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AS FILED ON MARCH 15, 1999.
REGISTRATION STATEMENT NO. 333- -
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM S-1
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
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CH2M HILL COMPANIES, LTD.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
OREGON 8711 93-0549963
(STATE OR OTHER (PRIMARY STANDARD (I.R.S. EMPLOYER
JURISDICTION OF INDUSTRIAL IDENTIFICATION NUMBER)
INCORPORATION OR CLASSIFICATION CODE
ORGANIZATION) NUMBER)
6060 SOUTH WILLOW DRIVE,
GREENWOOD VILLAGE, CO 80111-5142
(303) 771-0900
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
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SAMUEL H. IAPALUCCI
CH2M HILL COMPANIES, LTD.
6060 SOUTH WILLOW DRIVE
GREENWOOD VILLAGE, CO 80111-5142
(303) 771-0900
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
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COPY TO:
FRANCIS R. WHEELER, ESQ.
WHITNEY HOLMES, ESQ.
HOLME ROBERTS & OWEN LLP
1700 LINCOLN STREET
DENVER, CO 80203
(303) 861-7000
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective and from time
to time thereafter.
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [X]
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CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TILETOF EACH CLASS OF SECURITIES AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING REGISTRATION
TO BE REGISTERED(1) REGISTERED PER SHARE(2) PRICE(2) FEE
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<S> <C> <C> <C> <C>
Common Stock................ 24,227,530 $4.31 $104,420,654 $29,028.94
</TABLE>
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(1) This Registration Statement also relates to an indeterminate number of
interests in the Retirement and Tax-Deferred Savings Plan, Employee Stock
Plan, 1999 Stock Option Plan, 1999 Payroll Deduction Stock Purchase Plan,
the Pre-Tax Deferred Compensation Plan and the After-Tax Deferred
Compensation Plan pursuant to which certain of the shares of common stock
offered pursuant to the Prospectus included as part of this Registration
Statement may be issued and delivered or sold.
(2) Estimated solely for the purpose of determining the registration fee
pursuant to Rule 457 under the Securities Act of 1933.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
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<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND WILL BE AMENDED AND +
+COMPLETED. A REGISTRATION STATEMENT RELATING TO THE COMMON STOCK HAS BEEN +
+FILED WITH THE SECURITIES AND EXCHANGE COMMISSION AND WE MAY NOT SELL THESE +
+SECURITIES UNTIL THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS +
+PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING +
+AN OFFER TO BUY THESE SECURITIES IN ANY JURISDICTION WHERE THE OFFER OR SALE +
+IS NOT PERMITTED. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED MARCH 15, 1999
PROSPECTUS
[LOGO APPEARS HERE]
24,227,530 Shares of Common Stock
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CH2M HILL Companies, Ltd. and certain shareholders are offering up to
24,227,530 shares of common stock pursuant to this prospectus, including:
. Up to 2,000,000 shares that CH2M HILL may offer to its employees from time
to time directly or through the internal market to be established by CH2M
HILL
. Up to 2,000,000 shares that CH2M HILL may offer to its employees from time
to time through one or more of CH2M HILL's employee benefit plans
. Up to 1,536,980 shares that certain officers and directors may offer from
time to time through the internal market
. Up to 16,690,550 shares that other shareholders may offer from time to
time through the internal market
. Up to 2,000,000 shares that one or more of CH2M HILL's employee benefit
plans may offer from time to time through the internal market
All shareholders (other than CH2M HILL and the employee benefit plans) will
pay a commission equal to 2% of the proceeds of the sale of any shares of
common stock. The commission will be paid to a broker to defray the costs of
maintaining the internal market that will be established by CH2M HILL. CH2M
HILL will not receive any proceeds from the sale of shares by officers,
directors, consultants or other shareholders.
This is our initial public offering of common stock which is designed to
allow trading of the common stock among CH2M HILL employees, directors,
consultants and employee benefit plans up to four times each year on the
internal market. We are not seeking to have the common stock listed on any
securities exchange and transfers of the common stock are subject to various
restrictions.
-----------
Investing in the common stock involves certain risks. See "Risk Factors"
beginning on page 3.
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Effective for the year 1999, the formula price for the common stock as
determined by our Board of Directors is $4.31 per share.
<TABLE>
<CAPTION>
Per share Total
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<S> <C> <C>
Offering Price.................................................. $ $
Discounts and Commissions....................................... $ $
Proceeds to CH2M HILL........................................... $ $
Proceeds to Selling Shareholders................................ $ $
</TABLE>
All of the shares offered and sold pursuant to this prospectus will be sold
through the internal market. The offering price has been, and subsequent
trading prices for the common stock on the internal market will be, established
by the Board of Directors rather than by the operation of a trading market. The
internal market generally will permit eligible shareholders to buy and sell
shares of common stock up to four times each year on predetermined days at a
price determined by a formula adopted by the Board of Directors. For more
details on how the internal market will function, see "Internal Market
Information" beginning on page 7.
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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF
THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
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Prospectus dated , 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
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Page
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Prospectus Summary....................................................... 1
Risk Factors............................................................. 3
Securities Offered by this Prospectus.................................... 5
Internal Market Information.............................................. 7
Use of Proceeds.......................................................... 13
Dividend Policy.......................................................... 13
Dilution................................................................. 13
Selected Financial Data.................................................. 14
Business................................................................. 15
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 22
Employee Benefit Plans................................................... 28
Management............................................................... 49
Executive Compensation................................................... 51
Security Ownership of Certain Beneficial Owners and Management........... 53
Securities Offered by the Current Shareholders........................... 54
Description of Capital Stock............................................. 55
Shares Eligible for Future Sale.......................................... 59
Validity of Common Stock................................................. 59
Experts.................................................................. 59
Available Information.................................................... 60
Index to Consolidated Financial Statements............................... F-1
</TABLE>
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This prospectus contains forward-looking statements that involve risks and
uncertainties. Our actual results may differ significantly from the results
discussed in the forward-looking statements. Factors that might cause such
differences include, but are not limited to: the continuance of and funding for
certain governmental regulation and enforcement programs which create demand
for our services; our ability to attract, finance and perform large longer-term
projects; our ability to cover (through adequate insurance contracts or
otherwise) the liability risks inherent in our business, including
environmental liabilities and professional engineering liabilities; our ability
to manage the risks inherent in the government contracting business; our
ability to manage the costs associated with our fixed-price contracts; and our
ability to attract and retain professional personnel.
ii
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PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in this prospectus.
It does not contain all of the information that you should consider before
investing in the common stock. You should read the entire prospectus carefully,
including the "Risk Factors" section and the financial statements and the notes
to those statements. The information in this prospectus (including number of
shares and share prices) has been adjusted to reflect the conversion of each
outstanding share of Class A preferred stock into one share of common stock and
a ten-for-one stock split of the common stock.
General
CH2M HILL provides engineering, consulting, design, construction,
procurement, operations, maintenance, and project management services to our
clients in the public and private sectors. We provide services to our domestic
and foreign clients through three operating segments:
. Environmental, Energy and Infrastructure
. Water
. Industrial
For the year ended December 31, 1998, CH2M HILL had gross revenues of
approximately $935 million.
Environmental, Energy and Infrastructure consists of two businesses:
Environmental, Nuclear, Energy & Systems and Transportation. The Environmental,
Nuclear, Energy & Systems business provides integrated environmental and waste
management consulting and engineering services, and performs design and build,
remediation, construction and implementation of infrastructure and
telecommunications systems for a variety of public and private clients. The
Transportation business provides planning, siting, permitting, design, program
and construction management, transportation management and consulting services
for aviation, ports, highways, bridges and transit systems.
Water consists of two businesses: Water & Wastewater and Operations &
Maintenance. The Water & Wastewater business focuses on the planning, design,
construction and implementation of water supply systems and wastewater
treatment facilities. The Operations & Maintenance business provides services
to water and wastewater operators, including startup, performance testing,
facility operations, maintenance and management.
Industrial provides design, construction, specialized precision
manufacturing support and facility services to high-technology manufacturing
companies, food and beverage processing businesses and fine chemical and
pharmaceutical manufacturers.
Business Strategy
CH2M HILL is seeking to grow through increasing market share in each of our
operating segments both domestically and internationally. The key elements of
our strategy include:
. Increasing the number and the dollar value of our contracts
. Expanding and diversifying our client base
. Increasing the number of large, longer-term projects with the potential
for higher profit margins
. Encouraging ownership in our common stock across a greater proportion of
our workforce
Common Stock Ownership
Historically, our key employee policy has restricted ownership of common
stock to persons known as "key employees," and to employee benefit trusts.
Employees were selected for key employee status by existing key employees on
the basis of various objective and subjective criteria. To expand our ownership
base beyond "key employees," the Board of Directors decided to establish a new
ownership program as a replacement for the key employee policy. The main goals
of the new program are:
. Establishing an internal market to enable shareholders to buy and sell
common stock
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. Expanding the opportunity for common stock ownership to include all
eligible employees, directors and consultants
. Adopting new and amending existing employee benefit plans to encourage
employees to invest in common stock
Internal Market
Through the internal market, any eligible shareholder may offer shares of
common stock for sale to eligible buyers up to four times each year on pre-
determined trade dates. Our 401(k) plan, employee stock plan, stock option
plan, payroll deduction stock purchase plan and trusts holding common stock for
the benefit of the employees may also participate in these trades. Shares will
be bought and sold through the internal market at a formula price determined by
the Board of Directors that is intended to represent fair market value. CH2M
HILL may purchase or offer to sell shares of common stock on the internal
market on any trade date to balance the supply and demand for common stock
between sellers and buyers, but we will not be obligated to do so.
Principal Executive Offices
Our principal executive offices are located at 6060 South Willow Drive,
Greenwood Village, Colorado 80111-5142. Our telephone number is (303) 771-0900.
2
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RISK FACTORS
You should carefully consider the following factors and other information
contained in this prospectus before deciding to invest in our common stock.
Government Contracts Present Unique Risks
In 1998, we derived approximately 63% of our total revenues from contracts
with federal, state, local and foreign government agencies. In 1998, our mix
of contracts was:
[PIE CHART WHICH SHOWS PERCENTAGE OF CONTRACTS
WITH DIFFERENT TYPES OF CLIENTS APPEARS HERE]
Private commercial clients 37%
State, local and foreign government agency clients 47%
Federal government agency clients 16%
In addition, we own equity interests in joint ventures with revenues
attributable primarily or entirely to contracts with governmental clients.
Consequently, our operations, prospects and financial condition may be
adversely affected by the following risks inherent in government contracts:
. Because federal law and some state laws permit government agencies to
terminate a contract for convenience, our governmental clients may
terminate or decide not to renew our contracts with little or no prior
notice.
. Federal governmental clients may audit contract payments we receive for
several years after these payments are made. Based on these audits, the
clients may adjust or demand repayment of payments we previously
received. Audits have been completed on our federal contracts through
December 31, 1994 and are continuing for subsequent periods.
. Federal government contract regulations provide that any company
convicted of a crime or indicted on a violation of certain federal
statutes may lose its right to receive future contract awards or
extensions. To our knowledge, we are not currently subject to any
investigation that may affect our ability to compete for federal
government work.
. Our ability to earn revenues from our existing and future government
projects will depend upon the availability of funding from various
federal, state, local and foreign government agencies and private sector
clients. We cannot control whether those clients will fund or continue
funding our outstanding projects.
Fixed Price Contracts Present Special Risks
Under "fixed price" contracts, we estimate the costs of the project and
agree to deliver the project for a definite, predetermined payment regardless
of our actual costs incurred over the life of the project. Many of our fixed
price contracts involve large industrial facilities and public infrastructure
projects with fixed prices in the millions of dollars. Significant cost
overruns could have a material adverse effect on our business. We look to
various factors to estimate the costs and time requirements to complete fixed
price projects, including:
. Management's experience in completing similar projects
. Estimates by and contract terms with third-party suppliers relating to
the project, if any
. Estimated time for government entities to process applications, issue
permits and take other actions
We have experience in pricing and performing fixed price projects, but
fixed price assignments present the risk that our costs to
3
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complete a project may exceed the fixed price agreed to with the client. There
can be no assurances that the fixed payments negotiated for such projects will
adequately cover our actual costs and desired profit margins for such
projects.
Changes in Environmental Regulations Could Adversely Affect Our Operations
A substantial portion of our business is generated either directly or
indirectly as a result of federal, state, local and foreign laws and
regulations related to environmental matters. Changes in environmental
regulations could affect our business more significantly than they would
affect some other engineering firms. Accordingly, a reduction in the number or
scope of these laws and regulations, or changes in government policies
regarding the funding, implementation or enforcement of such laws and
regulations, could have a material adverse effect on our business. In
addition, any significant effort by government agencies to reduce the role of
private contractors in regulatory programs, including environmental compliance
projects, could have a material adverse effect on our business.
Our Work May Expose Us to Environmental Liability
We could become subject to liabilities or fines for our environmental
activities. The assessment, analysis, remediation, handling, management, and
disposal of hazardous substances compose a significant portion of our business
and involve significant risks, including the possibility of property damages,
personal injuries, fines and penalties and other regulatory action. Civil and
criminal liabilities and liabilities to clients and third parties for
environmental violations and damages can be very large. Although we have never
been subject to any significant fines relating to environmental matters, it is
possible that we could be subject to substantial fines or liabilities in the
future that could adversely affect our business.
Our Projects May Result in Liability for Faulty Engineering Services
Because our projects are often large and can affect many people, our
failure to make judgments and recommendations in accordance with applicable
professional standards could result in disproportionately large damages and,
perhaps, punitive damages. Our engineering practices involve professional
judgments regarding the planning, design, development, construction, operation
and management of industrial facilities and public infrastructure projects.
Although we have adopted a range of insurance, risk management and avoidance
programs designed to reduce potential liabilities, there can be no assurance
that such programs will protect us fully from all risks and liabilities.
Absence of a Public Market May Prevent You from Selling Your Stock
There is no public market for our common stock. While we intend the
internal market to provide liquidity to shareholders, there can be no
assurance that there will be enough orders to purchase shares to permit
shareholders to resell their shares on the internal market, or that a regular
trading market will develop or be sustained in the future. Moreover, although
CH2M HILL may enter the internal market as a buyer of common stock under
certain circumstances, including an excess of sell orders over buy orders, we
have no obligation to engage in internal market transactions and will not
guarantee market liquidity. Consequently, insufficient buyer demand could
cause sell orders to be prorated, or could prevent the internal market from
opening on any particular trade date. Insufficient buyer demand could cause
shareholders to suffer a total loss of investment or substantial delay in
their ability to sell their common stock. No assurance can be given that
shareholders desiring to sell all or a portion of their shares of common stock
will be able to do so. Accordingly, the purchase of common stock is suitable
for you only if you have limited need for liquidity in this investment.
Investors in the Offering Will Experience Immediate and Substantial Dilution
The initial offering price per share of common stock exceeds CH2M HILL's
net tangible book value per share. Accordingly, the purchasers of shares sold
in the offering will experience immediate and substantial dilution.
4
<PAGE>
We Do Not Plan to Pay Cash Dividends
We do not currently anticipate paying cash dividends on the common stock and
intend to continue to retain any earnings for use in our business.
All Shares of Common Stock Are Subject to Transfer Restrictions
All shares of common stock will be subject to CH2M HILL's right of first
refusal to purchase such shares before they may be sold to third parties (other
than on the internal market), our right to refuse to allow the shareholder to
sell or transfer such shares to specific transferees (other than on the
internal market), and our right to repurchase such shares upon the
shareholder's termination of employment.
Offering Price Determined by Formula Intended to Represent Fair Market Value
Not by Market Forces
The offering price is, and subsequent offering prices at each trade date
will be, established by a formula determined by the Board of Directors, taking
into consideration several factors which are described in the section of this
prospectus called "Internal Market Information." Our Board of Directors intends
the formula to result in offering prices for the common stock that represent
fair market value. The formula is subject to change at the discretion of the
Board of Directors.
Anti-Takeover Effects
The internal market and restrictions on the transfer of our common stock
will most likely prevent any acquisition offer that is not approved in advance
by our Board of Directors.
SECURITIES OFFERED BY THIS PROSPECTUS
Common Stock
The shares of common stock offered by CH2M HILL may be offered to present
and future employees, including executive officers, directors and consultants,
of CH2M HILL through the internal market or through the employee benefit plans
summarized below.
Certain officers, including officers who are also directors, may, from time
to time, sell up to an aggregate of 1,536,980 shares of common stock through
the internal market. Certain other employees of CH2M HILL may, from time to
time, sell up to an aggregate of 16,690,550 shares of common stock on the
internal market. We do not know whether these officers and other employees will
offer or sell some, none or all of such shares. The shares offered by officers
and other employees may include shares they hold directly and also shares they
hold indirectly through the employee benefit plans summarized below. The
officers and other employees will not be treated more favorably than other
shareholders participating on the internal market.
Pursuant to our Restated Bylaws, all shares of common stock are subject to
CH2M HILL's repurchase right, right of first refusal and certain other
restrictions on transferability.
Benefit Plans
The following summary of the benefit plans that will participate in the
internal market may not contain all the information that may be important to
you. For more detailed information on these plans, you should read the plan
documents, which will be made available to you on request and which have been
attached as exhibits to the registration statement filed with the Securities
and Exchange Commission.
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CH2M HILL EMPLOYEE BENEFIT PLANS
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. Retirement and Tax-Deferred Savings Plan (401(k) Plan)
. Employee Stock Plan
. 1999 Stock Option Plan
. 1999 Payroll Deduction Stock Purchase Plan
. Pre-Tax and After-Tax Deferred Compensation Plans
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5
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Retirement and Tax-Deferred Savings Plan
We maintain a 401(k) plan, which is intended to be qualified under Sections
401(a) and (k) of the Internal Revenue Code. Generally, all employees are
eligible to participate, except for leased employees, temporary employees, and
employees of affiliates that have not adopted the 401(k) plan. The 401(k) plan
allows our employees and certain of our affiliates' employees to make pre-tax
contributions through payroll deductions.
The 401(k) plan provides for contributions, including matching
contributions, by CH2M HILL. We may, but are not obligated to, make a matching
contribution to the 401(k) plan for the benefit of those participants who have
elected to defer a portion of their compensation. Matching contributions are
normally invested in shares of common stock. The amount of the matching
contribution is either a percentage of the employee's contributions for the
calendar quarter up to 3% of the employee's compensation, or a percentage of
the employee's contributions for the calendar quarter, up to a specified dollar
limit.
Participating employees will be 100% vested at all times in their employee
contribution account and the participant's rollover account, if any. Each
employee's matching contribution account and defined contribution account, if
any, are subject to the vesting schedule and other vesting rules contained in
the plan document governing the 401(k) plan. Benefits are payable to a
participant within certain specified time periods following such participant's
retirement, permanent disability, death or other termination of employment.
Employee Stock Plan
We maintain an employee stock plan, which is a profit sharing plan intended
to be qualified under Section 401(a) of the Internal Revenue Code. Generally,
all employees are eligible to participate, except leased employees, temporary
employees, and employees of our affiliates that have not adopted the employee
stock plan. Interests of participants in the employee stock plan vest in
accordance with the vesting schedule and other vesting rules contained in the
plan document governing the employee stock plan. Contributions are allocated to
a participant in shares of common stock and cash and are distributable in cash
within certain specified time periods following such participant's retirement,
permanent disability, death or other termination of employment. The amount of
CH2M HILL's annual contribution to the employee stock plan is determined by the
Board of Directors and may be in the form of cash or stock.
1999 Stock Option Plan
We have recently adopted the 1999 Stock Option Plan under which we may
grant stock options to eligible participants, including certain officers and
employees of CH2M HILL and its affiliates. The Ownership and Incentive
Compensation Committee of the Board of Directors (the "O&IC Committee") decides
which eligible employees will be granted options to buy common stock under the
1999 Stock Option Plan and determines the terms and conditions of such options.
1999 Payroll Deduction Stock Purchase Plan
We have recently established the 1999 Payroll Deduction Stock Purchase Plan
for the benefit of our employees and employees of certain of our affiliates.
The payroll deduction stock purchase plan provides for the purchase of common
stock through payroll deductions by participating employees. The payroll
deduction stock purchase plan is intended to qualify under Section 423 of the
Internal Revenue Code. To participate, an employee must authorize a deduction
of at least 1% of the employee's pay, but no more than 10%, subject to an
aggregate limit of $25,000 per year. The amounts deducted from the employee's
paychecks will be placed in a payroll deduction stock purchase account held in
the employee's name. Beginning in 2000, we will use the amount in the
employee's payroll deduction stock purchase account to buy common stock for the
employee on each trade date. The O&IC Committee will decide from time to time
what percentage, which may range from 0% to 15%, of the purchase price of
common stock we will contribute toward the purchase of common stock under the
payroll deduction stock purchase plan. As of January 1, 2000, CH2M HILL's
contribution percentage will be 10%. We will not actually contribute any amount
to the employee's payroll deduction stock purchase account. Instead,
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we will add the contribution percentage to the amount in the employee's stock
purchase account and use the combined amount to purchase common stock on each
trade date. We will buy the common stock on each trade date either in the
internal market or directly from CH2M HILL.
Pre-Tax and After-Tax Deferred Compensation Plans
We plan to adopt two deferred compensation plans known as the CH2M HILL
Companies, Ltd. Pre-Tax Deferred Compensation Plan and the CH2M HILL Companies,
Ltd. After-Tax Deferred Compensation Plan. In connection with these plans, we
have established the CH2M HILL Companies, Ltd. Pre-Tax Deferred Compensation
Trust and the CH2M HILL Companies, Ltd. After-Tax Deferred Compensation Trust.
Employees who are not eligible to own common stock directly may be eligible to
participate in the Pre-Tax or After-Tax Deferred Compensation Plan by electing
to defer compensation into the deferred compensation trusts.
When an eligible employee elects to receive interests in a deferred
compensation trust instead of current cash compensation, CH2M HILL or its
affiliates may use the deferred compensation to purchase common stock on the
internal market, issue treasury shares or issue new shares, and contribute that
common stock to a deferred compensation trust. CH2M HILL and its affiliates may
also contribute common stock to the Pre-Tax Deferred Compensation Trust as
bonuses on behalf of eligible employees. The trustees of the deferred
compensation trusts will receive and hold common stock contributed by CH2M HILL
and its affiliates. Cash dividends, if any, paid with respect to shares of
common stock held in the deferred compensation trusts will be returned to CH2M
HILL and will not be held in the deferred compensation trusts or made available
to participants in the Pre-Tax and After-Tax Deferred Compensation Plans.
INTERNAL MARKET INFORMATION
General
This section contains brief descriptions of:
. Our key employee policy
. The transition from the key employee policy to the internal market
. How the internal market will work
For more details on the key employee policy and the internal market, you should
read the entire key employee policy and the internal market rules, which are
attached as exhibits to the registration statement filed with the Securities
and Exchange Commission.
Until this offering, our principal policy on stock ownership has been our
key employee policy, which restricted ownership of the common stock to persons
referred to as "key employees." As of March 1999, approximately 1,000 key
employees held common stock. To expand our ownership base beyond key employees,
the Board of Directors decided to establish a new ownership program as a
replacement for the key employee policy. The main goals of the new program are:
. Establishing an internal market to enable shareholders to buy and sell
common stock
. Expanding the opportunity for common stock ownership to include all
eligible employees, directors and consultants
. Adopting new and amending existing employee benefit plans to encourage
employees to invest in common stock
Key Employee Policy
Under the key employee policy, existing key employees voted to select new
key employees recommended by the Board of Directors. To earn the recommendation
of the Board of Directors to become a key employee, an employee generally had
to work for CH2M HILL for four or more years, receive consistent high job
performance evaluations and be deemed critical to the success of CH2M HILL.
Designation as a key employee qualified an individual to receive bonuses in the
form of stock and cash. Each year we would grant bonuses expressed in dollar
amounts, but paid in shares of common stock and cash, to selected
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key employees based on job performance and position. Upon a key employee's
termination or retirement, we repurchased his or her shares at a price
calculated according to a formula established annually by the Board of
Directors.
Under the old formula, the market value of a share of common stock was
equal to the sum of present book value ("PBV") and the present going concern
value ("PGCV") divided by the number of outstanding shares of stock ("CS").
Old Formula Price = (PBV + PGCV)/CS
"PBV" was the total audited book value of CH2M HILL at the end of the most
recent fiscal year, prior to giving effect to the issuance of bonuses for the
most recent fiscal year. Nonrecurring or unusual transactions could be excluded
from the calculation at the discretion of the Board of Directors.
"PGCV" was 1.5 times the previous five fiscal year rolling average of net
income. Net income was defined as the net income on an accrual basis according
to our audited financial statements, after the deduction of all costs but
before the deduction of bonuses and income taxes. Nonrecurring or unusual
transactions could be excluded from the calculation at the discretion of the
Board of Directors.
As of March 15, 1999, approximately 1,000 key employees and the employee
benefit plan trusts held 29,400,380 shares of common stock.
[PIE CHART WHICH SHOWS OWNERSHIP OF COMMON STOCK APPEARS HERE]
Executive officers and employee directors, 1,536,980 shares 5.23%
Other key employees, 16,690,550 shares 56.77%
Employee benefit plan trusts, 11,172,850 shares 38.00%
Transition from the Key Employee Policy
In connection with establishing a new ownership program, on November 6,
1998, the Board of Directors (i) terminated the key employee policy and
established the internal market, effective on the date that the contingencies
described below are satisfied, and (ii) adopted the 1999 Stock Option Plan. Our
shareholders approved these actions of the Board of Directors during the key
employee vote on December 18, 1998. The Board of Directors will approve the
final terms of all of the other benefit plans before any common stock is sold
under this prospectus.
These actions by the Board of Directors, however, remain subject to the
effectiveness of the registration statement and to the rules and regulations of
the Securities and Exchange Commission and the securities commissions of a
sufficient number of states so that the internal market can function
efficiently, as determined by the Board of Directors in its discretion. Once
these contingencies have been satisfied, the old formula will no longer be in
effect and the key employee policy will not govern new transactions in the
common stock.
8
<PAGE>
How Does the Internal Market Work?
[GRAPH WHICH SHOWS OPERATION OF INTERNAL MARKET APPEARS HERE]
The internal market will permit shareholders, eligible employees and the
benefit plans to buy and sell shares of common stock up to four times each year
on predetermined trade dates.
Authorized Buyers. All sales of common stock on the internal market will be
restricted to the following "Authorized Buyers:"
- --------------------------------------------------------------------------------
AUTHORIZED BUYERS OF COMMON STOCK
- --------------------------------------------------------------------------------
. Employees, directors and consultants of CH2M HILL
. Trustees of the 401(k) Plan
. Trustees of the Employee Stock Plan
. Trustees of the Deferred Compensation Plans
. Administrator of the Payroll Deduction Stock Purchase Plan
9
<PAGE>
Limitations on the number of shares which an individual may purchase may be
imposed when there are more buy orders than sell orders for a particular trade
date.
Broker. We established and will manage the internal market through a broker,
initially Buck Investment Services, Inc., which will act upon instructions from
the buyers and sellers. Individual stock ownership account records will be
maintained by the broker. Subsequent to determination of the applicable formula
price for use on the next trade date, and at approximately fifteen days prior
to such trade date, we will advise all employees and directors as to the new
formula price and the next trade date, inquiring whether such individuals wish
to purchase or sell shares on the internal market and advising them on how to
deliver written buy and sell orders approximately five days prior to such trade
date.
Under-Subscribed Market. CH2M HILL may, but is not obligated to, purchase
shares of common stock on the internal market on any trade date, but only to
the extent that the number of shares offered for sale by shareholders exceeds
the number of shares sought to be purchased by Authorized Buyers.
If the aggregate number of shares offered for sale on the internal market on
any trade date is greater than the number of shares sought to be purchased,
shareholder offers to sell will be accepted as follows:
. If enough orders to buy are received to purchase all the shares offered
by each seller selling fewer than 500 shares and at least 500 shares from
each other seller, then all sell orders will be accepted up to the first
500 shares and the portion of any sell orders exceeding 500 shares will
be accepted on a pro-rata basis.
. If not enough orders to buy are received to purchase all the shares
offered by each seller selling fewer than 500 shares and at least 500
shares from each other seller, then the purchase orders will be allocated
equally to each seller.
Over-Subscribed Market. To the extent that the aggregate number of shares
sought to be purchased exceeds the aggregate number of shares offered for sale,
CH2M HILL may, but is not obligated to, sell authorized but unissued shares of
common stock on the internal market to satisfy purchase demands.
If the aggregate purchase orders exceed the number of shares available for
sale, the following prospective purchasers will have priority, in the order
listed:
. Administrator of the Payroll Deduction Stock Purchase Plan
. Trustees of the 401(k) Plan
. Trustees of the Employee Stock Plan
. Individual employees and directors on a pro rata basis (including
purchases through the pre-tax and after-tax deferred compensation plans)
Sales Commission. All sellers on the internal market (other than CH2M HILL
and the employee benefit plans) will pay the broker, initially Buck Investment
Services, Inc., a commission equal to 2% of the proceeds from such sales. No
commission is paid by Authorized Buyers on the internal market. All offers and
sales of common stock made on the internal market may be attributed to CH2M
HILL for securities law purposes.
Determination of Offering Price
The Board of Directors will determine the price, which is intended to be the
fair market value, of the shares of common stock on each trade date pursuant to
the formula and valuation process described below. The formula price per share
of common stock is as follows:
FORMULA PRICE = [(7.8 x M x P) + (SE)]/CS
"M" is the market factor, which is subjectively determined in the sole
discretion of the Board of Directors. In determining the market factor, the
Board of Directors will take into account factors the directors consider to be
relevant in determining the fair market value of the common stock, including:
. the market for publicly traded equity securities of companies most
comparable to CH2M HILL
10
<PAGE>
. the merger and acquisition market for companies most comparable to CH2M
HILL
. the prospects for CH2M HILL's future performance
. general economic conditions
. general capital market conditions
. other factors the Board of Directors deems appropriate
The Board of Directors may take into account the company appraisal
information obtained by the trustees of the benefit plans. The Board has not
assigned predetermined weights to the various factors it may consider in
determining the market factor.
In its discretion, the Board of Directors may change, from time to time,
the market factor component of the formula price. The Board of Directors will
not make any other change in the method of determining the formula price unless
(i) in the good faith exercise of its fiduciary duties and after consultation
with its professional advisors, the Board of Directors determines that the
formula price no longer results in a stock price that reasonably reflects the
fair market value of CH2M HILL on a per share basis, or (ii) a change in the
formula price or the method of valuing the common stock is required under
applicable law.
"P" is profit after tax for the four fiscal quarters immediately preceding
the trade date. Nonrecurring or unusual transactions could be excluded from the
calculation at the discretion of the Board of Directors.
"SE" is the shareholders' equity as set forth on CH2M HILL's most recently
available quarterly or annual financial statements. Nonrecurring or unusual
transactions could be excluded from the calculation at the discretion of the
Board of Directors.
"CS" is the number of shares of common stock outstanding at the end of the
fiscal quarter immediately preceding the trade date on a fully diluted basis.
By "fully diluted" we mean that the calculations are made as if all outstanding
options to purchase common stock had been exercised and as if certain other
"dilutive" securities were changed into shares of common stock.
Under the new formula, the formula price would have been $4.30 per share
based on a market factor of 1.0 on January 1, 1999. Under the old formula, the
price for the common stock for 1999 was $4.31, as determined by our Board of
Directors. The formula price will be reviewed by the Board of Directors up to
four times each year, usually in conjunction with Board of Directors meetings,
currently scheduled for February, May, August and November. The Board of
Directors believes that the formula price valuation process described above
will result in a stock price that will reasonably reflect the fair market value
of CH2M HILL on a per share basis.
[QUARTERLY TRADE TIMELINE APPEARS HERE]
11
<PAGE>
We intend to publish the current formula price and upcoming trade date prior
to each trade date to all participants in the internal market through internal
communications, including bulletins, electronic mail communications or mailed
reports. Trade dates are expected to occur approximately 75 days after the end
of each fiscal quarter.
We will also distribute our audited annual financial statements to all
shareholders, as well as other employees, and to participants in the internal
market through the employee benefit plans. Such information will be distributed
at the same time as our annual reports, proxy information and solicitations are
distributed for voting instructions from shareholders and participants in the
employee benefit plans each year.
Price Range of Common Stock
Because the common stock has not been publicly traded, there has not been
any historical market-determined price. However, the Board of Directors has
periodically determined the price of the common stock for purposes of awards of
common stock made pursuant to the key employee policy.
The price per share figures shown below for 1989 through 1999 reflect market
values established by the Board of Directors pursuant to the old formula for
purposes of transactions under the key employee policy and employee benefit
plans. There can be no assurance that the common stock will, in the future,
provide returns comparable to historical returns, or that the formula price
Fwill provide returns similar to those for past transactions that were based on
the old formula.
The stock prices have been adjusted to reflect the ten-for-one stock split.
Because of the change from the old formula to the new formula for
determining the formula price, the historical prices for the common stock are
not directly comparable to the stock prices that will be determined under the
new formula. Since the determination of the formula price includes market
analyses that are applied by the Board at the time of making its
determinations, we do not know what the historical prices for the common stock
would have been under the new formula.
[CHART APPEARS HERE]
Price Per
Share % Increase
Date (Old Formula) (Decrease)
1989 $2.05 __%
1990 2.25 9.8
1991 2.52 12.0
1992 2.77 9.9
1993 2.99 7.9
1994 2.95 (1.3)
1995 3.07 4.1
1996 3.31 7.8
1997 3.59 8.5
1998 3.82 6.4
1999 4.31 12.8
[GRAPH OF COMMON STOCK PRICE FROM 1989 TO 1999 APPEARS HERE]
12
<PAGE>
USE OF PROCEEDS
The shares of common stock which may be offered by CH2M HILL are
principally being offered to permit the acquisition of shares by the employee
benefit plans as described herein and to permit CH2M HILL to offer shares of
common stock on the internal market if necessary because there are more buy
orders than sell orders on a trade date. We do not intend or expect this
offering to raise significant capital. Any net proceeds received by CH2M HILL
from the sale of the common stock offered (after giving effect to the payment
of expenses of the offering) will be added to our general funds and used for
working capital and general corporate purposes. It is anticipated that the
majority of the sales of common stock on the internal market will be made by
shareholders and the employee benefit plans. All shareholders (other than CH2M
HILL and the employee benefit plans) will pay a commission equal to 2% of the
proceeds of the sale of any shares of common stock. The commission will be used
by the broker to defray the costs of establishing and maintaining the internal
market.
DIVIDEND POLICY
We do not currently anticipate paying any cash dividends on the common
stock and intend to retain any future earnings to finance the growth and
development of our business.
DILUTION
The tangible book value of CH2M HILL on December 31, 1998 was $72,946,000
or $2.60 per share. Tangible book value per share represents the amount of
total tangible assets less total liabilities, divided by the shares of common
stock then outstanding. Total common stock outstanding at December 31, 1998 was
28,025,940 shares. As the following table demonstrates, after giving effect to
the sale of 4,000,000 shares of common stock by CH2M HILL in the offering at a
formula price of $4.31 per share, and after deducting anticipated expenses that
had not been paid as of December 31, 1998, the pro forma book value of the
common stock on December 31, 1998 would have been $89,363,921 or $2.79 per
share, representing an immediate dilution of $1.52 per share to new investors
purchasing shares of common stock at the formula price. "Dilution per share"
represents the difference between the price per share to be paid by new
investors for shares issued in this offering and the net pro forma book value
per share as of December 31, 1998.
<TABLE>
<S> <C> <C>
Formula price per share............................................. $4.31
Net tangible book value per share before the offering............. $2.60
Increase per share attributable to new investors.................. 0.19
-----
Pro forma net tangible book value per share after the offering...... 2.79
-----
Dilution per share to new investors................................. $1.52
=====
</TABLE>
13
<PAGE>
SELECTED FINANCIAL DATA
The following table presents selected historical financial data derived from
the Consolidated Financial Statements of CH2M HILL, which have been reported on
by Arthur Andersen LLP, independent public accountants, for each of the last
five years. During the periods presented, CH2M HILL paid no cash dividends on
its common stock. The following information should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Consolidated Financial Statements and related notes
thereto, included elsewhere in this prospectus.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
Years Ended Decmber 31,
(dollars in thousands except per share data)
1994 1995 1996 1997 1998
- ---------------------------------------------------------------------------------------------------------------------
Statement of Operations Data:
<S> <C> <C> <C> <C> <C>
Revenues.................................. $676,205 $804,614 $937,198 $917,578 $935,030
Operating income.......................... 10,030 12,699 13,444 13,946 14,802
Net income................................ 3,255 5,371 4,709 4,716 5,812
Net income per common and
preferred share (basic and diluted)..... 0.11 0.19 0.17 0.17 0.21
Balance Sheet Data:
Total assets.............................. 224,541 304,136 309,364 311,117 297,784
Long-term debt including current maturities 33,270 44,576 39,987 34,414 27,388
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
14
<PAGE>
BUSINESS
Overview
CH2M HILL is a project delivery firm founded in 1946. We provide
engineering, consulting, design, construction, procurement, operations and
maintenance, and program and project management services to clients in the
private and public sector in the United States and abroad.
We are an employee-owned Oregon corporation with approximately 7,000
employees working in 65 offices throughout the United States and 33 offices
abroad.
Business Strategy
Our business strategy is to grow domestically and internationally through
increasing market share in each of our operating segments. The key elements of
this strategy are:
. Increasing the number and the dollar value of our contracts
. Expanding and diversifying our client base by attracting new private and
public sector clients and developing a diversified mix of projects
. Increasing the number of large, longer-term projects with the potential
for higher profit margins
. Encouraging ownership in our common stock across a greater proportion of
our workforce
Operating Segments
We provide services to our clients through three operating segments:
. Environmental, Energy and Infrastructure
. Water
. Industrial
Environmental, Energy and Infrastructure
Our Environmental, Energy and Infrastructure ("EE&I") operating segment
consists of two businesses: Environmental, Nuclear, Energy & Systems ("ENE&S")
and Transportation. These two businesses are described below.
EE&I's business strategy is to grow by increasing market share in each of
its two businesses, expanding its client base and obtaining large, longer-term
projects with the potential for higher profit margins. While maintaining its
focus on its traditional services, EE&I is expanding its expertise into related
industries such as telecommunications, and into related business concepts such
as "sustainable development." Sustainable development is a design approach
used, for example, in power plant design. Sustainable development addresses
environmental issues throughout the life of a project (from design and
construction to decommissioning) in an effort to minimize total environmental
impact.
ENE&S. ENE&S provides integrated environmental and waste management
consulting and engineering services, and performs design and build,
remediation, construction and implementation of infrastructure and
telecommunications systems for a variety of public and private clients.
1. Environmental. Our Environmental group provides environmental consulting
for remedial construction projects, ecological and natural resource damage
assessments, strategic environmental management and permitting services,
environmental liability management services, site investigations, remedial
design, implementation and construction services, treatment systems for
hazardous, toxic and radioactive waste contaminated properties, and sustainable
development planning, design and construction services.
Representative Environmental projects include:
. Environmental consulting, engineering and remedial activities for the
U.S. Air Force Center for Environmental Excellence
. Remediation of contaminated sites on Naval and Marine Corps installations
in 26 domestic states and several foreign countries
. Program management and remedial design of a refinery for a large oil
company
15
<PAGE>
. Environmental impact studies for a number of proposed industrial projects
and municipal programs on behalf of the Beijing city government in China
2. Nuclear. Our Nuclear group provides program management, integration,
engineering, construction and operations and maintenance services for the U.S.
Department of Energy and commercial nuclear power plants. We manage
decommissioning and closure of weapons production facilities and design nuclear
waste treatment and handling facilities in the United States, Western, Central
and Eastern Europe and the former Soviet Union.
Representative Nuclear projects include:
. Management and integration of decontamination, decommissioning, and
closure of the nuclear weapons production facility at Rocky Flats in
Golden, Colorado, on behalf of the U.S. Department of Energy
. Engineering, design and technical services to support decontamination,
decommissioning and remedial activities at the Department of Energy
Hanford Reservation in Richland, Washington
3. Energy. Our Energy group provides full lifecycle energy services (from
design to decommissioning), including consulting, engineering, design,
construction, operations and maintenance services for power projects around the
world.
Representative Energy projects include:
. Expert consulting on utility deregulation
. The design and construction of gas turbine energy systems
. The design and construction of energy efficiency upgrades
. Development of generation services in renewable energy
. Carbon and other greenhouse gasses management projects
4. Systems. For the communications industry, our Systems group provides
program management, planning, design, and construction management of local and
regional fiber optic and hybrid fiber/coaxial systems for voice, video and data
communications. In other markets, our Systems group develops and implements
environmental management information systems, and total energy management and
information technology systems. It provides military base operation services
for government agencies, and other outsourcing services for industrial and
government clients.
Representative Systems projects include:
. Program management, design and construction management of voice, video
and data networks for a large European telecommunications company in
Europe
. Design, implementation and on-going maintenance of the worldwide
environmental management information system in Detroit, Michigan
. Program management for the upgrade of a hybrid fiber/coaxial network for
voice, video and high-speed data services in several domestic cities
Transportation. Transportation provides planning, siting, permitting,
design, program and construction management, intermodal transportation planning
and consulting services for aviation, ports, highways, bridges and transit
systems.
Representative Transportation projects include:
. Master planning and program management for a large international airport
in the U.S., including terminal, financial, and airport environmental
planning
. Developing lighting control systems for another large international
airport in the U.S., including touch-screen controls, runway incursion
protection, and automatic safety measures
. Designing and providing project management and engineering services for
the expansion of a container shipping terminal in the Eastern U.S.,
including berths, wharf and cranes
. Seismic retrofit design of seven bridges along an interstate highway in
California
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<PAGE>
. Design of the Eastern Transportation Corridor for the Orange County,
California transportation authority including 27 miles of highway and 58
bridges
Water
Our Water operating segment consists of two businesses: Water & Wastewater
and Operations & Maintenance.
The business strategy of the Water operating segment is to grow through
increasing market share in each of its businesses, both domestically and
internationally, to diversify its client base, and to pursue larger projects.
We seek to attract new clients by leveraging our reputation for providing
quality services, and by taking advantage of the current trends for
outsourcing operations and maintenance activities to specialized service
providers.
Water & Wastewater. Our Water & Wastewater business focuses on the
planning, design, construction and implementation of water supply systems and
wastewater treatment facilities.
Representative Water & Wastewater projects include:
. Design of a water treatment plant and transmission pipelines in Las
Vegas, Nevada
. Design, construction and commissioning of a wastewater treatment facility
in Manakau, New Zealand
. Program management for design and construction of a deep tunnel sewage
project in the Republic of Singapore
. Design, construction and commissioning of a water treatment plant in
Halifax, Nova Scotia
Operations & Maintenance. Our Operations & Maintenance business provides
water, wastewater and public works operations and maintenance services to
water and wastewater facility operators, including startup and performance
testing, consulting, facility operations, on-going maintenance and management.
The facility management services include water and wastewater treatment,
collection, and distribution, equipment and process maintenance, and site
grounds maintenance.
Representative Operations & Maintenance projects include:
. Operations and maintenance of a water reclamation center in Fairfield,
California
. Operations of the wastewater facilities in Hoboken, New Jersey
. Operations of the wastewater plant for a large brewery in Jacarei, Brazil
Industrial
Our Industrial operating segment provides design, construction, specialized
precision manufacturing support and facility services support to high-
technology manufacturing companies, food and beverage processing businesses,
and fine chemical and pharmaceutical manufacturers.
The business strategy of the Industrial operating segment is to diversify
its client base beyond the microelectronics industry, capitalizing on a strong
professional reputation in project delivery of complex manufacturing
facilities and leadership in the area of single-source design, engineering and
construction of industrial manufacturing facilities.
The Industrial operating segment built its reputation primarily in the
microelectronics industry, where it provides a single source for a broad range
of integrated design and construction services. The Industrial segment's
clients typically require design and installation services for complex systems
that comprise many of their facilities, including clean rooms, ultrapure water
and wastewater treatment systems, chemical and gas systems, and production
tools.
Representative Industrial projects include:
. Design and construction services for the development of multiple domestic
and foreign production facilities for a large microelectronics
manufacturer
. Design and construction services for a soy sauce production facility in
California for a Japanese manufacturer
. Complete engineering and construction services for an ultrapure water
system for
17
<PAGE>
a multi-national pharmaceutical manufacturer
. Continuous facility engineering, maintenance and operations support
services for several microelectronics manufacturers under multi-year
contracts
Clients
Our clients include:
. Corporations in the energy, transportation, chemical, steel, aluminum,
mining, forest products, electronics, food, pharmaceuticals, and
manufacturing industries in the United States and abroad
. The U.S. Agency for International Development, U.S. Department of
Defense, U.S. Department of Energy and U.S. Environmental Protection
Agency
. A variety of state and local government agencies in the United States and
abroad
Kaiser-Hill
In 1995, through Kaiser-Hill Company, LLC ("Kaiser-Hill"), we won the U.S.
Department of Energy's Performance Based Integrating Management Contract for
the Rocky Flats Closure Project in Golden, Colorado. Kaiser-Hill is a joint
venture with ICF Kaiser International, Inc. in which we hold a 50 percent
interest. Rocky Flats is a former U.S. Department of Energy nuclear weapons
production facility. Under the five-year contract, Kaiser-Hill oversees
plutonium stabilization and storage, environmental restoration, waste
management, decontamination and decommissioning, site safety and security, and
construction activities of subcontractor companies.
Under the performance-based contract signed by Kaiser-Hill, a concept that
was developed in the U.S. Department of Energy's 1994 Contract Reform
Initiative, 85% of Kaiser-Hill's fees are based on performance, while only 15%
are fixed. Kaiser-Hill's contract commits it to dealing with urgent risks
first. Achievement of measurable results in the following "urgent risk" areas
determines Kaiser-Hill's incentive fee: stabilize plutonium and plutonium
residues for specific time frames; consolidate plutonium in a single building;
and clean up and remove all high-risk "hot spot" contamination. The Rocky Flats
contract is scheduled to expire in June 2000. Kaiser-Hill is in the process of
applying for renewal of the contract, but there can be no assurance that the
contract will be renewed.
Backlog
At December 31, 1998, our backlog (contracted task orders less previously
recognized revenue on such task orders) was approximately $1,337 million,
compared to a backlog of approximately $966 million at December 31, 1997. U.S.
government agencies operate under annual fiscal appropriations by Congress and
fund various federal contracts only on an incremental basis. The same is true
of many state, local and foreign contracts. Our ability to earn revenues from
our backlog depends on the availability of funding for various U.S., state,
local and foreign government agencies.
Government Contracting
Overall, we received 16% of our revenues in 1998 from U.S. federal
government contracts. Typically, a federal contract has an initial term of one
year combined with two, three, or four one-year renewal periods, exercisable at
the discretion of the federal government. The government is not obligated to
exercise its option to renew a federal contract. At the expiration of the term
of a federal contract, the contract in its entirety is resubmitted for
competitive bids by all interested service providers. The government's failure
to renew, or the early termination of, any significant portion of our federal
contracts would adversely affect our business and prospects.
Contracts with the federal government and its prime contractors usually
contain standard provisions for termination at the convenience of the
government or such prime contractors. Upon such a termination, we are generally
entitled to recover costs incurred, settlement expenses, and profit on work
completed prior to termination. Our federal contracts do not provide for
renegotiation of profits. Terminations of federal contracts may occur, and such
terminations could adversely affect our business and prospects.
18
<PAGE>
Federal contract payments we receive in excess of allowable direct and
indirect costs are subject to adjustment and repayment after audit by
government auditors. The U.S. government has completed audits on our incurred
contract costs through December 31, 1994, and audits are continuing for
subsequent periods.
As a U.S. government contractor, we are subject to federal regulations
under which our right to receive future awards of new federal contracts, or
extensions of existing federal contracts, may be unilaterally suspended or
barred if CH2M HILL is convicted of a crime or indicted based on allegations of
a violation of certain specific federal statutes. Suspensions, even if
temporary, can result in the loss of valuable contract awards for which we
would otherwise be eligible. While suspension and debarment actions may be
limited to that division or subsidiary of a company engaged in the improper
activity, government agencies have authority to impose debarment and suspension
on affiliated entities that were not involved in the improper activity. Any
suspension or debarment action against us or any of our affiliates could have a
material adverse impact upon our business and prospects.
Many similar regulations are also applicable to our contracts with state,
local and foreign governments.
Environmental Matters
A substantial portion of our business has been generated either directly or
indirectly as a result of federal, state, local and foreign laws and programs
related to protection of the environment. Our environmental activities are
conducted in the context of a rapidly developing and changing statutory and
regulatory framework. Such activities are subject to regulation by a number of
federal agencies, including the U.S. Environmental Protection Agency ("EPA"),
the U.S. Nuclear Regulatory Commission and the U.S. Occupational Safety and
Health Administration, as well as similar state, local and foreign regulatory
agencies.
Several federal statutes govern our environmental activities. The
Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA")
established the "superfund" program to clean up hazardous waste sites, and
provides for penalties and punitive damages for noncompliance with EPA orders.
CERCLA may impose strict liability (joint and several as well as individual) on
certain hazardous substance waste owners, operators, disposal arrangers,
transporters and disposal facility owners and operators (collectively,
"Potentially Responsible Parties" or "PRPs"). Liabilities under CERCLA may
include payment of the costs of removal or remedial action, for other necessary
response costs, for damages for injury, destruction or loss of natural
resources, and for the cost of health effects studies.
Although the liabilities imposed by environmental legislation are generally
intended to remedy and prohibit pollution by industrial companies, we could
face liability under environmental laws in some circumstances. Increasingly,
there are efforts to expand the reach of CERCLA to make environmental
contractors responsible for cleanup costs by claiming that environmental
contractors are owners or operators of hazardous waste facilities or that they
arranged for treatment, transportation, or disposal of hazardous substances.
Should we be held responsible under CERCLA for damages caused while performing
services or otherwise, CH2M HILL could be forced to bear such liability by
itself, if contribution or indemnification is not available from other parties.
The Resources Conservation and Recovery Act ("RCRA") governs hazardous
waste generation, treatment, transportation, storage, and disposal. RCRA, or
similar EPA-approved state programs, govern waste-handling activities involving
wastes classified as "hazardous." Substantial fees and penalties may be imposed
under RCRA and similar state statutes for any violation.
In addition to civil and criminal liabilities under environmental laws, we
could face liabilities to clients and other private parties for property
damage, personal injury and other claims. Such claims could arise in a number
of ways, including:
. An accidental release of pollutants during our performance of services
19
<PAGE>
. The inability of one of our remedial plans to contain or correct an
ongoing seepage or release of pollutants
. The inadvertent exacerbation by us of an existing contamination problem
. Reliance by others on reports or recommendations we prepare that turn
out to be incorrect
In the environmental field, personal injury claims may arise in connection
with our work while it is being done or long after completion of the project.
In addition, claimants may assert that we should be strictly liable for
performing environmental remediation services -- that is, liable for damages
even though our services may have been performed using reasonable care -- on
the grounds that such services involve "abnormally dangerous activities."
Contractual Liabilities
We operate under a number of different types of contracts with our private
and public sector clients, including cost reimbursement contracts, time-and-
materials contracts, and fixed price contracts. The most common type is the
fixed price contract, which accounted for 36.1% of our revenues in 1998. Under
fixed price contracts, we are paid a predetermined amount for all services
provided as determined at the project's inception. Under time-and-materials
contracts, we are paid at a specified fixed hourly rate for direct labor hours
worked. Under cost reimbursement contracts, our costs are reimbursed, often
with a negotiated cost ceiling and also with an incentive fee (either fixed or
some percentage of cost) to provide inducement for effective project
management. We assume the greatest financial risk on fixed price contracts
because we assume the risk of performing those contracts at the stipulated
prices regardless of actual costs incurred. We also incur some financial risks
under time-and-materials contracts because we contract to complete the work at
negotiated hourly rates. The failure to accurately estimate ultimate costs or
to control costs during performance of the work could result in losses or
reduced anticipated profits.
When we perform services for our clients, we can become liable for breach
of contract, personal injury, property damage, and negligence (including
improper or negligent performance or design, failure to meet specifications,
and breaches of express or implied warranties). Because our projects are
typically large enough to affect the lives of many people, the damages
available to a client or third parties are potentially large and could include
punitive and consequential damages. For example, our transportation projects
and manufacturing facility projects involve services and products that affect
not only our client, but also the many end users of those services and
products. In addition, our clients often require us to be responsible for
liabilities through contractual indemnities. Such provisions typically require
us to assume liabilities for damage or personal injury to the client, third
parties and their property, and also for fines and penalties.
We seek to protect CH2M HILL from potential liabilities by obtaining
indemnification where possible from our private sector clients. Under most of
our private sector contracts, we have been successful in obtaining such
indemnification, but such indemnification generally is not available if we
fail to satisfy specified standards of care in performing our services or if
the indemnifying party has insufficient assets to cover the liability.
We also try to obtain available indemnities from our public sector clients.
For example, some of our clients, including some U.S. government agencies, are
Potentially Responsible Parties under CERCLA. Under our contracts with these
clients, we usually try to seek contribution from the client for liability
imposed on us in connection with our work at these clients' CERCLA sites. In
addition, when we perform superfund related work for our U.S. government
clients, certain CERCLA provisions usually permit us to limit our potential
liabilities. However, the EPA recently has significantly narrowed the
circumstances under which it will indemnify contractors against liabilities
incurred in connection with CERCLA projects. There are also proposals both in
Congress and at various regulatory agencies to further restrict
indemnification of contractors from third-party claims. In connection with
services at the Rocky Flats closure project, Kaiser-Hill is indemnified by its
U.S. government client against certain liability
20
<PAGE>
claims arising out of contractual activities involving a nuclear incident.
International Operations
We routinely conduct operations outside of the United States. Overall, we
derived approximately $57 million or 6.1% of our service revenues in 1998 from
such operations. International operations entail additional business risks and
complexities such as foreign currency exchange fluctuations, different taxation
methods, restrictions on financial and business practices and political
instability. Our international clients include both private sector firms and
foreign government agencies in more than 20 countries, with significant
projects in Egypt, Spain, Singapore, and New Zealand.
Competition
The market for the design, consulting, engineering and construction
services that we offer is highly competitive. We compete with many other
design, consulting, engineering and construction firms, including large
multinational firms having substantially greater financial, management, and
marketing resources. Other competitors are small firms with lower cost
structures enabling them to offer lower prices for particular services. We also
compete with government agencies, including our own clients, that can utilize
their internal resources to perform certain services that we might otherwise
perform.
Most contracts between public sector clients and our EE&I and Industrial
operating segment are awarded through a competitive bidding process that places
no limit on the number or type of potential service providers. The process
usually begins with a government agency request for proposal that delineates
the size and scope of the proposed contract. The government agency evaluates
the proposals on the basis of technical merit and, in certain circumstances,
cost. For the Water operating segment, most contracts are awarded through
qualification selection processes that vary among projects.
In both the private and public sectors, acting either as a prime contractor
or as a subcontractor, we may join with other firms that we otherwise compete
with to form a team to compete for a single contract. Because a team can often
offer stronger combined qualifications than any firm standing alone, these
teaming arrangements can be very important to the success of a particular
contract competition or proposal. Consequently, we maintain a network of
relationships with other companies to form teams that compete for particular
contracts and projects.
Conflicts of Interest
Many of our clients and potential clients are concerned about actual or
possible conflicts of interest in retaining professional services consultants.
Governmental agencies and some private sector clients have contracting policies
that may, from time to time, prevent us from seeking or performing contracts
for certain potential clients. We have, on occasion, declined to bid on
particular projects because of actual or perceived conflicts of interest, and
we are likely to continue encountering such conflicts of interest in the
future.
Properties
Our corporate headquarters, a 131,000 square foot facility, is located at
6060 South Willow Drive, Greenwood Village, Colorado 80111. We lease all of our
significant facilities, including our corporate headquarters and 65 domestic
and 33 foreign office locations, under many separate leases. We believe that
comparable facilities are available for lease and therefore that the loss of
any such leases would not have a material adverse impact on our operations. We
believe that our facilities are adequate for the present needs of our business.
Legal Proceedings
We are party to various legal actions arising in the normal course of our
business. Our management believes that the levels of insurance coverage (after
retentions and deductibles) are generally adequate to cover our potential
liabilities for such claims, but there can be no assurance that we will be able
to avoid liabilities in excess of our policy limits.
21
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following discussion and analysis explains our general financial
condition, changes in financial condition and results of operations for CH2M
HILL as a whole and each of our operating segments including:
. Factors affecting our business
. Our revenues and profits in 1998, 1997, and 1996
. Where our revenues and profits came from
. Why those revenues and profits were different from year to year
. Where our cash came from and how it was used
. How all of this affects our overall financial condition
The following discussion contains, in addition to historical information,
forward-looking statements that involve risks and uncertainties. Our actual
results may differ significantly from the results discussed in the forward-
looking statements.
As you read this section, you should also refer to our consolidated
financial statements and the accompanying notes. These consolidated financial
statements provide additional information regarding our financial activities
and condition.
This analysis may be important to you in making decisions about your
investments in CH2M HILL.
Introduction
The engineering and construction industry has been undergoing substantial
change as public and private clients privatize and outsource many of the
services that were formerly provided internally. Numerous mergers and
acquisitions in the industry have resulted in a group of larger firms that
offer a full complement of single-source services including studies, designs,
construction, operations, and in some instances, facility ownership. Included
in the current trend is the movement towards longer-term contracts for the
expanded array of services, e.g., 5 to 20 year contracts for facility
operations. These larger, longer contracts require us to have substantially
greater financial capital to remain competitive.
We currently enjoy a strong reputation for innovative project delivery
assignments using cost effective approaches and application of advanced
technologies to meet our clients' needs. We continuously monitor acquisition
and investment opportunities that will expand our portfolio of services, add
value to the projects undertaken for clients, or enhance capital strength. We
believe that we are well positioned geographically, technically and financially
to compete worldwide in the markets we have elected to pursue and clients we
serve.
Overall
Net income after tax for 1998 was $5.8 million compared with $4.7 million in
1997 and 1996. Our earnings per share in 1998 was $0.21, compared with $0.17 in
1997 and 1996.
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------
1998 1997 1996
(in millions) Revenues Pre-tax Profit Revenues Pre-tax Profit Revenues Pre-tax Profit
------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Environmental,
Energy and
Infrastructure $386.1 41% $ 9.3 $360.2 39% $ 5.8 $389.6 42% $ 7.2
Water 362.8 39% 7.2 309.9 34% 5.0 289.3 31% 2.2
Industrial 186.1 20% 3.6 247.5 27% 7.2 258.3 27% 8.2
Corporate - - (5.7) - - (6.0) - - (5.6)
------------------------------------------------------------------------------------------------------
Total $935.0 100% $14.4 $917.6 100% $12.0 $937.2 100% $12.0
------------------------------------------------------------------------------------------------------
</TABLE>
22
<PAGE>
1998 RESULTS OF OPERATIONS COMPARED TO 1997
Overall, Environmental, Energy and Infrastructure generated a significant
portion of our improvement in pre-tax profit from 1997 to 1998. Most of this
improvement came from managing resources and containing costs throughout the
organization. We also realized project performance improvements (producing
improved net profit before tax yields) during the year.
ENVIRONMENTAL, ENERGY AND INFRASTRUCTURE
Revenues in the EE&I operating segment increased $25.9 million to $386.1
million in 1998, compared to $360.2 million in 1997. EE&I revenues accounted
for 41% and 39% of our total operating revenues for the years 1998 and 1997,
respectively. New hazardous waste remedial action contracts as well as
significant growth in the telecommunications markets were the main sources of
additional revenues.
We were awarded several major public sector contracts during the last half
of 1998 from federal government agencies (including the Department of Defense
and the Department of Energy) for hazardous/toxic waste remediation projects.
We also were awarded an energy management contract for a large public school
district in Southern California. EE&I has been successful in obtaining several
new major clients in the telecommunications market providing program management
oversight, site development and construction management services to install or
upgrade cable and wireless networks and related infrastructure both
domestically and internationally.
In 1998, Congress adopted the Transportation Efficiency Act for the 21st
Century (TEA 21) which provides federal funding to the various states for
transportation infrastructure improvement projects across the nation. TEA 21
has created numerous opportunities for revenue expansion in the Transportation
sector of EE&I including construction related projects for highways, bridges,
airports and ports.
WATER
Water segment revenues were $362.8 million in 1998 versus $309.9 million in
1997, an increase of $52.9 million. Approximately 30 percent of the growth came
from new contracts in the utility plant operations market for public and
private clients. The new contracts are for periods ranging from 5 to 20 years.
The balance of the increase came from contract activities in water and
wastewater infrastructure facility improvement programs principally in the
United States and Puerto Rico.
Profitability in the Water operating segment increased from $5.0 million in
1997 to $7.2 million in 1998. Profitability continued to improve as we
continued to win significant new contracts without a corresponding increase in
costs. Year over year, margins continued to be stable even though competition
was increasing. The market for the Water segment's sources continues to be
strong as necessary water and wastewater treatment infrastructure improvement
projects are undertaken by municipalities and other utility authorities across
the United States and abroad. The desire by municipalities to preserve the
environment and provide clean water creates a fundamental demand for our
services. Future success in the Water operating segment is dependent on
continuing improvements in project delivery performance which result in higher
profit yields and continuing successes in winning new contracts.
INDUSTRIAL
Revenues in the Industrial segment were $186.1 million in 1998, compared
with $247.5 million in 1997, a decrease of $61.4 million. This decline is due
to the significant slowdown in the microelectronics industry, which is the
primary user of the Industrial segment services worldwide. The microelectronics
industry decline began in 1997 and continued through 1998. Nearly all of the
industry's capital expenditure plans were stalled, resulting in a sharp decline
in purchases of engineering and construction services. The decline in revenues
caused by the downturn in the microelectronics industry was partially offset by
an increase in revenues from other industries served by the Industrial segment.
Services in the food, pharmaceutical, fine chemical, and facility services
markets each showed growth in revenues in 1998 as the Industrial segment
continues to diversify and penetrate into other markets.
Pre-tax profits in the Industrial segment were $3.6 million in 1998 versus
$7.2 million in 1997.
23
<PAGE>
Although profits declined year over year, the Industrial segment managed costs
by reducing staff levels to meet the current market environment. These actions
resulted in slightly improved gross margins over 1997.
Future success in the Industrial segment is dependent on recoveries in the
electronics industry where, for example, development of the next generation of
microcomputer chips will cause renewed activities in facility construction.
Industrial will also continue to expand their business into the food and
beverage, fine chemical, and pharmaceutical markets in the United States and
abroad.
1997 RESULTS OF OPERATIONS COMPARED TO 1996
Revenues for 1997 were $917.6 million compared to $937.2 million in 1996.
The decrease of $19.6 million was primarily related to a decline in the EE&I
segment, which was partially offset by improvements in the Water segment. Pre-
tax profit remained essentially unchanged.
ENVIRONMENTAL, ENERGY AND INFRASTRUCTURE
Revenues for the Environmental, Energy and Infrastructure segment were
$360.2 million in 1997 versus $389.6 million in 1996, a decrease of $29.4
million. Substantial completion of several major projects, including the
Eastern Corridor Transportation Project in Southern California, resulted in a
7.5% decline in revenue, and the decrease of $1.4 million in pre-tax profit.
Investments in several major marketing efforts affected pre-tax profits.
WATER
Water segment revenues were $309.9 million for 1997 versus $289.3 million
for 1996, an increase of $20.6 million. A significant portion of the revenue
increase was attributable to the utility plant operations market for public and
private clients. We continued to win substantial contracts that were for longer
terms and which will contribute to revenues over the next 20 years. The balance
of the increase was attributable to contract activities in the water and
wastewater infrastructure facility improvement programs principally in the
United States.
The increase in pre-tax profits of $2.8 million was a result of the
increase in revenues, project performance and cost containment programs. We
were able to add significant new contracts without increasing our cost
structure and also maintain stable margins.
INDUSTRIAL
Industrial segment revenues were $247.5 million in 1997 versus $258.3
million in 1996, a decrease of $10.8 million. This decline was primarily due to
the reduction in business from the microelectronics industry. The
microelectronics industry fostered significant growth for the Industrial
segment in past years by providing several very sizable projects during 1995
and 1996. These mega-projects were substantially complete by mid-1997 at which
time the microelectronics industry entered into a period of reevaluation of its
capital expenditure plans, ultimately leading to a decline in procurement of
engineering and construction services during 1997.
Pre-tax profits from Industrial segment operations were $7.2 million in
1997 versus $8.2 million in 1996, reflective of the downturn in revenues from
the microelectronics industry. Despite the revenue decline, the Industrial
segment's margins remained comparable to 1996 and costs were managed to
minimize the impact on profits.
Income Taxes
Our income tax provisions for the last several years were as follows:
- ------------------------------------------------
Income Tax Effective
Year Provision Tax Rate
- ------------------------------------------------
1998 $ 8,571 59.6%
1997 $ 7,295 60.7%
1996 $ 7,291 60.8%
- ------------------------------------------------
The effective tax rates are higher than the statutory tax rates since we
cannot deduct certain foreign net operating losses on our U.S. income tax
return. We are also disallowed a tax deduction for portions of meals and
entertainment expenses that are considered necessary to conduct our business.
24
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Our cash decreased by $21.7 million in 1998 versus increases of $22.7
million and $11.5 million in 1997 and 1996, respectively. The principal reason
for the decrease in 1998 was a reduction in advance payments on contracts
formerly realized in the Industrial operating segment.
Our business does not require significant capital expenditures. The capital
expenditures are generally for purchases of office equipment and leasehold
improvements. We spent $4.7 million, $2.6 million, and $4.9 million on such
expenditures in 1998, 1997 and 1996, respectively. These expenditures are
funded from current cash flows. We have established an operating lease program
under which most of our computing and related equipment is procured on an
ongoing basis.
We have an unsecured credit facility of $85.0 million, which we have not
used for over eighteen months. If we do borrow money against this facility, the
interest rates would range from 5.4% to 7.8% at current terms. The unsecured
credit facility expires December 31, 1999. We continuously assess our cash
needs to support our operations. We believe that we have adequate resources to
support our business and access to additional funding at competitive market
rates.
We also have a wholly-owned subsidiary that has an unsecured credit
facility of $9.5 million with interest payable on borrowings at the prime rate.
The subsidiary has not used their facility for over three years.
As of December 31, 1998, we had an outstanding bank term loan for $6.0
million, of which $4.0 million will be paid in 1999. The interest rate on the
loan is 7.1% and payments are made quarterly. We also had $20.6 million and
$22.5 million for 1998 and 1997, respectively, in notes payable to former
shareholders in varying amounts over the next ten years.
DERIVATIVES AND FINANCIAL INSTRUMENTS
We enter into forward contracts to hedge foreign currency risks and not for
speculative purposes. Generally, we do not have derivative type instruments.
NEW ACCOUNTING STANDARDS NOT YET ADOPTED
Statement of Financial Accounting Standards No. 133, "Accounting for
Derivative Instruments and Hedging Activities," establishes fair value
accounting and reporting standards for derivative instruments and hedging
activities. We will adopt SFAS No. 133 in the first quarter of 2000. We are
currently assessing the effect of adoption, if any, on our financial position,
results of operations, and cash flows.
Statement of Position 98-5, "Reporting on the Costs of Start-Up
Activities," requires costs of start-up activities, including organization
costs, to be expensed as incurred. We will adopt this statement during fiscal
1999, but we do not expect it to have an impact on earnings.
YEAR 2000 COMPLIANCE
GENERAL. The upcoming turn of the century poses many challenges to
companies worldwide that rely on computers and/or programmed control devices to
operate their businesses or are suppliers or providers of time-sensitive
software or automated technology devices. The problems stem from the practice
of software writers, software vendors and equipment suppliers of using only two
digits to designate calendar year (e.g., 98 versus 1998) in automated
applications. That practice does not provide for proper recognition of the Year
2000 because computers and other automated equipment may interpret the two-
digit date "00" as, for example, 1900, rather than 2000. Consequently,
computers and other automated systems may cease operation or operate
incorrectly. This effect is commonly referred to as the "year 2000 problem."
Several years ago, we recognized that the year 2000 problem could have
significant adverse impact on our operations. We have, therefore, been actively
working to mitigate potential impacts on our internal operations as well as
working with our vendors and clients to identify and remediate potential year
2000 problems. Since 1997, we have been evaluating and taking steps to remedy
year 2000 problems in the following four areas:
. Internal software and operating systems, including financial/management
software, communications systems, facilities controls, design and other
technical software and all systems interfaces
25
<PAGE>
. External vendors who supply services and products to us, including
financial institutions, governmental agencies, payroll services, and a
variety of other suppliers
. Clients for whom we designed and operate facilities that could have year
2000 problems
. Contingency planning related to the three areas above
READINESS. The following is a discussion of our current assessment of our
readiness in the four identified areas.
1. Internal Systems. Efforts have been underway since early 1997 by three
major working groups focused on identifying mission critical systems,
establishing testing protocols for all applications and performing tests on
identified potential problem areas. The identification phase was completed at
the end of 1998, and testing of software and other applications is currently
underway. Because we rely heavily on outside software vendors for most of our
internal applications in operations (e.g. Microsoft, Oracle, PDS, ADP, J. D.
Edwards), asserted to be "year 2000 compliant" versions of all critical
applications either have been installed or will be installed by April 1999. All
internally developed software applications are scheduled for testing with
sophisticated year 2000 problem identification software purchased from an
outside vendor. This testing and remediation effort is scheduled to be
completed by September 1999.
2. External Vendors. We have contacted supply and service vendors with whom
we have material business to confirm the year 2000 compliance of their
applications, services and products that we rely on for operations. Most major
vendors (approximately 75%) responded by the end of 1998 and second requests
for compliance confirmation either have been sent or are in the process of
being sent to those that did not respond or that provided inadequate responses.
This portion of the evaluation is scheduled for completion in June 1999.
Mission critical vendors (e.g., our primary bank and payroll services and
landlords) have responded adequately on the year 2000 compliance issue in their
services or products.
3. Clients of CH2M HILL. Because we are a service organization providing
design and operating services for a wide range of clients, we have actively
notified clients during the last half of 1998 of the need to be aware of
potential year 2000 problems in their operations. While we do not generally
provide year 2000 problem identification and remediation services to our
clients, as designers and operators of certain facilities, we have strongly
suggested in the notifications that the clients recognize that problems could
exist and an identification/ remediation program in their operations should be
undertaken immediately if not already done. We also made available to each
client a list of year 2000 service firms via direct personal delivery or
reference to a worldwide web site we established for this purpose. Follow-up
client reminders are being done in instances where we operate facilities on
behalf of clients that have not confirmed to us that they have undertaken or
completed compliance verification activities.
4. Contingency Planning. Contingency planning is currently underway with a
targeted completion date of July 1999. The contingency planning includes
identification and arrangements for backup computer hardware and software
(e.g., off-premise "hot sites"), knowledgeable operational staff physically on-
site in each material location at identified critical exposure times,
accessible financial reserves necessary to sustain operations for a reasonable
period of time and facility operations in the event of utility or other service
failures.
COMPANY RISKS ON YEAR 2000 ISSUES. The most significant year 2000 risks to
us are failure of systems in client or vendor operations, which could interrupt
sources of operating funds and/or necessary supplies. We are addressing these
issues by preparing contingency plans for the possible events, including
increasing credit facilities and consolidating vendors to compliant first tier
providers. Other than credit facilities and payroll services there are no
vendors that are particularly critical to our operations because we are a
"labor driven" organization and are not critically dependent on unique supply
chains. The contingency plans will also include strategies for dealing with
potential electrical power and communication system failures.
26
<PAGE>
COST ESTIMATES FOR COMPLIANCE EFFORTS. The total estimated costs for our
year 2000 remediation efforts was between $3.5 to $4.0 million as of December
31, 1998, of which we have spent approximately $2.5 million. Of the total
estimated cost, approximately $1.75 to $2.0 million represents the effort to
migrate our current systems to year 2000 compliant versions. All costs of year
2000 activities have been, and will in the future be, charged to current
operations as the costs are incurred.
27
<PAGE>
EMPLOYEE BENEFIT PLANS
CH2M HILL maintains a number of plans that provide benefits to employees of
CH2M HILL and its affiliates. Under some of these plans, employees of CH2M HILL
and certain affiliates may acquire common stock or beneficial interests in
common stock held in trusts. These plans are described below in general terms,
but this summary does not contain all the information that may be important to
you. For the complete terms of these plans, you should read the plan documents,
which will be made available to you on request and which have been attached as
exhibits to the registration statement filed with the Securities and Exchange
Commission.
<TABLE>
<CAPTION>
PLANS AT A GLANCE HOW PLAN WORKS CH2M HILL CONTRIBUTION
<S> <C> <C>
STOCK PURCHASE (DIRECT
OWNERSHIP)
Payroll Deduction Stock Payroll withholding (1%-10% of In 2000, 10% of purchase price;
Purchase Plan (PDSPP) compensation) to purchase common thereafter as determined by the
stock with after-tax dollars Board of Directors
- ---------------------------------------------------------------------------------------------------
Pre-Approved Direct Stock Purchase 5,000 shares or less on None
Purchase any trade date
- ---------------------------------------------------------------------------------------------------
Direct Stock Purchase Request approval from Stock None
through offer cycle Purchase Committee to purchase
over 5,000 shares
RETIREMENT PLANS (BENEFICIAL
OWNERSHIP)
401(k) Plan Invest pre-tax for retirement via Match determined by each Member
payroll withholding Employer limited to a percentage
of compensation or a specified
dollar amount
Meet eligibility requirements Defined contribution determined
by each Member Employer, subject
to Board approval and certain
limitations
- ---------------------------------------------------------------------------------------------------
Employee Stock Plan (ESP) CH2M HILL funded retirement plan 100%
invested in common stock
- ---------------------------------------------------------------------------------------------------
Deferred Compensation Plans Deferral of compensation to be For payroll deductions into the
paid at a later date in shares of pre-tax deferred compensation
common stock plan, in 2000, 10% of purchase
price; thereafter as determined
by the Board of Directors
STOCK INCENTIVES (DIRECT
OWNERSHIP)
Stock Bonus Grant of shares with no vesting Full value of shares awarded by
restrictions CH2M HILL
- ---------------------------------------------------------------------------------------------------
Stock Options Right to purchase shares within 5 Right to appreciation on option
years at the stock price on the shares over the option period
grant date, subject to 3-year
vesting
</TABLE>
28
<PAGE>
RETIREMENT AND TAX-DEFERRED SAVINGS PLAN (THE "401(K) PLAN")
The 401(k) Plan is a profit sharing plan that includes a cash or deferred
arrangement that is intended to qualify under Sections 401(a) and 401(k) of the
Internal Revenue Code. This means that contributions to the 401(k) Plan receive
certain favorable federal income tax treatment.
EMPLOYEES ELIGIBLE TO PARTICIPATE IN THE 401(K) PLAN
All of our employees are eligible to participate in the 401(k) Plan,
except:
. Leased employees
. Temporary employees
. Employees of affiliates that have not adopted the 401(k) Plan
As of January 1, 1999, none of CH2M HILL's foreign affiliates have adopted
the 401(k) Plan. Certain affiliates of CH2M HILL have adopted the 401(k) Plan
but have not adopted the provisions of the 401(k) Plan relating to defined
contributions or matching contributions. CH2M HILL and its affiliates that have
adopted the 401(k) Plan are referred to in this description as "Member
Employers."
TIMING OF PARTICIPATION IN THE 401(K) PLAN
Each eligible employee can participate in the 401(k) Plan with respect to
employee contributions and matching contributions, if applicable, beginning on:
. The first date of hire, or
. The first day of the first full pay period that begins on or after the
employee's date of hire
Each eligible employee begins to participate in the 401(k) Plan with
respect to defined contributions (if applicable) as of the first day of the
first month that begins on or after the eligible employee completes a twelve-
month period of service during which the employee is credited with at least
1,000 hours of service.
CONTRIBUTIONS TO THE 401(K) PLAN
EMPLOYEE CONTRIBUTIONS. The 401(k) Plan allows a participant to elect to
defer a portion of the participant's compensation for a calendar year, subject
to certain limits, and to have that deferred amount contributed to the
participant's employee contribution account in the 401(k) Plan.
MATCHING CONTRIBUTIONS. Each Member Employer may, but is not required to,
make matching contributions each calendar quarter. Matching contributions may
be made in an amount that is based on a percentage of the employee's
contributions for the calendar quarter or limited to a specified dollar amount
per employee.
Matching contributions to the 401(k) Plan may be made in cash or common
stock. Under the 401(k) Plan, all matching contribution accounts are required,
to the maximum extent practicable, to be invested in common stock, except that
matching contributions made by Operations Management International, Inc. are
not invested in common stock. Matching contributions made in common stock will
remain invested in common stock.
DEFINED CONTRIBUTIONS. Each Member Employer may, but is not required to,
make defined contributions to the 401(k) Plan on behalf of that Member
Employer's employees. The amount of each Member Employer's annual defined
contribution, if any, is determined by the Board of Directors of CH2M HILL.
Each Member Employer's defined contributions to the 401(k) Plan are
allocated to the defined contribution accounts of eligible employees of that
Member Employer. A participant in the 401(k) Plan is eligible to receive a
defined contribution for a calendar year if:
. The participant completed 1,000 hours of service during the calendar year
and was employed by the Member Employer at the end of the calendar year
. The participant retired during the calendar year at or after age 65 (55
if the participant has at least five years of service)
. The participant died during the calendar year
. The participant became permanently disabled during the calendar year
Each eligible participant receives a proportionate share of the Member
Employer's
29
<PAGE>
defined contribution for the calendar year. Each eligible participant's
proportionate share is determined by dividing that participant's eligible
compensation for the calendar year by the total eligible compensation for the
calendar year of all eligible participants.
ROLLOVER CONTRIBUTIONS. Participants or potential participants may transfer
a rollover contribution from another qualified retirement plan to the 401(k)
Plan.
INVESTMENT OF CONTRIBUTIONS TO THE 401(K) PLAN
Matching contributions to the 401(k) Plan (other than matching
contributions made by Operations Management International, Inc.) are invested
in common stock to the maximum extent practicable.
Defined contributions to the 401(k) Plan are initially invested in an
investment alternative selected by the trustees until direction is provided by
the participant. Participants in the 401(k) Plan may direct the investment of
contributions that are allocated to their accounts (other than matching
contributions made by CH2M HILL and invested in CH2M HILL stock), among various
investment alternatives selected by the trustees of the 401(k) Plan.
As of January 1, 2000, the investment alternatives offered by the trustees
will be as follows:
Fidelity Retirement Government Money Market Portfolio
CH2M HILL Fixed Income Fund
Fidelity Balanced Fund
Fidelity Equity-Income Fund
Spartan U.S. Equity Index Fund
Fidelity Magellan Fund
Fidelity Growth Company Fund
PIMCO Mid Cap Growth Fund
Janus Worldwide Fund
Company Stock Fund (invested in common stock of CH2M HILL)
The following tables summarize, as of the dates indicated, the investment
performance of each of the investment funds for the last three years, except
for the Company Stock Fund, which did not exist during the last three years.
The summary is based on an initial investment of $100 in each investment fund
as of December 31, 1996. Past performance is not a guarantee of future results.
The funds may, therefore, perform worse or better in the future than they
performed in the past.
FIDELITY RETIREMENT GOVERNMENT MONEY MARKET PORTFOLIO
<TABLE>
<CAPTION>
PERCENT
INCREASE
VALUATION AS OF UNIT VALUE FOR YEAR
--------------- ---------- --------
<S> <C> <C>
December 31, 1996........................................ $100.00 --
December 31, 1997........................................ $105.38 5.38%
December 31, 1998........................................ $110.96 5.30%
CH2M HILL FIXED INCOME FUND
<CAPTION>
PERCENT
INCREASE
VALUATION AS OF UNIT VALUE FOR YEAR
--------------- ---------- --------
<S> <C> <C>
December 31, 1996........................................ $100.00 --
December 31, 1997........................................ $106.13 6.13%
December 31, 1998........................................ $112.62 6.12%
</TABLE>
30
<PAGE>
Fidelity Balanced Fund
<TABLE>
<CAPTION>
Percent
Increase
Valuation as of Unit Value for Year
--------------- ---------- --------
<S> <C> <C>
December 31, 1996........................................ $100.00 --
December 31, 1997........................................ $123.45 23.45%
December 31, 1998........................................ $148.41 20.22%
Fidelity Equity-Income Fund
<CAPTION>
Percent
Increase
Valuation as of Unit Value for Year
--------------- ---------- --------
<S> <C> <C>
December 31, 1996........................................ $100.00 --
December 31, 1997........................................ $129.98 29.98%
December 31, 1998........................................ $146.26 12.53%
Spartan U.S. Equity Index Fund
<CAPTION>
Percent
Increase
Valuation as of Unit Value for Year
--------------- ---------- --------
<S> <C> <C>
December 31, 1996........................................ $100.00 --
December 31, 1997........................................ $133.04 33.04%
December 31, 1998........................................ $170.93 28.48%
Fidelity Magellan Fund
<CAPTION>
Percent
Increase
Valuation as of Unit Value for Year
--------------- ---------- --------
<S> <C> <C>
December 31, 1996........................................ $100.00 --
December 31, 1997........................................ $122.79 22.79%
December 31, 1998........................................ $164.08 33.63%
Fidelity Growth Company Fund
<CAPTION>
Percent
Increase
Valuation as of Unit Value for Year
--------------- ---------- --------
<S> <C> <C>
December 31, 1996........................................ $100.00 --
December 31, 1997........................................ $118.91 18.91%
December 31, 1998........................................ $151.29 27.23%
PIMCO Mid Cap Growth Fund
<CAPTION>
Percent
Increase
Valuation as of Unit Value for Year
--------------- ---------- --------
<S> <C> <C>
December 31, 1996........................................ $100.00 --
December 31, 1997........................................ $133.87 33.87%
December 31, 1998........................................ $144.33 7.81%
Janus Worldwide Fund
<CAPTION>
Percent
Increase
Valuation as of Unit Value for Year
--------------- ---------- --------
<S> <C> <C>
December 31, 1996........................................ $100.00 --
December 31, 1997........................................ $120.51 20.51%
December 31, 1998........................................ $151.69 25.87%
</TABLE>
31
<PAGE>
Except for investments in the Company Stock Fund, participants may transfer
amounts among the investment alternatives in accordance with rules established
by the trustees.
Amounts invested in the Company Stock Fund (other than matching
contributions, which are always invested in common stock) may be transferred
into other investment alternatives only as of a trade date. If a participant
wishes to transfer amounts invested in the Company Stock Fund into another
investment alternative as of a trade date, the trustees will direct the sale in
the internal market of an appropriate number of shares of common stock held in
the Company Stock Fund on that trade date. If only a portion of the common
stock offered for sale by the 401(k) Plan in the internal market is sold, only
that portion of the participant's investment in the Company Stock Fund will be
transferred into the other investment alternatives. The remaining portion of
the participant's investment in the Company Stock Fund will remain in the
Company Stock Fund. Thus, a participant's ability to transfer amounts out of
the Company Stock Fund may be restricted. A participant considering an
investment in the Company Stock Fund should read this entire Prospectus,
particularly the sections entitled "Risk Factors" and "Internal Market
Information."
Amounts invested in investment alternatives other than the Company Stock
Fund may not ordinarily be transferred into the Company Stock Fund. However,
the trustees may from time to time permit the transfer of amounts held in other
investment alternatives into the Company Stock Fund, subject to any
restrictions and conditions that the trustees deem to be appropriate.
It is the current intent of the trustees to keep all amounts allocated to
the Company Stock Fund invested in common stock, except for cash reserves for
distributions and expenses.
Vesting in Accounts in the 401(k) Plan
Each participant in the 401(k) Plan is, at all times, 100% vested in amounts
allocated to the participant's rollover contribution account and employee
contribution account.
Amounts allocated to a participant's defined contribution account and
matching contribution account are subject to the following vesting schedule:
- --------------------------------------------------------------------------------
Completed Amount Vested
Years of Amount Vested (Non-OMI
Service (OMI Employees) Employees)
- --------------------------------------------------------------------------------
1 20% 0%
- --------------------------------------------------------------------------------
2 40% 20%
- --------------------------------------------------------------------------------
3 60% 40%
- --------------------------------------------------------------------------------
4 80% 60%
- --------------------------------------------------------------------------------
5 100% 80%
- --------------------------------------------------------------------------------
6 100% 100%
- --------------------------------------------------------------------------------
A participant's defined contribution account and matching contribution
account become fully vested if the participant is still employed by CH2M HILL
or an affiliate when the participant:
. Reaches age 65 (55 if the participant has at least five years of service)
. Becomes permanently disabled
. Dies
Loans from the 401(k) Plan
Loans from the 401(k) Plan are available to any participant who is an active
employee of CH2M HILL or an affiliate. The total amount of a loan to a
participant from the 401(k) Plan may not exceed $50,000. This $50,000 limit is
reduced by the participant's highest outstanding loan balance during the twelve
months before the date on which a loan is obtained. The total amount of a loan
to a participant in the 401(k) Plan is further limited to 50% of the
participant's vested interest in the participant's accounts in the 401(k) Plan.
The loan may not exceed the combined amount in the participant's employee
contribution account and rollover contribution account. The minimum loan amount
is $1,000. A participant may only have one loan outstanding at any time.
Distributions and Withdrawals from the 401(k) Plan
If a participant in the 401(k) Plan terminates employment with us and if the
value of the vested portion of the participant's account in the 401(k) Plan
does not exceed $5,000, the vested portion of the participant's account in the
401(k) Plan will
32
<PAGE>
be distributed to the participant in a lump sum cash payment as soon as
reasonably practicable.
If a participant in the 401(k) Plan terminates employment with us and if
the value of the vested portion of the participant's account in the 401(k) Plan
is greater than $5,000, the participant may request an immediate distribution
or may elect to defer distribution until a later date. If distribution is
deferred, the participant's account will remain invested in accordance with the
401(k) Plan until the participant requests distribution. In any case,
distribution from the 401(k) Plan must begin when the participant reaches age
70 1/2.
A participant who has reached age 59 1/2 may request a distribution of the
participant's employee contribution account or the participant's rollover
account even if the participant has not terminated employment with CH2M HILL
and its affiliates.
When a participant requests a distribution from the 401(k) Plan, the
distribution will be made in cash in a lump sum as soon as reasonably
practicable. If the participant's account in the 401(k) Plan includes common
stock, the portion of the participant's account invested in common stock will
be distributed in cash as soon as reasonably practicable after the common stock
is sold on the internal market or to CH2M HILL. CH2M HILL intends to purchase
from the 401(k) Plan on each trade date sufficient common stock to permit
distributions to all participants whose requests for distributions are pending.
On some trade dates, however, CH2M HILL may not purchase from the 401(k) Plan
sufficient common stock to permit distributions to all participants whose
requests for distributions are pending. In that case, distribution of some or
all of the portion of a participant's account invested in common stock may be
delayed until a subsequent trade date.
If a participant dies while employed by CH2M HILL or an affiliate,
distribution of the participant's account in the 401(k) Plan will be made to
the participant's spouse or, if the participant's spouse has given proper
consent or if the participant has no spouse, to the beneficiary designated by
the participant. A surviving spouse of a deceased participant may delay
distribution of the participant's account in the 401(k) Plan for up to five
years from the date of death. A distribution from the account will be made in
accordance with the procedures described in the previous paragraph.
The 401(k) Plan permits a participant to obtain a hardship withdrawal from
the participant's employee contribution account or rollover contribution
account if there is an immediate and heavy financial need which may not
reasonably be met by the participant's other resources. The amount of a
hardship withdrawal may not exceed the amount required to meet the immediate
financial need, including any taxes or penalties resulting from the withdrawal,
and may be subject to various other limitations.
Employee Stock Plan
The Employee Stock Plan was originally adopted in 1977 as an employee stock
ownership plan, or ESOP. In 1983 the ESOP was converted into a profit sharing
plan designed to invest up to 100% of its assets in stock of CH2M HILL. The
Employee Stock Plan is a profit sharing plan that is intended to qualify under
Section 401(a) of the Internal Revenue Code. This means that contributions to
the Employee Stock Plan receive certain favorable federal income tax treatment.
Employees Eligible to Participate in the Employee Stock Plan
All of our employees are eligible to participate in the Employee Stock
Plan, except:
. Leased employees
. Temporary employees
. Employees of affiliates that have not adopted the Employee Stock Plan
As of January 1, 1999, none of CH2M HILL's foreign affiliates have adopted
the Employee Stock Plan. CH2M HILL and each affiliate that has adopted the
Employee Stock Plan are referred to as "Member Employers."
Each eligible employee begins to participate in the Employee Stock Plan
after completing a twelve-month period of service with a Member Employer during
which the eligible employee is credited with at least 1,000 hours of service.
33
<PAGE>
Contributions to the Employee Stock Plan
For each calendar year, each Member Employer may, but is not required to,
make a contribution to the Employee Stock Plan. The amount of each Member
Employer's contribution to the Employee Stock Plan, if any, for a calendar year
is determined by the Board of Directors of CH2M HILL. For the calendar year
ended December 31, 1998, Member Employers contributed a total of $3.5 million
to the Employee Stock Plan. Employees are not permitted to make contributions
to the Employee Stock Plan.
Each Member Employer's contribution to the Employee Stock Plan for a
calendar year is allocated to the accounts of eligible employees of that Member
Employer who are participants in the Employee Stock Plan.
Each eligible participant receives a proportionate share of the Member
Employer's contribution for the calendar year. Each eligible participant's
proportionate share is determined by dividing that participant's eligible
compensation for the calendar year by the total eligible compensation for the
calendar year of all participants.
Forfeitures, if any, of the nonvested portion of accounts of terminated
participants are allocated to the accounts of remaining eligible participants.
Investment of the Assets of the Employee Stock Plan
The Employee Stock Plan is authorized to invest up to 100% of its assets in
common stock. Cash contributions to the Employee Stock Plan will be used to
purchase common stock through the internal market on the next trade date, to
the extent that common stock is available for purchase on that trade date. If
common stock is not available for purchase on that trade date, cash
contributions will be held until common stock is available for purchase.
It is the intent of CH2M HILL that, to the maximum extent possible, all of
the assets of the Employee Stock Plan will be invested in common stock at all
times. Any cash in the Employee Stock Plan will be invested in an investment
vehicle selected by the trustees.
Vesting of Accounts in the Employee Stock Plan
Amounts contained in a participant's account in the Employee Stock Plan are
subject to the following vesting schedule:
- --------------------------------------------------------------------------------
Completed Years of
Service Amount Vested
- --------------------------------------------------------------------------------
2 20%
- --------------------------------------------------------------------------------
3 40%
- --------------------------------------------------------------------------------
4 60%
- --------------------------------------------------------------------------------
5 80%
- --------------------------------------------------------------------------------
6 100%
- --------------------------------------------------------------------------------
A participant also becomes fully vested if the participant is still
employed by CH2M HILL or an affiliate when the participant:
. Reaches age 65 (55 if the participant has at least five years of service)
. Becomes permanently disabled
. Dies
Loans from the Employee Stock Plan
Loans are not available to a participant from the Employee Stock Plan.
Distributions from the Employee Stock Plan
If a participant's employment with us terminates and the vested portion of
the participant's account in the Employee Stock Plan does not exceed $5,000,
the vested portion of the participant's account will be distributed to the
participant in a lump sum cash payment as soon as practicable after the next
trade date. If a participant's employment with us terminates and the vested
portion of the participant's account in the Employee Stock Plan is greater than
$5,000, the participant may request a distribution or may elect to defer
distribution of the account until a later date. If distribution is deferred,
the participant's account will remain invested in common stock until the
participant requests distribution.
34
<PAGE>
If a participant dies while employed by us, distribution of the
participant's account in the Employee Stock Plan will be made to the
participant's surviving spouse or, if the participant's surviving spouse has
given proper consent or if the participant has no surviving spouse, to the
beneficiary designated by the participant. Distributions to a surviving spouse,
or a beneficiary will be made in the same manner.
CH2M HILL intends to purchase from the Employee Stock Plan at each trade
date sufficient common stock to permit distribution covering all pending
requests for distributions. On some trade dates, CH2M HILL may not purchase
from the Employee Stock Plan sufficient common stock to permit distribution
covering all pending distribution requests. In that case, distribution of a
participant's account from the Employee Stock Plan may be delayed to a
subsequent trade date.
General Provisions of the 401(k) Plan and the Employee Stock Plan
The 401(k) Plan and the Employee Stock Plan (collectively, the "Plans")
each contain the following provisions:
Contribution Limitations
The maximum contribution for any calendar year which CH2M HILL or its
affiliates may make to the Plans for the benefit of a participant (including
employee contributions to the 401(k) Plan), plus forfeitures, may not exceed
the lesser of $30,000 or 25% of the participant's compensation for the calendar
year. The $30,000 limit will be adjusted for cost of living in accordance with
rules of the Secretary of the Treasury.
Administration
The Plans are administered by the trustees. The trustees have the power to
supervise each Plan's operations, including the power and authority to do all
of the following:
. Allocate fiduciary responsibilities among the fiduciaries of the Plans
. Designate agents to carry out responsibilities relating to the Plans
. Employ legal, actuarial, accounting, and other assistance as the trustees
may deem appropriate in carrying out the Plans
. Establish rules and regulations for the administration of the Plans
. Administer, interpret, construe and apply the Plans and determine
questions relating to eligibility, the amount of any participant's
service and the amount of benefits to which any participant or
beneficiary is entitled
. Determine the manner in which the Plans' assets are disbursed
Pass-Through Voting and Tendering of Common Stock
Each participant in the Plans has the right to instruct the trustees on a
confidential basis how to vote the participant's interest in common stock held
in the Plans. The trustees will vote all allocated shares held in the Plans as
to which no voting instructions are received, together with all unallocated
shares held in the Plans, in the same proportion, on a Plan-by-Plan basis, as
the allocated shares for which voting instructions have been received are
voted. The trustees are required to notify participants of their pass-through
voting rights prior to each meeting of shareholders.
In the event of a tender or exchange offer for the common stock, each
participant in the Plans has the right to instruct the trustees on a
confidential basis whether or not to tender or exchange the participant's
proportionate interest in common stock held in the Plans. The trustees will not
tender or exchange any allocated shares unless instructions are received from
participants. Shares held in the Plans which have not yet been allocated to the
accounts of participants will be tendered or exchanged by the trustees, on a
Plan-by-Plan basis, in the same proportion as the allocated shares held in each
Plan are tendered or exchanged.
The trustees' duties with respect to voting and tendering of common stock
are governed by the fiduciary provisions of the Employee Retirement Income
Security Act of 1974 ("ERISA"). These fiduciary provisions of ERISA
35
<PAGE>
may require, in certain limited circumstances, that the trustees override the
votes, or decisions whether or not to tender, of participants with respect to
common stock and to determine, in the trustees' best judgment, how to vote the
shares or whether or not to tender the shares.
Trustees of the Plans
The current trustees of the Plans are Fred K. Berry, Samuel H. Iapalucci,
Stan Vinson, Sharon Schlechter, and Cliff Thompson.
Generally, the trustees have all the rights afforded a trustee under
applicable law. Subject to limitations in the Plans, the trustees' rights
include, but are not limited to, the right to:
. Invest and reinvest the funds held in the Plans' trusts in any investment
of any kind
. Retain or sell the securities and other property held in the Plans'
trusts
. Consent or participate in any reorganization or merger in regard to any
corporation whose securities are held in the Plans' trusts (subject in
the case of the common stock to the participants' pass-through voting
rights and right to instruct the trustees in the event of a tender or
exchange offer)
. Exercise all the rights of the holder of any security held in the Plans'
trusts, including the right to vote such securities (subject, in the case
of the common stock, to the participants' pass-through voting rights)
. Vote proxies and exercise any other similar rights of ownership
. Lend to participants in the Plans such amounts as may be permitted under
the Plans
The trustees receive no compensation from the Plans for their service as
trustees of the Plans. Expenses incurred in the establishment, administration
and operation of the Plans are paid by the respective Plans unless CH2M HILL
elects to pay such expenses.
Administrative Services
CH2M HILL has entered into an agreement with Fidelity Institutional
Retirement Services Company to provide recordkeeping and other administrative
services to the Plans. Fidelity's fees for these services are paid by the
Plans.
Account Statements
Each participant is furnished with a quarterly statement of the
participant's account in the 401(k) Plan and with an annual statement of the
participant's account in the Employee Stock Plan.
Amendment and Termination
CH2M HILL has reserved the right to amend each of the Plans at any time,
for any reason and without prior notice, except that no such amendment may have
the effect of:
. Generally causing any assets of the Plans' trusts to be used for or
diverted to any purpose other than providing benefits to participants and
their beneficiaries and defraying expenses of the Plans, except as
permitted by applicable law
. Depriving any participant or beneficiary, on a retroactive basis, of any
benefit to which they would otherwise be entitled had the participant's
employment with us terminated immediately prior to the amendment
. Increasing the liabilities or responsibilities of the trustees without
their written consent
CH2M HILL has also retained the right to terminate either of the Plans at
any time and for any reason. In addition, CH2M HILL may discontinue
contributions to the Plans, but any such discontinuation does not automatically
terminate the Plans as to funds and assets then held by the trustees.
ERISA
Each of the Plans is subject to ERISA, including reporting and disclosure
obligations, fiduciary standards and prohibited transaction rules. Since the
Plans are individual account plans under ERISA, they are not subject to the
jurisdiction of the Pension Benefit Guaranty Corporation under Title IV of
ERISA and none of the Plans' benefits are guaranteed by the Pension Benefit
Guaranty Corporation.
36
<PAGE>
Federal Income Tax Consequences
The following paragraphs summarize certain federal income tax consequences
of participating in the Plans. This summary is intended to be general and is
not intended to address every federal income tax issue that may arise from
participation in the Plans. This summary does not address state or local tax
issues, which may be significant. Each participant in the Plans should consider
obtaining professional tax advice with respect to the Plans' tax impact on that
participant.
Each of the Plans is intended to qualify under Section 401(a) of the
Internal Revenue Code. Qualification under Section 401(a) of the Internal
Revenue Code generally produces the following federal income tax results with
respect to contributions, income and earnings, and distributions and loans
from, the Plans.
Contributions to the Plans. A participant will not be subject to federal
income tax on CH2M HILL contributions to the Plans at the time those
contributions are made.
A participant in the 401(k) Plan who makes employee contributions will
exclude the amount of those employee contributions from the participant's gross
income.
Neither the participant nor CH2M HILL will be subject to federal employment
taxes on CH2M HILL contributions to the Plans. Employee contributions to the
401(k) Plan will be subject to federal employment taxes.
The Plans will not be subject to federal income tax on contributions made
to the Plans by CH2M HILL.
Subject to limits contained in the Plans, CH2M HILL will be able to deduct
the amounts that it contributes to the Plans, including amounts contributed to
the 401(k) Plan as employee contributions. The amount of CH2M HILL's deduction
will generally be equal to the amount of the contributions.
Income and Appreciation of the Plans. Participants will not be subject to
federal income tax on income or appreciation in their accounts in the Plans
until distributions are made or deemed to be made to the participant.
The Plans will not be subject to federal income tax on their income or
appreciation, except to the extent that the Plans realize unrelated business
taxable income.
Distributions from the Plans. Distributions from the Plans will be subject
to federal income tax under complex rules that apply generally to distributions
from all tax-qualified retirement plans.
In general, a distribution from either of the Plans will be taxable in the
year of receipt as ordinary income unless the recipient is eligible for and
elects to make a qualifying "rollover" to an individual retirement account or
to another qualified plan.
An early distribution from the Plans will result in an additional 10% tax
on the taxable portion of the distribution. Early distributions are all
distributions made before the participant has reached age 59 1/2 unless:
. The participant is permanently disabled
. The distribution is made after termination of employment due to the death
of the participant
. The distribution is made after termination of employment to a participant
who terminated employment during or after the calendar year the
participant attained the age of 55
Exceptions from the 10% additional tax apply to distributions that are
rolled over to an individual retirement account or to another qualified plan
and to distributions that are used for deductible medical expenses.
A participant (or the participant's spouse in the event of the
participant's death) who (i) receives a distribution from the Plans (other than
certain mandatory distributions after age 70 1/2) and (ii) wishes to defer
immediate tax on the distribution, may transfer or "rollover" all or part of
the distribution to an individual retirement account or, in the case of a
participant, to another qualified retirement plan. To be effective, the
rollover must be completed within 60 days of receipt of the
37
<PAGE>
distribution. Alternatively, the participant or spouse may request a direct
transfer from the Plans to an individual retirement account or, in the case of
the participant, to another qualified retirement plan.
A participant (or a participant's spouse) who does not arrange a direct
transfer to an individual retirement account or to another qualified plan will
be subject to federal income tax withholding at a rate of 20% of the
distribution, even if the participant or spouse later makes a rollover.
A participant (or the participant's spouse) who makes a valid rollover to
an individual retirement account or to another qualified plan will defer
payment of federal income tax until such time as such participant or spouse
actually begins to receive distributions from the individual retirement account
or other qualified plan.
Loans from the 401(k) