<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12
The IT Group
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-------------------------------------------------------------------------
(3) Filing Party:
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(4) Date Filed:
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Notes:
<PAGE>
[The IT Group LOGO]
THE IT GROUP, INC.
2790 Mosside Boulevard
Monroeville, Pennsylvania 15146-2792
NOTICE OF 1999 ANNUAL MEETING OF STOCKHOLDERS
The 1999 Annual Meeting of Stockholders (the "Annual Meeting") of The IT
Group, Inc. (the "Company") will be held at The IT Group, Inc., located at
2790 Mosside Boulevard, Monroeville, Pennsylvania 15146-2792 on June 9, 1999,
at 9:00 a.m. Eastern time, for the following purposes:
1. To elect five (5) directors to hold office until the Annual Meeting of
Stockholders in the year 2000 and until their successors are elected and
qualified; and
2. To transact such other business as may properly come before the Annual
Meeting.
Holders of record of the Company's Common Stock at the close of business on
May 6, 1999 are entitled to notice of and to vote at the Annual Meeting and at
any adjournment(s) or postponement(s) thereof. A list of stockholders entitled
to vote at the Annual Meeting will be open to examination by any stockholder
for any purpose germane to the Annual Meeting, during ordinary business hours,
from May 28, 1999 until June 9, 1999 at the Company's executive offices
located at 2790 Mosside Boulevard, Monroeville, Pennsylvania 15146-2792.
Each stockholder is requested to sign and date the enclosed proxy card and
to return it without delay in the enclosed postage-paid envelope. Any
stockholder present at the Annual Meeting may withdraw the proxy and vote
personally on each matter brought before the Annual Meeting.
By Order of the Board of Directors,
/s/ James G. Kirk
James G. Kirk
Secretary
May 20, 1999
Monroeville, Pennsylvania
LOGO Recycled
<PAGE>
THE IT GROUP, INC.
2790 Mosside Boulevard
Monroeville, Pennsylvania 15146-2792
----------------
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
JUNE 9, 1999
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of The IT Group, Inc., a Delaware
corporation (the "Company"), for use at the 1999 Annual Meeting of
Stockholders of the Company to be held at 9:00 a.m. Eastern time, on
Wednesday, June 9, 1999, at The IT Group, Inc., located at 2790 Mosside
Boulevard, Monroeville, Pennsylvania 15146-2792, and at any adjournment(s) or
postponement(s) thereof (the "Annual Meeting"). It is anticipated that this
Proxy Statement, together with the proxy and the 1999 Annual Report to
Stockholders, will first be mailed to the Company's stockholders on or about
May 20, 1999.
VOTING AT THE MEETING
The close of business on May 6, 1999 has been fixed as the record date for
determination of holders ("Stockholders") of the Company's Common Stock, $0.01
par value (the "Common Stock"), entitled to notice of and to vote at the
Annual Meeting. On that date, there were outstanding and entitled to vote
22,710,133 shares of Common Stock. The presence, either in person or by proxy,
of persons entitled to cast a majority of such votes constitutes a quorum for
the transaction of business at the Annual Meeting.
Stockholders are entitled to one vote per share on all matters submitted for
consideration at the Annual Meeting, subject to cumulative voting rights in
the election of Common Stock Directors (see "Election of Directors"). With
regard to the election of Common Stock Directors, votes may be cast in favor
of or withheld from nominees. Votes that are withheld will be excluded
entirely from the vote and will have no effect. Abstentions may be specified
on all proposals other than the election of Common Stock Directors.
Abstentions on returned proxies are counted as shares present in the
determination of whether the shares of stock represented at the Annual Meeting
constitute a quorum. Each proposal is tabulated separately. Abstentions are
counted in tabulations of the votes cast on proposals presented to the
stockholders, whereas broker non-votes are not counted for purposes of
determining whether a proposal has been approved.
A person giving the enclosed proxy has the power to revoke it at any time
before it is exercised by (i) attending the Annual Meeting and voting in
person, (ii) duly executing and delivering a proxy for the Annual Meeting
bearing a later date or (iii) delivering written notice of revocation to the
Secretary of the Company prior to use of the enclosed proxy at the Annual
Meeting.
ELECTION OF DIRECTORS
Board of Directors
At the 1996 Annual Meeting of Stockholders, stockholders approved a cash
investment (the "Investment") of $45,000,000 in the Company by certain
investors affiliated with The Carlyle Group (collectively, "Carlyle"), a
private merchant bank headquartered in Washington, D.C. In consideration of
its investment, Carlyle received 45,000 shares of newly issued Cumulative
Convertible Participating Preferred Stock, par value $100 per share (the
"Convertible Preferred Stock"), and warrants (the "Warrants") to purchase up
to 1,250,000 shares of our Common Stock (at the current exercise price of
$11.39 per share).
1
<PAGE>
Pursuant to the terms of the Investment agreements, 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 the Investment (the "Five-Year
Period"), provided that Carlyle continues to own at least 20% of the voting
power of the Company. The Investment agreements also provide that the number
of directors comprising our Board will be an odd number. A majority of the
directors (the "Preferred Stock Directors") will be elected by the holders of
the Convertible Preferred Stock acting by written consent and without a
meeting of the Common Stock holders, and the remaining directors (the "Common
Stock Directors") will be elected by the Common Stock holders. The Preferred
Stock Directors serve for annual terms. The Investment agreements also provide
that at least two of the directors elected by the holders of the Common Stock
will have no employment or other relationship with us or Carlyle, other than
their positions as directors of the Company. During the Five-Year Period,
holders of the Convertible Preferred Stock will not participate in elections
of the Common Stock Directors and the Preferred Stock Directors will not have
the right to vote on the election of any director to fill a vacancy among the
Common Stock Directors. At the end of the Five-Year Period, provided that
Carlyle continues to own at least 20% of the voting power of the Company,
holders of the Convertible Preferred Stock will be entitled to elect the
largest number of directors which is a minority of the directors and to vote
with the Common Stock holders (as a single class) on the election of the
remaining directors. Additionally, the holders of the Convertible Preferred
Stock, in the event they no longer have the right to elect at least a minority
of the directors, will have the right (voting as a class with holders of our
7% Cumulative Convertible Exchangeable Preferred Stock, par value $100 per
share, and any other parity stock) to elect two directors to the Board in the
event we fail to make payment of dividends on the Convertible Preferred Stock
for six dividend periods.
Pursuant to an agreement of merger dated January 15, 1998 (the "OHM Merger
Agreement"), the Company acquired OHM Corporation ("OHM") in a two-step
transaction, comprised of a tender offer for 13,933,000 shares of OHM common
stock, or 54% of the outstanding OHM stock, for $160,300,000 in cash, which
was consummated on February 25, 1998, and a merger (the "OHM Merger") of an IT
subsidiary into OHM on June 11, 1998. In the OHM Merger, the former OHM
shareholders received IT common stock representing approximately 57% of the
outstanding IT common stock and 45% of the voting power of IT, as well as cash
in the aggregate amount of $30,800,000. Subsequent to the OHM Merger, holders
of the Convertible Preferred Stock own approximately 21% (approximately 24%
assuming exercise of the Carlyle Warrants) of the Company's voting power.
At the Special Meeting of Shareholders held on June 11, 1998 (the "Special
Meeting"), at which the OHM Merger was approved, the shareholders also voted
to eliminate our classified Board of Directors system. Under that system, the
Common Stock Directors served for three year terms which were staggered to
provide for the election of approximately one-third of the Board members each
year. As a result of the shareholders' vote to eliminate our classified Board
of Directors system, the holders of the Common Stock are entitled to vote each
year on the election of all Common Stock Directors.
After the OHM Merger, pursuant to the OHM Merger Agreement, Richard W. Pogue
and Charles W. Schmidt were appointed to the Board of Directors as Common
Stock Directors. In connection with their appointment, the authorized number
of directors (both Common and Preferred Stock Directors) was increased to nine
(9), with the Board consisting of five Preferred Stock Directors and four
Common Stock Directors so that the Preferred Stock Directors continue to
represent a majority of the Board of Directors. To allow for this change, one
of the Common Stock Directors, E. Martin Gibson, resigned as such and was
reappointed as a Preferred Stock Director.
Pursuant to a Unanimous Written Consent of the Board of Directors of the
Company dated as of May 14, 1999, all members of the Company's Board consented
to increase the authorized number of Directors to eleven (11), and nominated
Dr. Francis J. Harvey for election as an additional Common Stock Director. As
noted, under the terms of the Company's Convertible Preferred Stock, Carlyle
currently has the right to elect the smallest number of Directors that
constitutes a majority of the Board of Directors. Therefore, Carlyle, which
currently elects five (5) of the Company's nine (9) directors, has the right
to elect a Director to fill one vacancy created by
2
<PAGE>
the expansion of the Board to eleven (11) directors. Carlyle advised the
Company in writing that it did not presently intend to elect a sixth Preferred
Stock Director, although it reserved its rights to do so at any time for any
reason so long as it satisfied the ownership test described above.
Accordingly, after the upcoming Annual Meeting, assuming Dr. Harvey's
election, the Board of Directors of the Company will consist of ten (10)
Directors, i.e., five (5) Preferred Stock Directors and five (5) Common Stock
Directors, subject to Carlyle's right later to fill the one vacancy on the
Board of Directors by electing an additional Preferred Stock Director.
The names of the nominees for election as Common Stock Directors, who have
been nominated by the Board of Directors, and the names of the Preferred Stock
Directors, who are not subject to election by the Common Stock, are set forth
in the following table. Should any nominee become unavailable to serve, the
proxies solicited hereby may be voted for election of such other persons as
shall be nominated by the Board of Directors.
