<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 Inc.
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(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):
[_] 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:
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(2) Aggregate number of securities to which transaction applies:
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(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):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] 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:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
<PAGE>
[LOGO OF IT GROUP, INC.]
THE IT GROUP, INC.
2790 Mosside Boulevard
Monroeville, Pennsylvania 15146-2792
NOTICE OF 2000 ANNUAL MEETING OF STOCKHOLDERS
The 2000 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 8, 2000,
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 2001 and until their successors are elected
and qualified;
2. To consider and vote upon the approval of the Company's 2000 Stock
Incentive Plan; and
3. To transact such other business as may properly come before the Annual
Meeting.
Holders of record of the Company's "Common Stock" and "Convertible Preferred
Stock" (both as defined) at the close of business on April 18, 2000 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 26, 2000 until June 7, 2000 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 1, 2000
Monroeville, Pennsylvania
[Recycled Logo]
<PAGE>
THE IT GROUP, INC.
2790 Mosside Boulevard
Monroeville, Pennsylvania 15146-2792
----------------
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
JUNE 8, 2000
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 2000 Annual Meeting of
Stockholders of the Company to be held at 9:00 a.m. Eastern time, on Thursday,
June 8, 2000, 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 2000 Annual Report to
Stockholders, will first be mailed to the Company's stockholders on or about
May 3, 2000.
VOTING SECURITIES OF THE COMPANY
The authorized voting securities of the Company for purposes of the Annual
Meeting (as of the record date of April 18, 2000) consist of :
1. 22,906,562 issued and outstanding shares of the Company's 50,000,000
authorized shares of Common Stock, par value $0.01 per share (the
"Common Stock");
2. 46,095 issued and outstanding shares of 6% Cumulative Convertible
Preferred Stock (the "Convertible Preferred Stock") of the Company's
180,000 authorized shares of preferred stock, par value $100 per share.
Common Stock
Holders of shares of Common Stock are entitled to one vote for each share
held of record on the record date on all matters submitted to a vote of the
stockholders, except in connection with the election of Common Stock
Directors, in which case holders of shares of Common Stock have cumulative
voting rights.
Convertible Preferred Stock
Holders of shares of Convertible Preferred Stock generally have the right to
vote (on an as-converted basis) as a single class with the holders of shares
of Common Stock and other classes or series of stock entitled to vote as a
single class with the Common Stock, on all matters submitted to a vote of
stockholders except (a) matters for which class voting is required by law or
under the Company's Certificate of Incorporation and (b) during the five-year
period ending on November 20, 2001, with respect to the election of the
directors required to be elected by holders of the Common Stock. In any vote
with respect to which holders of shares of Convertible Preferred Stock have
the right to vote as a single class with the holders of shares of Common
Stock, each share of Convertible Preferred Stock is entitled to cast the
number of votes equal to the number of votes which could be cast in that vote
by a holder of the number of shares of Common Stock into which that share of
Convertible Preferred Stock is convertible on the date of that vote. Shares of
Convertible Preferred Stock may at any time, at the option of the holders of
those shares, be converted into shares of Common Stock. Each share of the
Convertible Preferred Stock is currently convertible into shares of Common
Stock at the rate of 131.75 per share of Convertible Preferred Stock, subject
to adjustment under certain circumstances.
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VOTING AT THE MEETING
The close of business on April 18, 2000 has been fixed as the record date
for determination of holders ("Stockholders") of the Company's Common Stock
and Convertible Preferred Stock entitled to notice of and to vote at the
Annual Meeting. On that date, there were outstanding and entitled to vote
22,906,562 shares of Common Stock and 46,095 shares of Convertible Preferred
Stock convertible into 6,073,122 shares of Common Stock. The presence, either
in person or by proxy, of persons entitled to cast a majority of such
28,979,684 votes constitutes a quorum for the transaction of business at the
Annual Meeting.
With regard to the election of "Common Stock Directors" (as defined below),
votes by holders of the Company's Common Stock 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.
PROPOSAL I
ELECTION OF DIRECTORS
Board of Directors
Pursuant to the terms of the agreements under which the Convertible
Preferred Stock was purchased in 1996 (the "Investment") by investors
affiliated with The Carlyle Group (collectively, "Carlyle"), a private
merchant bank headquartered in Washington, D.C., 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.
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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 directors, has the right to elect a
Director to fill one vacancy created by 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 Dr. Harvey's
election at the 1999 Annual Meeting, the Board of Directors of the Company
consists 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.
Under the Company's Certificate of Incorporation, holders of the Company's
Common Stock are entitled to cumulate voting rights in the election of Common
Stock directors. Under cumulative voting, each holder of the Company's Common
Stock is entitled to a number of votes equal to the number of directors to be
elected multiplied by the number of shares of Common Stock the stockholder is
entitled to vote. Such votes may be cast for one nominee or distributed among
two or more candidates. The candidates for election receiving the highest
number of affirmative votes of the shares entitled to vote for them up to the
number of directors to be elected by those shares will be elected.
No stockholder shall be entitled to cumulate votes for a candidate unless
such candidate's name has been placed in nomination prior to the voting. In
voting by proxy, a stockholder is conferring upon the proxyholders the
discretionary authority to cumulate votes in electing directors. If any person
is properly nominated for director other than the nominees set forth in the
table above, the persons named in the accompanying proxy may vote at their
discretion cumulatively for less than all the nominees set forth.
Directors serve for one (1) year terms. 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 2001:
Anthony J. DeLuca (1)... 52 Director, Chief Executive Officer
and President 2000 1996
Francis J. Harvey
(1)(2)................. 56 Director 2000 1999
James C. McGill (3)..... 56 Director 2000 1990
Richard W. Pogue (3).... 72 Director 2000 1998
Charles W. Schmidt (2).. 72 Director 2000 1998
Preferred Stock
Directors:
Daniel A. D'Aniello
(1)(2)(4).............. 53 Director and Chairman of the
Board (non-officer position) 2000 1996
Philip B. Dolan (2)(4).. 42 Director 2000 1996
E. Martin Gibson (3)(4). 62 Director 2000 1994
Robert F. Pugliese
(3)(4)................. 67 Director 2000 1996
James David Watkins
(2)(4)................. 73 Director 2000 1996
</TABLE>
- --------
(1) Member of Executive Committee
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(2) Member of Compensation Committee.
(3) Member of Audit Review 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, Mr. Pugliese, and Admiral Watkins each to serve an
annual term to expire in 2001.
Background of the Nominees and Preferred Stock Directors:
Mr. D'Aniello has been a Managing Director of 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., Baker & Taylor, Inc., 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 to that, Mr. DeLuca had been Senior Vice 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 of Carlyle since 1998. Before that, he was a
Vice President of 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 Board of Directors of Hardinge, 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., Powerize.com, Kuhlman Electric Corp.,
ArtMetropolis.com, Inc., ILT Corp. 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, Rotek Incorporated and TRW Inc.
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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.
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, Admiral Watkins 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 GTS Duratek,
Inc.
Meetings of the Board of Directors and Committees
During the period December 25, 1998 through December 31, 1999, the end of
the Company's last fiscal year, the Company's Board of Directors held seven
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 one meeting during the period from
December 25, 1998 through December 31, 1999. The Executive Committee manages
the business and affairs of the Company between regularly scheduled Board
Meetings.
The Company's Audit Committee held five meetings from December 25, 1998
through December 31, 1999. 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 December 25,
1998 through December 31, 1999. The Compensation Committee reviews salaries,
bonuses and other aspects of executive compensation and administers the
Company's stock incentive and other compensation plans.
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.
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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.
Stock Options. The purpose of the Company's Amended and Restated 1996 Stock
Incentive Plan (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. Pursuant to the terms of the 1996 Plan,
grants of stock options to non-employee directors are within the discretion of
the Compensation Committee, however, no grants have been made to non-employee
directors. As of April 18, 2000, the maximum number of shares authorized for
issuance under the 1996 Plan is 1,786,191.
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 until November 2001, on account of their
service as directors prior to the Investment.
PROPOSAL 2
APPROVAL OF ADOPTION OF
2000 STOCK INCENTIVE PLAN
At the Annual Meeting, stockholders will be asked to approve the Company's
2000 Stock Incentive Plan (the "2000 Plan"), which was adopted by the Board of
Directors in March 2000, subject to approval by the Company's stockholders.
The Company's Board of Directors considers the 2000 Plan to be important to
the Company's ability to appropriately compensate its officers and key
employees as the Company's operations continue to expand through acquisitions
and internally generated growth. In this respect, the 2000 Plan will further
implement the objectives pursued under the 1996 Plan. The 1996 Plan ceases to
be available for new awards on November 20, 2001. Of the 1,786,191 shares
authorized under the 1996 Plan, only 28,802 were available for grant on April
18, 2000. The 2000 Plan also provides for limited option grants to the
Company's directors, in order to more closely align their compensation to
increases in stockholder value.
VOTE REQUIRED
Approval of the 2000 Plan requires the affirmative vote of a majority of the
shares of Common Stock and of the Convertible Preferred Stock voting on an as-
converted basis, present or represented by proxy and entitled to vote at the
Annual Meeting.
SUMMARY OF THE NEW PLAN
The following summary of the main features of the 2000 Plan is qualified in
its entirety by reference to the complete text of the 2000 Plan, which is set
forth as Appendix I to this Proxy Statement.
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<PAGE>
GENERAL
The 2000 Plan authorizes the grant and issuance of three different types of
Awards:
. Stock Options, which can qualify as "incentive stock options" under the
Tax Code or as "non-qualified stock options;"
. Incentive Stock, which is stock the grant, issuance, retention, vesting
and/or transferability of which may be subject to various terms and
conditions; and
. Incentive Bonuses, which are performance bonuses paid in either cash or
stock.
The 2000 Plan has a number of special terms and limitations, including:
. The exercise price for stock options granted under the plan generally
must equal the Company's stock price on the date the option is granted;
. The number of shares available for issuance increases annually, during
the life of the plan, to only 2% of the number of Common Stock shares
(the "Shares") the Company has issued and outstanding on the first day
of fiscal years 2001, 2002, 2003, 2004, and 2005;
. The 2000 Plan states that stock options granted under it can not be
"repriced", as defined in the 2000 Plan;
. Awards may not be granted under the 2000 Plan after the fifth
anniversary of stockholder approval of the plan;
. Nonemployee directors participate under the 2000 Plan only through their
eligibility to receive a limited number of options; and
. Stockholder approval is required for certain types of amendments to the
2000 Plan.
The 2000 Plan is designed to enable the Company to attract, retain and
motivate principally its directors, officers and other senior management and
technical personnel, and to further align their interests with those of the
stockholders of the Company, by providing for or increasing the proprietary
interest of such persons in the Company.
The 2000 Plan has various provisions so that Awards under it may, but need
not, qualify for an exemption from the "short swing liability" provisions of
Section 16(b) of the Exchange Act pursuant to Rule 16b-3 and/or qualify as
"performance based compensation" that is exempt from the $1 million limitation
on the deductibility of compensation under Section 162(m) of the Tax Code.
However, stockholder approval of the class of eligible participants, the per
person annual award limitations and the "Qualifying Performance Criteria"
which may be used under the 2000 Plan is required in order for awards under
the 2000 Plan to qualify as "performance based compensation" under Tax Code
Section 162(m).
ELIGIBILITY
Any person who is an employee (as that term is defined under SEC Form S-8,
which is used for registering compensatory stock arrangements under the
Securities Act) or prospective employee of the Company or any of its
affiliates is eligible to be selected as a recipient of an Award under the
2000 Plan. Nonemployee directors are eligible to participate under the 2000
Plan solely for purposes of receiving initial and annual stock option grants
that are described below. The Compensation Committee of the Board of Directors
has not yet determined how many individuals are ultimately to participate in
the 2000 Plan, but currently there are approximately 447
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<PAGE>
individuals holding awards granted under the 1996 Plan. While it is generally
expected that the same categories of executives, senior management and
technical personnel who participate under the 1996 Plan will be eligible to
participate under the 2000 Plan, Awards may from time to time be granted to
employees who are not in these groups but who have otherwise distinguished
themselves for their contributions or are expected to make significant
contributions to the Company.
ADMINISTRATION
The 2000 Plan will be administered by the Compensation Committee of the
Board of Directors, although the Board of Directors may exercise any authority
of the Committee under the 2000 Plan in lieu of the Committee's exercise
thereof. The Committee may designate subcommittees and may delegate certain
administrative functions to others.
Subject to the express provisions of the 2000 Plan, the Committee has broad
authority to administer and interpret the 2000 Plan, including, without
limitation, authority to determine who is eligible to participate in the 2000
Plan and to which of such persons, and when, Awards are granted under the 2000
Plan, to determine the number of shares of Common Stock subject to Awards, the
exercise or purchase price of such shares under an Award and the other terms
and conditions applicable to Awards, to establish, verify the satisfaction of,
adjust, reduce or waive any performance goals or other conditions applicable
to Awards, to prescribe and amend the terms of the documents evidencing Awards
made under the 2000 Plan, to interpret, construe and adopt rules relating to
the plan, and to make all other determinations deemed necessary or advisable
for the administration of the 2000 Plan.
STOCK SUBJECT TO THE NEW PLAN
The aggregate number of Shares initially available for issuance under the
2000 Plan is 455,000. As of April 18, 2000, the closing price of the Common
Stock on the New York Stock Exchange was $6.50.
The number of Shares available under the 2000 Plan increases under several
circumstances. First, in order to provide for Awards in future years as past
grants vest or result in share issuances, the number of Shares available for
issuance under the 2000 Plan increases as of the first day of fiscal years
2001, 2002, 2003, 2004, and 2005 by 2% of the number of Shares the Company has
issued and outstanding on each such date. Any Shares from these annual
increases that are not subject to Awards granted during the year in which they
are first made available will be available for issuance under Awards granted
in subsequent years.
The number of Shares subject to the 2000 Plan and to outstanding Awards
under the 2000 Plan also will be appropriately adjusted by the Committee if
the Common Stock is affected through a reorganization, merger, consolidation,
recapitalization, restructuring, reclassification, dividend (other than
quarterly cash dividends) or other distribution, stock split, spin-off or sale
of substantially all of the Company's assets. For purposes of calculating the
aggregate number of Shares issued under the 2000 Plan, only the number of
Shares actually issued upon exercise or settlement of an Award and not
delivered to or retained by the Company upon cancellation, expiration or
forfeiture of an Award or in payment or satisfaction of the purchase price,
exercise price or tax withholding obligation of an Award shall be counted.
AWARDS
The 2000 Plan authorizes the grant and issuance of the following types of
Awards: Stock Options, Incentive Bonuses, and Incentive Stock. In addition,
special provisions apply to the grant of Stock Options to nonemployee
directors. No Award may be granted pursuant to the 2000 Plan more than 5 years
after the date of stockholder approval of the 2000 Plan.
