Remediation Services Corp.
Groundwater Technology, Inc.
IT International Investments, Inc.
Fluor Daniel Environmental Services, Inc.
IT Environmental (Australia) PTY, Ltd.
IT Group Infrastructure and Environmental, Ltd.
GTI Italia, S.R.L.
IT Korea Services, Inc.
IT Japan Services, Inc.
International Technology Europe Ltd.
IT International Operations, Inc.
IT International Holdings, Inc.
IT-Tulsa Holdings, Inc.
IT Corporation
Universal Professional Insurance Company
IT-International Technology Espana S.A.
IT E&C Operations, Inc.
IT-Europe Pollution Control Engineering, Ltd.
Chi Mei International Technology Co., Ltd.
Chi Mei Entech Co., Ltd.
PHR Environmental Consultants, Inc.
33
<PAGE>
IT Environmental and Facilities, Inc.
IT Corporation Korea Branch
Gradient Corporation
Pacific Environmental Group, Inc.
IT Corporation Limited
KOHAP-IT Ltd.
IT Corporation De Mexico
IT Corporation of North Carolina
IT C&V Operations, Inc.
IT Investment Holdings, Inc.
Jellinek, Schwartz and Connolly, Inc.
GCAP Services, Inc.
Landbank, Inc.
Sielken, Inc.
JSC International, Inc.
JSC International, Ltd.
Landbank Environmental Properties LLC
Kato Road LLC
Landbank Remediation Corp.
Northeast Restoration Company, LLC
Empire State I, LLC
Empire State II, LLC
The Dorchester Group (Delaware LLC)
37-02 College Point Boulevard, LLC
Roche Ltee, Groupe Conseil / Roche Ltd., Consulting Group
3280365 Canada Inc.
Amikwiche Construction Ltee
34
<PAGE>
CFCL Roche International Limited
Evaluation J.M. Fournier Inc.
Les Impressions Integrales Inc.
Les Consultants En Environnement Argus 2000 Inc.
Roche Construction Inc.
Rosaire Despres & Associes Inc.
Soderoc Developpement Ltee
Proton Technology Company Limited
Evimbec LtEe
Chevalier, Hughes & Associes (1992) Inc.
Roche International Inc.
A.C.T. International Inc.
Groupe Conseil Forchemex LtEe
Roche Gestion Services Publics Inc.
35
<PAGE>
SCHEDULE C
<TABLE>
<CAPTION>
Principal Amount
Initial Purchasers of Notes
------------------ -----------------
<S> <C>
Donaldson, Lufkin & Jenrette
Securities Corporation............................................ $112,500,000
Salomon Smith Barney.................................................. $112,500,000
------------
Total........................................................... $225,000,000
============
</TABLE>
36
<PAGE>
SCHEDULE D
Jurisdictions where Qualified
to do Business as a Foreign Corporation
OHM Remediation Services, Inc.
- ------------------------------
California
Hawaii
Massachusetts
Pennsylvania
Virginia
IT CORPORATION
- --------------
Alaska
Florida
Illinois
Kentucky
Louisiana
Maryland
Michigan
New Jersey
New Mexico
Nevada
New York
Ohio
South Carolina
Tennessee
Texas
Virginia
Groundwater Technology, Inc.
- ----------------------------
California
New York
Texas
37
<PAGE>
SCHEDULE E
Subsidiaries to be Dissolved
1. Environmental Financial Services Corporation, a Delaware corporation
2. Environmental Treatment and Technology Corporation, a Delaware corporation
3. Groundwater Technology Government Services, Inc., a Delaware corporation
4. Groundwater Technology Overseas Corp., a Delaware corporation
5. GTI Investment Company, a Delaware corporation
6. Isobar, Inc., a California corporation
7. IT Hanford, Inc., a Washington corporation
8. OHM Corporation, a Nevada corporation
9. OHM Environmental Resources Management Corp., an Ohio corporation
10. OHM International, Inc., a Delaware corporation
11. OHM Savannah River Corp., an Ohio corporation
12. ICF Kaiser Defense Programs, Inc. (to be dissolved simultaneously with the
consummation of the EFM Acquisition)
13. ICF Kaiser Remediation Company (to be dissolved simultaneously with the
consummation of the EFM Acquisition)
14. ICF Kaiser Logistics, Inc. (to be dissolved simultaneously with the
consummation of the EFM Acquisition)
15. ICF Kaiser Logistics Oak Ridge, Inc. (to be dissolved simultaneously with
the consummation of the EFM Acquisition)
16. ICF Kaiser Site Solutions, Inc. (to be dissolved simultaneously with the
consummation of the EFM Acquisition)
38
<PAGE>
SCHEDULE G
Registration Rights
1. The Carlyle Group has registration rights under the Registration Rights
Agreement International Technology and certain investors signatory thereto,
dated November 20, 1996.
2. The IT Group, Inc. currently has an effective shelf registration statement
on file (File No. 333-07647) in connection with its acquisition of the
Gradient Corporation.
3. Pursuant to the terms of the acquisition agreements in connection with the
acquisition of Jellinek, Schwartz and Connolly, Inc., PHR Environmental
Consultants, Inc., Pacific Environmental Group Inc., Landbank, Inc., and
Beneco Enterprises, Inc., the sellers are entitled to receive post-closing
earn-out payments in the form of cash or stock, in the Company's
discretion. If stock is given, the sellers have registration rights with
respect to such stock.
39
<PAGE>
EXHIBIT 10.18
EXECUTION COPY
================================================================================
THE IT GROUP, INC.
and
THE GUARANTORS NAMED HEREIN
-------------------------------------
$225,000,000
11% SENIOR SUBORDINATED NOTES DUE 2009
-------------------------------------
REGISTRATION RIGHTS AGREEMENT
DATED AS OF APRIL 9, 1999
--------------------
DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION
SALOMON SMITH BARNEY
<PAGE>
This Registration Rights Agreement (this "Agreement") is made and entered
---------
into as of April 9, 1999, by and among The IT Group, Inc., a Delaware
corporation (the "Company"), the Guarantors listed on the signature pages hereto
-------
(each, a "Guarantor" and collectively, the "Guarantors"), and Donaldson, Lufkin
--------- ----------
& Jenrette Securities Corporation and Salomon Smith Barney (each an "Initial
-------
Purchaser" and, collectively, the "Initial Purchasers"), each of whom has agreed
- --------- ------------------
to purchase the Company's 11% Series A Senior Subordinated Notes due 2009 (the
"Series A Notes") pursuant to the Purchase Agreement (as defined below).
- ---------------
This Agreement is made pursuant to the Purchase Agreement, dated April 6,
1999, (the "Purchase Agreement"), by and among the Company, the Guarantors and
------------------
the Initial Purchasers. In order to induce the Initial Purchasers to purchase
the Series A Notes, the Company has agreed to provide the registration rights
set forth in this Agreement. The execution and delivery of this Agreement is a
condition to the obligations of the Initial Purchasers set forth in Section 3 of
the Purchase Agreement. Capitalized terms used herein and not otherwise defined
shall have the meaning assigned to them the Indenture, dated the Closing Date,
among the Company, the Guarantors and The Bank of New York, as Trustee, relating
to the Series A Notes and the Series B Notes (the "Indenture").
---------
The parties hereby agree as follows:
SECTION 1. DEFINITIONS
As used in this Agreement, the following capitalized terms shall have the
following meanings:
Act: The Securities Act of 1933, as amended.
---
Affiliate: As defined in Rule 144 of the Act.
---------
Broker-Dealer: Any broker or dealer registered under the Exchange Act.
-------------
Certificated Securities: Definitive Notes, as defined in the Indenture.
-----------------------
Closing Date: The date hereof.
------------
Commission: The Securities and Exchange Commission.
----------
Consummate: An Exchange Offer shall be deemed "Consummated" for purposes
----------
of this Agreement upon the occurrence of (a) the filing and effectiveness under
the Act of the Exchange Offer Registration Statement relating to the Series B
Notes to be issued in the Exchange Offer, (b) the maintenance of such Exchange
Offer Registration Statement continuously effective and the keeping of the
Exchange Offer open for a period not less than the period required pursuant to
Section 3(b) hereof and (c) the delivery by the Company to the Registrar under
the Indenture of Series B Notes in the same aggregate principal amount as the
aggregate principal amount of Series A Notes tendered by Holders thereof
pursuant to the Exchange Offer.
Consummation Deadline: As defined in Section 3(b) hereof.
---------------------
Effectiveness Deadline: As defined in Section 3(a) and 4(a) hereof.
----------------------
Exchange Act: The Securities Exchange Act of 1934, as amended.
------------
2
<PAGE>
Exchange Offer: The exchange and issuance by the Company of a principal
--------------
amount of Series B Notes (which shall be registered pursuant to the Exchange
Offer Registration Statement) equal to the outstanding principal amount of
Series A Notes that are tendered by such Holders in connection with such
exchange and issuance.
Exchange Offer Registration Statement: The Registration Statement relating
-------------------------------------
to the Exchange Offer, including the related Prospectus.