<TABLE>
<CAPTION>
Term to Director of the
Name Age Current Position Expire IT Group Since
- ---- --- --------------------------------- ------- ---------------
<S> <C> <C> <C> <C>
Nominees for term expiring in 2000:
Anthony J. DeLuca (1)... 52 Director, Chief Executive Officer 1999 1996
and President
Francis J. Harvey....... 55 -- -- --
James C. McGill (3)..... 55 Director 1999 1990
Richard W. Pogue (3).... 71 Director 1999 1998
Charles W. Schmidt (2).. 71 Director 1999 1998
Preferred Stock Directors:
Daniel A. D'Aniello 52 Director and Chairman of the 1999 1996
(1)(2)(4).............. Board (non-officer position)
Philip B. Dolan 41 Director 1999 1996
(1)(2)(4)..............
E. Martin Gibson (3)(4). 61 Director 1999 1994
Robert F. Pugliese 66 Director 1999 1996
(3)(4).................
James David Watkins 72 Director 1999 1996
(2)(4).................
</TABLE>
- --------
(1) Member of Executive Committee
(2) Member of Compensation Committee.
(3) Member of Audit Committee.
(4) The Preferred Stock Directors serve for annual terms. The holders of the
Convertible Preferred Stock have indicated to the Company their intention
to reelect, on or before the date of the Annual Meeting, Mr. D'Aniello,
Mr. Dolan, Mr. Gibson, Admiral Watkins, and Mr. Pugliese each to serve an
annual term to expire in 2000.
Background of the Nominees and Preferred Stock 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.
Mr. DeLuca was named Chief Executive Officer and President on July 22, 1997
and President and Acting Chief Executive Officer and a Director as of July 1,
1996. Prior thereto, Mr. DeLuca had been Senior Vice
3
<PAGE>
President and Chief Financial Officer of the IT Group 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.
Dr. Harvey is a management consultant. He served Westinghouse Corporation
for 28 years, most recently as the Chief Operating Officer of Westinghouse's
Industries and Technology Group in 1996-1997. Dr. Harvey has also served as
the President of Westinghouse's Electronic Systems Group from 1995 to 1996,
President of its Government and Environmental Services Company from 1994 to
1995, and as its Vice President of Science and Technology from 1993 to 1994.
Dr. Harvey was chosen as a White House Fellow and served as Special Assistant
to the Secretary of Defense from 1978 to 1979. Dr. Harvey also serves on the
Boards of GTS Duratek, Inc. and Powerize.com, and Timoline Corp.
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 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 for 12 years prior
to 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 previously was 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 for
12 years prior to the OHM Merger.
4
<PAGE>
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 New York from 1993 to 1998.
Admiral Watkins currently serves as a Director of Edison International and GTS
Duratek, Inc. and as Chairman of Eurotech, Ltd.
Meetings of the Board of Directors and Committees
During the period March 27, 1998 through December 25, 1998, the end of the
Company's last fiscal year, the Company's Board of Directors held five
meetings. During such fiscal year, each director attended 75% or more of the
aggregate of (i) the total number of meetings of the Board of Directors (held
during the period for which he has been a director) and (ii) the total number
of meetings held by all committees of the Board on which he served (during the
period that he served).
The Company's Executive Committee held two meetings during the period from
March 27, 1998 through December 25, 1998. The Executive Committee manages the
business and affairs of the Company between regularly scheduled Board
Meetings.
The Company's Audit Committee held three meetings from March 27, 1998
through December 25, 1998. The Audit Committee makes recommendations to the
Board of Directors concerning the selection of the Company's independent
auditors and reviews with the independent auditors the scope and results of
the annual audit.
The Company's Compensation Committee held five meetings from March 27, 1998
through December 25, 1998. The Compensation Committee reviews salaries,
bonuses and other aspects of executive compensation and administers the
Company's 1996 Stock Incentive Plan, which was approved by stockholders at the
1996 Annual Meeting of Stockholders.
Compensation of Directors
Retainer Fees. Non-employee directors each receive compensation of
approximately $35,000 per calendar year, consisting of a retainer fee of
$6,000 per quarter and a board meeting fee of $2,750 for each board meeting
attended (no additional compensation is given for attendance at committee
meetings). Directors' compensation may be paid in cash and/or stock as
determined by the Executive Committee. Payments on account of directors fees
earned by Messrs. D'Aniello and Dolan are paid directly to Carlyle.
Chairman of the Board. The Chairman of the Board of Directors serves as a
member or ex-officio member of all committees of the Board and is required to
spend significant time on Company matters. The chairmanship is a non-officer,
non-employee position. Upon completion of the Investment, Carlyle named one of
the Preferred Stock Directors, Mr. Daniel A. D'Aniello, Chairman of the Board.
Mr. D'Aniello is compensated for his services at the rate of $120,000 per
calendar year, in lieu of the non-employee director fees described above. Mr.
D'Aniello receives the same compensation the previous chairman, Mr. E. Martin
Gibson, received.
Stock Options. At the 1996 Annual Meeting, Stockholders approved the 1996
Stock Inventive Plan (the "1996 Plan"). The purpose of the 1996 Plan is to
enable the Company and its subsidiaries to attract, retain and motivate
employees by providing for or increasing their proprietary interests in the
Company, and to attract non-employee directors and further align their
interests with those of the stockholders by providing for or increasing their
proprietary interests in the Company. Every employee of the Company or any of
its subsidiaries is eligible to be considered for the grant of awards under
the 1996 Plan.
5
<PAGE>
Prior to the Special Meeting, the maximum number of shares of Common Stock
that could be issued pursuant to awards granted under the 1996 Plan was
639,357; and on April 1 of each of the years 1999, 2000 and 2001, such maximum
number was to be increased by a number equal to 2% of the number of shares of
Common Stock issued and outstanding on each of such dates. At the Special
Meeting, stockholders approved amendments to the plan to provide for a one-
time increase equal to 2% of the shares of Common Stock issued in the Merger,
and to change the date of occurrence of the remaining scheduled annual
increases from April 1 of each such year to the first business day of each
fiscal year of the Company through 2001, in accordance with the previously
announced change to the last Friday in December as the end of the Company's
fiscal year. With this 2% one-time increase, the maximum number of shares
authorized for issuance under the 1996 Plan is 878,240.
The 1996 Plan is administered by the Compensation Committee of the Board
(the "Committee"). Subject to the provisions of the 1996 Plan, the Committee
has full and final authority to adopt, amend and rescind rules and regulations
relating to the 1996 Plan, select the employees to whom awards will be granted
thereunder, to grant such awards, and to determine the terms and conditions of
such awards and the number of shares to be issued pursuant thereto.
Pursuant to the terms of the 1996 Plan, grants of stock options to non-
employee directors are within the discretion of the Compensation Committee,
and since the approval of the 1996 Plan at the 1996 Annual Meeting of
Stockholders, no grants have been made to non-employee directors.
Pursuant to the OHM merger agreement, each holder of an option to purchase a
share of OHM Common Stock (each an "OHM Option") granted under OHM's 1986
Stock Option Plan, the Directors Deferred Fee Plan, the Incentive Stock Plan
and the Nonqualified Stock Option Plan for Directors (collectively, the "OHM
Stock Plans") was required to elect the treatment of their OHM Options under
the provisions of the OHM merger agreement. OHM Option holders were permitted
to elect that each OHM Option, be converted into the right to receive cash
consideration equal to the product of (x) (1) the excess of $11.50 over (2)
the exercise price per share subject to such OHM Option and (y) the number of
shares subject to such OHM Option, or that, at the effective time of the
merger, each OHM Option would be deemed to constitute an option to acquire, on
the same terms and conditions as were applicable under such OHM Option, a
number of shares of Common Stock equivalent to the number of shares of OHM
Common Stock that could have been purchased immediately prior to the effective
time under such OHM Option multiplied by 1.394 shares of OHM Common Stock for
each share of Common Stock (the "Exchange Ratio") rounded up to the nearest
whole number of shares of Common Stock), at a price per share of Common Stock
(rounded up to the nearest whole cent) equal to (y) the aggregate exercise
price for the Shares otherwise purchasable pursuant to such OHM Option divided
by (z) the Exchange Ratio; provided, however, that in the case of any OHM
Option to which Section 422 of the Internal Revenue Code of 1986, as amended
(the "Code") applied, the option price, the number of shares purchasable
pursuant to such option and the terms and conditions of exercise of such
option would be determined in accordance with the foregoing, subject to such
adjustments necessary in order to satisfy the requirements of Section 424(a)
of the Code. Pursuant to the OHM merger agreement, the Company assumed each
OHM Option to which this second election applied in accordance with the terms
of the OHM Stock Plans under which such OHM Option was issued and the stock
option agreement by which it was evidenced. Holders of OHM Options with
respect to 188,038 shares of OHM Common Stock (convertible into 262,126 shares
of Company Common Stock) chose the second election.
Retirement Plan. Prior to the consummation of the Investment, the Company
maintained a retirement plan for non-employee directors and under certain
circumstances directors who met the plan's length of service requirements were
entitled to an accelerated lump sum payment upon a change of control such as
the change of control resulting from the Investment. In connection with the
Investment, however, each of the then non-employee directors of the Company
acknowledged and agreed to a modification of the right to receive the
accelerated lump sum payment. The payments to be received by non-employee
directors pursuant to the amended plan are significantly less than the lump
sum payments that were waived. Pursuant to the plan, as amended, Mr. Gibson is
to receive $16,000 in annual benefits, for a total of $80,000, and Mr. McGill
is to receive $40,000 in annual benefits, for a total of $200,000, payable in
monthly installments over five years, on account of their service as directors
prior to the Investment.
6
<PAGE>
BENEFICIAL OWNERSHIP OF SHARES
The following table sets forth information as of May 3, 1999 with respect to
beneficial ownership of (a) Common Stock, (b) Depositary Shares, each
representing 1/100 of a share of 7% Preferred Stock (the Depositary Shares),
(c) Convertible Preferred Stock and (d) the Warrants, by (w) each person known
by the Company to be the beneficial owner of 5% or more of the outstanding
Common Stock (based solely on information contained in Schedules 13D, -G, or -
F filed by such persons and delivered to the Company), Depositary Shares,
Convertible Preferred Stock or Warrants, (x) each director of the Company, (y)
the executive officers of the Company and (z) all directors and persons
serving as executive officers of the Company as a group.
<TABLE>
<CAPTION>
Amount and Amount and Amount and Percent of
Nature of Percent of Nature of Percent of Nature of Convertible
Beneficial Common Beneficial Depositary Beneficial Preferred
Ownership of Stock Ownership of Shares Ownership of Stock
Common Beneficially Depositary Beneficially Convertible Beneficially
Name Stock (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) 22.40% 41,263 89.52%
Carlyle Investment
Management, L.L.C...... 766,954(4) 3.27% 4,832 10.48%
Brahman Capital Corp. et
al..................... 2,939,492(5) 13.01%
T. Rowe Price
Associates, Inc.(6).... 1,493,311 6.60%
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(9)...... 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....... 187,679 *
David L. Backus......... 14,207 *
James G. Kirk........... 2,624 *
James R. Mahoney........ 84,894 *
Richard W. Pogue........ 69,841(11) *
Raymond J. Pompe........ 73,919 *
Charles W. Schmidt...... 15,940 *
Philip O. Strawbridge... 173,195 *
All directors and
executive officers as a
group (14 persons)(12). 661,170 2.82%
</TABLE>
- --------
*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 May 3, 1999 upon exercise of stock options (and conversion of
Depositary Shares in the case of Messrs. Gibson and McGill) in the
following amounts: (i) 6,875 shares upon exercise of options and 5,351
shares upon conversion of the Depositary Shares as to Mr. Gibson, (ii)
1,875 shares upon exercise of options and 1,070 shares upon conversion of
the Depositary Shares as to Mr. McGill, (iii) 55,760 shares as to Mr.
Pogue, (iv) 13,940 shares as to Mr. Schmidt, (v) 38,834 shares as to Mr.
DeLuca, (vi) 35,693 shares as to Mr. Mahoney, (vii) 20,355 shares as to
Mr. Pompe, (viii) 2,624 shares as to Mr. Kirk, and (ix) 136,565 shares as
to Mr. Strawbridge.
7
<PAGE>
(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 May 3, 1999 plus (i) the number of shares of Common Stock
subject to options exercisable currently or within 60 days of May 3, 1999
by such person or group, (ii) 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 of 1934, as amended (Rule 13d-3(d)(1)).
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 Carlyle Warrants held
by certain limited partnerships controlled by TCG Holdings, L.L.C., a
Delaware limited liability company ("TCG Holdings"), as set forth in more
detail in the following sentence. The cumulative TCG Holdings ownership
figure represents (i) 1,826,339 shares beneficially owned by Carlyle
Partners II, L.P., a Delaware limited partnership ("CPII"), (ii) 82,936
shares beneficially owned by Carlyle Partners III, L.P., a Delaware
limited partnership ("CPIII"), (iii) 1,530,275 shares beneficially owned
by Carlyle International Partners II, L.P., a Cayman Islands limited
partnership ("CIPII"), (iv) 82,095 shares beneficially owned by Carlyle
International Partners III, L.P., a Cayman Islands limited partnership
("CIPIII"), (v) 344,474 shares beneficially owned by C/S International
Partners, a Cayman Islands partnership ("C/SIP"), (vi) 1,907 shares
beneficially owned by Carlyle Investment Group, L.P., a Delaware limited
partnership ("CIG"), (vii) 2,407,370 shares beneficially owned by
Carlyle-IT International Partners, L.P., a Cayman Islands limited
partnership ("CITIP"), (viii) 80,818 shares beneficially owned by
Carlyle-IT International Partners II, L.P., a Cayman Islands limited
partnership ("CITIPII"), and (ix) 199,847 shares beneficially owned by
Carlyle-IT Partners, L.P., a Delaware limited partnership ("CITP"). TC
Group, L.L.C., a Delaware limited liability company ("TC Group"), may be
deemed to be the beneficial owner of 6,556,061 shares of ITC Common Stock
as the general partner of CPII, CPIII, CIG, and CITP, and as the managing
general partner of CIPII, CIPIII, C/SIP, CITIP and CITIPII. 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 ("CIM"), TCG Holdings may be deemed the beneficial
owner of the shares of Common Stock controlled by CIM (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 CPII, CPIII, CIG,
CITP and CIM is Delaware Trust Building, 900 Market Street, Suite 200,
Wilmington, Delaware 19801. The principal business address of CIPII,
CIPIII, C/SIP, CITIP and CITIPII 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 Carlyle Warrants held
by the State Board of Administration of the State of Florida over which
CIM holds sole voting and disposition power. Because certain managing
members of TCG Holdings are also managing members of CIM, CIM 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 (Amendment No. 1)
filed by the Brahman Stockholders, which is comprised of the entities
listed in the following sentence (filing as joint filers), with the SEC
dated February 12, 1999. The Brahman Stockholders' cumulative ownership
represents (i) 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, (ii) 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 disposition,
(iii) 1,214,219 shares with respect to which BY Partners, L.P. has shared
power to vote or
8
<PAGE>
direct the vote and shared power to dispose or direct the disposition, (iv)
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, (v) 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 (vi) 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) but that 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)
further that 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 (Price) with the SEC dated February 12, 1999. Price's
ownership represents (i) 1,328,000 shares which Price owns directly and
(ii) 165,911 shares deemed outstanding and owned directly subject to
warrants and conversion privileges. Further, of the 1,493,911 share 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 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 of 1934, Price is
deemed to be a beneficial owner of such securities; however, Price
expressly disclaims that it is, in fact, the beneficial owner of such
securities. 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. (Dimension) with the SEC 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.
(These investment companies and investment vehicles are the Portfolios.)
In its role as investment advisor and investment manager, Dimension
possesses both voting and investment power over the securities of the
Company described that are owned by the Portfolios. All securities
reported in this schedule are owned by the portfolios, 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
Shareholders, which is composed of the entities listed in the following
sentence (filing as joint filers), with the SEC dated June 4, 1998. The
Baron Stockholders is comprised of Baron Capital Group, Inc. (BCG),
Bamco, Inc. (BAMCO), Baron Small Cap Fund (BSC), Baron Asset Fund (BAF),
and Ronald Baron. The Baron Stockholders report in such Schedule 13G that
(i) BCG, BAMCO, BSC and Ronald Baron have the shared power to vote or
direct the vote of 1,200,000 shares of Common Stock; (ii) BCG, BAMCO, BAF
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 BCG,
BAMCO, BSC, 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 BCG. BSC is an investment advisory
client of BAMCO. Ronald Baron owns a controlling interest in BCG. BCG and
Ronald Baron disclaim beneficial ownership of shares held by their
controlled entities (or the investment advisory
9
<PAGE>
client thereof) to the extent such shares are held by persons other than
BCG 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 Company
Common Stock beneficially owned by TCG Holdings. Mr. Dolan is an employee
of The Carlyle Group and holds no economic interest in either TC Group or
TCG Holdings, and as such expressly disclaims any beneficial ownership in
the shares of Company 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 May 3, 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 312,521 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 May 3, 1999 and 6,000 Depositary Shares
(convertible into 6,421 shares of Common Stock).
10
<PAGE>
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth the annual, long-term compensation and other
compensation for services in all capacities to the Company for calendar year
("CY") 1998 and fiscal years ("FY") ended March 27, 1998 and March 28, 1997
with respect to the Chief Executive Officer and the four most highly
compensated executive officers, other than the Chief Executive Officer, as of
December 25, 1998 (the "Named Officers").
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation
--------------------- ------------------------
Awards
Other Restricted Securities All Other
Annual Stock Underlying Compensation
Name and Principal Position Year Salary($) Bonus($)(1) Compensation(3) Awards($) Options(#)(4) ($) (5)
- --------------------------- ------- --------- ----------- --------------- ---------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Anthony J. DeLuca....... CY 1998 $378,462 $300,000 -- $ -- 43,782 $ 95,481
Chief Executive Officer FY 1998 $320,000 $170,000 -- -- 0 248,250
and President FY 1997 $307,981 $50,000 -- -- 26,333 37,614
Raymond J. Pompe........ CY 1998 $275,960 $110,000 -- -- 18,286 $ 31,474
Senior Vice President, FY 1998 $265,000 $106,000 -- -- 0 29,473
Engineering &
Construction FY 1997 $248,075 $ 26,500 -- -- 16,417 18,270
James R. Mahoney........ CY 1998 $260,000 $ 66,812 $55,814 -- 8,052 $ 221,078
Senior Vice President, FY 1998 $260,000 $ 47,383 $40,681 -- 0 143,687
Consulting & Ventures FY 1997 $260,000 $ 26,000 -- -- 16,333 27,060
James G. Kirk........... CY 1998 $164,385 $ 55,000 -- -- 5,000 $ 12,111
Vice President, FY 1998 $160,000 $ 36,074 -- -- 0 10,863
General Counsel &
Secretary FY 1997 $150,625 $ 10,000 -- -- 4,667 8,352
Philip O. Strawbridge
(6).................... CY 1998 $263,567 $110,000 -- -- 23,166 $1,612,191
Sr. Vice President and FY 1997 $262,376 $144,600 -- -- 75,000 109,817
Chief Administrative
Officer FY 1996 $187,321 $ 0 -- $108,875 22,967 47,305
</TABLE>
- --------
(1) On June 9, 1998, the Company elected to convert from a fiscal year ending
on the last Friday in March to a fiscal year ending on the last Friday in
December. The compensation reported for the Named Officers for CY 1998
represents remuneration paid during the twelve month period commencing
January 1, 1998 and ending December 31, 1998. The compensation reported
for FY 1998 for Messrs. DeLuca, Pompe, Mahoney and Kirk represents
remuneration paid during the period commencing March 29, 1997 and ending
March 27, 1998. The compensation reported for FY 1997 for Mr. Strawbridge
represents remuneration paid during the period commencing January 1, 1997
and ending December 31, 1997, which corresponds to the OHM Corporation
1997 fiscal year. The compensation reported for FY 1997 for Messrs.
DeLuca, Pompe, Mahoney and Kirk represents remuneration paid during the
period commencing March 29, 1996 and ending March 28, 1997. The
compensation reported for FY 1996 for Mr. Strawbridge represents
remuneration for the period January 1, 1996 and ending December 31, 1996,
which corresponds to the OHM Corporation 1996 fiscal year.
(2) Bonus amounts are reported in the fiscal year they are earned or accrued,
even though some or all of the actual cash payment may be made in the next
fiscal year. For FY 1997, each Named Officer, with the exception of Mr.
Strawbridge who was not employed by the Company and therefore did not
participate in the Company's FY 1997 management incentive plan, who
received a "Bonus" also received a grant of stock options in FY 1998 for
achieving the performance objectives set forth in the 1997 Management
Incentive Plan. Such stock options are reported in this table under
Securities Underlying Options in 1997.
(3) The dollar value of perquisites and other personal benefits, if any, for
each of the Named Officers except Mr. Mahoney was less than reporting
thresholds established by the SEC. Mr. Mahoney received tax
11
<PAGE>
reimbursement for relocation expenses reported under "Other Annual
Compensation" of $33,183 in CY 1998 and $17,022 in FY 1998.
(4) During 1998, stock options were awarded which vest in 25% increments over
four years beginning one year from the date of grant, expire ten years
after the date of grant, and were issued at an exercise price equal to
fair market value of the Common Stock on date of grant. The number of
option shares so issued to the Named Officers in 1998 are as follows: Mr.
DeLuca 25,000; Mr. Mahoney 5,000; Mr. Pompe 15,000; Mr. Strawbridge
18,500; and Mr. Kirk 5,000. Also during 1998, stock options were awarded
which vest at 100% four years after date of grant, expire five years after
date of grant and were issued at an exercise price equal to fair market
value of the Common Stock on date of grant. These options will vest on an
accelerated basis as follows: 50% will vest if the Common Stock price
averages $13.50 for a period of 90 consecutive days, and 50% will vest if
the common stock price averages $16.50 for a period of 90 consecutive
days. The number of option shares so issued to the Named Officers in 1998
are as follows: Mr. DeLuca 18,782; Mr. Mahoney 3,052; Mr. Pompe 3,286; and
Mr. Strawbridge 4,666. For FY 1997, each Named Officer, with the exception
of Mr. Strawbridge who was not employed by the Company and therefore did
not participate in the Company's FY 1997 Management Incentive Plan, who
received a "Bonus" also received a grant of non-qualified stock options in
fiscal year 1998 for achieving the performance objectives set forth in the
1997 Management Incentive Plan. The options vest in 25% increments over
four years beginning one year from the date of grant, expire ten years
after the date of grant and were issued at an exercise price equal to the
fair market value of the Common Stock on the date of grant. The number of
option shares so granted to the Named Officers in FY 1998 was as follows:
Mr. DeLuca, 8,333 shares; Mr. Mahoney, 4,333 shares; Mr. Pompe, 4,417
shares; and Mr. Kirk, 1,667 shares.
(5) For CY 1998, the amounts shown for Messrs. DeLuca, Pompe, Mahoney,
Strawbridge (IT and OHM combined) and Kirk represent $9,008; $13,719;
$8,331; $1,017 and $908 respectively of life insurance premiums in excess
of $50,000. Although required to be reported as income, the Named
Officers, as do all salaried employees, pay the cost of all life insurance
premiums for life insurance coverage in excess of one times their salary.
In addition, the amounts shown include: the Company's contribution to the
Company's Retirement Plan, a defined contribution plan, for the Company's
fixed and 401(k) Company matching contributions for Messrs. DeLuca, Pompe,
Mahoney, Strawbridge (IT and OHM combined) and Kirk in the amounts of
$6,877; $8,000; $7,485; $8,793; and $7,946 respectively; the Company's
contribution to the Company's Restoration Plan, a non-qualified
supplemental retirement plan, to Messrs. DeLuca, Pompe, Mahoney,
Strawbridge and Kirk in the amounts of $16,059; $9,755; $7,000; $874 and
$2,902 respectively; partial forgiveness of the principal on a relocation
loan to purchase a residence of $5,000 and $10,000 for Messrs. DeLuca and
Mahoney respectively; accrued but unused paid time off of $26,346 for Mr.
DeLuca; reimbursed relocation expenses of $26,554, $178,204 and $2,666 for
Messrs. DeLuca, Mahoney and Strawbridge respectively; imputed interest on
relocation loans of $5,637 and $7,099 for Messrs. DeLuca and Mahoney
respectively; earnings on voluntary deferred compensation of $2,959 for
Mr. Mahoney; and severance and other entitled payments paid by OHM under
the OHM merger agreement of $1,598,842 to Mr. Strawbridge. For FY 1998,
the amounts shown for Messrs. DeLuca, Mahoney, Pompe and Kirk represent
$7,507, $6,943, $11,433 and $165 respectively, of life insurance premiums
in excess of $50,000. Although required to be reported as income, the
Named Officers, as do all salaried employees, pay the cost for all life
insurance premiums for coverage in excess of one times their salary in
calendar years 1998 and 1997 and one and one-half times their salary in
calendar year 1996. In addition, the amounts shown include: the Company's
contribution to the Company's Retirement Plan, a defined contribution
plan, for the Company's fixed and 401(k) Company matching contributions
for Messrs. DeLuca, Mahoney, Pompe and Kirk in the amounts of $4,800,
$7,908, $8,000 and $7,975 respectively; the Company's contribution to the
Company's Restoration Plan, a non-qualified supplemental retirement plan,
to Messrs. DeLuca, Mahoney, Pompe and Kirk as follows: $14,800, $5,680,
$10,040 and $2,723 respectively; $3,500 and $10,000 for partial principal
forgiveness on a relocation loan to purchase a residence for Messrs.
DeLuca and Mahoney; $27,692 in accrued but unused paid time off for Mr.
DeLuca; $93,951 and $35,157 in reimbursed relocation expenses for Messrs.
DeLuca and Mahoney respectively; and $96,000 and $78,000 in relocation
mobility
12
<PAGE>
allowances for Messrs. DeLuca and Mahoney respectively. For FY 1997, the
amounts shown for Messrs. DeLuca, Mahoney, Pompe and Kirk represent $5,255,
$4,860, $5,897 and $991 respectively, of life insurance premiums in excess
of $50,000. In addition, the amounts shown include: the Company's
contribution to the Company's Retirement Plan, a defined contribution plan,
for the Company's fixed and 401(k) Company matching contributions for
Messrs. DeLuca, Mahoney, Pompe and Kirk in the amounts of $4,500, $7,500,
$7,500 and $7,361 respectively; the Company's contribution to the Company's
Restoration Plan, a non-qualified supplemental retirement plan, to Messrs.
DeLuca, Mahoney and Pompe as follows: $7,300, $4,700 and $4,873,
respectively; $10,000 for partial principal forgiveness on a relocation
loan to purchase a residence for Mr. Mahoney; $17,508 in accrued but unused
paid time off for Mr. DeLuca; and $3,052 in reimbursed relocation expenses
for Mr. DeLuca.
(6) Remuneration shown for Mr. Strawbridge for CY 1998 reflects "salary" and
"bonus" for IT and OHM combined, and "All Other Compensation" for IT and
OHM as set forth in footnote #4. Remuneration shown for Mr. Strawbridge
for FY 1997 and 1996 reflects information published in OHM Corporation's
shareholder meeting proxy materials for each of OHM's fiscal years 1997
and 1996, with the exception that $144,600 FY 1997 bonus is comprised of
$119,000 reported in the OHM proxy as paid in 1997 plus a bonus of $25,600
earned in 1997 but paid by OHM in 1998, of which $25,000 was earned in
1996 but paid by OHM in 1997 and $94,000 which was earned and paid in
1997.
Stock Option Grants in the Last Fiscal Year
The following table provides information related to grants of stock options
to the Named Officers pursuant to the Company's Stock Incentive Plans during
the nine month transition period commencing on March 28, 1998 and ended
December 25, 1998. No stock appreciation rights ("SARs") were granted during
the last fiscal year.
<TABLE>
<CAPTION>
Percent of
Total
Options
Number of Granted to
Securities Employees Grant Date
Underlying in Fiscal Exercise Price Present
Name Grant Date Option (1) Year Per Share (2) Expiration Date Value (3)
- ---- ---------- ---------- ---------- -------------- --------------- ----------
<S> <C> <C> <C> <C> <C> <C>
DeLuca.................. 5/26/98 25,000 7.5% $10.1250 5/26/08 $152,000
11/17/98 18,782 5.7% $ 9.4375 11/17/03 79,448
------ --------
43,782 13.2% $231,448
Pompe................... 5/26/98 15,000 4.5% $10.1250 5/26/08 $ 91,200
11/17/98 3,286 1.0% $ 9.4375 11/17/03 13,900
------ --------
18,286 5.5% $105,100
Mahoney................. 5/26/98 5,000 1.5% $10.1250 5/26/08 $ 30,400
11/17/98 3,052 0.9% $ 9.4375 11/17/03 12,910
------ --------
8,052 2.4% $ 43,310
Strawbridge............. 5/26/98 18,500 5.6% $10.1250 5/26/08 $112,480
11/17/98 4,666 1.4% $ 9.4375 11/17/03 19,737
------ --------
23,166 7.0% $132,217
Kirk.................... 5/26/98 5,000 1.5% $10.1250 5/26/08 $ 30,400
</TABLE>
- --------
(1) Options granted May 26, 1998 vest in 25% increments over four years
beginning one year from the date of grant. Full vesting occurs on the
fourth anniversary date and expires ten years after grant. Options become
100% vested and are exercisable for two years after retirement from the
Company. Options granted November 17, 1998 vest 100% after four years and
expire five years after grant. Vesting is accelerated if the Company's
Common Stock price increases to certain predetermined levels. Options
vested at retirement expire two years after retirement; options unvested
at retirement are eligible to become vested for six months following
retirement.
(2) The exercise price on options granted is the fair market value of the
Common Stock on the date of grant.
13
<PAGE>
(3) When calculating the present value of options granted in 1998, the Company
used the Black-Sholes option pricing model to obtain a calculated present
value with certain assumptions regarding volatility, risk free interest
rate and when the shares would be exercised throughout the vesting period.
In addition, the Company took a 3% discount for each year in the vesting
period to account for the risk of forfeiture in the event that the
executive terminates employment with the Company. The Black-Sholes present
value for options granted May 26, 1998 is $6.08 with assumptions as
follows: volatility of .445; risk free interest rate of 5.78%; and an
assumption that shares would be exercised evenly throughout the four year
vesting period. The Black-Sholes present value for options granted
November 17, 1998 is $4.23 with assumptions as follows: volatility of
.524; risk free interest rate of 4.76% and an assumption that options
would be exercised four years after grant, since accelerated vesting is
subject to the price of company Common Stock achieving certain price
thresholds. The valuation is not intended to forecast possible future
appreciation, if any, of the Common Stock. The real value of the option
depends on the actual performance of the Company's Common Stock during the
applicable period.
Aggregated Option Exercises During Last Fiscal Year and Option Values at End
of Last Fiscal Year
The following table provides information with respect to the exercise of
stock options during the nine month transition period commencing on March 28,
1998 and ended December 25, 1998 by the Named Officers, and with respect to
unexercised "in-the-money" stock options outstanding as of December 25, 1998.
In-the-money stock options are options for which the exercise price is less
than the market price of the underlying stock at the end of the fiscal year.
No executive officer or any other employee of the Company held or exercised
any SARs at any time during the nine months ended December 25, 1998.
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexericsed
Options at Fiscal Year End In-The-Money Options
Shares (In shares) at Fiscal Year End ($)(1)
On Value ---------------------------- ----------------------------
Name Exercise Realized($) Exercisable Unexercisable(2) Exercisable Unexercisable(2)
- ---- -------- ----------- ----------- ---------------- ----------- ----------------
<S> <C> <C> <C> <C> <C> <C>
DeLuca.................. 0 $0.00 31,334 66,031 $ 20,258 $120,192
Pompe................... 0 $0.00 17,355 32,598 $ 12,315 $ 58,620
Mahoney................. 0 $0.00 28,834 22,301 $ 12,227 $ 47,321
Strawbridge............. 0 $0.00 143,536 23,166 $734,107 $ 27,822
Kirk.................... 0 $0.00 1,874 8,500 $ 3,668 $ 16,313
</TABLE>
- --------
(1) Represents the difference between the $11.1875 closing market price of the
Company's Common Stock at December 25, 1998, minus the exercise price of
the options.
(2) Messrs. DeLuca, Mahoney and Pompe's options with respect to 2,500 shares,
2,000 shares and 2,000 shares, respectively, have vested as a result of
the passage of time but may not be exercised unless the Company's stock
price increases to certain predetermined levels. Because the condition has
not been satisfied and the options therefore are not vested, such options
are not included in this table or the "Beneficial Ownership of Shares"
table in Item 12.
(3) Mr. Strawbridge's exercisable shares were originally issued by OHM and
were converted to the Company's options equivalent in number of shares and
exercise price. Mr. Strawbridge, as were all employees of OHM who held
outstanding OHM stock options, was permitted to cash out the OHM options
or convert the OHM options to the Company's options equivalent in number
of shares and exercise price.
14
<PAGE>
REPORT OF THE COMPENSATION COMMITTEE
ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors is composed of four
nonemployee directors. The Compensation Committee reviews management
compensation levels and evaluates management performance and related matters.
The Compensation Committee also administers the Company's various management
incentive plans, including the 1996 Stock Incentive Plan. This report relates
to the fiscal year that ended December 25, 1998.
The Compensation Committee retains the services of nationally known
independent consulting firms specializing in executive compensation to assist
it in performing its functions. The Compensation Committee reviews surveys and
other materials describing the compensation practices of companies from which
the Company recruits and with which it competes for management talent,
including (i) large engineering and construction companies, (ii) environmental
services companies, including some that are and some that are not in the peer
group index in the Five-Year Stock Price Performance Graph included in this
Proxy Statement, and (iii) other companies in general industry of similar
size. The Committee considers this information and other factors in its
deliberations on management compensation.
Compensation Committee Interlocks and Insider Participation
No member of the Compensation Committee is a former or current officer or
associate of the Company or its subsidiaries and there are no Compensation
Committee interlocks.
Compensation Program Objectives
The compensation strategy and programs are designed to attract, retain, and
motivate key management and to align the financial interests of the Company's
executive officers with those of its stockholders.
The compensation strategy is designed to align management and stockholder
interests by placing a large percentage of an executive officer's total
compensation "at risk" in the form of annual and long-term incentives, which
at target levels, are generally intended to provide about 60% of total
compensation. In addition, a substantial percentage of management's incentive
compensation, both annual and long-term incentives, will be linked to the
value of the Company's common stock. In this fiscal year, the Compensation
Committee approved certain actions, including the adoption of the Executive
Stock Ownership Program, to further reinforce the compensation strategy. This
program requires that, within a three-year period, key executives acquire and
hold a number of shares of the Company's stock equivalent to a multiple--which
ranges from one-times for certain executives up to three-times for the Chief
Executive Officer--of their base salary. This program, which includes a stock
purchase, stock option and executive loan program, is intended to
significantly increase the equity holdings of participating executives.
The Company's Management Compensation Program is designed to provide:
(i) Base salaries that are competitive with those of engineering and
construction, environmental services, and general industry companies;
(ii) Competitive total annual cash compensation, delivered through annual
incentive compensation that varies in a consistent and predictable
manner with the financial performance of the Company; and
(iii) Long-term incentive compensation that focuses management on building
stockholder value through the attainment of longer-term financial and
strategic goals, and encourages management stock ownership.
In the design and administration of the Management Compensation Program, the
Company attempts to achieve an appropriate balance among various elements of
compensation, each of which is discussed, as are Committee's actions, in
greater detail below.
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Base Salary
As a guideline, the base salary for Company management is targeted at the
fiftieth percentile level of comparable engineering and construction and
environmental services companies and other companies of similar size in order
to attract and retain key talent in this highly competitive industry. The
Company's salary plan for executive officers is approved, on an annual basis,
by the Compensation Committee and takes into account individual performance,
the Company's overall financial performance, and competitive practice.
No actions were taken during the fiscal year that ended December 25, 1998
with the exception of Mr. Strawbridge, whose base salary was increased by
$5,000 to $265,000 per annum to reflect his new responsibilities and
competitive practices following the merger with OHM Corporation. The
Compensation Committee completed its annual review of officer pay levels and
made salary adjustments in the prior fiscal period which ended in March 1998.
Total Annual Cash Compensation (base salary plus annual incentive)
As a guideline, total annual cash compensation is set at between the
fiftieth percentile and the upper quartile of comparable engineering and
construction and environmental services and general industry companies when
annual performance goals and targets are achieved. Upper-quartile cash
compensation can be earned only if business results significantly exceed
Company goals.
Annual Incentive Compensation
The Management Incentive Plan (the "MIP") is designed to reward executive
officers and other key employees, on an annual basis, for their contributions
to the achievement of corporate and business unit goals and for individual
performance. Each fiscal year each eligible participant has a target incentive
award that generally is expressed as a percentage of the participant's base
salary for that fiscal year. The aggregate target incentive awards of all
participants cannot exceed the size of an incentive fund, the dollar amount of
which is determined by the Compensation Committee. The incentive fund,
approved by the Compensation Committee, is directly linked to the Company's
annual budget goals, which are approved by the Board of Directors. If the
Company's performance exceeds budget, the maximum incentive award payable to
participants is in the range of 150% of the target incentive award. Company
goals are expressed in terms of specific financial targets that are
established as part of the annual budgeting process, which includes a review
of the performance of a comparable group of engineering and construction, and
environmental services companies.
For the fiscal year that ended December 25, 1998, the target incentive
awards adopted under the MIP were intended to provide an incentive to key
management to continue to improve the financial performance of the Company. As
performance measures, the Compensation Committee selected earnings before
interest and taxes ("EBIT"), and collection of accounts receivable as measured
by days' sales outstanding ("DSO"). Specific goals and financial targets
associated with these measures were established for the annual performance
period. Annualized target incentive awards ranged from 5% of salary for
certain key employees to 55% of salary for the Chief Executive Officer.
Incentive awards begin to be earned when the Company reaches a threshold level
of EBIT. Any incentive award funds accrued are distributed at the end of the
fiscal year, contingent on the performance goals.
Financial goals and targets were achieved for the nine-month fiscal year
that ended December 25, 1998. The distribution of incentive awards was
determined for the nine-month period, by the Compensation Committee, on the
basis of an assessment of Company and business unit performance, and of
individual performance in relation to established objectives. The total
incentive awards earned by the Named Officers under the MIP for the fiscal
year that ended December 25, 1998 were as follows: Mr. DeLuca, $300,000; Mr.
Kirk, $55,000; Mr. Mahoney, $66,812; Mr. Pompe, $110,000; and Mr. Strawbridge,
$110,000.
During the fiscal year that ended December 25, 1998, the Company approved
the Executive Bonus Plan (the "EBP") in order to provide an additional
incentive to certain key executives to improve its overall
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profitability and value on a sustainable long-term basis and to remain with
the Company. The EBP provides for a cash bonus to be paid on the attainment of
share price targets of $13.50, $16.50, and $25.00 for a period of 90 calendar
days within a three-year period. In addition, a cash bonus will be paid
annually to each key executive who remains with the Company for a three-year
period. If the share price targets are achieved and the executive remains
employed by the Company throughout the three-year period, then the annual
bonus award would average about 15% of salary for certain executives and about
60% of salary for the Chief Executive Officer.
Total Direct Compensation (total annual cash compensation plus the annualized
value of long-term incentives)
As a guideline, total direct compensation for executive officers, through
long-term incentive awards under the 1996 Stock Incentive Plan, is set at
between the fiftieth percentile and the upper quartile of comparable
engineering and construction, environmental services and general industry
companies when the Company's long-term goals to increase stockholder value are
achieved or exceeded.
Long-Term Incentive Compensation Program
The 1996 Stock Incentive Plan authorizes the granting of various stock and
cash-based incentive awards to officers and key employees of the Company and
its subsidiaries. The 1996 Plan gives the Compensation Committee the
flexibility to make longer-term incentive awards in a variety of forms to
better align the long-term interests of the Company's management with those of
its stockholders. The Compensation Committee granted nonqualified stock
options (NQSOs) to officers in fiscal year that ended December 25, 1998 in two
separate actions. One action was an annual grant under which option shares
vest in equal installments over four years. The number of shares granted to
the Named Officers were as follows: Mr. DeLuca, 25,000; Mr. Kirk, 5,000;
Mr. Mahoney, 5,000; Mr. Pompe, 15,000, and Mr. Strawbridge, 18,500. The other
action was a special grant of NQSOs, in connection with the Executive Stock
Ownership Program, that vest at the end of four years, but 50% of the shares
will vest earlier if the Company's share price reaches $13.50 for 90
consecutive calendar days and the remaining 50% of the shares will vest if the
Company's share price reaches $16.50 for a period of 90 consecutive calendar
days. The number of shares granted to Named Officers under this program were
as follows: Mr. DeLuca,18,782; Mr. Mahoney, 3,052; Mr. Pompe, 3,286, and Mr.
Strawbridge, 4,666.
Compensation of Chief Executive Officer
The Committee assessed the competitiveness of Mr. DeLuca's salary for the
prior fiscal year using several compensation data sources. The Committee
increased Mr. DeLuca's salary to $400,000 per annum; therefore no salary
adjustment was made in the current fiscal year. Mr. DeLuca earned an incentive
award of $300,000 under the Management Incentive Plan for the fiscal year that
ended December 25, 1998, which reflected the achievement of the Company's EBIT
and other financial goals and Mr. DeLuca's individual performance in relation
to preestablished objectives. Mr. DeLuca was granted a contingent bonus under
the Executive Bonus Plan that is composed of two components: a bonus in the
amount of $516,505 that will be earned in certain increments if the Company's
share price reaches $13.50, $16.50 and $25.00 for a period of 90 calendar days
within three years from the date of the award; and a bonus in the amount of
$187,914 a third of which will be earned each year that Mr. DeLuca remains
with the Company for the next three years. The Committee granted 25,000 NQSOs
to Mr. DeLuca in fiscal year that ended December 25, 1998 as part of an annual
grant to officers. In addition, Mr. DeLuca received a grant of 18,782 of NQSOs
in connection with the Executive Stock Ownership Program. The shares vest at
the end of four years, but 50% of the shares will vest earlier if the
Company's share price reaches $13.50 for 90 consecutive calendar days and the
remaining 50% of the shares will vest if the Company's share price reaches
$16.50 for a period of 90 consecutive calendar days.
Section 162(m) of the Internal Revenue Code
As of January 1, 1994, the Internal Revenue Code of 1986 (the "Code") was
amended to eliminate the deductibility of certain compensation in excess of $1
million. Compensation awarded under a "performance-
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<PAGE>
based" compensation program that was approved by stockholders is exempted from
the deduction limitation. The Compensation Committee considered the effect of
Section 162(m) of the Code on the Company's compensation programs when it
adopted the 1996 Stock Incentive Plan, which qualified as a "performance-
based" compensation program under the Code. The Company intends to adopt
"performance-based" compensation programs in the future as may be required.
However, the Compensation Committee believes that its primary responsibility
is to provide compensation programs that attract, retain, and reward executive
talent in a manner that is in the best interests of both the Company and its
stockholders. Accordingly, the Compensation Committee will consider tax-
deductibility, but will not necessarily be limited by this consideration as it
determines the Company's executive compensation strategy.
THE COMPENSATION COMMITTEE
Philip B. Dolan, Chairman
Daniel A. D'Aniello
Charles W. Schmidt
James David Watkins
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STOCK PRICE PERFORMANCE GRAPH
The following graph sets forth the Company's cumulative total stockholder
return on its Common Stock compared to the S&P 500 Index and a peer group of
companies selected by the Company consisting of companies engaged in the
environmental services industry at the end of each fiscal year. The companies
in the peer group are: Dames & Moore Group, EMCON, Harding Lawson Associates
GP, Inc., ICF Kaiser International, Inc., Sevenson Environmental Services,
Inc., TRC Companies, Inc., and Roy F. Weston, Inc. (the "Peer Group"). The
Company believes that the Peer Group it has selected represents a group of
reasonably comparable companies engaged in the environmental services
industry.
[GRAPH APPEARS HERE]
COMPARISON OF FIVE YEAR CUMULATIVE RETURN
AMONG IT GROUP, INDUSTRY GROUP INDEX AND S&P 500 INDEX
-------- -------------- -------
<TABLE>
<CAPTION>
Measurement period INDUSTRY S&P 500
(Fiscal year Covered) IT GROUP GROUP INDEX INDEX
- --------------------- --------- ----------- ---------
<S> <C> <C> <C>
Measurement PT -
3/31/94 $ 100 $ 100 $ 100
FYE 3/31/95 $ 79 $ 73 $ 116
FYE 3/29/96 $ 83 $ 66 $ 153
FYE 3/27/97 $ 57 $ 65 $ 188
FYE 3/27/98 $ 83 $ 72 $ 271
FYE 12/24/98 $ 93 $ 60 $ 307
</TABLE>
Assumes $100 invested on March 31, 1994 in the Company's Common Stock, the
S&P 500 Index, and the Peer Group, and assumes the reinvestment of all
dividends.
THIS GRAPH REPRESENTS HISTORICAL STOCK PRICE PERFORMANCE AND IS NOT
NECESSARILY INDICATIVE OF ANY FUTURE STOCK PRICE PERFORMANCE.
THE FOREGOING REPORT OF THE COMPENSATION COMMITTEE AND THE PERFORMANCE GRAPH
THAT APPEARS IMMEDIATELY AFTER SUCH REPORT SHALL NOT BE DEEMED TO BE
SOLICITING MATERIAL OR TO BE FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES EXCHANGE ACT OF 1934 OR
INCORPORATED BY REFERENCE IN ANY DOCUMENT SO FILED.
19
<PAGE>
CERTAIN TRANSACTIONS
Employment Agreements. The Company and each of Anthony J. DeLuca, James
R.Mahoney and Raymond J. Pompe have entered into employment agreements with
terms through November 1999. The employment agreements provide for initial
base salaries at the rates in effect at the time of the closing of the
Investment, subject to annual upward adjustment at the discretion of the
Compensation Committee of the Board of Directors (the "Compensation
Committee"). Salaries are subject to reduction only in connection with action
taken by the Board of Directors for all management employees. Each of the
employment agreements provides for a short-term incentive compensation plan to
be administered by the Compensation Committee. The target short-term incentive
compensation level is 40%, and the maximum level is 60%, of base salary,
except in the case of Mr. DeLuca, for whom the target level is 50%, and the
maximum level is 75%, of base salary. The Company also is required to maintain
long-term incentive plans to be administered by the Compensation Committee,
which will make awards, primarily of stock options, based on appropriate
performance criteria. The annual awards are at the discretion of the
Compensation Committee and will generally target long-term incentive
opportunities.
The agreements provide for severance payments under certain circumstances.
Under the agreements, the Company will have "good reason" to terminate Messrs.
DeLuca, Mahoney or Pompe because of the Company's performance if such persons
fail to meet certain management forecasts for two consecutive fiscal years. If
the executive is terminated because of the Company's performance (under the
circumstances permitted in the agreements) within 24 months after a change in
control, is terminated without reason, or resigns for cause, he is entitled to
receive his base salary as adjusted from time to time (presently $400,000 in
the case of Mr. DeLuca, $260,000 in the case of Mr. Mahoney and $280,000 in
the case of Mr. Pompe) for 12 months following the termination (24 months in
the case of Mr. DeLuca), or, if he is terminated because of the Company's
performance (under the circumstances permitted in the agreements) but not
within 24 months after a change in control, he is entitled to receive his base
salary for six months following the termination (12 months in the case of Mr.
DeLuca). In addition, under certain circumstances, the executive's short-term
incentive compensation will be paid on a pro-rated basis, and he will be
entitled to Company employee benefits for a specified period.
The Company has provided loans to Messrs. DeLuca, Mahoney and Pompe to allow
them to make substantial purchases of the Company's Common Stock in the open
market. The agreements each required that within three months of the closing
of the Investment, Mr. DeLuca purchase between $100,000 and $125,000 worth of
Common Stock and Messrs. Mahoney and Pompe each purchase between $75,000 and
$100,000 worth of Common Stock. All of the executives have purchased the
required amounts of Common Stock, and Messrs. DeLuca, Mahoney, and Pompe have
received loans in the principal amounts of $125,000, $100,000, and $100,000,
respectively, to purchase the stock. In connection with the short-term
compensation plan described above, the Company may provide for forgiveness of
a certain portion of the loan principal and interest if previously agreed to
targets are met or exceeded. The loans bear interest at the rate of 8.25% per
year and are repayable at upon the earlier of the executive's termination of
employment or November 19, 1999. The employment agreements also provide for
reimbursement for business expenses and vacation and other benefits consistent
with existing Company policies and practices.
Additionally, as part of their employment agreements, each of Messrs.
DeLuca, Mahoney and Pompe are bound by non-compete provisions with the Company
if they terminate their employment by resignation.
The Company has also agreed to enter into employment agreements with David
L. Backus and Philip O. Strawbridge with terms similar to those of the
employment agreements for Messrs. Mahoney and Pompe. The Company has also
agreed to enter into severance agreements with certain other key executives of
the Company. Such agreements generally will provide for the payment of 12
months of base salary in the event the executive is involuntarily terminated
for other than cause.
Mr. Strawbridge, as well as other senior executives at OHM, entered into
employment agreements with OHM prior to the execution of the Merger Agreement,
and the tender offer for OHM resulted in a change in control of OHM for
purposes of those employment agreements. As a result of the change in control,
under his
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<PAGE>
employment agreement, Mr. Strawbridge was entitled to continue his employment
with OHM in his position at the time of the tender offer for a period of
approximately three years following the date of the change in control. During
his term of employment, Mr. Strawbridge would have been entitled to receive a
base salary and to continue to participate in incentive and employee benefit
plans at levels no less favorable to him than existed prior to the change in
control. In the event of a termination by OHM or by Mr. Strawbridge of his
employment during the employment term under circumstances amounting to good
reason under his employment agreement, Mr. Strawbridge would have been
entitled to receive a lump sum payment, subject to an overall limitation to
assure that payments will not constitute "excess parachute payments" under
federal income tax law. Mr. Strawbridge has agreed to remain employed but the
Company has agreed to pay to Mr. Strawbridge the amount he would have received
under his employment agreement if his employment had been terminated, and
pursuant to that agreement Mr. Strawbridge has received $1,400,000.
Backus Arrangements. David L. Backus, a Senior Vice President, has agreed to
be employed by the Company following the acquisition of GTI. While employed at
GTI, Mr. Backus was on loan from his previous employer. The Company paid Mr.
Backus $200,000 as full consideration for the value of foregone benefits and
compensation that he would have been entitled to if he had returned to his
previous employer.
Coffman Agreement. In connection with his resignation from the Company,
Franklin E. Coffman, a Senior Vice President, entered into an agreement dated
as of April 17, 1998 superseding his employment agreement. See "Certain
Transactions--Employment Agreements." Pursuant to that agreement Mr. Coffman
resigned as an officer of the Company and received a one-time payment of
$275,000, less payroll deductibles representing one year's salary and the cash
value of certain benefits. Mr. Coffman's eligibility to participate in Company
benefits ceased as of the date of the agreement. The Company and Mr. Coffman
also agreed that he would have the right to exercise vested options during a
two year period after the agreement and that all unvested options will expire
on the earlier of their scheduled expiration or April 7, 2000. The Company
also agreed to lift vesting restrictions on 8,971 shares of previously awarded
restricted stock. The terms of the agreement were consistent with terms that
he would have received if he had retired from the Company.
Retention of Eckert Seamans Cherin & Mellott. The Company has retained the
law firm of Eckert Seamans Cherin & Mellott, to which Robert F. Pugliese, a
director of the Company, is Special Counsel, to perform certain limited
services in connection with the Company's credit agreement and the merger of
OHM Corporation.
Relocation Loans. In certain circumstances, the Company has granted and may
in the future grant interest-free loans to executive officers, officers and
certain other employees principally for real estate purchases in connection
with company-initiated transfers to a new location. All loans are approved by
the Compensation Committee and are to be secured by the principal residence of
the individual. Mr. James R. Mahoney, Senior Vice President, entered into a
relocation loan arrangement with the Company with an original principal amount
of $200,000 and secured by a deed of trust on his personal residence in
California. The loan was interest free so long as Mr. Mahoney remained an
employee. Beginning December 31, 1991 and on each December 31st thereafter
until the due date of the loan, 5% of the original principal amount (to a
maximum of 50% of the original principal amount) was forgiven by the Company.
Additionally, Mr. Mahoney agreed to repay the remaining 50% of the original
principal amount in installments related to the issuance of awards under the
Company's incentive compensation plan. In April 1997, $122,451 remained
outstanding on this loan. In May 1998, Mr. Mahoney repaid in full the $102,451
then remaining outstanding on his loan in connection with the sale of his
California residence.
In connection with the relocation and consolidation of the Company's
corporate headquarters from Torrance, California to Pittsburgh, Pennsylvania
in June 1997, and other relocations occurring at approximately the same time,
the Company offered relocation assistance to a limited number of officers and
key employees. Relocation assistance packages offered to these individuals
involve three elements: 1) reimbursement of out-of-pocket relocation expenses,
including travel, real estate brokerage commissions (up to a 6% maximum), and
loan origination fees (up to a maximum of two points), 2) a loan to be used
for the purchase of a new residence, and 3) a mobility allowance of between
15% and 30% of salary (Mr. Mahoney received an allowance of 30% of
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<PAGE>
salary in connection with his relocation and Mr. DeLuca received a 30%
allowance in connection with his relocation). Amounts paid to reimburse out-
of-pocket expenses were "grossed-up" for tax purposes. The loans to relocating
associates have ten year terms, are to be secured by the residence purchased,
and do not bear interest as long as the associate stays with the Company. Five
percent of the loan principal is required to be repaid annually by the
associate and 5% will be forgiven annually by the Company for each year the
associate remains with the Company. The loans are also due upon the sale of
the residence purchased. Mr. DeLuca and Mr. Mahoney each were offered and
accepted relocation loans on such terms in the original principal amounts of
up to $100,000. Mr. DeLuca accepted a loan of $70,000 in May 1997 and the
balance of $30,000 in August 1998. During the fiscal year ended December 25,
1998, (i) Mr. DeLuca repaid $3,500 of the loan, and (ii) the maximum amount
owed by Mr. DeLuca to the Company under the loan was $91,500. As of March 5,
1999, the principal amount outstanding for Mr. DeLuca's loan was $86,500. Mr.
Mahoney accepted a loan of $100,000 in April 1998. During the fiscal year
ended December 25, 1998, the maximum amount owed by Mr. Mahoney to the Company
under the loan was $100,000. As of March 5, 1999, the principal amount
outstanding for Mr. Mahoney's loan was $90,000. Total relocation costs for all
relocating employees was approximately $953,000.
Executive Stock Ownership. The Company has adopted an Executive Stock
Ownership Program which requires that within three years certain key
executives own an amount of the Company's Common Stock equal to a multiple of
their salary ranging from one times salary for vice presidents to three times
salary for Mr. DeLuca. To assist these executives in meeting the ownership
guidelines, the Company has provided loans to Messrs. DeLuca, Mahoney, Pompe,
and Strawbridge in the amounts of $939,100, $152,600, $164,300 and $233,300
respectively, to purchase the Company's Common Stock. The Company also
provided similar loans totaling $510,700 to four other key executives. All of
the executives used the loans solely to purchase the Company's Common Stock at
current market prices. The loans bear interest at the rate of 4.46% per year
and are repayable upon the earlier of the executives' termination of
employment or November 23, 2001. It is expected that the executives will be
able to repay the loans from incentive compensation payments earned throughout
the three-year loan period.
Carlyle Financial Advisory Fees. In connection with the Investment, the
Company agreed to pay Carlyle (i) an annual financial advisory fee of
$100,000, payable quarterly; and (ii) investment banking fees (equal to 1% of
transaction value) and reimbursement of reasonable out-of-pocket expenses for
investment banking services rendered to the Company. The Company has paid
$2,500,000 in investment banking fees to Carlyle (and reimburse reasonable
out-of-pocket expenses) for services rendered in connection with the Merger
transactions, which is less than the 1% fee to which Carlyle would otherwise
have been entitled pursuant to the terms of its existing agreement with the
Company.
Indemnification. The General Corporation Law of the State of Delaware, the
state of incorporation of the Company, and the Bylaws of the Company provide
for indemnification of directors and officers. Section 145 of the Delaware
General Corporation Law provides generally that a person sued as a director,
officer, employee or agent of a corporation may be indemnified by the
corporation for reasonable expenses, including attorneys' fees, if, in cases
other than actions brought by or in the right of the corporation, he or she
has acted in good faith and in a manner he or she reasonably believed to be
in, or not opposed to, the best interests of the corporation (and in the case
of a criminal proceeding, had no reasonable cause to believe that his or her
conduct was unlawful). Section 145 provides that no indemnification for any
claim or matter may be made, in the case of an action brought by or in the
right of the corporation, if the person has been adjudged to be liable, unless
the Court of Chancery or other court determines that indemnity is fair and
reasonable despite the adjudication of liability. Indemnification is mandatory
in the case of a director, officer, employee or agent who has been successful
on the merits, or otherwise, in defense of a suit against him or her. The
determination of whether a director, officer, employee or agent should be
indemnified must be made by a majority of disinterested directors, independent
legal counsel or the stockholders.
Directors and officers of the Company are covered under policies of
directors' and officers' liability insurance. The directors and all officers
serving the Company as Senior Vice President or in a higher position and
certain other officers are parties to Indemnity Agreements (the Indemnity
Agreements). The Indemnity
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Agreements provide indemnification for the directors and covered officers in
the event the directors' and officers' liability insurance does not cover a
particular claim for indemnification or if such a claim or claims exceed the
limits of such coverage. The Indemnity Agreements are generally intended to
provide indemnification for any amounts a director or covered officer is
legally obligated to pay because of claims arising out of the director's or
officer's service to the Company.
Additionally, the Company's Certificate of Incorporation provides that its
directors are not to be liable to the Company or its stockholders for monetary
damages for breach of fiduciary duty to the fullest extent permitted by law.
This provision is intended to allow the Company's directors the benefit of the
Delaware General Corporation Law which provides that directors of Delaware
corporations may be relieved of monetary liabilities for breach of their
fiduciary duty of care, except under certain circumstances, including breach
of the director's duty of loyalty, acts or omissions not in good faith or
involving intentional misconduct or a knowing violation of law or any
transaction from which the director derived an improper personal benefit.
The Investment agreements also contain additional provisions for the
indemnification of Company directors and officers in certain circumstances.
The Investment Agreement provides that the Company will indemnify, defend and
hold harmless Carlyle, and its affiliates, directors, officers, advisors,
employees and agents to the fullest extent lawful from and against all
demands, losses, damages, penalties, claims, liabilities, obligations,
actions, causes of action and reasonable expenses (Losses) arising out of the
Investment Agreement or the related transactions or arising by reason of or
resulting from the breach of any representation, warranty, covenant or
agreement of the Company contained in the Investment Agreement for the period
for which such representation or warranty survives; provided, however, that
the Company shall not have any liability to indemnify Carlyle with respect to
Losses arising from the bad faith or gross negligence of the Carlyle
indemnified party.
The Investment agreements also provide that Carlyle will indemnify, defend
and hold harmless the Company, its affiliates, directors, officers, advisors,
employees and agents from and against all Losses arising out of the breach of
any representation, warranty, covenant or agreement of Carlyle contained in
the Investment Agreement for the period for which such representation or
warranty survives; provided, however, that Carlyle shall not have any
liability to indemnify the Company with respect to Losses arising from the bad
faith or gross negligence of the Company indemnified party.
The Investment agreements provide that no claim may be made against an
indemnifying party for indemnification until the aggregate dollar amount of
all Losses exceeds $1,500,000 and the indemnification obligations of the
respective parties shall be effective only until the dollar amount paid in
respect of the Losses indemnified against aggregates to an amount equal to
$45,000,000.
Further, pursuant to the Merger Agreement with OHM, the Company will, from
and after the effective time of the OHM Merger, indemnify and hold harmless,
to the fullest extent permitted under applicable law (and the Company will
also advance expenses as incurred to the fullest extent permitted under
applicable law, provided the person to whom expenses are advanced provides an
undertaking to repay such advances if it is ultimately determined that such
person is not entitled to indemnification), each present and former director
and officer of OHM and its subsidiaries against any costs or expenses
(including reasonable attorneys' fees), judgments, fines, losses, claims,
damages or liabilities incurred in connection with any claim, action, suit,
proceeding or investigation, whether civil, criminal, administrative or
investigative, arising out of or pertaining to matters existing or occurring
at or prior to the effective time of the OHM Merger, including the
transactions contemplated by the OHM Merger Agreement, which is based or
arises out of the fact that such person is or was a director or officer of OHM
or any of its subsidiaries. In addition, for not less than six years after the
effective time, the Company and OHM will maintain OHM's and its subsidiaries'
existing directors' and officers' liability insurance ("D&O Insurance"),
subject to certain maximum premium payments, provided that the Company may
substitute therefor policies having at least the same coverage and containing
terms which are no less advantageous to the intended beneficiaries thereof
than the existing D&O Insurance with respect to matters existing or occurring
at or prior to the effective time or may purchase a six-year extended
reporting endorsement under OHM's existing D&O Insurance.
23
<PAGE>
The Company has substantially similar indemnification obligations with
respect to persons who are or were directors, officers, employees or agents of
GTI before or after the effective time of the merger with GTI, pursuant to the
agreement for the acquisition of GTI.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange Act")
requires directors, certain officers of the Company and persons holding more
than 10% of the Company's Common Stock to file reports concerning their
ownership of Common Stock by dates established under the Exchange Act and also
requires that the Company disclose any noncompliance with those requirements
during the year ended December 25, 1998. Based solely upon a review of reports
delivered to the Company, the Company believes all Section 16(a) filing
requirements were satisfied.
INDEPENDENT AUDITOR
Ernst & Young LLP was the Company's independent auditor for the year ended
December 25, 1998 and has been selected as the auditor for the current fiscal
year, as recommended by the Audit Committee. A representative of that firm is
expected to be at the Annual Meeting and will have an opportunity to make a
statement, if desired. The representative will also be available to respond to
appropriate questions from stockholders.
STOCKHOLDER PROPOSALS
The Company expects to hold its next annual meeting of stockholders in June
2000. Any eligible stockholder (as defined below) of the Company wishing to
have a proposal considered for inclusion in the Company's proxy solicitation
materials for the annual meeting in the year 2000 under Exchange Act Rule 14a-
8 must set forth such proposal in writing and file it with the Secretary of
the Company a reasonable time in advance of the date of mailing the Company's
proxy statement. The Company will consider any proposal filed on or before
January 20, 2000 to be in compliance with such requirement. The Board of
Directors of the Company will review any proposals from eligible stockholders
which it receives by that date and, with advice of counsel, will determine
whether any such proposal will be included in its 2000 proxy solicitation
materials under applicable SEC proxy rules. An eligible stockholder is one who
is the record or beneficial owner of at least 1% or $1,000 in market value of
securities entitled to be voted at that annual meeting and has held such
securities for at least one year and who shall continue to own such securities
through the date on which the annual meeting is held. In addition, under the
Company's bylaws, a stockholder who wishes to propose business for
consideration at the annual meeting in the year 2000 or to nominate persons
for election to the Board of Directors must deliver to the Company the
information specified in the Company's Bylaws regarding such proposal or
nomination not later than the "Advance Notice Deadline Date." For this
purpose, the Advance Notice Deadline Date is the date that is 60 days in
advance of the date of the annual meeting in the year 2000 or, if later, the
fifteenth day following the date the Company first announces the date for the
annual meeting in the year 2000. Under Exchange Act Rule 14a-4, as recently
amended, the Company also may exercise discretionary voting authority under
proxies it solicits to vote on a proposal made by a stockholder that the
stockholder does not seek to include in the Company's proxy statement pursuant
to Rule 14a-8, unless the Company is notified about the proposal before the
Advance Notice Deadline Date.
ANNUAL REPORT
The Company's Annual Report to Stockholders for the transition period ended
December 25, 1998 (the "Annual Report" or the "1998 Annual Report") is being
mailed to stockholders together with this Proxy Statement. Stockholders are
referred to the report for financial and other information about the Company,
and such information is incorporated in this Proxy Statement by reference and
is part of the proxy soliciting material.
24
<PAGE>
FORM 10-K ANNUAL REPORT
The Company will provide to any stockholder, without charge, a copy of its
Report on Form 10-K (as amended) for the transition period ended December 25,
1998, including financial statements, filed with the SEC, upon the request of
any such stockholder. Requests should be directed to The IT Group, Inc.,
Attention: Investor Relations, 2790 Mosside Boulevard, Monroeville,
Pennsylvania 15146-2792, 412-372-7701.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company hereby incorporates by reference in this Proxy Statement its
Report on Form 10-K for the transition period ended December 25, 1998, as
amended through Amendment No. 1 on Form 10-K/A dated April 26, 1999, and the
Quarterly Report on Form 10-Q for the quarter ended March 26, 1999.
GENERAL AND OTHER MATTERS
The Company will bear the cost of this solicitation of proxies, including
expenses in connection with preparing, assembling and mailing the proxy
solicitation materials and the charges and expenses of brokerage firms and
others for forwarding solicitation materials to beneficial owners. The Company
has engaged MacKenzie Partners, Inc. ("MacKenzie") to assist in the
solicitation of proxies, for which MacKenzie will be paid a management fee of
$5,000 plus out-of-pocket expenses.
As of the date of this Proxy Statement, there are no other matters to be
brought before the Annual Meeting. Pursuant to the Company's Bylaws, in order
to present business at the Annual Meeting other than that proposed by the
Board, a stockholder must give written notice to the Secretary of the Company
not later than sixty days in advance of the Annual Meeting or, if later, the
fifteenth day following the first public disclosure of the date of the Annual
Meeting. Any such notice must set forth as to each matter the stockholder
proposes to bring before the meeting: (i) a brief description of the business
desired to be brought before the meeting and the reasons for conducting such
business at the meeting; (ii) the name and address, as they appear on the
Company's books, of the stockholder proposing such business; (iii) the class,
series and number of shares of the Company that are beneficially owned by the
stockholder, and (iv) any material interest of the stockholder in such
business. In addition, a stockholder making any such proposal must promptly
provide any information reasonably requested by the Company. Should any other
matters come before the Annual Meeting, action may be taken thereon pursuant
to the proxies in the form enclosed, which confer discretionary authority on
the persons named therein or their substitutes with respect to such matters.
By Order of the Board of Directors,
/s/ James G. Kirk
James G. Kirk
Secretary
May 20, 1999
Monroeville, Pennsylvania
25
<PAGE>
1970-PS-99
<PAGE>
The IT GROUP, INC.
ANNUAL MEETING OF STOCKHOLDERS
JUNE 9, 1999
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned constitues and appoints ANTHONY J. DELUCA and JAMES G.
KIRK and each of them, attorneys-in-fact and proxies of the undersigned, to
represent the undersigned and to vote all shares of Common Stock, $0.01 par
P value, of the IT Group, Inc. (the "Company") which the undersigned would be
R entitled to vote if personally present at the Annual Meeting of
O Stockholders of the Company (the "1999 Annual Meeting") to be held at 9:00
X a.m. Eastern Time, on Wednesday, June 9, 1999, at The IT Group, Inc.,
Y located at 2790 Mosside Boulevard, Monroeville, Pennsylvania 15146-2792,
and at any adjournment or postponement thereof. All proxies shall be voted
as directed, or, if no direction is given, for the nominees named on the
reverse side.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
---------------
SEE REVERSE
SIDE
---------------
<PAGE>
[X] Please mark votes as in this example.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE
IT GROUP, INC.
<TABLE>
<S> <C>
1. ELECTION OF DIRECTORS: 2. In the discretion of the proxyholders with respect to any
Nominees: Anthony J. DeLuca, Francis J. Harvey, James C. other matter that may properly come before the 1999
McGill, Richard W. Pogue, and Charles W. Annual Meeting and at any adjournment or postponement
Schmidt thereof. The Board of Directors is not aware of any other
matters that will be presented at the meeting.
FOR WITHHELD
[_] [_] MARK HERE FOR
ADDRESS CHANGE
AND NOTE AT LEFT [_]
[_] _________________________________________ Please date and sign exactly as your name or names appear
For all nominees except as noted above hereon. If more than one owner, all should sign. Executors,
administrators, trustees, guardians, attorneys and corporate
officers should indicate their fiduciary capacity or full
title when signing.
Signature: ________________________ Date: _______________ Signatue: ________________________ Date: ______________
</TABLE>