8
<PAGE>
Stock Options. Subject to the express provisions of the 2000 Plan and as
discussed in this paragraph, the Committee has discretion to determine the
vesting schedule of options, the events causing an option to expire, the
number of Shares subject to any option, the restrictions on transferability of
an option, and such further terms and conditions, in each case not
inconsistent with the 2000 Plan, as may be determined from time to time by the
Committee. The 2000 Plan expressly provides that the Company can not "reprice"
options. The exercise price for options may not be less than 100% of the fair
market value of the Common Stock on the date the option is granted, except
that (i) the exercise price of an option may be higher or lower in the case of
options granted to employees of a company acquired by the Company in
assumption or substitution of options held by such employees at the time such
company is acquired, and (ii) in the event an employee is required to pay or
forego the receipt of any cash amount in consideration of receipt of an
option, the exercise price plus such cash amount shall equal or exceed 100% of
the fair market value of the Common Stock on the date the option is granted.
The exercise price of an option may be paid through various means specified by
the Committee, including in cash or check, by delivering to the Company Shares
of Common Stock, by a reduction in the number of Shares issuable pursuant to
such option, or by payment through an arrangement with a stock broker to pay
over proceeds from the sale of Shares issuable under a Stock Option. Options
granted under the 2000 Plan may be either incentive stock options ("ISOs")
qualifying under Section 422 of the Tax Code or non-qualified stock options
("NQSOs"), which are not intended to qualify as ISOs.
Incentive Bonuses. The 2000 Plan authorizes the grant of Incentive Bonuses
pursuant to which a Participant may become entitled to receive an amount based
on satisfaction of such performance criteria as are specified by the
Committee. Incentive Bonuses may be paid in either cash or in Shares, and
payment in cash does not affect the number of Shares available under the 2000
Plan. Subject to the express provisions of the 2000 Plan and as discussed in
this paragraph, the Committee has discretion to determine the terms of any
Incentive Bonus, including the target and maximum amount payable to a
Participant as an Incentive Bonus, the performance criteria (which may be
based on financial performance and/or personal performance evaluations) and
level of achievement versus these criteria that determines the amount payable
under an Incentive Bonus, the fiscal year or other period as to which
performance will be measured for determining the amount of any payment, the
timing of any payment earned by virtue of performance, restrictions on the
alienation or transfer of an Incentive Bonus prior to actual payment,
forfeiture provisions, and such further terms and conditions, in each case not
inconsistent with the 2000 Plan, as the Committee may determine from time to
time. All or any portion of an Incentive Bonus may be designed to qualify as
"performance based compensation" that is exempt from the $1 million limit on
deductible compensation under Section 162(m) of the Code. The performance
criteria for any portion of an Incentive Bonus that is intended to satisfy the
requirements for "performance-based compensation" will be a measure based on
one or more "Qualifying Performance Criteria" (as defined below).
Notwithstanding satisfaction of any performance goals, the amount paid under
an Incentive Bonus may be reduced by the Committee on the basis of such
further considerations as the Committee in its sole discretion shall
determine.
Incentive Stock. Incentive Stock is an award or issuance of Shares the
grant, issuance, retention, vesting and/or transferability of which shall
occur at such time and in such installments as determined by the Committee or
under criteria (including performance conditions) established by the
Committee. Subject to the express provisions of the 2000 Plan and as discussed
in this paragraph, the Committee has discretion to determine the terms of any
Incentive Stock Award, including the number of Shares subject to an Incentive
Stock Award or a formula for determining such, the purchase price, if any, for
the Shares (which may be below fair market value), the conditions that
determine the number of Shares granted, issued, retainable and/or vested,
forfeiture provisions, the effect of termination of employment for various
reasons, and such further terms and conditions, in each case not inconsistent
with the 2000 Plan, as may be determined from time to time by the Committee.
Incentive Stock may be granted, issued, retainable and/or vested based upon
continued employment, the passage of time or the satisfaction of performance
criteria, as specified by the Committee. The performance criteria upon which
Performance Shares are granted, issued, retained and/or vested may be based on
financial performance and/or personal performance evaluations, except that for
any Incentive Stock that is intended by the Committee to satisfy the
requirements for "performance-based compensation" under Code Section 162(m)
the performance criteria shall be a measure based on one or more Qualifying
Performance Criteria. Notwithstanding satisfaction
9
<PAGE>
of any performance goals, the number of Shares granted, issued, retainable
and/or vested under an Incentive Stock Award may be reduced by the Committee
on the basis of such further considerations as the Committee in its sole
discretion shall determine.
Nonemployee Director Stock Options. Nonemployee directors participate under
the 2000 Plan only through the receipt of initial and annual option grants.
The 2000 Plan provides that upon first joining the Board and annually
thereafter each nonemployee directors may receive a stock option grant for a
number of Shares specified by the Committee or the Board. The total number of
Shares subject to options granted to any one nonemployee director during any
calendar year can not exceed 5,000. The 2000 Plan expressly provides that the
Company can not "reprice" options. The exercise price for options may not be
less than 100% of the fair market value of the Common Stock on the date the
option is granted, except that in the event a nonemployee director is required
to pay or forego the receipt of any cash amount in consideration of receipt of
an option, the exercise price plus such cash amount shall equal or exceed 100%
of the fair market value of the Common Stock on the date the option is
granted. Subject to the foregoing, the Committee determines the date of grant
of nonemployee director options, the vesting and/or exercisability provisions
of such options and the exact number of Shares subject to such options.
QUALIFYING PERFORMANCE CRITERIA AND SECTION 162(m) LIMITS
Subject to stockholder approval of the 2000 Plan, the performance criteria
for any Incentive Bonus or any Incentive Stock that is intended to satisfy the
requirements for "performance based compensation" under Code Section 162(m)
shall be any one or more of the following performance criteria, either
individually, alternatively or in any combination, applied to either the
Company as a whole or to a business unit or subsidiary, either individually,
alternatively or in any combination, and measured either annually or
cumulatively over a period of years, on an absolute basis or relative to a
pre-established target, to previous years' results or to a designated
comparison group, in each case as specified by the Committee in the Award: (a)
cash flow, (b) earnings per share (including earnings before interest, taxes,
depreciation, and amortization), (c) stock price, (d) return on equity, (e)
total stockholder return, (f) return on capital, (g) return on assets or net
assets, (h) revenue, (i) income or net income, (j) operating income or net
operating income, (k) operating profit or net operating profit, (l) operating
margin or profit margin, (m) return on operating revenue and (n) market share.
The Committee shall appropriately adjust any evaluation of performance under a
Qualifying Performance Criteria to exclude any of the following events that
occur during a performance period: (i) asset write-downs, (ii) litigation or
claim judgments or settlements, (iii) the effect of changes in tax law,
accounting principles or other such laws or provisions affecting reported
results, (iv) accruals for reorganization and restructuring programs, and (v)
any extraordinary non-recurring items as described in Accounting Principles
Board Opinion No. 30 and/or in management's discussion and analysis of
financial condition and results of operations appearing in the Company's
annual report to stockholders for the applicable year.
The aggregate number of Shares issuable under all Options and Incentive
Stock Awards granted under the 2000 Plan during any calendar year to any one
Eligible Person may not exceed 200,000, unless such limitation is not required
under Section 162(m) of the Code. The maximum amount payable pursuant to that
portion of an Incentive Bonus Award granted for any fiscal year to any person
that is intended to satisfy the requirements for "performance based
compensation" under Code Section 162(m) may not exceed $1,500,000.
CHANGE OF CONTROL
The Committee may provide, either at the time an Option is granted or
thereafter, that a Change of Control shall have such effect as specified by
the Committee, or no effect, as the Committee in its sole discretion may
provide. Without limiting the foregoing, either at the time an Award is
granted or thereafter, the Committee may but need not provide that if a Change
of Control occurs, Awards will become exercisable, payable, vested, paid, or
canceled, and the Committee may (1) accelerate the time at which Awards then
outstanding may be exercised
10
<PAGE>
or settled in full for a limited period of time, after which time all
unexercised or unsettled Awards will terminate, (2) accelerate the time at
which Options then outstanding may be exercised so that such Options may be
exercised in full for their then remaining term, (3) require the mandatory
surrender to the Company of outstanding Awards which may be canceled in
exchange for an amount of cash equal to the excess of the fair market value of
the aggregate Shares subject to such Award over the aggregate exercise or
purchase price for such Shares, or (4) allow the Award to be adjusted as
provided in Section 10.2. For these purposes, the term "Committee" means the
Committee as constituted prior to the occurrence of the Change of Control.
A change of control is defined to include (a) any date upon which the
directors of the Company who were nominated by the Board of Directors for
election as directors and/or were elected by the holders of the Company's
Cumulative Convertible Participating Preferred Stock cease to constitute a
majority of the directors of the Company (provided that no individual
initially elected or nominated as a director of the Company as a result of an
actual or threatened election contest with respect to directors or any other
actual or threatened solicitation of proxies or consents by or on behalf of
any person other than the Board is counted as having been nominated by the
Board of Directors for this purpose); (b) a reorganization, merger or
consolidation of the Company the consummation of which results in the
outstanding securities of any class then subject to the Award being exchanged
for or converted into cash, property and/or securities not issued by the
Company, (c) the acquisition of substantially all of the property and assets
of the Company by any person or entity; (d) the dissolution or liquidation of
the Company; (e) the date of the first public announcement that any person or
entity, together with all Affiliates and Employees (as such capitalized terms
are defined in Rule 12b-2 promulgated under the Exchange Act) of such person
or entity, shall have become the Beneficial Owner (as defined in Rule 13d-3
promulgated under the Exchange Act) of voting securities of the Company
representing 35% or more of the voting power of the Company (provided that the
terms "person" and "entity", as used in these provisions, do not include (i)
the Company, any of its subsidiaries, The Carlyle Group and its Affiliates,
(ii) any employee benefit plan of the Company or any of its subsidiaries, or
(iii) any entity holding voting securities of the Company for or pursuant to
the terms of any such plan); or (f) any other event specified by the
Committee, regardless of whether at the time an Option is granted or
thereafter.
TRANSFERABILITY AND OTHER PROVISIONS APPLICABLE TO AWARDS
Generally, Awards granted under the 2000 Plan may not be sold, assigned,
conveyed, gifted, pledged, hypothecated or otherwise transferred in any manner
prior to the vesting or lapse of any and all restrictions applicable thereto,
other than by will or the laws of descent and distribution, except that the
Committee may permit an Award to be transferable to a member or members of the
Participant's family or to entities owned or established for the benefit of a
Participant's family. The 2000 Plan also provides that the Committee may, but
need not, provide that the holder of an Award has a right (such as a stock
appreciation right) to receive a number of Shares or cash, or a combination
thereof, the amount of which is determined by reference to the value of the
Award. Finally, the 2000 Plan does not limit the Company's right to make other
arrangements to provide stock options and other forms of compensation
arrangements as it determines appropriate.
AMENDMENTS AND TERMINATION
The Board of Directors may amend, alter or discontinue the 2000 Plan or any
agreement evidencing an Award made under the 2000 Plan, but (except with
respect to adjustments to reflect stock splits, stock dividends and other
antidilution adjustments) no such amendment shall, without the approval of the
stockholders of the Company: (a) increase the maximum number of Shares of
Common Stock for which Awards may be granted under the 2000 Plan; (b) reduce
the price at which Stock Options may be granted; (c) reduce the exercise price
of outstanding Options; (d) extend the term of the 2000 Plan; (e) change the
class of persons eligible to participate under the 2000 Plan; (f) increase the
number of Shares subject to Nonemployee Director Options granted to a
Nonemployee Director under the 2000 Plan; (g) increase the percentage of
Shares that are eligible for issuance under Incentive Bonuses and Incentive
Stock Awards; or (h) after any change of control, impair the rights of any
Award holder without such holder's consent.
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<PAGE>
FEDERAL INCOME TAX CONSEQUENCES
The following discussion of the federal income tax consequences of the 2000
Plan is intended to be a summary of applicable federal law as currently in
effect. State and local tax consequences may differ, and tax laws may be
amended or interpreted differently during the term of the 2000 Plan or of
Awards thereunder. Because the federal income tax rules governing Awards and
related payments are complex and subject to frequent change, and they depend
on the Participant's individual circumstances, Participants are advised to
consult their tax advisors prior to exercise of options or other Awards or
dispositions of stock acquired pursuant to Awards.
ISOs and NQSOs are treated differently for federal income tax purposes. ISOs
are intended to comply with the requirements of Section 422 of the Code. NQSOs
need not comply with such requirements.
An optionee is not taxed on the grant or, except as described below,
exercise of an ISO. The difference between the exercise price and the fair
market value of the Shares on the exercise date will, however, be a preference
item for purposes of the alternative minimum tax, and thus an optionee could
be subject to the alternative minimum tax as a result of the exercise of an
ISO. If an optionee holds the Shares acquired upon exercise of an ISO for at
least two years following the option grant date and at least one year
following exercise, the optionee's gain, if any, upon a subsequent disposition
of such Shares is long-term capital gain. The measure of the gain is the
difference between the proceeds received on disposition and the optionee's
basis in the Shares (which generally equals the exercise price). If an
optionee disposes of Shares acquired pursuant to exercise of an ISO before
satisfying the one and two-year holding periods described above, the optionee
may recognize both ordinary income and capital gain in the year of
disposition. The amount of the ordinary income will be the lesser of (i) the
amount realized on disposition less the optionee's adjusted basis in the
Shares (usually the exercise price) or (ii) the difference between the fair
market value of the Shares on the exercise date and the exercise price. The
balance of the consideration received on such a disposition will be long-term
capital gain if the stock had been held for at least one year following
exercise of the ISO. The Company is not entitled to an income tax deduction on
the grant or exercise of an ISO or on the optionee's disposition of the Shares
after satisfying the holding period requirements described above. If the
holding periods are not satisfied, the Company will be entitled to a deduction
in the year the optionee disposes of the Shares in an amount equal to the
ordinary income recognized by the optionee.
An optionee is not taxed on the grant of an NQSO. On exercise, however, the
optionee recognizes ordinary income equal to the difference between the option
price and the fair market value of the Shares acquired on the date of
exercise. The Company is entitled to an income tax deduction in the year of
exercise in the amount recognized by the optionee as ordinary income. Any gain
on subsequent disposition of the Shares is long-term capital gain if the
Shares are held for at least one year following exercise. The Company does not
receive a deduction for this gain.
Participants generally are required to recognize ordinary income with
respect to Incentive Stock equal to the fair market value of the Shares (less
any amount paid to acquire the Shares) when the Shares are both received and
no longer subject to vesting restrictions, except that a Participant who
receives Incentive Stock that is subject to vesting restrictions and who
properly makes an election under Section 83(b) of the Code (an "83(b)
election") within 30 days of receipt will recognize ordinary income based on
the value of the underlying Shares (determined without regard to the vesting
restrictions) on the date of initial receipt (as opposed to the date of
vesting) and may treat appreciation subsequent to the date of receipt as
capital gain (depending on the holding period for the Shares). Participants
receiving Incentive Stock should consult their tax advisors regarding the
ability and advisability of making the 83(b) election, including the
limitations on claiming a loss if the Shares decline in value or are forfeited
after receipt. The Company generally receives a deduction equal to the
ordinary income recognized by the recipient of Incentive Stock.
Certain officers, directors and significant stockholders of the Company who
are subject to Section 16(b) of the Exchange Act should consult their tax
advisors regarding the effect of Section 16(b) on the amount and
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<PAGE>
timing of income to be recognized in connection with an Award, including the
ability and advisability of making an 83(b) election in connection with an
Award.
Special rules will apply in cases where a recipient of an Award pays the
exercise or purchase price of the Award or applicable withholding tax
obligations under the 2000 Plan by delivering previously owned Shares or by
reducing the number of Shares otherwise issuable pursuant to the Award. The
surrender or withholding of such Shares will in certain circumstances result
in the recognition of income with respect to such Shares or a carryover basis
in the Shares acquired, and may constitute a disposition for purposes of
applying the ISO holding periods discussed above. The Company generally will
be entitled to withhold any required taxes in connection with the exercise or
payment of an Award, and may require the Participant to pay such taxes as a
condition to exercise of an Award.
The terms of the agreements or other documents pursuant to which specific
Awards are made under the 2000 Plan may provide for accelerated vesting or
payment of an Award in connection with a change in ownership or control of the
Company. In that event and depending upon the individual circumstances of the
Participant, certain amounts with respect to such Awards may constitute
"excess parachute payments" under the "golden parachute" provisions of the
Code. Pursuant to these provisions, a Participant will be subject to a non-
deductible 20% excise tax on any "excess parachute payments" and the Company
will be denied any deduction with respect to such payments. Participants
should consult their tax advisors as to whether accelerated vesting of an
Award in connection with a change of ownership or control of the Company would
give rise to an excess parachute payment.
As described above, Awards under the 2000 Plan may qualify as "performance-
based compensation" under Section 162(m) of the Code in order to preserve
federal income tax deductions by the Company with respect to any compensation
required to be taken into account under Section 162 of the Code that is in
excess of $1,000,000 and paid to a Covered Employee (as defined in Section
162). Compensation for any year that is attributable to an Award granted to a
Covered Employee and that does not so qualify may not be deductible by the
Company to the extent such compensation, when combined with other compensation
paid to such employee for the year, exceeds $1,000,000.
INITIAL GRANTS
The Committee has full discretion to determine the timing and recipients of
any stock option grants under the 2000 Plan and the number of Shares subject
to any such options that may be granted under the 2000 Plan, subject to an
annual limitation on the total number of options that may be granted to any
optionee. Therefore, the benefits and amounts that will be received by each of
the named executive officers, the executive officers as a group, the
nonemployee directors and all other senior management or technical personnel
under the 2000 Plan are not presently determinable.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE IN FAVOR OF THE NEW
PLAN. PROXIES SOLICITED BY THE BOARD OF DIRECTORS WILL BE VOTED FOR THIS
PROPOSAL UNLESS STOCKHOLDERS SPECIFY OTHERWISE IN THEIR PROXIES.
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<PAGE>
BENEFICIAL OWNERSHIP OF SHARES
The following table sets forth information as of April 18, 2000 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 (the "Warrants") to
purchase up to 1,250,000 shares of Common Stock (at a current exercise price
of $11.39 per share), 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 named executive officers
of the Company and (z) all directors and persons serving as executive officers
of the Company as a group. To our knowledge, none of the directors or
executive officers own any, and no one else beneficially owns 5% or more, of
the 8% Convertible Subordinated Debentures previously issued by OHM
Corporation (the "Debentures") or Debentures convertible into 5% or more of
the Common Stock.
<TABLE>
<CAPTION>
Amount and
Amount and Amount and Nature of Percent of
Nature of Percent of Nature of Percent of Beneficial Convertible
Beneficial Common Beneficial Depositary Ownership of Preferred
Ownership of Stock Ownership of Shares Convertible Stock
Common Beneficially Depositary Beneficially Preferred Beneficially
Name Stock(1)(2) Owned(2) Shares Owned 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%
T. Rowe Price
Associates, Inc. (5)... 1,925,100 8.4%
Osterweis Capital
Management, Inc., et
al. (6)................ 1,449,478 6.37%
Daniel A. D'Aniello (7). 0 --
Philip B. Dolan (7)..... 0 --
E. Martin Gibson........ 7,851 * 5,000 *
Francis J. Harvey....... 5,000 *
James C. McGill (8)..... 21,338 * 1,000 *
Richard W. Pogue........ 69,841(9) *
Robert F. Pugliese...... 2,966 *
Charles W. Schmidt...... 15,940 *
James D. Watkins........ 2,966 *
Anthony J. DeLuca....... 369,940 1.61%
David L. Backus......... 54,377 *
M. Scott Bonta.......... 52,398 *
Gary L. Gardner......... 56,557 *
Enzo M. Zoratto......... 64,821 *
All directors and
executive
officers as a group (21
persons) (10).......... 1,108,104 4.78%
</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 April 18, 2000 upon exercise of stock options (and conversion of
Depositary Shares in the case of Messrs. Gibson and McGill) in the
following amounts: (i) 2,500 shares upon exercise of options and 5,351
shares upon conversion of the Depositary Shares as to Mr. Gibson, (ii)
2,500 shares upon exercise of options and 1,070
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<PAGE>
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)
78,891 shares as to Mr. DeLuca, (vi) 4,500 shares as to Mr. Backus, (vii)
5,648 shares as to Mr. Bonta, (viii) 9,557 shares as to Mr. Gardner, and
(ix) 14,547 shares as to Mr. Zoratto.
(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 April 18, 2000 plus (i) the number of shares of Common Stock
subject to options exercisable currently or within 60 days of April 18,
2000 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 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 SBC Partners II, L.P., a Delaware
limited partnership ("CSBCII"), (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, CPSBCII, 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 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 based solely from a Schedule 13G (Amendment No. 1)
filed by T. Rowe Price Associates ("Price") with the SEC dated February
11, 2000. Of the 1,925,100 shares Price holds, it has
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<PAGE>
sole power to vote or direct the vote of 531,700 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.
(6) Such information is derived solely from a Schedule 13G filed by the
"Osterweis Shareholders" which is comprised of the entities listed in the
following sentence (filing as joint filers) with the SEC dated February
10, 2000. The Osterweis Shareholders are comprised of Osterweis Capital
Management, Inc., Osterweis Capital Management, L.L.C., and John S.
Osterweis. The Osterweis Shareholders report in such Schedule 13G that
(i) Osterweis Capital Management, Inc. has sole voting power with respect
to 732,949 shares, shared voting power with respect to 40,430 shares, and
sole dispositive power with respect to 1,020,384 shares, (ii) Osterweis
Capital Management, L.L.C. has sole voting power with respect to 413,170
shares, and sole dispositive power with respect to 429,094 shares and
(iii) John S. Osterweis has sole voting power with respect to 1,146,119
shares, shared voting power with respect to 40,430 shares, and sole
dispositive power with respect to 1,449,478 shares. The Osterweis
Shareholders' address is One Maritime Plaza, Suite 800, San Francisco,
California 94111.
(7) 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.
(8) 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 2,500 shares that may be purchased upon the exercise of options
that are currently exercisable or that will become exercisable within 60
days of April 18, 2000.
(9) 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.
(10) Includes 250,035 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 April 18, 2000 and 6,000 Depositary Shares
(convertible into 6,421 shares of Common Stock).
16
<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 years
("CY") 1999, 1998 and 1997, and fiscal year 1998 ("FY 1998") ended March 27,
1998 with respect to the Chief Executive Officer and the four most highly
compensated executive officers, other than the Chief Executive Officer, as of
December 31, 1999 and two additional individuals, Messrs. Strawbridge and
Mahoney, who were not Executive Officers as of December 31, 1999, but whose
compensation would otherwise require disclosure (the "Named Officers").
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation Awards
--------------------------- --------------------------
Other Restricted Securities All Other
Name and Principal Annual Stock Underlying Compensation
Position Year(1) Salary($) Bonus($)(2) Compensation(3) Awards($)(4) Options(#)(5) ($)(6)
- ------------------ ------- --------- ----------- --------------- ------------ ------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Anthony J. DeLuca....... CY 1999 $449,042 $300,000 $216,467 $347,599 140,678 $ 285,313
Chief Executive Officer CY 1998 $378,462 $300,000 -- -- 43,782 $ 95,481
and President FY 1998 $320,000 $170,000 -- -- 8,333 $ 248,250
David L. Backus (7)(9).. CY 1999 $225,000 $ 85,000 -- $ 67,598 38,477 $ 112,061
Senior Vice President, CY 1998 $166,666 $ 66,000 -- -- 5,000 $ 227,690
International and CY 1997 $158,053 $ 37,500 -- -- 7,500 $ 41,593
Outsourcing
Gary L. Gardner (8)(9).. CY 1999 $200,395 $ 65,000 $ 39,872 $ 45,999 43,000 $ 51,708
Senior Vice President, CY 1998 $185,016 -- -- -- 10,214 $ 21,069
Commercial Engineering CY 1997 $172,859 $ 33,302 -- -- 36,000 $ 29,754
and Construction
Enzo M. Zoratto......... CY 1999 $194,231 $ 65,000 $ 35,829 $ 45,999 43,000 $ 42,268
Senior Vice President, CY 1998 $166,923 $ 85,000 -- -- 17,568 $ 12,205
Government Services FY 1998 $139,230 $ 45,312 -- -- 1,354 $ 15,880
M. Scott Bonta.......... CY 1999 $172,615 $ 65,000 -- $ 44,804 34,457 $ 31,530
Senior Vice President, CY 1998 $157,769 $ 85,000 -- -- 12,500 $ 24,460
Consulting and FY 1998 $130,000 $ 35,689 $ 17,175 -- 1,354 $ 85,909
Technology; Chief
Information Officer
Philip O. Strawbridge
(10)(11)............... CY 1999 $193,562 $ 82,082 $104,740 -- 13,000 $ 555,263
Senior Vice President
and CY 1998 $263,567 $110,000 -- -- 23,166 $1,612,191
Chief Administrative CY 1997 $262,376 $144,600 -- -- 75,000 $ 109,817
Officer
James R. Mahoney (10)... CY 1999 $175,000 $ 73,726 $ 70,653 -- 4,000 $ 518,400
Senior Vice President, CY 1998 $260,000 $ 66,812 $ 55,814 -- 8,052 $ 221,078
Consulting and Ventures FY 1998 $260,000 $ 47,383 $ 40,681 -- -- $ 143,687
</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 1999,
1998 and 1997 represents remuneration paid during the twelve-month period
commencing January 1st and ending December 31st each year, which for
purposes of this table corresponds to the Company's fiscal year. The
compensation reported for FY 1998 for Messrs. DeLuca, Zoratto, Bonta and
Mahoney represents remuneration paid during the twelve-month period
commencing March 29, 1997 and ending March 27, 1998.
(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. CY 1999 bonus payments for Messrs. Strawbridge and
Mahoney represent a pro-rated bonus under the Company's 1999 Management
Incentive Plan accrued and paid in 1999.
17
<PAGE>
(3) For CY 1999, the dollar value of perquisites and other personal benefits
for Mr. Backus and Mr. Bonta was less than reporting thresholds
established by the SEC. Tax gross up payments on bonuses earned and paid
under the Company's Executive Bonus Plan were paid in CY 1999 in the
amounts of $176,537, $25,479, $21,725, $51,082 and $45,210 to Messrs.
DeLuca, Gardner, Zoratto, Strawbridge and Mahoney, respectively. For FY
1998, Mr. Bonta received an auto allowance of $5,850 and tax
reimbursement for relocation expenses reported under "Other Annual
Compensation" of $10,104. Mr. Strawbridge received tax reimbursement for
relocation expenses reported under "Other Annual Compensation" of $34,253
in 1999. Mr. Mahoney received tax reimbursement for relocation expenses
reported under "Other Annual Compensation" of $33,183 in CY 1998 and
$17,022 in FY 1998.
(4) Grants of Restricted Stock were approved primarily under the 1996 Plan,
effective January 1, 2000, which vest in 25% increments over four years
beginning one year from the date of grant. The number of Restricted Stock
shares so issued to Named Officers was: Mr. DeLuca 38,093; Mr. Backus
7,408; Mr. Gardner 5,041; Mr. Zoratto 5,041; and Mr. Bonta 4,910. Mr.
DeLuca's restricted stock was issued outside of the 1996 Plan. The dollar
amount shown is based on the fair market value of the Common Stock on the
date of grant (and as of the last day of FY 1999) and, except for Mr.
DeLuca, represents the aggregate restricted stock holdings of Named
Officers as of the last day of FY 1999. Mr. DeLuca's aggregate holdings
as of the last day of FY 1999 were $370,411. Restricted Stock awards of
Common Stock do not pay dividends.
(5) During CY 1999, non-qualified stock options were awarded under the 1996
Plan 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, including
options, if applicable, approved in 1999 by the Compensation Committee
with a grant date of January 1, 2000 to the Named Officers are as
follows: Mr. DeLuca 140,678; Mr. Backus 35,635; Mr. Gardner 18,000; Mr.
Zoratto 18,000; Mr. Bonta 17,687; Mr. Strawbridge 13,000 and Mr. Mahoney
5,000. Also during CY 1999, 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 $17.42 for a
period of 90 consecutive days, and 50% will vest if the Common Stock
price averages $20.91 for a period of 90 consecutive days. The number of
option shares so issued to the Named Officers in CY 1999 were as follows:
Mr. Backus 2,842; and Mr. Bonta 1,770. Also during CY 1999, stock options
were awarded which vest in 25% increments over four years beginning one
year from the date of grant, expire ten years after date of grant and
were issued at an exercise price equal to the fair market value of the
Common Stock on date of grant. These options will vest on an accelerated
basis as follows: 25% will vest if the Common Stock price averages $17.50
for a period of 90 consecutive days, and 25% will vest if the Common
Stock averages $21.00 for a period of 90 consecutive days. The number of
option shares so issued to Named Officers in 1999 was as follows: Mr.
Gardner 25,000; Mr. Zoratto 25,000 and Mr. Bonta 15,000.
During CY 1998, stock options were awarded under the 1996 Plan which vest
in 25% increments over four years beginning one year from date of grant,
expire ten years after date of grant and were issued at an exercise price
equal to the fair market value of the Common Stock on date of grant. The
number of option shares so issued to the Named Officers in CY 1998 were as
follows: Mr. DeLuca 25,000; Mr. Gardner 7,500; Mr. Zoratto 15,000; Mr.
Bonta 12,500; Mr. Strawbridge 18,500 and Mr. Mahoney 5,000. Also, during CY
1998 options were awarded which vest 100% four years after date of grant
and were issued at an exercised price equal to the 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 averaged $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 Named Officers in CY 1998 were as follows: Mr.
DeLuca 18,782; Mr. Gardner 2,714; Mr. Zoratto 2,568; Mr. Strawbridge 4,666
and Mr. Mahoney 3,052. During CY 1998, Mr. Backus was granted 5,000 options
under the terms of the Fluor Daniel GTI Inc. ("GTI") Stock Plan.
18
<PAGE>
For FY 1997, each Named Officer (with the exception of Messrs. Backus,
Gardner and Strawbridge who were 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
under the 1996 Plan in FY 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; Messrs. Zoratto and Bonta
1,354 shares each, and Mr. Mahoney 4,333 shares. During CY 1997, Mr. Backus
was granted 7,500 option shares under the terms of the GTI Stock Plan.
During CY 1997, Mr. Gardner was granted 36,000 option shares under the
terms of the OHM Stock Option Plan. Mr. Gardner was given certain
elections, as were all persons who held options to purchase OHM stock under
the OHM Stock Option Plan, which governed the handling of OHM options
outstanding at the time of the merger with IT. These options, at Mr.
Gardner's election, were cashed out on the same terms and conditions
applicable to other OHM option holders.
(6) For CY 1999, the amounts shown for Messrs. DeLuca, Backus, Gardner,
Zoratto, Bonta, Strawbridge, and Mahoney represent $1,411; $75; $365;
$190; $179, $220 and $2,029 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 401(k) Company matching contributions for Messrs.
DeLuca, Backus, Gardner, Zoratto, Bonta, Strawbridge and Mahoney in the
amounts of $8,000; $5,757; $8,000; $8,000; $8,000, $6,400 and $6,400
respectively; the Company's contribution to the Company's Restoration
Plan, a non-qualified supplemental retirement plan, to Messrs. DeLuca,
Backus, Gardner, Zoratto, and Bonta in the amounts of $20,740; $3,250;
$1,858; $5,428; and $4,921 respectively; partial forgiveness of the
principal on a relocation loan to purchase a residence of $5,000 and
$3,000 for Messrs. DeLuca and Bonta respectively; accrued but unused paid
time off for Messrs. DeLuca, Backus, Gardner, Bonta, and Mahoney of
$30,288; $48,678; $10,817; $11,308, and $60,874 respectively; reimbursed
relocation expenses of $3,870 and $122,544 for Messrs. DeLuca and
Strawbridge respectively; imputed interest on relocation loans of $7,511;
$4,122 and $7,299 for Messrs. DeLuca, Bonta and Mahoney respectively;
earnings on voluntary deferred compensation for Messrs. Backus, Gardner,
Zoratto, Strawbridge and Mahoney of $512; $540; $145; $766 and $5,725,
respectively; performance and continued service bonuses under the
Company's Executive Bonus Plan of $208,494, $30,128, $28,506, $51,492 and
$54,813 for Messrs. DeLuca, Gardner, Zoratto, Strawbridge and Mahoney;
payment of $53,790 to Mr. Backus under the terms of a Retention Agreement
entered into by Mr. Backus and GTI; contract termination payments to Mr.
Strawbridge (see "Certain Transactions") of $251,883; and severance and
related payments (see "Certain Transactions") payments to Messrs.
Strawbridge and Mahoney of $121,957 and $381,260 respectively.
For CY 1998, the amounts shown for Messrs. DeLuca, Gardner, Zoratto, Bonta,
Strawbridge and Mahoney represent $9,008, $418, $639, $1183, $1,017 and
$8,331 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 401(k)
Company matching contributions for Messrs. DeLuca, Backus, Gardner,
Zoratto, Bonta, Strawbridge and Mahoney in the amounts of $6,877, $16,427,
$9,457, $8,204, $7,952, $8,793, and $7,485 respectively; the Company's
contribution to the Company's Restoration Plan, a non-qualified
supplemental retirement plan, to Messrs. DeLuca, Gardner, Zoratto, Bonta,
Strawbridge and Mahoney in the amounts of $16,059, $519, $3,362, $2,694,
$874 and $7,000 respectively; partial forgiveness of the principal on a
relocation loan to purchase a residence of $5,000, $3,000 and $10,000 for
Messrs. DeLuca, Bonta and Mahoney respectively; accrued but unused paid
time off of $26,346, $1,263, $10,674 and $6,250 for Messrs. DeLuca, Backus,
Gardner and Bonta respectively; reimbursed relocation expenses of $26,554,
$2,666 and $178,204 for Messrs. DeLuca, Strawbridge and Mahoney
19
<PAGE>
respectively; imputed interest on relocation loans of $5,637, $3,382 and
$7,099 for Messrs. DeLuca, Bonta and Mahoney respectively; earnings on
voluntary deferred compensation of $2,959 for Mr. Mahoney; a safety bonus
paid by GTI to Mr. Backus of $10,000; severance and other entitled payments
paid by OHM under the OHM merger agreement of $1,598,842 to Mr.
Strawbridge; and $200,000 to Mr. Backus as full consideration for the value
of foregone benefits and compensation had he returned to his previous
employer (see "Certain Transactions").
For FY 1998 for Messrs. DeLuca, Zoratto, Bonta and Mahoney and CY 1997 for
Messrs. Gardner, Strawbridge, and Backus, the amounts shown for Messrs.
DeLuca, Gardner, Zoratto, Bonta, and Mahoney, represent $7,507, $582, $680,
$1,074, and $11,433 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 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, Backus, Gardner, Zoratto, Bonta
and Mahoney in the amounts of $4,800, $13,560, $2,370, $6,835, $10,289, and
$7,908 respectively; the Company's contribution to the Company's
Restoration Plan, a non-qualified supplemental retirement plan, to Messrs.
DeLuca and Mahoney of $14,800 and $5,680, respectively; $3,500, $22,627,
$3,000 and $10,000 for partial principal forgiveness on a relocation loan
to purchase a residence for Messrs. DeLuca, Gardner, Bonta and Mahoney
respectively; $27,692, $1,216, $8,365 and $6,250 in accrued but unused paid
time off for Mr. DeLuca, Backus, Zoratto and Bonta respectively; $93,951,
$42,899 and $35,157 in reimbursed relocation expenses for Messrs. DeLuca,
Bonta and Mahoney respectively; $96,000; $32,500 and $78,000 in relocation
mobility allowances for Messrs. DeLuca, Bonta and Mahoney respectively;
$26,818 in miscellaneous other compensation paid by GTI to Mr. Backus; and
$4,175 in imputed interest associated with a relocation loan to Mr. Gardner
by OHM.
(7) Represents compensation earned by Mr. Backus as an employee of the
Company and as an employee of Fluor Daniel GTI, Inc. ("GTI") which was
acquired by the Company in December 1998. During the years reported, Mr.
Backus was also paid compensation not reported herein attributable, or
substantially attributable, to his employment with Fluor Daniel, Inc.,
parent to GTI, prior to the Company's acquisition of GTI. Options granted
to Mr. Backus in CY 1998 and 1997 were issued by GTI. Mr. Backus'
options, as were all outstanding options held by employees of GTI, were
cashed out prior to the merger with the Company.
(8) Options granted to Mr. Gardner in CY 1997 were originally issued by OHM.
Mr. Gardner, as were all employees of OHM who held outstanding options,
was permitted to cash out the OHM options or convert OHM options to the
Company's options equivalent in number of shares and exercise price.
(9) Amounts shown for Mr. Backus and Mr. Gardner under "All Other
Compensation" for CY 1998 and 1997 paid by GTI and OHM respectively, are
for GTI and OHM programs analogous to the referenced Company programs.
(10) Effective July 29, 1999, Mr. Strawbridge resigned as an officer of the
Company with a termination of employment effective September 27, 1999.
Effective August 21, 1999, Mr. Mahoney resigned as an officer and
employee of the Company. For Messrs. Strawbridge and Mahoney, "Salary",
"Bonus", "Other Annual Compensation", and "All Other Compensation",
reflect amounts earned and/or paid prior to their respective employment
termination dates, including severance and other related payments made
after December 31, 1999 under the terms of their respective separation
agreements associated with their employment termination which superceded
their respective employment agreements.
(11) 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 #6. Remuneration shown for Mr. Strawbridge
for CY 1997 reflects information published in OHM Corporation's
shareholder meeting proxy materials for OHM's fiscal year 1997, with the
exception that $144,600 CY 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.
20
<PAGE>
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 1996 Plan during the fiscal
year ended December 31, 1999 including options approved during 1999 by the
Compensation Committee with a grant date of January 1, 2000. No stock
appreciation rights ("SARs") were granted during the last fiscal year.
The maximum number of shares authorized for issuance under the 1996 Plan as
of December 31, 1999 was 1,330,809 (and as of April 18, 2000 is 1,786,191
shares), which is subject to increase by a number equal to 2% of the number of
shares of Common Stock issued and outstanding on the first business day of
each fiscal year of the Company through 2001.
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.
In connection with the Company's acquisition of OHM, 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. Holders of
OHM Options with respect to 188,038 shares of OHM Common Stock (convertible
into 262,126 shares of Company Common Stock) elected to have their OHM Options
converted into options to acquire Company Common Stock in accordance with the
terms of the OHM merger agreement and the Company assumed each such option. No
further grants are allowed, however, under the terms of the Company's
assumption of the OHM Stock Plans.
<TABLE>
<CAPTION>
Number of Percent of Total
Securities Options Granted Grant Date
Grant Underlying To Employees Exercise Price Present
Name Date Option (1) In Fiscal Year (2) Per Share (3) Expiration Date Value (4)
- ---- ------- ---------- ------------------ -------------- --------------- ----------
<S> <C> <C> <C> <C> <C> <C>
DeLuca.................. 2/23/99 50,000 4.2% $13.2500 2/23/09 $422,000
1/1/00 90,678 7.6% $ 9.1250 1/1/10 $521,399
------- ---- --------
140,678 11.8% $943,399
Backus.................. 2/23/99 18,000 1.5% $13.2500 2/23/09 $151,920
3/8/99 2,842 0.2% $13.9375 3/8/04 $ 17,791
1/1/00 17,635 1.5% $ 9.1250 1/1/10 $101,401
------- ---- --------
38,477 3.2% $271,112
Gardner................. 2/23/99 6,000 0.5% $13.2500 2/23/09 $ 50,640
7/29/99 25,000 2.1% $13.9375 7/29/09 $222,500
1/1/00 12,000 1.0% $ 9.1250 1/1/10 $ 69,000
------- ---- --------
43,000 3.6% $342,140
Zoratto................. 2/23/99 6,000 0.5% $13.2500 2/23/09 $ 50,640
7/29/99 25,000 2.1% $13.9375 7/29/09 $222,500
1/1/00 12,000 1.0% $ 9.1250 1/1/10 $ 69,000
------- ---- --------
43,000 3.6% $342,140
</TABLE>
21
<PAGE>
<TABLE>
<CAPTION>
Number of Percent of Total
Securities Options Granted Grant Date
Grant Underlying To Employees Exercise Price Present
Name Date Option (1) In Fiscal Year (2) Per Share (3) Expiration Date Value (4)
- ---- ------- ---------- ------------------ -------------- --------------- ----------
<S> <C> <C> <C> <C> <C> <C>
Bonta................... 2/23/99 6,000 0.5% $13.2500 2/23/09 $ 50,640
3/8/99 1,770 0.1% $13.9375 3/8/04 $ 11,080
7/29/99 15,000 1.3% $13.9375 7/29/09 $133,500
1/1/00 11,687 1.0% $ 9.1250 1/1/10 $ 67,200
------ --- --------
1/1/00 34,457 2.9% $262,420
Strawbridge............. 2/23/99 13,000 1.1% $13.2500 2/23/09 $109,720
Mahoney................. 2/23/99 4,000 0.3% $13.2500 8/21/01 $ 33,760
</TABLE>
- --------
(1) Options granted February 23, 1999, July 29, 1999 and January 1, 2000 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 March 8, 1999
vest 100% after four years and expire five years after grant. Vesting of
the Options granted March 8, 1999 and July 29, 1999 are accelerated if
the Company's Common Stock price increases to certain predetermined
levels. 100% of the March 8, 1999 grant is subject to accelerated
vesting, and 50% of the July 29, 1999 is subject to accelerated vesting.
For the March 8, 1999 grant, options vested at retirement expire two
years after retirement; options unvested at retirement are eligible to
become vested for six months following retirement.
(2) Total options granted to employees in fiscal year includes options
approved in 1999 by Compensation Committee with a grant date of January
1, 2000.
(3) The exercise price on options granted is the fair market value of the
Common Stock on the date of grant.
(4) When calculating the present value of options shown in the table, 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 February 23, 1999 is $8.44 with
assumptions as follows: volatility of.512; risk free interest rate of
5.45%; and an assumption that shares would be exercised evenly throughout
the four year vesting period. The Black-Sholes present value for options
granted March 8, 1999 is $6.26 with assumptions as follows: volatility
of.509, risk free interest rate of 5.33% 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 Black-Sholes present value for options granted July 29,
1999 is $8.90 with assumptions as follows: volatility of.551; risk free
interest rate of 6.28% and an assumption that options would be exercised
evenly throughout the four year vesting period. The Black-Sholes present
value for options approved by the Compensation Committee during FY 1999
but granted effective January 1, 2000 is $5.75 with assumptions as
follows: volatility of.462; risk free interest rate of 6.79% and an
assumption that options would be exercised evenly throughout the four
year vesting period. These valuations are not intended to forecast
possible future appreciation, if any, of the Common Stock. The real value
of the option depends on the actual performance of the Company's Common
Stock during the applicable period.
22
<PAGE>
Aggregated Option Exercises During Last Fiscal Year and Option Values at End
of Last Fiscal Year
The following table provides information with respect to the exercise of
stock options during the fiscal year ending December 31, 1999 by the Named
Officers, and with respect to unexercised "in-the-money" stock options
outstanding as of December 31, 1999. In-the-money stock options are options
for which the exercise price is less than the market price of the underlying
stock at the end of the fiscal year. No executive officer or any other
employee of the Company held or exercised any SARs at any time during the
fiscal year ended December 31, 1999.
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised
Options at Fiscal Year End In-The-Money Options
(In shares) at Fiscal Year End($)(1)
Shares Acquired Value ---------------------------- ----------------------------
Name On Exercise Realized($) Exercisable Unexercisable(2) Exercisable Unexercisable(2)
- ---- --------------- ----------- ----------- ---------------- ----------- ----------------
<S> <C> <C> <C> <C> <C> <C>
DeLuca.................. 0 $ 0 56,058 88,807 $13,355 $13,353
Backus.................. 0 $ 0 0 20,842 $ 0 $ 0
Gardner (3)............. 0 $ 0 3,232 37,982 $ 0 $ 0
Zoratto................. 416 $ 705 8,209 45,711 $ 2,191 $ 2,187
Bonta................... 5,521 $ 26,983 60 34,072 $ 0 $ 2,062
Strawbridge (3)(4)...... 143,524 $589,772 0 0 $ 0 $ 0
Mahoney (4)............. 15,000 $156,912 53,609 1,526 $15,208 $ 0
</TABLE>
- --------
(1) Represents the difference between the $9.1250 closing market price of the
Company's Common Stock at December 31, 1999, minus the exercise price of
the options.
(2) Mr. DeLuca's and Mr. Mahoney's options with respect to 2,500 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. Gardner and Mr. Strawbridge's exercisable shares include shares
originally issued by OHM which were converted to the Company's options
equivalent in number of shares and exercise price. Mr. Gardner and Mr.
Strawbridge, as were all employees of OHM who held outstanding OHM stock
options, were 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.
(4) Effective July 29, 1999, Mr. Strawbridge resigned as an officer of the
Company with a termination of employment effective September 27, 1999.
Effective August 21, 1999, Mr. Mahoney resigned as an officer and
employee of the Company.
23
<PAGE>
REPORT OF THE COMPENSATION COMMITTEE
ON EXECUTIVE COMPENSATION
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors is composed of five
non-employee 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 31, 1999.
The Compensation Committee retains the services of nationally known
independent consulting firms specializing in executive compensation to assist
it in performing its functions. During fiscal year 1999, the retained
consultant conducted a comprehensive analysis of the Company's executive pay
practices compared to competitive market practices. The Compensation Committee
also reviewed surveys and other materials describing the compensation
practices of companies from which the Company recruits and with which it
competes for management talent. This includes other companies in general
industry of similar size, as well as large engineering and construction
companies and environmental services companies. 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
employee 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 at least 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. Based upon the consulting firm's report,
several actions were approved to reinforce this strategy. Grants of both
Restricted Stock and Non-Qualified Stock Options were approved. In addition,
the Compensation Committee approved the participation of additional
executives, including Mr. Backus and Mr. Bonta, in the Executive Stock
Ownership Program (ESOP), which was adopted in the prior fiscal year. The ESOP
requires that, within a three-year period, key executives acquire and hold a
number of shares of the Company's Common Stock equivalent to a multiple--which
ranges from one-times for certain executives up to four-times for the Chief
Executive Officer--of their base salary. This program, which may include a
stock purchase loan program, stock options and an executive bonus program, is
intended to significantly increase the equity holdings of participating
executives. Additionally, the Compensation Committee approved the conversion
of the existing Restoration Plan from a Non-Qualified Deferred Cash
Compensation Plan to a Current Stock Plan.
The Company's Management Compensation Program is designed to provide:
(i) Base salaries that are competitive with general industry, including
engineering and construction and environmental services;
(ii) Competitive total annual cash compensation, delivered in substantial
part 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
shareholder value through the attainment of longer-term financial
and strategic goals, and encourages management stock ownership.
24
<PAGE>
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.
Base Salary
As a guideline, the base salary for Company management is targeted at the
fiftieth percentile level of general industry companies of similar size,
including comparable engineering and construction and environmental services
companies, 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.
The Compensation Committee completed its annual review of officer pay levels
and made salary adjustments during the fiscal year ended December 31, 1999
taking into consideration competitive pay practices, the need to retain key
executives, and increased responsibilities associated with the strategic
realignment of the Company's business units. Base salaries were adjusted as
follows: Mr. Bonta was increased from $168,000 to $180,000; Mr. Gardner was
increased from $185,000 to $225,000 and Mr. Zoratto was increased from
$175,000 to $225,000. Since Mr. Backus joined the company late in fiscal year
1998, his salary was not increased during fiscal 1999.
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 general industry companies,
including comparable engineering and construction and environmental services,
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.
For the fiscal year that ended December 31, 1999, 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 employees to 75% 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 earned are distributed following the end of the
fiscal year, contingent on performance.
Financial goals and targets were achieved for the fiscal year ended December
31, 1999. The distribution of incentive awards was determined for the period,
by the Compensation Committee, on the basis of an assessment of Company's
overall performance, and of individual performance in relation to established
objectives. The total
25
<PAGE>
incentive awards earned by the Named Officers under the MIP for the fiscal
year ended December 31, 1999 were as follows: Mr. DeLuca, $300,000; Mr.
Backus, $85,000; and $65,000 each for Messrs. Bonta, Gardner and Zoratto.
During the prior fiscal year, the Company adopted the Executive Bonus Plan
(the "EBP") in order to provide an additional incentive to certain key
executives, to improve its overall profitability and value on a sustainable
long-term basis, and to have them remain with the Company. The EBP provides
for a cash bonus to be paid upon the attainment of certain price targets for a
share of Common Stock ranging from $13.50 to $25.00 for a period of 90
calendar days as well as a cash bonus to be paid annually to each key
executive who remains with the Company over 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
approximately 15% of salary for certain executives and about 60% of salary for
the Chief Executive Officer, based upon the executive's salary at the time
participation commenced. During fiscal year 1999, Mr. Backus and Mr. Bonta
commenced participation in the EBP.
Bonuses were paid under the EBP for FY 1999, since the Company's share price
averaged a pre-determined level for a period of 90 consecutive calendar days
and for continued service through the first anniversary of the executive's
participation in the EBP. A $30,128 bonus was paid to Mr. Gardner and a
$28,506 bonus was paid to Mr. Zoratto.
Net Total Compensation
(total annual cash compensation plus the annualized value of long-term
incentives)
As a guideline, net total compensation for executive officers, through long-
term incentive awards under the 1996 Plan, is set at between the fiftieth
percentile and the upper quartile of general industry companies, including
comparable engineering and construction and environmental services companies,
when the Company's long-term goals to increase stockholder value are achieved
or exceeded.
Long-Term Incentive Compensation Program
The 1996 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. In addition to other grants made during fiscal year 1999, the
Compensation Committee approved grants of Restricted Stock and Non-Qualified
Stock Options (NQSOs) both effective in January 2000. These grants vest in
equal installments over four years. The number of shares granted to the Named
Officers were as follows: Mr. Backus: 7,408 shares of Restricted Stock and
35,635 NQSOs; Mr. Bonta: 4,910 shares of Restricted Stock and 32,687 NQSOs;
Mr. Gardner: 5,041 shares of Restricted Stock and 43,000 NQSOs, and Mr.
Zoratto: 5,041 shares of Restricted Stock and 43,000 NQSOs. In addition, upon
commencement of participation in the ESOP, Mr. Backus was granted 2,842 NQSOs
and Mr. Bonta was granted 1,770 NQSOs.
Grants of stock were made associated with the conversion of the Restoration
Plan from a Non-Qualified Deferred Cash Compensation Plan to a separate stock
plan. Shares were granted to satisfy all accrued liability under the plan as
of December 31, 1999. Shares issued, which were immediately vested, were as
follows: Mr. Backus: 369 shares; Mr. Bonta: 883 shares; Mr. Gardner: 274
shares, and Mr. Zoratto: 1,021 shares.
Compensation of Chief Executive Officer
The Committee assessed the competitiveness of Mr. DeLuca's salary for the
fiscal year ended December 31, 1999 using competitive information developed by
nationally known independent consulting firms. The Committee increased Mr.
DeLuca's salary to $450,000 per annum. Mr. DeLuca earned an incentive award of
$300,000 under the Management Incentive Plan for the current fiscal year,
which reflected the achievement of
26
<PAGE>
the Company's EBIT and other financial goals and Mr. DeLuca's individual
performance in relation to pre-established objectives. Mr. DeLuca also was
paid bonuses under the EBP for FY 1999: a bonus in the amount of $143,062
since the price of a share of the Company's Common Stock averaged a pre-
determined level for a period of 90 consecutive calendar days; and a bonus in
the amount of $65,432 for continued service through the first anniversary of
his participation in the EBP. The Committee also granted 50,000 NQSOs to Mr.
DeLuca in fiscal year ended December 31, 1999 as part of an annual grant to
officers. Mr. DeLuca participated in the grant of Restricted Stock and NQSOs
for officers, which restricted stock was granted outside of the 1996 Plan, and
which was effective January 2000. He received 38,093 shares of Restricted
Stock and 90,678 NQSOs which vest equally over four (4) years. Mr. DeLuca
received 7,655 shares of Company stock in settlement of accrued obligations
under the conversion of Restoration Plan from a Non-Qualified Deferred
Compensation Plan to a current stock plan. Mr. DeLuca also vested in 9,391
NQSO's granted pursuant to the ESOP since the Company's share price averaged a
predetermined level for 90 consecutive calendar days during the fiscal year.
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-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 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
Francis J. Harvey
Charles W. Schmidt
James David Watkins
27
<PAGE>
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: Foster Wheeler Corp., Harding Lawson Associates GP,
Inc., Sevenson Environmental Services, Inc., Tetra Tech, Inc., TRC Companies,
Inc., URS Corp., and Roy F. Weston, Inc. (the "Peer Group"). We deleted EMCON,
Fluor Daniel GTI, Inc., and ICF Kaiser International, Inc. because we acquired
all or a portion of each of those companies during this fiscal year and have
included Foster Wheeler Corp., Tetra Tech, Inc., and URS Corp. (We substituted
URS Corp. for Dames & Moore Group because URS acquired Dames & Moore Group
during the fiscal year.) 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]
3/31/95 3/29/96 3/27/97 3/28/98 12/24/98 12/31/99
The IT Group, Inc. 100 105 72 105 118 96
S&P 500 Index 100 132 162 234 265 322
Industry Group 100 131 111 116 95 77
Assumes $100 invested on March 31, 1995 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.
28
<PAGE>
CERTAIN TRANSACTIONS
Employment Agreements. The Company and Anthony J. DeLuca entered into an
employment agreement with a term through November 1999. (Messrs. James R.
Mahoney and Raymond J. Pompe, who left the Company's employ in 1999 had
similar agreements.) The employment agreements provided 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
were subject to reduction only in connection with action taken by the Board of
Directors for all management employees. Each of the employment agreements
provided for a short-term incentive compensation plan to be administered by
the Compensation Committee. The target short-term incentive compensation level
was 40%, and the maximum level was 60%, of base salary, except in the case of
Mr. DeLuca, for whom the target level was 50%, and the maximum level was 75%,
of base salary. The Company also was required to maintain long-term incentive
plans administered by the Compensation Committee, to make awards, primarily of
stock options, based on appropriate performance criteria. The annual awards
were at the discretion of the Compensation Committee and generally targeted
long-term incentive opportunities.
The agreements provided for severance payments under certain circumstances.
Under the agreements, the Company had "good reason" to terminate Messrs.
DeLuca, Mahoney or Pompe because of the Company's performance if such persons
failed to meet certain management forecasts for two consecutive fiscal years.
If the executive was terminated because of the Company's performance (under
the circumstances permitted in the agreements) within 24 months after a change
in control, was terminated without reason, or resigned for cause, he was
entitled to receive his base salary as adjusted from time to time ($450,000 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 was 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 was 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 was to be paid on a pro-rated basis, and he was
entitled to Company welfare benefits for a specified period.
The Company 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 purchased the required
amounts of Common Stock, and Messrs. DeLuca, Mahoney, and Pompe 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 were met or
exceeded. The loans bear interest at the rate of 8.25% per year and are
repayable upon the earlier of the executive's termination of employment or
November 19, 1999. The term of Mr. DeLuca's loan was extended until November
19, 2000. Mr. Mahoney's loan was repaid as a part of his termination of
employment (See Certain Transactions--Mahoney Separation Agreement). The
Company has agreed with Mr. Pompe to extend the term of his loan pending the
resolution of the claims arising out of his departure from the Company. The
employment agreements also provided 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 were bound by non-compete provisions with the
Company if they terminated their employment by resignation.
The Company expects to enter into a similar replacement agreement with Mr.
DeLuca in the near future. The Company has also agreed to enter into
employment agreements with certain other named executives with terms similar
to those of the employment agreements for Messrs. Mahoney and Pompe. 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.
29
<PAGE>
Backus Arrangements. David L. Backus, a Senior Vice President, agreed to be
employed by the Company following our 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.
Strawbridge Separation Agreement. In connection with his resignation from
the Company, Philip O. Strawbridge, a Senior Vice President and Chief
Administrative Officer entered into an agreement dated as of November 15,
1999. Pursuant to that agreement, Mr. Strawbridge confirmed his prior
resignation as an officer of the Company and received a one-time payment of
$251,883, representing approximately one (1) year's salary, plus $55,799 in
payment of accrued but unpaid Paid Time Off, $11,159 for COBRA costs, $25,000
for career transition and outplacement costs, $30,869 vested and payable under
the terms of the OHM Supplemental Executive Retirement Plan, and $82,082
representing all sums due under the Company's FY 1999 Management Incentive
Plan. Mr. Strawbridge also received $30,000 to buy out outstanding options
under the Company's 1996 Plan and $32,998 representing sums vested and payable
under the Company's Deferred Compensation and Restoration Plans. Mr.
Strawbridge also agreed to repay on or before April 28, 2000 his $142,545 loan
under the 1998 Executive Stock Ownership Program. These terms are consistent
with the employment agreement offered to Mr. Strawbridge. (The Company also
previously paid Mr. Strawbridge $1,400,000, which is the amount he would have
received under his employment agreement with OHM if his employment with OHM
had been terminated following a change of control, such as occurred when the
Company acquired OHM.)
Mahoney Separation Agreement. In connection with his resignation from the
Company, Mr. James R. Mahoney, a Senior Vice President, entered into an
agreement dated as of February 28, 2000. Pursuant to the agreement, Mr.
Mahoney confirmed his prior resignation as an officer of the Company and the
Company agreed to pay him a severance payment of $340,000 less amounts
previously paid him as salary. Mr. Mahoney also received $2,604 accrued but
unpaid Paid Time Off, $25,000 on account of outplacement services, and $16,260
in other miscellaneous payments. The Company also agreed to allow stock
options and restricted stock previously granted to vest and remain exercisable
as though he had retired from the Company. With respect to Mr. Mahoney's
relocation loan, of which $80,000 in principal remained outstanding as of his
resignation, Mr. Mahoney will, as required under his promissory note, pay the
loan with interest in annual installments until fully repaid beginning as of
his resignation. Mr. Mahoney also authorized the Company to withhold the
$100,000 balance due under his 1996 Stock Purchase Loan from his severance
payments. Mr. Mahoney also agreed to pay the remaining balance of $107,524 due
under his 1998 Executive Stock Ownership Program Loan according to its terms
on September 19, 2000. The Company also released Mr. Mahoney from non-
competition and other obligations under his 1996 Employment Agreement. These
terms are consistent with the provisions of his 1996 Employment Agreement.
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 approximately $180,000
of services during the fiscal year ending December 31, 1999 in connection with
the acquisition of OHM and certain employment litigation.
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.
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
30
<PAGE>
3) a mobility allowance of between 15% and 30% of salary (Mr. DeLuca received
a 30% allowance and Mr. Bonta received a 25% allowance in connection with
their relocations). Amounts paid to reimburse out-of-pocket expenses were
"grossed-up" for tax purposes. The loans to relocating employees have ten year
terms, are to be secured by the residence purchased, and do not bear interest
as long as the employee stays with the Company. Five percent of the loan
principal is required to be repaid annually by the employee and 5% will be
forgiven annually by the Company for each year the employee remains with the
Company. The loans are also due upon the sale of the residence purchased. 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 31, 1999, (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 $91,000. As of April 5, 2000, the principal
amount outstanding for Mr. DeLuca's loan was $80,000. In 1996, Mr. Bonta
accepted a loan of $60,000. During the fiscal year ended December 31, 1999,
the maximum amount owed by Mr. Bonta under the loan was $54,000 and as of
April 5, 2000, the principal balance was $48,000.
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 four times
salary for Mr. DeLuca. To assist these executives in meeting the ownership
guidelines, the Company provided loans to Messrs. DeLuca, Backus, Bonta,
Gardner and Zoratto in the amounts of $939,100; $198,000; $123,300; $135,700
and $128,400 respectively, to purchase the Company's Common Stock. The Company
also provided similar loans totaling $921,600 to seven 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 a rate ranging from
4.46% to 5.25% per year and are repayable upon the earlier of the executives'
termination of employment or three (3) years. The executives should be able to
repay the loans from incentive compensation payments earned during the 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.
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 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
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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.
Further, pursuant to the OHM merger agreement, the Company agreed to
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
acquisition of OHM, 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.
The Company has substantially similar indemnification obligations with
respect to persons who are or were directors, officers, employees or agents of
GTI and EMCON before or after the effective time of the respective mergers
with GTI and EMCON, pursuant to the respective agreements for the acquisition
of GTI and EMCON.
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 31, 1999. 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 31, 1999 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.
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STOCKHOLDER PROPOSALS
The Company expects to hold its next annual meeting of stockholders on May
23, 2001. 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 2001 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 23, 2001 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 2001 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 2001 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 2001 or, if later, the
fifteenth day following the date the Company first announces the date for the
annual meeting in the year 2001. 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 fiscal year ended
December 31, 1999 (the "Annual Report" or the "1999 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.
FORM 10-K ANNUAL REPORT
The Company will provide to any stockholder, without charge, a copy of its
Report on Form 10-K for the fiscal year ended December 31, 1999, 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.
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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
not to exceed $6,500 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 1, 2000
Monroeville, Pennsylvania
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APPENDIX I
2000 STOCK INCENTIVE PLAN
OF
THE IT GROUP, INC.
SECTION 1. PURPOSE OF PLAN
The purpose of this 2000 Stock Incentive Plan (this "Plan") of The IT Group,
Inc., a Delaware corporation (the "Company"), is to enable the Company to
attract, retain and motivate its officers, directors and other senior
management and technical personnel and to further align the interests of such
persons with those of the stockholders of the Company by providing for or
increasing the proprietary interest of such persons in the Company.
SECTION 2. ADMINISTRATION OF PLAN
2.1 Composition of Committee. This Plan shall be administered by the
Compensation Committee of the Board of Directors (the "Committee"), as
appointed from time to time by the Board of Directors. The Board of Directors
shall fill vacancies on, and from time to time may remove or add members to,
the Committee. The Committee shall act pursuant to a majority vote or
unanimous written consent. The Board of Directors, in its sole discretion, may
exercise any authority of the Committee under this Plan in lieu of the
Committee's exercise thereof and in such instances references herein to the
Committee shall refer to the Board. Unless otherwise provided by the Board:
(a) with respect to any Award for which such is necessary and desired for such
Award to be exempted by Rule 16b-3 of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), the Committee shall consist of the Board of
Directors or of two or more directors each of whom is a "non-employee
director" (as such term is defined in Rule 16b-3 promulgated under the
Exchange Act, as such Rule may be amended from time to time), (b) with respect
to any Award that is intended to qualify as "performance-based compensation"
under Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code"), the Committee shall consist of two or more directors, each of whom is
an "outside director" (as such term is defined under Section 162(m) of the
Code), and (c) with respect to any other Award, the Committee may appoint one
or more separate committees (any such committee, a "Subcommittee") composed of
one or more directors of the Company (who may but need not be members of the
Committee) and may delegate to any such Subcommittee(s) the authority to grant
Awards, as defined in Section 5.1 hereof, under the Plan to Eligible Persons,
to determine all terms of such Awards, and/or to administer the Plan or any
aspect of it. Any action by any such Subcommittee within the scope of such
delegation shall be deemed for all purposes to have been taken by the
Committee. The Committee may designate the Secretary of the Company or other
Company employees to assist the Committee in the administration of the Plan,
and may grant authority to such persons to execute agreements or other
documents evidencing Awards made under this Plan or other documents entered
into under this Plan on behalf of the Committee or the Company.
2.2 Powers of the Committee. Subject to the express provisions and
limitations set forth in this Plan, the Committee shall be authorized and
empowered to do all things necessary or desirable, in its sole discretion, in
connection with the administration of this Plan, including, without
limitation, the following:
(a) to prescribe, amend and rescind rules and regulations relating to this
Plan and to define terms not otherwise defined herein; provided that,
unless the Committee shall specify otherwise, for purposes of this
Plan (i) the term "fair market value" shall mean, as of any date, the
closing price for a Share (as defined in Section 3.1) reported on the
New York Stock Exchange (or such other stock exchange or quotation
system on which Shares are then listed or quoted) for the business day
immediately preceding such date; and (ii) the term "Company" shall
mean the Company and its subsidiaries and affiliates, unless the
context otherwise requires;
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(b) to determine which persons are Eligible Persons (as defined in Section
4), to which of such Eligible Persons, if any, Awards shall be granted
hereunder and the timing of any such Awards, and to grant Awards;
(c) to grant Awards to Eligible Persons and determine the terms and
conditions thereof, including the number of Shares subject to Awards
and the exercise or purchase price of such Shares and the
circumstances under which Awards become exercisable or vested or are
forfeited or expire, which terms may but need not be conditioned upon
the passage of time, continued employment, the satisfaction of
performance criteria, the occurrence of certain events (including
events which the Board or the Committee determine constitute a Change
of Control), or other factors;
(d) to establish, verify the extent of satisfaction of, adjust, reduce or
waive any performance goals or other conditions applicable to the
grant, issuance, exercisability, vesting and/or ability to retain any
Award;
(e) to prescribe and amend the terms of the agreements or other documents
evidencing Awards made under this Plan (which need not be identical);
(f) to determine whether, and the extent to which, adjustments are
required pursuant to Section 10;
(g) to interpret and construe this Plan, any rules and regulations under
this Plan and the terms and conditions of any Award granted hereunder,
and to make exceptions to any such provisions in good faith and for
the benefit of the Company; and
(h) to make all other determinations deemed necessary or advisable for the
administration of this Plan.
2.3 Determinations of the Committee. All decisions, determinations and
interpretations by the Committee regarding this Plan shall be final and
binding on all Eligible Persons and Participants. The Committee shall consider
such factors as it deems relevant to making such decisions, determinations and
interpretations including, without limitation, the recommendations or advice
of any director, officer or employee of the Company and such attorneys,
consultants and accountants as it may select
SECTION 3. STOCK SUBJECT TO PLAN
3.1 Aggregate Limits. The aggregate number of shares of the Company's Common
Stock, $.01 par value ("Shares"), issued pursuant to all Awards granted under
this Plan shall not exceed 455,000 plus an annual increase on the first
business day of each of the Company's fiscal years 2001, 2002, 2003, 2004 and
2005, of a number of Shares equal to two percent (2%) of the number of Shares
issued and outstanding on each of such dates. The aggregate number of Shares
available for issuance under this Plan and the number of Shares subject to
outstanding Options or other Awards shall be subject to adjustment as provided
in Section 10.2 and Section 11. The Shares issued pursuant to this Plan may be
Shares that either were reacquired by the Company, including Shares purchased
in the open market, or authorized but unissued Shares.
3.2 Tax Code Limits. The aggregate number of Shares issuable under all
Options and Incentive Stock Awards granted under this Plan during any calendar
year to any one Eligible Person shall not exceed 200,000, subject to the
further limitation set forth in Section 6.8 with respect to Nonemployee
Directors. Notwithstanding anything to the contrary in this Plan, the
foregoing limitations shall be subject to adjustment under Section 10, but
only to the extent that such adjustment will not affect the status of any
Award intended to qualify as "performance-based compensation" under Code
Section 162(m). The foregoing limitations shall not apply to the extent that
they are no longer required in order for compensation in connection with
grants under this Plan to be treated as "performance-based compensation" under
Code Section 162(m). The aggregate number of Shares that may be issued
pursuant to the exercise of ISOs granted under this Plan shall not exceed
900,000, which number shall be calculated and adjusted pursuant to Section 3.3
and Section 10 only to the extent that such calculation or adjustment will not
affect the status of any Option intended to qualify as an ISO under Code
Section 422.
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3.3 Issuance of Shares. For purposes of Section 3.1, the aggregate number of
Shares issued under this Plan at any time shall equal only the number of
Shares actually issued upon exercise or settlement of an Award and shall not
include Shares subject to Awards that have been canceled, expired or forfeited
or Shares subject to Awards that have been delivered (either actually or
constructively by attestation) to or retained by the Company in payment or
satisfaction of the purchase price, exercise price or tax withholding
obligation of an Award.
SECTION 4. PERSONS ELIGIBLE UNDER PLAN
Any person, including any director of the Company, who is an employee or
prospective employee of the Company or of any of its subsidiaries or
affiliates shall be eligible to be considered for the grant of Awards
hereunder (an "Eligible Person"). For purposes of Section 6.8, an "Eligible
Person" shall also include a director of the Company who is not a salaried
employee (a "Nonemployee Director"). Unless provided otherwise by the
Committee, the term "employee" shall mean an "employee" as such term is
defined in General Instruction A to Form S-8 under the Securities Act of 1933,
as amended. A "Participant" is any current or former Eligible Person to whom
an Award has been made and any person (including any estate) to whom an Award
has been assigned or transferred pursuant to Section 9.1.
SECTION 5. PLAN AWARDS
5.1 Award Types. The Committee, on behalf of the Company, is authorized
under this Plan to enter into certain types of arrangements with Eligible
Persons and to confer certain benefits on them. The following arrangements or
benefits are authorized under this Plan if their terms and conditions are not
inconsistent with the provisions of this Plan: Options, Incentive Bonuses and
Incentive Stock. Such arrangements and benefits are sometimes referred to
herein as "Awards." The authorized types of arrangements and benefits for
which Awards may be granted are defined as follows:
(a) Options: An Option is a right granted under Section 6 to purchase a
number of Shares at such exercise price, at such times, and on such
other terms and conditions as are specified in the agreement or terms
and conditions or other document evidencing the Award (the "Option
Document"). Options intended to qualify as Incentive Stock Options
("ISOs") pursuant to Code Section 422 and Options not intended to
qualify as ISOs ("Nonqualified Options") may be granted under Section
6. Options may be granted to Nonemployee Directors only pursuant to
Section 6.8
(b) Incentive Stock: Incentive Stock is an award or issuance of Shares
made under Section 8, the grant, issuance, retention, vesting and/or
transferability of which is subject during specified periods of time
to such conditions (which may include continued employment or
performance conditions) and terms as are expressed in the agreement or
other document evidencing the Award (the "Incentive Stock Document").
(c) Incentive Bonus: An Incentive Bonus is a bonus opportunity awarded
under Section 7 pursuant to which a Participant may become entitled to
receive an amount, payable in cash or Shares, based on satisfaction of
such performance criteria as are specified in the agreement or other
document evidencing the Award (the "Incentive Bonus Document").
5.2 Grants of Awards. An Award may consist of one such arrangement or
benefit or two or more of them in tandem or in the alternative.
SECTION 6. OPTIONS
The Committee may grant an Option or provide for the grant of an Option,
either from time to time in the discretion of the Committee or automatically
upon the occurrence of specified events, including, without limitation, the
achievement of performance goals, the satisfaction of an event or condition
within the control of the recipient of the Award or within the control of
others.
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6.1 Option Document. Each Option Document shall contain provisions regarding
(a) the number of Shares that may be issued upon exercise of the Option, (b)
the purchase price of the Shares and the means of payment for the Shares, (c)
the term of the Option, (d) such terms and conditions on the vesting and/or
exercisability of an Option as may be determined from time to time by the
Committee, (e) restrictions on the transfer of the Option and forfeiture
provisions and (f) such further terms and conditions, in each case not
inconsistent with this Plan as may be determined from time to time by the
Committee. Option Documents evidencing ISOs shall contain such terms and
conditions as may be necessary to qualify, to the extent determined desirable
by the Committee, with the applicable provisions of Section 422 of the Code.
6.2 Option Price. The purchase price per share of the Shares subject to each
Option granted under this Plan shall equal or exceed 100% of the fair market
value of such Stock on the date the Option is granted, except that (a) the
exercise price of an Option may be higher or lower in the case of Options
granted to an employee of a company acquired by the Company in assumption and
substitution of options held by such employee at the time such company is
acquired, and (b) in the event an Eligible Person is required to pay or forego
the receipt of any cash amount in consideration of receipt of an Option, the
exercise price plus such cash amount shall equal or exceed 100% of the fair
market value of such Stock on the date the Option is granted.
6.3 Option Term. The "Term" of each Option granted under this Plan,
including any ISOs, shall be 10 years from the date of its grant, unless the
Committee provides for a lesser term.
6.4 Option Vesting. Options granted under this Plan shall become vested
and/or exercisable at such time and in such installments during the period
prior to the expiration of the Option's Term as determined by the Committee.
The Committee shall have the right to make the timing of the ability to
exercise any Option granted under this Plan subject to continued employment,
the passage of time and/or such performance requirements as deemed appropriate
by the Committee.
6.5 Termination of Employment or Service. Subject to Section 11, unless the
Committee provides otherwise the terms of any Option granted under the Plan
shall provide (a) that if the Eligible Person to whom such Option was granted
ceases to be an employee for any reason other than death, disability or
Retirement, the Option shall not thereafter become exercisable to an extent
greater than it could have been exercised on the date the Eligible Person's
status as an employee ceased, and that on the death, disability or Retirement
of an Eligible Person the Option shall become fully exercisable; and (b) that
the Option shall expire and cease to be exercisable upon the earlier of the
expiration of the Option Term and (i) in the case of the Eligible Person's
termination of employment on account of the Retirement, the second anniversary
of the date of the Eligible Person's Retirement; (ii) in the case of the
Eligible Person's termination of employment on account of the death or
disability, the first anniversary of the termination of the Eligible Person's
employment, (iii) in the case of the Eligible Person's termination of
employment on account of a termination for cause, one month after the
termination of the Eligible Person's employment, and (iv) in the case of the
Eligible Person's termination of employment for any reason other than the
foregoing, ninety (90) days after the termination of Eligible Person's
employment.
6.6 Payment of Exercise Price. The exercise price of an Option shall be paid
in the form of one of more of the following, as the Committee shall specify,
either through the terms of the Option Document or at the time of exercise of
an Option: (a) cash or certified or cashiers' check, (b) shares of capital
stock of the Company that have been held by the Participant for such period of
time as the Committee may specify, (c) other property deemed acceptable by the
Committee, (d) a reduction in the number of Shares or other property otherwise
issuable pursuant to such Option, (e) payment under an arrangement with a
broker selected or approved by the Company where payment is made pursuant to
an irrevocable commitment by the broker to deliver to the Company proceeds
from the sale of the Shares issuable upon exercise of the Option, or (f) any
combination of (a) through (e).
6.7 No Option Repricing. Without the approval of stockholders, the Company
shall not reprice any Options. For purposes of this Plan, the term "reprice"
shall mean lowering the exercise price of previously
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awarded Options within the meaning of Item 402(i) under Securities and
Exchange Commission Regulation S-K (including canceling previously awarded
Options and regranting them with a lower exercise price).
6.8 Nonemployee Director Options. Upon first joining the Board of Directors
each Nonemployee Director may be granted an initial Nonqualified Option and
thereafter may be granted annually a Nonqualified Option (any such Option, a
"Nonemployee Director Option"), in each case to purchase a number of Shares as
set forth by the Committee or the Board of Directors. Notwithstanding the
foregoing, the aggregate number of Shares subject to Options granted under
this Plan during any calendar year to any one Nonemployee Director shall not
exceed 5,000. Except as otherwise set forth in this Section 6.8, Nonemployee
Director Options shall be subject to the other terms, conditions and
limitations as are established by the Committee or the Board of Directors or
provided for pursuant to the Plan.
SECTION 7. INCENTIVE BONUSES
Each Incentive Bonus Award will confer upon the Employee the opportunity to
earn a future payment tied to the level of achievement with respect to one or
more performance criteria established for a performance period established by
the Committee.
7.1 Incentive Bonus Document. Each Incentive Bonus Document shall contain
provisions regarding (a) the target and maximum amount payable to the
Participant as an Incentive Bonus, (b) the performance criteria and level of
achievement versus these criteria that shall determine the amount of such
payment, (c) the term of the performance period as to which performance shall
be measured for determining the amount of any payment, (d) the timing of any
payment earned by virtue of performance, (e) restrictions on the alienation or
transfer of the Incentive Bonus prior to actual payment, (f) forfeiture
provisions and (g) such further terms and conditions, in each case not
inconsistent with this Plan as may be determined from time to time by the
Committee. The maximum amount payable as an Incentive Bonus may be a multiple
of the target amount payable, but the maximum amount payable pursuant to that
portion of an Incentive Bonus Award granted under this Plan for any fiscal
year to any Participant that is intended to satisfy the requirements for
"performance-based compensation" under Code Section 162(m) shall not exceed
$1,500,000.
7.2 Performance Criteria. The Committee shall establish the performance
criteria and level of achievement versus these criteria that shall determine
the target and maximum amount payable under an Incentive Bonus Award, which
criteria may be based on financial performance and/or personal performance
evaluations. The Committee may specify the percentage of the target Incentive
Bonus that is intended to satisfy the requirements for "performance-based
compensation" under Code Section 162(m). Notwithstanding anything to the
contrary herein, the performance criteria for any portion of an Incentive
Bonus that is intended by the Committee to satisfy the requirements for
"performance-based compensation" under Code Section 162(m) shall be a measure
based on one or more Qualifying Performance Criteria (as defined in Section
9.2) selected by the Committee and specified at the time the Incentive Bonus
Award is granted. The Committee shall certify the extent to which any
Qualifying Performance Criteria has been satisfied, and the amount payable as
a result thereof, prior to payment of any Incentive Bonus that is intended to
satisfy the requirements for "performance- based compensation" under Code
Section 162(m).
7.3 Timing and Form of Payment. The Committee shall determine the timing of
payment of any Incentive Bonus. The Committee may provide for or, subject to
such terms and conditions as the Committee may specify, may permit a
Participant to elect for the payment of any Incentive Bonus to be deferred to
a specified date or event. An Incentive Bonus may be payable in Shares or in
cash or other property. Any Incentive Bonus that is paid in cash or other
property shall not affect the number of Shares otherwise available for
issuance under this Plan.
7.4 Discretionary Adjustments. Notwithstanding satisfaction of any
performance goals, the amount paid under an Incentive Bonus Award on account
of either financial performance or personal performance evaluations may be
reduced by the Committee on the basis of such further considerations as the
Committee shall determine.
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SECTION 8. INCENTIVE STOCK
Incentive Stock is an award or issuance of Shares the grant, issuance,
retention, vesting and/or transferability of which is subject during specified
periods of time to such conditions (including continued employment or
performance conditions) and terms as the Committee deems appropriate.
8.1 Incentive Stock Document. Each Incentive Stock Document shall contain
provisions regarding (a) the number of Shares subject to such Award or a
formula for determining such, (b) the purchase price of the Shares, if any,
and the means of payment for the Shares, (c) the performance criteria, if any,
and level of achievement versus these criteria that shall determine the number
of Shares granted, issued, retainable and/or vested, (d) such terms and
conditions on the grant, issuance, vesting and/or forfeiture of the Shares as
may be determined from time to time by the Committee, (e) restrictions on the
transferability of the Shares and (f) such further terms and conditions in
each case not inconsistent with this Plan as may be determined from time to
time by the Committee.
8.2 Sale Price. Subject to the requirements of applicable law, the Committee
shall determine the price, if any, at which Shares of Incentive Stock shall be
sold or awarded to an Eligible Person, which may vary from time to time and
among Eligible Persons and which may be below the fair market value of such
Shares at the date of grant or issuance.
8.3 Share Vesting. The grant, issuance, retention and/or vesting of Shares
of Incentive Stock shall occur at such time and in such installments as
determined by the Committee or under criteria established by the Committee.
The Committee shall have the right to make the timing of the grant and/or the
issuance, ability to retain and/or vesting of Shares of Incentive Stock
subject to continued employment, passage of time and/or such performance
criteria as deemed appropriate by the Committee. Notwithstanding anything to
the contrary herein, the performance criteria for any Incentive Stock that is
intended to satisfy the requirements for "performance-based compensation"
under Code Section 162(m) shall be a measure based on one or more Qualifying
Performance Criteria selected by the Committee and specified at the time the
Incentive Stock Award is granted.
8.4 Discretionary Adjustments. Notwithstanding satisfaction of any
performance goals, the number of Shares granted, issued, retainable and/or
vested under an Incentive Stock Award on account of either financial
performance or personal performance evaluations may be reduced by the
Committee on the basis of such further considerations as the Committee shall
determine.
8.5 Termination of Employment. Subject to Section 11, upon a termination of
employment by a Participant prior to the vesting of or the lapsing of
restrictions on Incentive Stock, the Incentive Stock Awards granted to such
Participant shall be subject to such procedures as determined by the
Committee.
SECTION 9. OTHER PROVISIONS APPLICABLE TO AWARDS
9.1 Transferability. Unless the agreement or other document evidencing an
Award (or an amendment thereto authorized by the Committee) expressly states
that the Award is transferable as provided hereunder, no Award granted under
this Plan, nor any interest in such Award, may be sold, assigned, conveyed,
gifted, pledged, hypothecated or otherwise transferred in any manner prior to
the vesting or lapse of any and all restrictions applicable thereto, other
than by will or the laws of descent and distribution. The Committee may grant
an Award or amend an outstanding Award to provide that the Award is
transferable or assignable (i) in the case of a transfer without the payment
of any consideration, to any "family member" as such term is defined in
Section 1(a)(5) of the General Instructions to Form S-8 under the 1933 Act, as
such may be amended from time to time, (ii) in any transfer described in
clause (ii) of Section 1(a)(5) of the General Instructions to Form S-8 under
the 1933 Act as amended from time to time, provided that following any such
transfer or assignment the Award will remain subject to substantially the same
terms applicable to the Award while held by the Participant, as modified as
the Committee shall determine appropriate, and as a condition to such transfer
the transferee shall execute an agreement agreeing to be bound by such terms.
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9.2 Qualifying Performance Criteria. For purposes of this Plan, the term
"Qualifying Performance Criteria" shall mean any one or more of the following
performance criteria, either individually, alternatively or in any
combination, applied to either the Company as a whole or to a business unit or
subsidiary, either individually, alternatively or in any combination, and
measured either annually or cumulatively over a period of years, on an
absolute basis or relative to a pre-established target, to previous years'
results or to a designated comparison group, in each case as specified by the
Committee in the Award: (a) cash flow, (b) earnings per share (including
earnings before interest, taxes, depreciation, and amortization), (c) stock
price, (d) return on equity, (e) total stockholder return, (f) return on
capital, (g) return on assets or net assets, (h) revenue, (i) income or net
income, (j) operating income or net operating income, (k) operating profit or
net operating profit, (l) operating margin or profit margin, (m) return on
operating revenue, and (n) market share. To the extent consistent with Section
162(m) of the Code, the Committee shall appropriately adjust any evaluation of
performance under a Qualifying Performance Criteria to exclude any of the
following events that occurs during a performance period: (i) asset write-
downs, (ii) litigation or claim judgments or settlements, (iii) the effect of
changes in tax law, accounting principles or other such laws or provisions
affecting reported results, (iv) accruals for reorganization and restructuring
programs and (v) any extraordinary non-recurring items as described in
Accounting Principles Board Opinion No. 30 and/or in management's discussion
and analysis of financial condition and results of operations appearing in the
Company's annual report to stockholders for the applicable year.
9.3 Dividends. Unless otherwise provided by the Committee, no adjustment
shall be made in Shares issuable under Awards on account of cash dividends
that may be paid or other rights that may be issued to the holders of Shares
prior to their issuance under any Award. The Committee shall specify whether
dividends or dividend equivalent amounts shall be paid to any Participant with
respect to the Shares subject to any Award that have not vested or been issued
or that are subject to any restrictions or conditions on the record date for
dividends.
9.4 Documents Evidencing Awards. The Committee shall, subject to applicable
law, determine the date an Award is deemed to be granted, which for purposes
of this Plan shall not be affected by the fact that an Award is contingent on
subsequent stockholder approval of this Plan. The Committee or, except to the
extent prohibited under applicable law, its delegate(s) may establish the
terms of agreements or other documents evidencing Awards under this Plan and
may, but need not, require as a condition to any such agreement's or
document's effectiveness that such agreement or document be executed by the
Participant and that such Participant agree to such further terms and
conditions as specified in such agreement or document. The grant of an Award
under this Plan shall not confer any rights upon the Participant holding such
Award other than such terms, and subject to such conditions, as are specified
in this Plan as being applicable to such type of Award (or to all Awards) or
as are expressly set forth in the agreement or other document evidencing such
Award.
9.5 Tandem Stock or Cash Rights. Either at the time an Award is granted or
by subsequent action, the Committee may, but need not, provide that an Award
shall contain as a term thereof, a right, either in tandem with the other
rights under the Award or as an alternative thereto, of the Participant to
receive, without payment to the Company, a number of Shares, cash or a
combination thereof, the amount of which is determined by reference to the
value of the Award.
9.6 Additional Restrictions on Awards. Either at the time an Award is
granted or by subsequent action, the Committee may, but need not, impose such
restrictions, conditions or limitations as it determines appropriate as to the
timing and manner of any resales by a Participant or other subsequent
transfers by a Participant of any Shares issued under an Award, including
without limitation (a) restrictions under an insider trading policy,
(b) restrictions designed to delay and/or coordinate the timing and manner of
sales by Participants, and (c) restrictions as to the use of a specified
brokerage firm for such resales or other transfers.
SECTION 10. CHANGES IN CAPITAL STRUCTURE
10.1 Corporate Actions Unimpaired. The existence of outstanding Awards
(including any Options) shall not affect in any way the right or power of the
Company or its stockholders to make or authorize any or all
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adjustments, recapitalizations, reorganizations, exchanges, or other changes
in the Company's capital structure or its business, or any merger or
consolidation of the Company, or any issuance of Shares or other securities or
subscription rights thereto, or any issuance of bonds, debentures, preferred
or prior preference stock ahead of or affecting the Shares or other securities
of the Company or the rights thereof, or the dissolution or liquidation of the
Company, or any sale or transfer of all or any part of its assets or business,
or any other corporate act or proceeding, whether of a similar character or
otherwise. Further, except as expressly provided herein or by the Committee,
(i) the issuance by the Company of shares of stock of any class of securities
convertible into shares of stock of any class, for cash, property, labor or
services, upon direct sale, upon the exercise of rights or warrants to
subscribe therefor, or upon conversion of shares or obligations of the Company
convertible into such shares or other securities, (ii) the payment of a
dividend in property other than Shares, or (iii) the occurrence of any similar
transaction, and in any case whether or not for fair value, shall not affect,
and no adjustment by reason thereof shall be made with respect to, the number
of Shares subject to Options or other Awards theretofore granted or the
purchase price per Share, unless the Committee shall determine in its sole
discretion that an adjustment is necessary to provide equitable treatment to a
Participant.
10.2 Adjustments Upon Certain Events. If the outstanding Shares or other
securities of the Company, or both, for which the Award is then exercisable or
as to which the Award is to be settled shall at any time be changed or
exchanged by declaration of a stock dividend, stock split, combination of
shares, recapitalization, or reorganization, the Committee may, and if such
event occurs after a Change of Control the Committee shall, appropriately and
equitably adjust the number and kind of Shares or other securities which are
subject to the Plan or subject to any Awards theretofore granted, and the
exercise or settlement prices of such Awards, so as to maintain the
proportionate number of Shares or other securities without changing the
aggregate exercise or settlement price, provided, however, that such
adjustment shall be made so as to not affect the status of any Award intended
to qualify as an ISO or as "performance-based compensation" under Section
162(m) of the Code.
SECTION 11. CHANGE OF CONTROL
11.1 Definitions. Unless the Committee provides otherwise,
For purposes of the Plan and Awards granted under the Plan, the term "Change
of Control" shall mean the first to occur of the following events:
(a) any date upon which the directors of the Company who were nominated by
the Board of Directors for election as directors and/or were elected
by the holders of the Cumulative Convertible Participating Preferred
Stock of the Company cease to constitute a majority of the directors
of the Company; provided, however, that no individual initially
elected or nominated as a director of the Company as a result of an
actual or threatened election contest with respect to directors or any
other actual or threatened solicitation of proxies or consents by or
on behalf of any person other than the Board shall be counted as
having been nominated by the Board of Directors for this purpose;
(b) a reorganization, merger or consolidation of the Company the
consummation of which results in the outstanding securities of any
class then subject to the Award being exchanged for or converted into
cash, property and/or securities not issued by the Company,
(c) the acquisition of substantially all of the property and assets of the
Company by any person or entity;
(d) the dissolution or liquidation of the Company;
(e) the date of the first public announcement that any person or entity,
together with all Affiliates and Employees (as such capitalized terms
are defined in Rule 12b-2 promulgated under the Exchange Act) of such
person or entity, shall have become the Beneficial Owner (as defined
in Rule 13d-3 promulgated under the Exchange Act) of voting securities
of the Company representing 35% or more
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of the voting power of the Company; provided, however, that the terms
"person" and "entity," as used in this subsection (e), shall not include
(i) the Company, any of its subsidiaries, The Carlyle Group and its
Affiliates, (ii) any employee benefit plan of the Company or any of its
subsidiaries, or (iii) any entity holding voting securities of the
Company for or pursuant to the terms of any such plan; or
(f) any other event specified by the Committee, regardless of whether at
the time an Option is granted or thereafter.
11.2 Effect of Change of Control on Options. The Committee may provide,
either at the time an Option is granted or thereafter, that a Change of
Control shall have such effect as specified by the Committee, or no effect, as
the Committee in its sole discretion may provide. Without limiting the
foregoing, the Committee may but need not provide, either at the time an
Option is granted or thereafter, that if a Change of Control occurs, then
effective as of a date selected by the Committee, the Committee (which for
purposes of the Changes of Control described in (a) and (e) above shall be the
Committee as constituted prior to the occurrence of such Change of Control)
acting in its sole discretion without the consent or approval of any
Participant, will effect one or more of the following alternatives or
combination of alternatives with respect to outstanding Options (which
alternatives may vary among individual Participants and may be conditional on
the occurrence of such of the Change of Control events specified in clause (a)
through (e) above): (1) accelerate the time at which Options then outstanding
may be exercised in full for a limited period of time on or before a specified
date (which will permit the Participant to participate with the Shares
received upon exercise of such Option in the event of a Change of Control)
fixed by the Committee, after which specified date all unexercised Options and
all rights of Participants thereunder shall terminate, (2) accelerate the time
at which Options then outstanding may be exercised so that such Options may be
exercised in full for their then remaining term, (3) require the mandatory
surrender to the Company of outstanding Options held by such Participant
(irrespective of whether such Options are then exercisable under the
provisions of the Plan) as of a date, before or not later than sixty days
after such Change of Control, specified by the Committee, and in such event
the Committee shall thereupon cancel such Options and the Company shall pay to
each Participant an amount of cash equal to the excess of the fair market
value of the aggregate Shares subject to such Option over the aggregate
exercise price for such Shares, or (4) allow the Option to be adjusted as
provided in Section 10.2; provided, however, the Committee shall not select an
alternative (unless consented to by the Participant) that, if the Participant
exercised his accelerated Options pursuant to alternative 1 or 2 and
participated in the transaction specified in clause (a), (b) or (d) or
received cash pursuant to alternative 3, would result in the Participant's
owing any money by virtue of operation of Section 16(b) of the Exchange Act.
If all such alternatives have such a result, the Committee shall take such
action, which is hereby authorized, to put such Participant in as close to the
same position as such Participant would have been in had alternative 1, 2 or 3
been selected but without resulting in any payment by such Participant
pursuant to Section 16(b) of the Exchange Act. Notwithstanding the foregoing,
with the consent of the Participant, the Committee may in lieu of the
foregoing make such provision with respect of any Change of Control as it
deems appropriate.
11.3 Effect of Change of Control on Other Awards. The Committee may provide,
either at the time an Award is granted or thereafter, that a Change of Control
shall have such effect as specified by the Committee, or no effect, as the
Committee in its sole discretion may provide. Without limiting the foregoing,
the Committee may but need not provide, either at the time an Award is granted
or thereafter, that if a Change of Control occurs, then effective as of a date
selected by the Committee, the Committee (which for purposes of the Changes of
Control described in (a) and (e) above shall be the Committee as constituted
prior to the occurrence of such Change of Control) acting in its sole
discretion without the consent or approval of any Participant, will effect one
or more of the following alternatives or combination of alternatives with
respect to outstanding Awards (which alternatives may vary among individual
Participants and may be conditional on the occurrence of such of the Change of
Control events specified in clause (a) through (e) above): (1) accelerate the
time at which Awards theretofore made may be issued or vested and/or eliminate
or waive any forfeiture provisions relating to such Awards (so as to permit
the Participant to participate with the Shares in the event of a Change of
Control), (2) require the mandatory surrender to the Company of outstanding
Awards held by such Participant (irrespective of
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whether such Awards are then vested, or whether the Shares under such Award
are then subject to forfeiture or otherwise subject to other terms and
conditions under such Award) as of a date, before or not later than sixty days
after such Change of Control, specified by the Committee, and in such event
the Committee shall thereupon cancel such Awards and the Company shall pay to
each Participant an amount of cash equal to the excess of the fair market
value of the Shares subject to that portion of the Award as the Committee may
designate over any amount due to the Company from the Participant with respect
to such Shares, or (3) allow the Award to be adjusted as provided in Section
10.2; provided, however, the Committee shall not select an alternative (unless
consented to by the Participant) that, if the Participant participated in the
transaction specified in clause (a), (b) or (d) or received cash pursuant to
alternative 2, would result in the Participant's owing any money by virtue of
operation of Section 16(b) of the Exchange Act. If all such alternatives have
such a result, the Committee shall take such action, which is hereby
authorized, to put such Participant in as close to the same position as such
Participant would have been in had alternative 1, 2 or 3 been selected but
without resulting in any payment by such Participant pursuant to Section 16(b)
of the Exchange Act. Notwithstanding the foregoing, with the consent of the
Participant, the Committee may in lieu of the foregoing make such provision
with respect of any Change of Control as it deems appropriate.
SECTION 12. TAXES
12.1 Withholding Requirements. The Committee may make such provisions or
impose such conditions as it may deem appropriate for the withholding or
payment by a Participant of any taxes that the Committee determines are
required in connection with any Award granted under this Plan, and a
Participant's rights in any Award are subject to satisfaction of such
conditions.
12.2 Payment of Withholding Taxes. Notwithstanding the terms of Section
12.1, the Committee may provide in the agreement or other document evidencing
an Award or otherwise that all or any portion of the taxes required to be
withheld by the Company or, if permitted by the Committee, desired to be paid
by the Participant, in connection with the exercise, vesting, settlement or
transfer of any Award shall be paid or, at the election of the Participant,
may be paid by the Company withholding shares of the Company's capital stock
otherwise issuable or subject to such Award, by the Participant delivering
previously owned shares of the Company's capital stock, in each case having a
fair market value equal to the amount required or elected to be withheld or
paid, or by a broker selected or approved by the Company paying such amount
pursuant to an irrevocable commitment by the broker to deliver to the Company
proceeds from the sale of the Shares issuable under the Award. Any such
election is subject to such conditions or procedures as may be established by
the Committee and may be subject to approval by the Committee.
SECTION 13. AMENDMENTS OR TERMINATION
The Board may amend, alter or discontinue this Plan or any agreement or
other document evidencing an Award made under this Plan but, except as
provided pursuant to the anti-dilution adjustment provisions of Section 10.2
and the Change of Control provisions of Section 11, no such amendment shall,
without the approval of the stockholders of the Company:
(a) increase the maximum number of Shares for which Awards may be granted
under this Plan;
(b) reduce the price at which Options may be granted below the price
provided for in Section 6.2;
(c) reduce the exercise price of outstanding Options;
(d) extend the term of this Plan;
(e) change the class of persons eligible to be Participants;
(f) increase the number of shares subject to Nonemployee Director Options
granted to a Nonemployee Director pursuant to Section 6.8;
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(g) increase the percentage of shares that are eligible for non-Option
Awards; or
(h) after any Change of Control, impair the rights of any Award holder
without such holder's consent.
The Board may amend, alter or discontinue the Plan or any agreement
evidencing an Award made under the Plan, but no amendment or alteration shall
be made which would impair the rights of any Award holder, without such
holder's consent, under any Award theretofore granted, provided that no such
consent shall be required if the Committee determines in its sole discretion
and prior to the date of any Change of Control (as defined, if applicable, in
the agreement evidencing such Award) that such amendment or alteration either
(i) is required or advisable in order for the Company, the Plan or the Award
to satisfy any law or regulation or to meet the requirements of any accounting
standard, or (ii) is not reasonably likely to significantly diminish the
benefits provided under such Award, or that any such diminishment has been
adequately compensated.
SECTION 14. COMPLIANCE WITH OTHER LAWS AND REGULATIONS
This Plan, the grant and exercise of Awards thereunder, and the obligation
of the Company to sell, issue or deliver Shares under such Awards, shall be
subject to all applicable federal, state and foreign laws, rules and
regulations and to such approvals by any governmental or regulatory agency as
may be required. The Company shall not be required to register in a
Participant's name or deliver any Shares prior to the completion of any
registration or qualification of such Shares under any federal, state or
foreign law or any ruling or regulation of any government body which the
Committee shall determine to be necessary or advisable. This Plan is intended
to constitute an unfunded arrangement for a select group of management or
other key employees, directors and consultants.
No Option shall be exercisable unless a registration statement with respect
to the Option is effective or the Company has determined that such
registration is unnecessary. Unless the Awards and Shares covered by this Plan
have been registered under the Securities Act of 1933, as amended, or the
Company has determined that such registration is unnecessary, each person
receiving an Award and/or Shares pursuant to any Award may be required by the
Company to give a representation in writing that such person is acquiring such
Shares for his or her own account for investment and not with a view to, or
for sale in connection with, the distribution of any part thereof.
SECTION 15. OPTION GRANTS AND AWARDS BY SUBSIDIARIES
In the case of a grant of an Option or other Award granted to any Eligible
Person employed by a subsidiary, such grant may, if the Committee so directs,
be implemented by the Company issuing any subject Shares to the subsidiary,
for such lawful consideration as the Committee may determine, upon the
condition or understanding that the subsidiary will transfer the Shares to the
Participant in accordance with the terms of the Option or other Award
specified by the Committee pursuant to the provisions of the Plan.
Notwithstanding any other provision hereof, such Option or other Award may be
issued by and in the name of the subsidiary and shall be deemed granted on
such date as the Committee shall determine.
SECTION 16. NO RIGHT TO COMPANY EMPLOYMENT
Nothing in this Plan or as a result of any Award granted pursuant to this
Plan shall confer on any individual any right to continue in the employ of the
Company or interfere in any way with the right of the Company to terminate an
individual's employment at any time. The agreements or other documents
evidencing Awards may contain such provisions as the Committee may approve
with reference to the effect of approved leaves of absence.
SECTION 17. LIABILITY OF COMPANY
The Company and any Affiliate which is in existence or hereafter comes into
existence shall not be liable to a Participant, an Eligible Person or other
persons as to:
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(a) The Non-Issuance of Shares. The non-issuance or sale of shares as to
which the Company has been unable to obtain from any regulatory body
having jurisdiction the authority deemed by the Company's counsel to
be necessary to the lawful issuance and sale of any shares hereunder;
and
(b) Tax Consequences. Any tax consequence expected, but not realized, by
any Participant, Eligible Person or other person due to the receipt,
exercise or settlement of any Option or other Award granted hereunder.
SECTION 18. EFFECTIVENESS AND EXPIRATION OF PLAN
This Plan shall be effective on the date of stockholder approval of this
Plan. All Awards granted under this Plan are subject to, and may not be
exercised before, the approval of this Plan by the stockholders prior to the
first anniversary date of the effective date of this Plan, by the affirmative
vote of the holders of a majority of the outstanding shares of the Company
present, or represented by proxy, and entitled to vote, at a meeting of the
Company's stockholders or by written consent in accordance with the laws of
the State of Delaware; provided that if such approval by the stockholders of
the Company is not forthcoming, all Awards previously granted under this Plan
shall be void. No Awards shall be granted pursuant to this Plan more than five
(5) years after the effective date of this Plan.
SECTION 19. NON-EXCLUSIVITY OF PLAN
Neither the adoption of this Plan by the Board nor the submission of this
Plan to the stockholders of the Company for approval shall be construed as
creating any limitations on the power of the Board or the Committee to adopt
such other incentive arrangements as either may deem desirable, including
without limitation, the granting of restricted stock or stock options
otherwise than under this Plan, and such arrangements may be either generally
applicable or applicable only in specific cases.
SECTION 20. GOVERNING LAW
This Plan and any agreements or other documents hereunder shall be
interpreted and construed in accordance with the laws of the State of Delaware
and applicable federal law. The Committee may provide that any dispute as to
any Award shall be presented and determined in such forum as the Committee may
specify, including through binding arbitration. Any reference in this Plan or
in the agreement or other document evidencing any Award to a provision of law
or to a rule or regulation shall be deemed to include any successor law, rule
or regulation of similar effect or applicability.
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1970-PS
<PAGE>
DETACH HERE
PROXY
THE IT GROUP, INC.
ANNUAL MEETING OF STOCKHOLDERS
JUNE 8, 2000
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned constitutes 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
value, of The IT Group, Inc. (the "Company") which the undersigned would be
entitled to vote if personally present at the Annual Meeting of Stockholders of
the Company (the "2000 Annual Meeting") to be held at 9:00 a.m. Eastern Time, on
Thursday, June 8, 2000, at The IT Group, Inc. 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 and proposals included on the reverse side.
_____________ _____________
| SEE REVERSE | | SEE REVERSE |
| SIDE | CONTINUED AND TO BE SIGNED ON REVERSE SIDE | SIDE |
_____________ _____________
<PAGE>
DETACH HERE
Please mark ____
[X] votes as in |
this example |
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF THE IT GROUP, INC.
1. Election of Directors.
Nominees: (01) Anthony J. DeLuca, (02) Francis J. Harvey,
(03) James C. McGill, (04) Richard W. Pogue and
(05) Charles W. Schmidt
FOR WITHHELD
[_] [_]
[_]
--------------------------------------
For all nominees except as note above
FOR AGAINST ABSTAIN
2. Approval of the 2000 Stock Incentive [_] [_] [_]
Plan.
3. In the discretion of the proxyholders with respect to any other
matter that may properly come before the 2000 Annual Meeting
and at any adjournment or postponement thereof. The Board of
Directors is not aware of any other matters that will be
presented at the meeting.
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT [_]
Please sign exactly as your name appears 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: Signature: Date:
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