Exempt Resales: The transactions in which the Initial Purchasers propose
--------------
to sell the Series A Notes to certain "qualified institutional buyers," as such
term is defined in Rule 144A under the Act and pursuant to Regulation S under
the Act.
Filing Deadline: As defined in Sections 3(a) and 4(a) hereof.
---------------
Holders: As defined in Section 2 hereof.
-------
Prospectus: The prospectus included in a Registration Statement at the
----------
time such Registration Statement is declared effective, as amended or
supplemented by any prospectus supplement and by all other amendments thereto,
including post-effective amendments, and all material incorporated by reference
into such Prospectus.
Recommencement Date: As defined in Section 6(d) hereof.
-------------------
Registration Default: As defined in Section 5 hereof.
--------------------
Registration Statement: Any registration statement of the Company and the
----------------------
Guarantors relating to (a) an offering of Series B Notes pursuant to an Exchange
Offer or (b) the registration for resale of Transfer Restricted Securities
pursuant to the Shelf Registration Statement, in each case, (i) that is filed
pursuant to the provisions of this Agreement and (ii) including the Prospectus
included therein, all amendments and supplements thereto (including post-
effective amendments) and all exhibits and material incorporated by reference
therein.
Regulation S: Regulation S promulgated under the Act.
------------
Rule 144: Rule 144 promulgated under the Act.
--------
Series B Notes: The Company's 11% Series B Senior Notes due 2009 to be
--------------
issued pursuant to the Indenture: (i) in the Exchange Offer or (ii) as
contemplated by Section 4 hereof.
Shelf Registration Statement: As defined in Section 4 hereof.
----------------------------
Suspension Notice: As defined in Section 6(d) hereof.
-----------------
TIA: The Trust Indenture Act of 1939 (15 U.S.C. Section 77aaa-77bbbb) as
---
in effect on the date of the Indenture.
Transfer Restricted Securities: Each (A) Series A Note, until the earliest
------------------------------
to occur of (i) the date on which such Series A Note is exchanged in the
Exchange Offer for a Series B Note which is entitled to be resold to the public
by the Holder thereof without complying with the prospectus delivery
requirements of the Act, (ii) the date on which such Series A Note has been
disposed of in accordance
3
<PAGE>
with a Shelf Registration Statement (and the purchasers thereof have been issued
Series B Notes), or (iii) the date on which such Series A Note is distributed to
the public pursuant to Rule 144 under the Act and each (B) Series B Note held by
a Broker Dealer until the date on which such Series B Note is disposed of by a
Broker-Dealer pursuant to the "Plan of Distribution" contemplated by the
Exchange Offer Registration Statement (including the delivery of the Prospectus
contained therein).
SECTION 2. HOLDERS
A Person is deemed to be a holder of Transfer Restricted Securities (each,
a "Holder") whenever such Person is the record owner of Transfer Restricted
------
Securities.
SECTION 3. REGISTERED EXCHANGE OFFER
(a) Unless the Exchange Offer shall not be permitted by applicable federal
law (after the procedures set forth in Section 6(a)(i) below have been complied
with), the Company and the Guarantors shall (i) cause the Exchange Offer
Registration Statement to be filed with the Commission as soon as practicable
after the Closing Date, but in no event later than 75 days after the Closing
Date (such 75th day being the "Filing Deadline"), (ii) use all commercially
---------------
reasonable efforts to cause such Exchange Offer Registration Statement to become
effective at the earliest possible time, but in no event later than 180 days
after the Closing Date (such 180th day being the "Effectiveness Deadline"),
----------------------
(iii) in connection with the foregoing, (A) file all pre-effective amendments to
such Exchange Offer Registration Statement as may be necessary in order to cause
it to become effective, (B) file, if applicable, a post-effective amendment to
such Exchange Offer Registration Statement pursuant to Rule 430A under the Act
and (C) cause all necessary filings, if any, in connection with the registration
and qualification of the Series B Notes to be made under the Blue Sky laws of
such jurisdictions as are necessary to permit Consummation of the Exchange
Offer, and (iv) upon the effectiveness of such Exchange Offer Registration
Statement, commence and Consummate the Exchange Offer. The Exchange Offer shall
be on the appropriate form permitting (i) registration of the Series B Notes to
be offered in exchange for the Series A Notes that are Transfer Restricted
Securities and (ii) resales of Series B Notes by Broker-Dealers that tendered
into the Exchange Offer Series A Notes that such Broker-Dealer acquired for its
own account as a result of market making activities or other trading activities
(other than Series A Notes acquired directly from the Company or any of its
Affiliates) as contemplated by Section 3(c) below.
(b) The Company and the Guarantors shall use their respective commercially
reasonable efforts to cause the Exchange Offer Registration Statement to be
effective continuously, and shall keep the Exchange Offer open for a period of
not less than the minimum period required under applicable federal and state
securities laws to Consummate the Exchange Offer; provided, however, that in no
event shall such period be less than 20 Business Days. The Company and the
Guarantors shall cause the Exchange Offer to comply with all applicable federal
and state securities laws. No securities other than the Series B Notes shall be
included in the Exchange Offer Registration Statement. The Company and the
Guarantors shall use their respective commercially reasonable efforts to cause
the Exchange Offer to be Consummated on the earliest practicable date after the
Exchange Offer Registration Statement has become effective, but in no event
later than 30 business days thereafter (such 30th day being the "Consummation
------------
Deadline").
- --------
(c) The Company shall include a "Plan of Distribution" section in the
Prospectus contained in the Exchange Offer Registration Statement and indicate
therein that any Broker-Dealer who holds Transfer Restricted Securities that
were acquired for the account of such Broker-Dealer as a result of market-making
activities or other trading activities (other than Series A Notes acquired
directly from the Company or any Affiliate of the Company), may exchange such
Transfer Restricted Securities pursuant to the Exchange Offer. Such "Plan of
Distribution" section shall also contain all other information with respect to
such sales
4
<PAGE>
by such Broker-Dealers that the Commission may require in order to permit such
sales pursuant thereto, but such "Plan of Distribution" shall not name any such
Broker-Dealer or disclose the amount of Transfer Restricted Securities held by
any such Broker-Dealer, except to the extent required by the Commission as a
result of a change in policy, rules or regulations after the date of this
Agreement.
Because such Broker-Dealer may be deemed to be an "underwriter" within the
meaning of the Act and must, therefore, deliver a prospectus meeting the
requirements of the Act in connection with its initial sale of any Series B
Notes received by such Broker-Dealer in the Exchange Offer, the Company and
Guarantors shall permit the use of the Prospectus contained in the Exchange
Offer Registration Statement by such Broker-Dealer to satisfy such prospectus
delivery requirement. To the extent necessary to ensure that the prospectus
contained in the Exchange Offer Registration Statement is available for sales of
Series B Notes by Broker-Dealers, the Company and the Guarantors agree to use
their respective commercially reasonable efforts to keep the Exchange Offer
Registration Statement continuously effective, supplemented, amended and current
as required by and subject to the provisions of Section 6(a) and (c) hereof and
in conformity with the requirements of this Agreement, the Act and the policies,
rules and regulations of the Commission as announced from time to time, for a
period of 90 days from the Consummation Deadline (as such period may be extended
pursuant to the terms of this Agreement relating to a Shelf Registration) or
such shorter period as will terminate when all Transfer Restricted Securities
covered by such Registration Statement have been sold pursuant thereto. The
Company and the Guarantors shall provide sufficient copies of the latest version
of such Prospectus to such Broker-Dealers, promptly upon request, and in no
event later than one day after such request, at any time during such period. No
Broker-Dealer shall be authorized by the Company or any Guarantor to deliver and
shall not deliver the Prospectus after 90 days from the Consummation Deadline in
connection with the rules contemplated by this Section 3(c).
SECTION 4. SHELF REGISTRATION
(a) Shelf Registration. If (i) the Exchange Offer is not permitted by
------------------
applicable law (after the Company and the Guarantors have complied with the
procedures set forth in Section 6(a)(i) below) or (ii) if any Holder of Transfer
Restricted Securities shall notify the Company within 20 Business Days following
the Consummation Deadline that (A) such Holder was prohibited by law or
Commission policy from participating in the Exchange Offer or (B) such Holder
may not resell the Series B Notes acquired by it in the Exchange Offer to the
public without delivering a prospectus and the Prospectus contained in the
Exchange Offer Registration Statement is not appropriate or available for such
resales by such Holder or (C) such Holder is a Broker-Dealer and holds Series A
Notes acquired directly from the Company or any of its Affiliates, then the
Company and the Guarantors shall:
(x) cause to be filed, on or prior to 30 days after the earlier of (i) the
date on which the Company determines that the Exchange Offer Registration
Statement cannot be filed as a result of clause (a)(i) above and (ii) the date
on which the Company receives the notice specified in clause (a)(ii) above,
(such earlier date, the "Filing Deadline"), a shelf registration statement
---------------
pursuant to Rule 415 under the Act (which may be an amendment to the Exchange
Offer Registration Statement (the "Shelf Registration Statement")), relating to
----------------------------
all Transfer Restricted Securities, and
(y) shall use their respective commercially reasonable efforts to cause such
Shelf Registration Statement to become effective on or prior to 60 days after
the Filing Deadline for the Shelf Registration Statement (such 60th day the
"Effectiveness Deadline").
- -----------------------
If, after the Company has filed an Exchange Offer Registration Statement
that satisfies the requirements of Section 3(a) above, the Company is required
to file and make effective a Shelf Registration Statement solely because the
Exchange Offer is not permitted under applicable federal law (i.e., clause
(a)(i)
5
<PAGE>
above), then the filing of the Exchange Offer Registration Statement shall be
deemed to satisfy the requirements of clause (x) above; provided that, in such
event, the Company shall remain obligated to meet the Effectiveness Deadline set
forth in clause (y).
To the extent necessary to ensure that the Shelf Registration Statement is
available for sales of Transfer Restricted Securities by the Holders thereof
entitled to the benefit of this Section 4(a) and the other securities required
to be registered therein pursuant to Section 6(b)(ii) hereof, the Company and
the Guarantors shall use their respective commercially reasonable efforts to
keep any Shelf Registration Statement required by this Section 4(a) continuously
effective, supplemented, amended and current as required by and subject to the
provisions of Sections 6(b) and (c) hereof and in conformity with the
requirements of this Agreement, the Act and the policies, rules and regulations
of the Commission as announced from time to time, for the period from the date
of its effectiveness to the earlier of: (x) of the 2nd anniversary of the
effective date of the Shelf Registration (as extended pursuant to Section
6(c)(i)) following the Closing Date, and (y) the day following the date that all
Transfer Restricted Securities covered by such Shelf Registration Statement have
been sold pursuant thereto.
(b) Provision by Holders of Certain Information in Connection with the
------------------------------------------------------------------
Shelf Registration Statement. No Holder of Transfer Restricted Securities may
- ----------------------------
include any of its Transfer Restricted Securities in any Shelf Registration
Statement pursuant to this Agreement unless and until such Holder furnishes to
the Company in writing, within 20 days after receipt of a request therefor, the
information specified in Item 507 or 508 of Regulation S-K, as applicable, of
the Act for use in connection with any Shelf Registration Statement or
Prospectus or preliminary Prospectus included therein. No Holder of Transfer
Restricted Securities shall be entitled to liquidated damages pursuant to
Section 5 hereof unless and until such Holder shall have provided all such
information. Each selling Holder agrees to promptly furnish additional
information required to be disclosed in order to make the information previously
furnished to the Company by such Holder not materially misleading.
SECTION 5. LIQUIDATED DAMAGES
If (i) any Registration Statement required by this Agreement is not filed
with the Commission on or prior to the applicable Filing Deadline, (ii) any such
Registration Statement has not been declared effective by the Commission on or
prior to the applicable Effectiveness Deadline, (iii) the Exchange Offer has not
been Consummated on or prior to the Consummation Deadline or (iv) any
Registration Statement required by this Agreement is filed and declared
effective but shall thereafter cease to be effective or fail to be usable for
its intended purpose without being succeeded immediately by a post-effective
amendment to such Registration Statement that cures such failure and that is
itself declared effective immediately (each such event referred to in clauses
(i) through (iv), a "Registration Default"), then the Company and the Guarantors
--------------------
hereby jointly and severally agree to pay to each Holder of Transfer Restricted
Securities affected thereby liquidated damages in an amount equal to $.05 per
week per $1,000 in principal amount of Transfer Restricted Securities held by
such Holder for each week or portion thereof that the Registration Default
continues for the first 90-day period immediately following the occurrence of
such Registration Default. The amount of the liquidated damages shall increase
by an additional $.05 per week per $1,000 in principal amount of Transfer
Restricted Securities with respect to each subsequent 90-day period until all
Registration Defaults have been cured, up to a maximum amount of liquidated
damages of $.50 per week per $1,000 in principal amount of Transfer Restricted
Securities; provided that the Company and the Guarantors shall in no event be
required to pay liquidated damages for more than one Registration Default at any
given time. Notwithstanding anything to the contrary set forth herein, (1) upon
filing of the Exchange Offer Registration Statement (and/or, if applicable, the
Shelf Registration Statement), in the case of (i) above, (2) upon the
effectiveness of the Exchange Offer Registration Statement (and/or, if
applicable, the Shelf Registration Statement), in the case of (ii) above, (3)
upon Consummation of the Exchange Offer, in
6
<PAGE>
the case of (iii) above, or (4) upon the filing of a post-effective amendment to
the Registration Statement or an additional Registration Statement that causes
the Exchange Offer Registration Statement (and/or, if applicable, the Shelf
Registration Statement) to again be declared effective or made usable in the
case of (iv) above, the liquidated damages payable with respect to the Transfer
Restricted Securities as a result of such clause (i), (ii), (iii) or (iv), as
applicable, shall cease.
All accrued liquidated damages shall be paid to the Holders entitled
thereto, in the manner provided for the payment of interest in the Indenture, on
each Interest Payment Date, as more fully set forth in the Indenture and the
Notes. The Company of the Guarantors will pay all accrued liquidated damages by
depositing with the paying agent under the Indenture, in trust, for the benefit
of the Holders, prior to 10:00 A.M. New York City time on the next Interest
Payment Date, sums sufficient to pay the liquidated damages then due.
Notwithstanding the fact that any securities for which liquidated damages are
due cease to be Transfer Restricted Securities, all obligations of the Company
and the Guarantors to pay liquidated damages with respect to securities shall
survive until such time as such obligations with respect to such securities
shall have been satisfied in full.
SECTION 6. REGISTRATION PROCEDURES
(a) Exchange Offer Registration Statement. In connection with the Exchange
-------------------------------------
Offer, the Company and the Guarantors shall (x) comply with all applicable
provisions of Section 6(c) below, (y) use their respective commercially
reasonable efforts to effect such exchange and to permit the resale of Series B
Notes by Broker-Dealers that tendered in the Exchange Offer Series A Notes that
such Broker-Dealer acquired for its own account as a result of its market making
activities or other trading activities (other than Series A Notes acquired
directly from the Company or any of its Affiliates) being sold in accordance
with the intended method or methods of distribution thereof, and (z) comply with
all of the following provisions:
(i) If, following the date hereof there has been announced a change in
Commission policy with respect to exchange offers such as the Exchange
Offer, that in the reasonable opinion of counsel to the Company raises a
substantial question as to whether the Exchange Offer is permitted by
applicable federal law, the Company and the Guarantors hereby agree to seek
a no-action letter or other favorable decision from the Commission allowing
the Company and the Guarantors to Consummate an Exchange Offer for such
Transfer Restricted Securities. The Company and the Guarantors hereby
agree to pursue the issuance of such a decision to the Commission staff
level. In connection with the foregoing, the Company and the Guarantors
hereby agree to take all commercially reasonable actions as may be
requested by the Commission or otherwise required in connection with the
issuance of such decision, including without limitation (A) participating
in telephonic conferences with the Commission, (B) delivering to the
Commission staff an analysis prepared by counsel to the Company setting
forth the legal bases, if any, upon which such counsel has concluded that
such an Exchange Offer should be permitted and (C) diligently pursuing a
resolution (which need not be favorable) by the Commission staff.
(ii) As a condition to its participation in the Exchange Offer, each
Holder of Transfer Restricted Securities (including, without limitation,
any Holder who is a Broker Dealer) shall furnish, upon the request of the
Company, prior to the Consummation of the Exchange Offer, a written
representation to the Company and the Guarantors (which may be contained in
the letter of transmittal contemplated by the Exchange Offer Registration
Statement) to the effect that (A) it is not an Affiliate of the Company,
(B) it is not engaged in, and does not intend to engage in, and has no
arrangement or understanding with any person to participate in, a
distribution of the Series B Notes to be issued in the Exchange Offer and
(C) it is acquiring the Series B Notes in its ordinary course of business.
As a condition to its participation in the Exchange Offer each Holder using
the
7
<PAGE>
Exchange Offer to participate in a distribution of the Series B Notes
shall acknowledge and agree that, if the resales are of Series B Notes
obtained by such Holder in exchange for Series A Notes acquired directly
from the Company or an Affiliate thereof, it (1) could not, under
Commission policy as in effect on the date of this Agreement, rely on the
position of the Commission enunciated in Morgan Stanley and Co., Inc.
----------------------------
(available June 5, 1991) and Exxon Capital Holdings Corporation (available
----------------------------------
May 13, 1988), as interpreted in the Commission's letter to Shearman &
----------
Sterling dated July 2, 1993, and similar no-action letters (including, if
--------
applicable, any no-action letter obtained pursuant to clause (i) above),
and (2) must comply with the registration and prospectus delivery
requirements of the Act in connection with a secondary resale transaction
and that such a secondary resale transaction must be covered by an
effective registration statement containing the selling security holder
information required by Item 507 or 508, as applicable, of Regulation S-K.
(iii) Prior to effectiveness of the Exchange Offer Registration
Statement, the Company and the Guarantors shall provide a supplemental
letter to the Commission (A) stating that the Company and the Guarantors
are registering the Exchange Offer in reliance on the position of the
Commission enunciated in Exxon Capital Holdings Corporation (available May
----------------------------------
13, 1988), Morgan Stanley and Co., Inc. (available June 5, 1991) as
----------------------------
interpreted in the Commission's letter to Shearman & Sterling dated July 2,
-------------------
1993, and, if applicable, any no-action letter obtained pursuant to clause
(i) above, (B) including a representation that neither the Company nor any
Guarantor has entered into any arrangement or understanding with any Person
to distribute the Series B Notes to be received in the Exchange Offer and
that, to the best of the Company's and each Guarantor's information and
belief, each Holder participating in the Exchange Offer is acquiring the
Series B Notes in its ordinary course of business and has no arrangement or
understanding with any Person to participate in the distribution of the
Series B Notes received in the Exchange Offer and (C) any other undertaking
or representation required by the Commission as set forth in any no-action
letter obtained pursuant to clause (i) above, if applicable.
(b) Shelf Registration Statement.
----------------------------
In connection with the Shelf Registration Statement, the Company and
the Guarantors shall (i) comply with all the provisions of Section 6(c) below
and use their respective commercially reasonable efforts to effect such
registration to permit the sale of the Transfer Restricted Securities being sold
in accordance with the intended method or methods of distribution thereof (as
indicated in the information furnished to the Company pursuant to Section 4(b)
hereof), and pursuant thereto the Company and the Guarantors will prepare and
file with the Commission a Registration Statement relating to the registration
on any appropriate form under the Act, which form shall be available for the
sale of the Transfer Restricted Securities in accordance with the intended
method or methods of distribution thereof within the time periods and otherwise
in accordance with the provisions hereof, and
(ii) issue, upon the request of any Holder or purchaser of Series A
Notes covered by any Shelf Registration Statement contemplated by this
Agreement, Series B Notes having an aggregate principal amount equal to the
aggregate principal amount of Series A Notes sold pursuant to the Shelf
Registration Statement and surrendered to the Company for cancellation; the
Company shall register Series B Notes on the Shelf Registration Statement for
this purpose and issue the Series B Notes to the purchaser(s) of securities
subject to the Shelf Registration Statement in the names as such purchaser(s)
shall designate.
(c) General Provisions. In connection with any Registration Statement and
------------------
any related Prospectus required by this Agreement, the Company and the
Guarantors shall:
(i) use their respective commercially reasonable efforts to keep such
Registration Statement continuously effective and provide all requisite
financial statements for the period specified in Section 3 or 4 of this
Agreement, as applicable. Upon the occurrence of any event that
8
<PAGE>
would cause any such Registration Statement or the Prospectus
contained therein (A) to contain an untrue statement of material fact or
omit to state any material fact necessary to make the statements therein
not misleading or (B) not to be effective and usable for resale of Transfer
Restricted Securities during the period required by this Agreement, the
Company and the Guarantors shall file promptly an appropriate amendment to
such Registration Statement curing such defect, and, if Commission review
is required, use their respective commercially reasonable efforts to cause
such amendment to be declared effective as soon as practicable.
(ii) prepare and file with the Commission such amendments and post-
effective amendments to the applicable Registration Statement as may be
necessary to keep such Registration Statement effective for the applicable
period set forth in Section 3 or 4 hereof, as the case may be; cause the
Prospectus to be supplemented by any required Prospectus supplement, and as
so supplemented to be filed pursuant to Rule 424 under the Act, and to
comply fully with Rules 424, 430A and 462, as applicable, under the Act in
a timely manner; and comply with the provisions of the Act with respect to
the disposition of all securities covered by such Registration Statement
during the applicable period in accordance with the intended method or
methods of distribution by the sellers thereof set forth in such
Registration Statement or supplement to the Prospectus;
(iii) advise each Holder promptly and, if requested by such Holder,
confirm such advice in writing, (A) when the Prospectus or any Prospectus
supplement or post-effective amendment has been filed, and, with respect to
any applicable Registration Statement or any post-effective amendment
thereto, when the same has become effective, (B) of any request by the
Commission for amendments to the Registration Statement or amendments or
supplements to the Prospectus or for additional information relating
thereto, (C) of the issuance by the Commission of any stop order suspending
the effectiveness of the Registration Statement under the Act or of the
suspension by any state securities commission of the qualification of the
Transfer Restricted Securities for offering or sale in any jurisdiction, or
the initiation of any proceeding for any of the preceding purposes, (D) of
the existence of any fact or of the notification of the happening of any
event that makes any statement of a material fact made in the Registration
Statement, the Prospectus, any amendment or supplement thereto or any
document incorporated by reference therein untrue, or that requires the
making of any additions to or changes in the Registration Statement in
order to make the statements therein not misleading, or that requires the
making of any additions to or changes in the Prospectus in order to make
the statements therein, in the light of the circumstances under which they
were made, not misleading. If at any time the Commission shall issue any
stop order suspending the effectiveness of the Registration Statement, or
any state securities commission or other regulatory authority shall issue
an order suspending the qualification or exemption from qualification of
the Transfer Restricted Securities under state securities or Blue Sky laws,
the Company and the Guarantors shall use their respective commercially
reasonable efforts to obtain the withdrawal or lifting of such order at the
earliest possible time;
(iv) subject to Section 6(c)(i), if any fact or event contemplated by
Section 6(c)(iii)(D) above shall exist or have occurred, prepare a
supplement or post-effective amendment to the Registration Statement or
related Prospectus or any document incorporated therein by reference or
file any other required document so that, as thereafter delivered to the
purchasers of Transfer Restricted Securities, the Prospectus will not
contain an untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading;
(v) furnish to each Holder in connection with such exchange or sale,
if any, before filing with the Commission, copies of any Registration
Statement or any Prospectus included therein or
9
<PAGE>
any amendments or supplements to any such Registration Statement or
Prospectus (including all documents incorporated by reference after the
initial filing of such Registration Statement), which documents will be
subject to the review and comment of such Holders in connection with such
sale, if any, for a period of at least five Business Days, and the Company
will not file any such Registration Statement or Prospectus or any
amendment or supplement to any such Registration Statement or Prospectus
(including all such documents incorporated by reference) to which such
Holders shall reasonably object within five Business Days after the receipt
thereof. A Holder shall be deemed to have reasonably objected to such
filing if such Registration Statement, amendment, Prospectus or supplement,
as applicable, as proposed to be filed, contains an untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein not misleading or fails to comply with the applicable
requirements of the Act;
(vi) promptly prior to the filing of any document that is to be
incorporated by reference into a Registration Statement or Prospectus,
provide copies of such document to each Holder in connection with such
exchange or sale, if any, make the Company's and the Guarantors'
representatives available for discussion of such document and other
customary due diligence matters, and include such information in such
document prior to the filing thereof as such Holders may reasonably
request;
(vii) make available, at reasonable times, for inspection by each
Holder and any attorney or accountant retained by such Holders, all
financial and other records, pertinent corporate documents of the Company
and the Guarantors and cause the Company's and the Guarantors' officers,
directors and employees to supply all information reasonably requested by
any such Holder, attorney or accountant in connection with such
Registration Statement or any post-effective amendment thereto subsequent
to the filing thereof and prior to its effectiveness;
(viii) if requested by any Holders in connection with such exchange
or sale, promptly include in any Registration Statement or Prospectus,
pursuant to a supplement or post-effective amendment if necessary, such
information as such Holders may reasonably request to have included
therein, including, without limitation, information relating to the "Plan
of Distribution" of the Transfer Restricted Securities; and make all
required filings of such Prospectus supplement or post-effective amendment
as soon as practicable after the Company is notified of the matters to be
included in such Prospectus supplement or post-effective amendment;
(ix) furnish to each Holder in connection with such exchange or
sale, without charge, at least one copy of the Registration Statement, as
first filed with the Commission, and of each amendment thereto, including
all documents incorporated by reference therein and all exhibits (including
exhibits incorporated therein by reference);
(x) deliver to each Holder without charge, as many copies of the
Prospectus (including each preliminary prospectus) and any amendment or
supplement thereto as such Persons reasonably may request; the Company and
the Guarantors hereby consent to the use (in accordance with law) of the
Prospectus and any amendment or supplement thereto by each selling Holder
in connection with the offering and the sale of the Transfer Restricted
Securities covered by the Prospectus or any amendment or supplement
thereto;
(xi) upon the request of the Holders of a majority of the aggregate
principal amount of the Transfer Restricted Securities, enter into such
agreements (including underwriting agreements) and make such
representations and warranties and take all such other actions in
connection therewith in order to expedite or facilitate the disposition of
the Transfer Restricted Securities
10
<PAGE>
pursuant to any applicable Registration Statement contemplated by this
Agreement as may be reasonably requested by any Holder in connection with
any sale or resale pursuant to any applicable Registration Statement. In
such connection, the Company and the Guarantors shall:
(A) upon request of any Holder, furnish (or in the case of
paragraphs (2) and (3), use its commercially reasonable efforts to cause
to be furnished) to each Holder, upon Consummation of the Exchange Offer
or upon the effectiveness of the Shelf Registration Statement, as the
case may be:
(1) a certificate, dated such date, signed on behalf of the Company
and each Guarantor by (x) the President or any Vice President and (y)
a principal financial or accounting officer of the Company and such
Guarantor, confirming, as of the date thereof, the matters set forth
in Sections 6(aa) and 9(b) of the Purchase Agreement and such other
similar matters as such Holders may reasonably request;
(2) an opinion, dated the date of Consummation of the Exchange
Offer or the date of effectiveness of the Shelf Registration
Statement, as the case may be, of counsel for the Company and counsel
for the Guarantors covering matters similar to those set forth in
paragraphs (e), (f), (g) of Section 9 of the Purchase Agreement and
such other matter as such Holder may reasonably request, and in any
event including a statement to the effect that such counsel has
participated in conferences with officers and other representatives of
the Company and the Guarantors, representatives of the independent
public accountants for the Company and the Guarantors and have
considered the matters required to be stated therein and the
statements contained therein, although such counsel has not
independently verified the accuracy, completeness or fairness of such
statements; and that such counsel advises that, on the basis of the
foregoing (relying as to materiality to the extent such counsel deems
appropriate upon the statements of officers and other representatives
of the Company and the Guarantors and without independent check or
verification), no facts came to such counsel's attention that caused
such counsel to believe that the applicable Registration Statement, at
the time such Registration Statement or any post-effective amendment
thereto became effective and, in the case of the Exchange Offer
Registration Statement, as of the date of Consummation of the Exchange
Offer, contained an untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary to
make the statements therein not misleading, or that the Prospectus
contained in such Registration Statement as of its date and, in the
case of the opinion dated the date of Consummation of the Exchange
Offer, as of the date of Consummation, contained an untrue statement
of a material fact or omitted to state a material fact necessary in
order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. Without
limiting the foregoing, such counsel may state further that such
counsel assumes no responsibility for, and has not independently
verified, the accuracy, completeness or fairness of the financial
statements, notes and schedules and other financial data included in
any Registration Statement contemplated by this Agreement or the
related Prospectus; and
(3) a customary comfort letter, dated the date of Consummation of
the Exchange Offer, or as of the date of effectiveness of the Shelf
Registration Statement, as the case may be, from the Company's
independent accountants, in
11
<PAGE>
the customary form and covering matters of the type customarily
covered in comfort letters to underwriters in connection with
underwritten offerings, and affirming the matters set forth in the
comfort letters delivered pursuant to Section 9(i) of the Purchase
Agreement; and
(B) deliver such other documents and certificates as may be
reasonably requested by the selling Holders to evidence compliance with
the matters covered in clause (A) above and with any customary conditions
contained in the any agreement entered into by the Company and the
Guarantors pursuant to this clause (xi);
(xii) prior to any public offering of Transfer Restricted Securities,
cooperate with the selling Holders and their counsel in connection with the
registration and qualification of the Transfer Restricted Securities under
the securities or Blue Sky laws of such jurisdictions as the selling
Holders may request and do any and all other acts or things necessary or
advisable to enable the disposition in such jurisdictions of the Transfer
Restricted Securities covered by the applicable Registration Statement;
provided, however, that neither the Company nor any Guarantor shall be
required to register or qualify as a foreign corporation where it is not
now so qualified or to take any action that would subject it to the service
of process in suits or to taxation, other than as to matters and
transactions relating to the Registration Statement, in any jurisdiction
where it is not now so subject;
(xiii) in connection with any sale of Transfer Restricted Securities
that will result in such securities no longer being Transfer Restricted
Securities, cooperate with the Holders to facilitate the timely preparation
and delivery of certificates representing Transfer Restricted Securities to
be sold and not bearing any restrictive legends; and to register such
Transfer Restricted Securities in such denominations and such names as the
selling Holders may request at least two Business Days prior to such sale
of Transfer Restricted Securities;
(xiv) use their respective commercially reasonable efforts to cause
the disposition of the Transfer Restricted Securities covered by the
Registration Statement to be registered with or approved by such other
governmental agencies or authorities as may be necessary to enable the
seller or sellers thereof to consummate the disposition of such Transfer
Restricted Securities, subject to the proviso contained in clause (xii)
above;
(xv) provide a CUSIP number for all Transfer Restricted Securities
no later than the effective date of a Registration Statement covering such
Transfer Restricted Securities and provide the Trustee under the Indenture
with printed certificates for the Transfer Restricted Securities which are
in a form eligible for deposit with the Depository Trust Company;
(xvi) otherwise use their respective commercially reasonable efforts
to comply with all applicable rules and regulations of the Commission, and
make generally available to its security holders with regard to any
applicable Registration Statement, as soon as practicable, a consolidated
earnings statement meeting the requirements of Rule 158 (which need not be
audited) covering a twelve-month period beginning after the effective date
of the Registration Statement (as such term is defined in paragraph (c) of
Rule 158 under the Act);
(xvii) cause the Indenture to be qualified under the TIA not later
than the effective date of the first Registration Statement required by
this Agreement and, in connection therewith, cooperate with the Trustee and
the Holders to effect such changes to the Indenture as may be required for
such Indenture to be so qualified in accordance with the terms of the TIA;
and execute and use its
12
<PAGE>
commercially reasonable efforts to cause the Trustee to execute, all
documents that may be required to effect such changes and all other forms
and documents required to be filed with the Commission to enable such
Indenture to be so qualified in a timely manner; and
(xviii) provide promptly to each Holder, upon request, each document
filed with the Commission pursuant to the requirements of Section 13 or
Section 15(d) of the Exchange Act.
(d) Restrictions on Holders. Each Holder agrees by acquisition of a
-----------------------
Transfer Restricted Security that, upon receipt of the notice referred to in
Section 6(c)(iii)(C) or any notice from the Company of the existence of any fact
of the kind described in Section 6(c)(iii)(D) hereof (in each case, a
"Suspension Notice"), such Holder will forthwith discontinue disposition of
- ------------------
Transfer Restricted Securities pursuant to the applicable Registration Statement
until (i) such Holder has received copies of the supplemented or amended
Prospectus contemplated by Section 6(c)(iv) hereof, or (ii) such Holder is
advised in writing by the Company that the use of the Prospectus may be resumed,
and has received copies of any additional or supplemental filings that are
incorporated by reference in the Prospectus (in each case, the "Recommencement
--------------
Date"). Each Holder receiving a Suspension Notice hereby agrees that it will
- ----
either (i) destroy any Prospectuses, other than permanent file copies, then in
such Holder's possession which have been replaced by the Company with more
recently dated Prospectuses or (ii) deliver to the Company (at the Company's
expense) all copies, other than permanent file copies, then in such Holder's
possession of the Prospectus covering such Transfer Restricted Securities that
was current at the time of receipt of the Suspension Notice. The time period
regarding the effectiveness of such Registration Statement set forth in Section
3 or 4 hereof, as applicable, shall be extended by a number of days equal to the
number of days in the period from and including the date of delivery of the
Suspension Notice to the date of delivery of the Recommencement Date.
SECTION 7. REGISTRATION EXPENSES
(a) All expenses incident to the Company's and the Guarantors' performance
of or compliance with this Agreement will be borne by the Company, regardless of
whether a Registration Statement becomes effective, including without
limitation: (i) all registration and filing fees and expenses; (ii) all fees
and expenses of compliance with federal securities and state Blue Sky or
securities laws; (iii) all expenses of printing (including printing certificates
for the Series B Notes to be issued in the Exchange Offer and printing of
Prospectuses), messenger and delivery services and telephone; (iv) all fees and
disbursements of counsel for the Company, the Guarantors and the Holders of
Transfer Restricted Securities; (v) all application and filing fees in
connection with listing the Series B Notes on a national securities exchange or
automated quotation system pursuant to the requirements hereof; and (vi) all
fees and disbursements of independent certified public accountants of the
Company and the Guarantors (including the expenses of any special audit and
comfort letters required by or incident to such performance).
The Company will, in any event, bear its and the Guarantors' internal
expenses (including, without limitation, all salaries and expenses of its
officers and employees performing legal or accounting duties), the expenses of
any annual audit and the fees and expenses of any Person, including special
experts, retained by the Company or the Guarantors.
(b) In connection with any Registration Statement required by this
Agreement (including, without limitation, the Exchange Offer Registration
Statement and the Shelf Registration Statement), the Company and the Guarantors
will reimburse the Initial Purchasers and the Holders of Transfer Restricted
Securities who are tendering Series A Notes in the Exchange Offer and/or selling
or reselling Series A Notes or Series B Notes pursuant to the "Plan of
Distribution" contained in the Exchange Offer Registration Statement or the
Shelf Registration Statement, as applicable, for the reasonable fees and
disbursements of
13
<PAGE>
not more than one counsel, who shall be Latham & Watkins, unless another firm
shall be chosen by the Holders of a majority in principal amount of the Transfer
Restricted Securities for whose benefit such Registration Statement is being
prepared.
SECTION 8. INDEMNIFICATION
(a) The Company and the Guarantors agree, jointly and severally, to
indemnify and hold harmless each Holder, its directors, officers and each
Person, if any, who controls such Holder (within the meaning of Section 15 of
the Act or Section 20 of the Exchange Act), from and against any and all losses,
claims, damages, liabilities, judgments, (including without limitation, any
legal or other expenses incurred in connection with investigating or defending
any matter, including any action that could give rise to any such losses,
claims, damages, liabilities or judgments) caused by any untrue statement or
alleged untrue statement of a material fact contained in any Registration
Statement, preliminary prospectus or Prospectus (or any amendment or supplement
thereto) provided by the Company to any Holder or any prospective purchaser of
Series B Notes or registered Series A Notes, or caused by any omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, except insofar as
such losses, claims, damages, liabilities or judgments are caused by an untrue
statement or omission or alleged untrue statement or omission that is based upon
information relating to any of the Holders furnished in writing to the Company
by any of the Holders.
(b) Each Holder of Transfer Restricted Securities agrees, severally and not
jointly, to indemnify and hold harmless the Company and the Guarantors, and
their respective directors and officers, and each person, if any, who controls
(within the meaning of Section 15 of the Act or Section 20 of the Exchange Act)
the Company, or the Guarantors to the same extent as the foregoing indemnity
from the Company and the Guarantors set forth in section (a) above, but only
with reference to information relating to such Holder furnished in writing to
the Company by such Holder expressly for use in any Registration Statement. In
no event shall any Holder, its directors, officers or any Person who controls
such Holder be liable or responsible for any amount in excess of the amount by
which the total amount received by such Holder with respect to its sale of
Transfer Restricted Securities pursuant to a Registration Statement exceeds (i)
the amount paid by such Holder for such Transfer Restricted Securities and (ii)
the amount of any damages that such Holder, its directors, officers or any
Person who controls such Holder has otherwise been required to pay by reason of
such untrue or alleged untrue statement or omission or alleged omission.
(c) In case any action shall be commenced involving any person in respect
of which indemnity may be sought pursuant to Section 8(a) or 8(b) (the
"indemnified party"), the indemnified party shall promptly notify the person
- ------------------
against whom such indemnity may be sought (the "indemnifying person") in writing
-------------------
and the indemnifying party shall assume the defense of such action, including
the employment of counsel reasonably satisfactory to the indemnified party and
the payment of all reasonable fees and expenses of such counsel, as incurred
(except that in the case of any action in respect of which indemnity may be
sought pursuant to both Sections 8(a) and 8(b), a Holder shall not be required
to assume the defense of such action pursuant to this Section 8(c), but may
employ separate counsel and participate in the defense thereof, but the fees and
expenses of such counsel, except as provided below, shall be at the expense of
the Holder). Any indemnified party shall have the right to employ separate
counsel in any such action and participate in the defense thereof, but the fees
and expenses of such counsel shall be at the expense of the indemnified party
unless (i) the employment of such counsel shall have been specifically
authorized in writing by the indemnifying party, (ii) the indemnifying party
shall have failed to assume the defense of such action or employ counsel
reasonably satisfactory to the indemnified party or (iii) the named parties to
any such action (including any impleaded parties) include both the indemnified
party and the indemnifying party, and the indemnified party shall have been
advised by such counsel that there may be one or more legal defenses available
to it which are different from or additional to those available to the
indemnifying
14
<PAGE>
party (in which case the indemnifying party shall not have the right to assume
the defense of such action on behalf of the indemnified party). In any such
case, the indemnifying party shall not, in connection with any one action or
separate but substantially similar or related actions in the same jurisdiction
arising out of the same general allegations or circumstances, be liable for the
fees and expenses of more than one separate firm of attorneys (in addition to
any local counsel) for all indemnified parties and all reasonable fees and
expenses shall be reimbursed as they are incurred. Such firm shall be designated
in writing by a majority of the Holders, in the case of the parties indemnified
pursuant to Section 8(a), and by the Company and Guarantors, in the case of
parties indemnified pursuant to Section 8(b). The indemnifying party shall
indemnify and hold harmless the indemnified party from and against any and all
losses, claims, damages, liabilities and judgments by reason of any settlement
of any action (i) effected with its written consent or (ii) effected without its
written consent if the settlement is entered into more than twenty business days
after the indemnifying party shall have received a request from the indemnified
party for reimbursement for the fees and expenses of counsel (in any case where
such reasonable fees and expenses are at the expense of the indemnifying party)
and, prior to the date of such settlement, the indemnifying party shall have
failed to comply with such reimbursement request. No indemnifying party shall,
without the prior written consent of the indemnified party, effect any
settlement or compromise of, or consent to the entry of judgment with respect
to, any pending or threatened action in respect of which the indemnified party
is or could have been a party and indemnity or contribution may be or could have
been sought hereunder by the indemnified party, unless such settlement,
compromise or judgment (i) includes an unconditional release of the indemnified
party from all liability on claims that are or could have been the subject
matter of such action and (ii) does not include a statement as to or an
admission of fault, culpability or a failure to act, by or on behalf of the
indemnified party.
(d) To the extent that the indemnification provided for in this Section 8
is unavailable to an indemnified party in respect of any losses, claims,
damages, liabilities or judgments referred to therein, then each indemnifying
party, in lieu of indemnifying such indemnified party, shall contribute to the
amount paid or payable by such indemnified party as a result of such losses,
claims, damages, liabilities or judgments (i) in such proportion as is
appropriate to reflect the relative benefits received by the Company and the
Guarantors, on the one hand, and the Holders, on the other hand, from their sale
of Transfer Restricted Securities or (ii) if the allocation provided by clause
8(d)(i) is not permitted by applicable law, in such proportion as is appropriate
to reflect not only the relative benefits referred to in clause 8(d)(i) above
but also the relative fault of the Company and the Guarantors, on the one hand,
and of the Holder, on the other hand, in connection with the statements or
omissions which resulted in such losses, claims, damages, liabilities or
judgments, as well as any other relevant equitable considerations. The relative
fault of the Company and the Guarantors, on the one hand, and of the Holder, on
the other hand, shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information supplied by the
Company or such Guarantor, on the one hand, or by the Holder, on the other hand,
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The amount paid
or payable by a party as a result of the losses, claims, damages, liabilities
and judgments referred to above shall be deemed to include, subject to the
limitations set forth in the second paragraph of Section 8(a), any legal or
other fees or expenses reasonably incurred by such party in connection with
investigating or defending any action or claim.
The Company, the Guarantors and each Holder agree that it would not be just
and equitable if contribution pursuant to this Section 8(d) were determined by
pro rata allocation (even if the Holders were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to in the immediately preceding paragraph.
The amount paid or payable by an indemnified party as a result of the losses,
claims, damages, liabilities or judgments referred to in the immediately
preceding paragraph shall be deemed to include, subject to the limitations set
forth
15
<PAGE>
above, any legal or other expenses reasonably incurred by such indemnified party
in connection with investigating or defending any matter, including any action
that could have given rise to such losses, claims, damages, liabilities or
judgments. Notwithstanding the provisions of this Section 8, no Holder, its
directors, its officers or any Person, if any, who controls such Holder shall be
required to contribute, in the aggregate, any amount in excess of the amount by
which the total received by such Holder with respect to the sale of Transfer
Restricted Securities pursuant to a Registration Statement exceeds (i) the
amount paid by such Holder for such Transfer Restricted Securities and (ii) the
amount of any damages which such Holder has otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. The Holders'
obligations to contribute pursuant to this Section 8(c) are several in
proportion to the respective principal amount of Transfer Restricted Securities
held by each Holder hereunder and not joint.
SECTION 9. RULE 144A AND RULE 144
The Company and each Guarantor agrees with each Holder, for so long as any
Transfer Restricted Securities remain outstanding and during any period in which
the Company or such Guarantor (i) is not subject to Section 13 or 15(d) of the
Exchange Act, to make available, upon request of any Holder, to such Holder or
beneficial owner of Transfer Restricted Securities in connection with any sale
thereof and any prospective purchaser of such Transfer Restricted Securities
designated by such Holder or beneficial owner, the information required by Rule
144A(d)(4) under the Act in order to permit resales of such Transfer Restricted
Securities pursuant to Rule 144A, and (ii) is subject to Section 13 or 15 (d) of
the Exchange Act, to make all filings required thereby in a timely manner in
order to permit resales of such Transfer Restricted Securities pursuant to Rule
144.
SECTION 10. EFM ACQUISITION
Pursuant to the terms of an Asset Purchase Agreement, dated as of March 8,
1999, by and between the Company and ICF Kaiser International, Inc. ("ICFK"),
----
the Company agreed to purchase specified assets and assume specified liabilities
(including all of the issued and outstanding stock of certain subsidiaries of
ICFK (the "EFM Subsidiaries")) ("EFM") of ICFK Environment and Facilities
---------------- ---
Management Group (the "EFM Acquisition"). Upon consummation of the EFM
---------------
Acquisition, the EFM Subsidiaries shall be formally dissolved under the Delaware
General Corporation Law, and all of the assets and liabilities of such
subsidiaries shall be contributed to IT Environmental and Facilities, Inc., a
Delaware corporation.
SECTION 11. MISCELLANEOUS
(a) Remedies. The Company and the Guarantors acknowledge and agree that
--------
any failure by the Company and/or the Guarantors to comply with their respective
obligations under Sections 3 and 4 hereof may result in material irreparable
injury to the Initial Purchasers or the Holders for which there is no adequate
remedy at law, that it will not be possible to measure damages for such injuries
precisely and that, in the event of any such failure, the Initial Purchasers or
any Holder may obtain such relief as may be required to specifically enforce the
Company's and the Guarantors' obligations under Sections 3 and 4 hereof. The
Company and the Guarantors further agree to waive the defense in any action for
specific performance that a remedy at law would be adequate.
(b) No Inconsistent Agreements. Neither the Company nor any Guarantor
--------------------------
will, on or after the date of this Agreement, enter into any agreement with
respect to its securities that is inconsistent with the
16
<PAGE>
rights granted to the Holders in this Agreement or otherwise conflicts with the
provisions hereof. The rights granted to the Holders hereunder do not in any way
conflict with and are not inconsistent with the rights granted to the holders of
the Company's and the Guarantors' securities under any agreement in effect on
the date hereof.
(c) Amendments and Waivers. The provisions of this Agreement may not be
----------------------
amended, modified or supplemented, and waivers or consents to or departures from
the provisions hereof may not be given unless (i) in the case of Section 5
hereof and this Section 10(c)(i), the Company has obtained the written consent
of Holders of all outstanding Transfer Restricted Securities and (ii) in the
case of all other provisions hereof, the Company has obtained the written
consent of Holders of a majority of the outstanding principal amount of Transfer
Restricted Securities (excluding Transfer Restricted Securities held by the
Company or its Affiliates). Notwithstanding the foregoing, a waiver or consent
to departure from the provisions hereof that relates exclusively to the rights
of Holders whose Transfer Restricted Securities are being tendered pursuant to
the Exchange Offer, and that does not affect directly or indirectly the rights
of other Holders whose Transfer Restricted Securities are not being tendered
pursuant to such Exchange Offer, may be given by the Holders of a majority of
the outstanding principal amount of Transfer Restricted Securities subject to
such Exchange Offer.
(d) Third Party Beneficiary. The Holders shall be third party
-----------------------
beneficiaries to the agreements made hereunder between the Company and the
Guarantors, on the one hand, and the Initial Purchasers, on the other hand, and
shall have the right to enforce such agreements directly to the extent they may
deem such enforcement necessary or advisable to protect its rights or the rights
of Holders hereunder.
(e) Notices. All notices and other communications provided for or
-------
permitted hereunder shall be made in writing by hand-delivery, first-class mail
(registered or certified, return receipt requested), telex, telecopier, or air
courier guaranteeing overnight delivery:
(i) if to a Holder, at the address set forth on the records of the
Registrar under the Indenture, with a copy to the Registrar under the
Indenture; and
(ii) if to the Company or the Guarantors:
The IT Group, Inc.
12790 Mosside Boulevard
Monroeville, PA 15146-2792
Telecopier No.: (412) 858-3997
Attention: General Counsel
and
The IT Group, Inc.
12790 Mosside Boulevard
Monroeville, PA 15146-2792
Telecopier No.: (412) 858-3997
Attention: Senior Corporate Counsel
17
<PAGE>
With a copy to:
Gibson, Dunn & Crutcher LLP
333 South Grand Avenue
Los Angeles, CA 90071
Telecopier No.: (213) 229-7520
Attention: Peter F. Ziegler, Esq.
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five Business
Days after being deposited in the mail, postage prepaid, if mailed; when receipt
acknowledged, if telecopied; and on the next business day, if timely delivered
to an air courier guaranteeing overnight delivery.
Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the Trustee at the
address specified in the Indenture.
(f) Successors and Assigns. This Agreement shall inure to the benefit of
----------------------
and be binding upon the successors and assigns of each of the parties, including
without limitation and without the need for an express assignment, subsequent
Holders; provided, that nothing herein shall be deemed to permit any assignment,
transfer or other disposition of Transfer Restricted Securities in violation of
the terms hereof or of the Purchase Agreement or the Indenture. If any
transferee of any Holder shall acquire Transfer Restricted Securities in any
manner, whether by operation of law or otherwise, such Transfer Restricted
Securities shall be held subject to all of the terms of this Agreement, and by
taking and holding such Transfer Restricted Securities such Person shall be
conclusively deemed to have agreed to be bound by and to perform all of the
terms and provisions of this Agreement, including the restrictions on resale set
forth in this Agreement and, if applicable, the Purchase Agreement, and such
Person shall be entitled to receive the benefits hereof.
(g) Counterparts. This Agreement may be executed in any number of
------------
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(h) Headings. The headings in this Agreement are for convenience of
--------
reference only and shall not limit or otherwise affect the meaning hereof.
(i) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
-------------
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE
CONFLICT OF LAW RULES THEREOF.
(j) Severability. In the event that any one or more of the provisions
------------
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable, the validity, legality and enforceability of
any such provision in every other respect and of the remaining provisions
contained herein shall not be affected or impaired thereby.
(k) Entire Agreement. This Agreement is intended by the parties as a final
----------------
expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein
with respect to the registration rights granted with respect to the Transfer
Restricted Securities. This Agreement supersedes all prior agreements and
understandings between the parties with respect to such subject matter.
18
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
The IT Group, Inc.
By:__________________________________
Name: Anthony J. DeLuca
Title: Chief Executive Officer and President
Alaska Remediation Services Corp.
Beneco Enterprises, Inc.
Fluor Daniel Environmental Services, Inc.
GCAP Services, Inc.
Gradient Corporation
Groundwater Technology, Inc.
IT C&V Operations, Inc.
IT Corporation
IT Corporation of North Carolina
IT E&C Operations, Inc.
IT Environmental and Facilities, Inc.
IT International Holdings, Inc.
IT International Investments, Inc.
IT International Operations, Inc.
IT Investment Holdings, Inc.
IT Japan Services, Inc.
IT Korea Services, Inc.
IT Tulsa Holdings, Inc.
Jellinek, Schwartz and Connolly, Inc.
JSC International, Inc.
Landbank, Inc.
Landbank Remediation Corp.
Pacific Environmental Group Inc.
PHR Environmental Consultants, Inc.
Sielken, Inc.
OHM Corporation
OHM Remediation Services, Corp.
37-02 College Point Boulevard, LLC
Empire State I, LLC
Empire State II, LLC
Kato Road LLC
Landbank Environmental Properties LLC
Northeast Restoration Company, LLC
The Dorchester Group
By:__________________________________
Name: James G. Kirk
Title: Vice President
<PAGE>
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By:__________________________________
Name:
Title:
SALOMON SMITH BARNEY
By:__________________________________
Name:
Title:
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-4) and related prospectus of The IT Group, Inc.
for the registration of $225 million of Senior Subordinated notes due 2009 and
to the incorporation by reference therein of our report dated February 15, 1999
(except for the subsequent event footnote as to which the date is March 8,
1999), with respect to the consolidated financial statements and schedule of
The IT Group, Inc. included in its Transition Report (Form 10-K) for the nine
months ended December 25, 1998, filed with the Securities and Exchange
Commission.
We also consent to the use of our report dated February 15, 1999 (except for
the subsequent event footnote as to which the date is March 8, 1999), of The IT
Group, Inc., the use of our report dated February 12, 1998 (except for Note 1,
as to which the date is May 4, 1998) of OHM Corporation for the year ended
December 31, 1997, and the use of our report dated November 20, 1998 (except
for Note 8, as to which the date is December 3, 1998) of Fluor Daniel GTI, Inc.
for the year ended October 31, 1998, in the Registration Statement (Form S-4)
and related prospectus of The IT Group, Inc. for the registration of $225
million of Senior Subordinated notes due 2009.
Ernst & Young LLP
Pittsburgh, Pennsylvania
April 20, 1999
<PAGE>
EXHIBIT 23.3
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form S-4 (File
no. ) of our report dated March 11, 1999, on our audit of the statement of
assets acquired and liabilities assumed of the Environmental and Facilities
Management Group of ICF Kaiser International, Inc. as of December 31, 1998, and
the related statement of operating revenue and expenses for the year then
ended. We also consent to the reference to our firm under the caption
"Experts".
PricewaterhouseCoopers LLP
McLean, VA
April 22, 1999
<PAGE>
EXHIBIT 23.4
CONSENT OF AUDITORS
We consent to the inclusion in this registration statement on Form S-4 (File
no. XXX) and the related prospectus of The IT Group, Inc. for the registration
of $225,000,000, 11 1/4% Series B Senior Subordinated Notes due 2009 of our
report dated February 22, 1999, to the Directors of Roche ltee, Groupe conseil
on our audit of the consolidated balance sheets of Roche ltee, Groupe conseil
as at December 31, 1998, 1997 and 1996 and the related consolidated statements
of operations, stockholders' equity and cash flows for each of the years then
ended. We also consent to the reference to our firm under the caption "Experts"
in the above-described registration statement on Form S-4.
Mallette Maheu
General Partnership
Chartered accountants
Quebec City, Canada
April 22, 1999
<PAGE>
EXHIBIT 25.1
= = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = =
FORM T-1
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2) [_]
----------------------------
THE BANK OF NEW YORK
(Exact name of trustee as specified in its charter)
<TABLE>
<S> <C>
New York 13-5160382
(State of incorporation (I.R.S. employer
if not a U.S. national bank) identification no.)
One Wall Street, New York, NY 10286
(Address of principal executive offices) (Zip code)
</TABLE>
------------------------------
THE IT GROUP, INC.
(Exact name of obligor as specified in its charter)
<TABLE>
<S> <C>
Delaware 33-0001212
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
</TABLE>
Table of additional Co-Registrants
----------------------------------
<TABLE>
<S> <C> <C>
Alaska Remediation Services Corp. Alaska 92-0161467
IT Corporation California 94-1259053
Fluor Daniel Environmental Services, Inc. California 33-0437335
Pacific Environmental Group, Inc. California 94-3027373
Kato Road LLC California 84-1417566
Jellinek, Schwartz & Connolly, Inc. District of Columbia 52-1139905
JSC International, Inc. District of Columbia 52-1862081
Empire State I, LLC Delaware 84-1479218
Empire State II, LLC Delaware 84-1479217
GCAP Services, Inc. Delaware 52-2077368
Groundwater Technology, Inc. Delaware 02-0324047
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
IT C & V Operations, Inc. Delaware 23-2946547
IT E & C Operations, Inc. Delaware 23-2946696
IT Environmental and Facilities, Inc. Delaware 25-1833796
IT International Holdings, Inc. Delaware 51-0386873
IT International Investments, Inc. Delaware 04-2944746
IT International Operations, Inc. Delaware 93-1018025
IT Investment Holdings, Inc. Delaware 33-0721650
IT Japan Services Inc. Delaware 25-1832096
IT Korea Services Inc. Delaware 25-1832097
Landbank Environmental Properties LLC Delaware 84-1417843
LandBank, Inc. Delaware 77-0391324
LandBank Remediation Corp. Delaware 94-3223144
Northeast Restoration Company, LLC Delaware 84-1479222
PHR Environmental Consultants, Inc. Delaware 33-0754921
The Dorchester Group Delaware 84-1479214
37-02 College Point Boulevard, LLC Delaware 84-1479216
Gradient Corporation Massachusetts 04-2857447
IT Corporation of North Carolina, Inc. North Carolina 56-1231308
OHM Corporation Ohio 34-1503050
OHM Remediation Services Corp. Ohio 34-1275607
IT-Tulsa Holdings, Inc. Oklahoma 73-1004178
Sielken, Inc. Texas 76-0143090
Beneco Enterprises, Inc. Utah 87-0349697
2790 Mosside Boulevard
Monroeville, Pennsylvania 15146-2792
(Address of principal executive offices) (Zip code)
</TABLE>
----------------------------------
11-1/4% Series B Senior Subordinated Notes due 2009
(Title of the indenture securities)
= = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = =
-2-
<PAGE>
1. General information. Furnish the following information as to the Trustee:
(a) Name and address of each examining or supervising authority to which
it is subject.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
Name Address
- -------------------------------------------------------------------------------------------------
<S> <C>
Superintendent of Banks of the State of 2 Rector Street, New York, NY
New York 10006, and Albany, NY 12203
Federal Reserve Bank of New York 33 Liberty Plaza, New York, NY
10045
Federal Deposit Insurance Corporation Washington, DC 20429
New York Clearing House Association New York, NY 10005
</TABLE>
(b) Whether it is authorized to exercise corporate trust powers.
Yes.
2. Affiliations with Obligor.
If the obligor is an affiliate of the trustee, describe each such
affiliation.
None.
16. List of Exhibits.
Exhibits identified in parentheses below, on file with the Commission, are
incorporated herein by reference as an exhibit hereto, pursuant to Rule 7a-
29 under the Trust Indenture Act of 1939 (the "Act") and 17 C.F.R.
229.10(d).
1. A copy of the Organization Certificate of The Bank of New York
(formerly Irving Trust Company) as now in effect, which contains the
authority to commence business and a grant of powers to exercise
corporate trust powers. (Exhibit 1 to Amendment No. 1 to Form T-1
filed with Registration Statement No. 33-6215, Exhibits 1a and 1b to
Form T-1 filed with Registration Statement No. 33-21672 and Exhibit 1
to Form T-1 filed with Registration Statement No. 33-29637.)
4. A copy of the existing By-laws of the Trustee. (Exhibit 4 to Form T-1
filed with Registration Statement No. 33-31019.)
6. The consent of the Trustee required by Section 321(b) of the Act.
(Exhibit 6 to Form T-1 filed with Registration Statement No. 33-
44051.)
7. A copy of the latest report of condition of the Trustee published
pursuant to law or to the requirements of its supervising or examining
authority.
-3-
<PAGE>
SIGNATURE
Pursuant to the requirements of the Act, the Trustee, The Bank of New York,
a corporation organized and existing under the laws of the State of New York,
has duly caused this statement of eligibility to be signed on its behalf by the
undersigned, thereunto duly authorized, all in the City of New York, and State
of New York, on the 20th day of April, 1999.
THE BANK OF NEW YORK
By: /s/CHERYL L. LASER
-------------------------------------
Name: CHERYL L. LASER
Title: ASSISTANT VICE PRESIDENT
-4-
<PAGE>
Consolidated Report of Condition of
THE BANK OF NEW YORK
of One Wall Street, New York, N.Y. 10286
And Foreign and Domestic Subsidiaries,
a member of the Federal Reserve System, at the close of business December 31,
1998, published in accordance with a call made by the Federal Reserve Bank of
this District pursuant to the provisions of the Federal Reserve Act.
<TABLE>
<CAPTION>
ASSETS Dollar Amounts
in Thousands
<S> <C>
Cash and balances due from depository
institutions:
Noninterest-bearing balances and currency and $3,951,273
coin...........................................
Interest-bearing balances....................... 4,134,162
Securities:
Held-to-maturity securities..................... 932,468
Available-for-sale securities................... 4,279,246
Federal funds sold and Securities purchased 3,161,626
under agreements to resell......................
Loans and lease financing receivables:
Loans and leases, net of unearned
income...............37,861,802
LESS: Allowance for loan and
lease losses............619,791
LESS: Allocated transfer risk
reserve........................3,572
Loans and leases, net of unearned income, 37,238,439
allowance, and reserve.........................
Trading Assets................................... 1,551,556
Premises and fixed assets (including capitalized 684,181
leases).........................................
Other real estate owned.......................... 10,404
Investments in unconsolidated subsidiaries and 196,032
associated companies............................
Customers' liability to this bank on acceptances 895,160
outstanding.....................................
Intangible assets................................ 1,127,375
Other assets..................................... 1,915,742
--------------
</TABLE>
<PAGE>
<TABLE>
<S> <C>
Total assets..................................... $60,077,664
==============
LIABILITIES
Deposits:
In domestic offices............................. $27,020,578
Noninterest-bearing...................11,271,304
Interest-bearing......................15,749,274
In foreign offices, Edge and Agreement 17,197,743
subsidiaries, and IBFs.........................
Noninterest-bearing......................103,007
Interest-bearing......................17,094,736
Federal funds purchased and Securities sold 1,761,170
under agreements to repurchase..................
Demand notes issued to the U.S. Treasury......... 125,423
Trading liabilities.............................. 1,625,632
Other borrowed money:
With remaining maturity of one year or less..... 1,903,700
With remaining maturity of more than one year 0
through three years............................
With remaining maturity of more than three years 31,639
Bank's liability on acceptances executed and 900,390
outstanding.....................................
Subordinated notes and debentures................ 1,308,000
Other liabilities................................ 2,708,852
--------------
Total liabilities................................ 54,583,127
==============
EQUITY CAPITAL
Common stock..................................... 1,135,284
Surplus.......................................... 764,443
Undivided profits and capital reserves........... 3,542,168
Net unrealized holding gains (losses) on 82,367
available-for-sale securities...................
Cumulative foreign currency translation (29,725)
adjustments..................................... -------------
Total equity capital............................. 5,494,537
--------------
Total liabilities and equity capital............. $60,077,664
==============
</TABLE>
I, Thomas J. Mastro, Senior Vice President and Comptroller of the above-
named bank do hereby declare that this Report of Condition has been prepared in
conformance with the
<PAGE>
instructions issued by the Board of Governors of the Federal Reserve System and
is true to the best of my knowledge and belief.
Thomas J. Mastro
We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and is true and
correct.
Thomas A. Reyni Directors
Gerald L. Hassell
Alan R. Griffith
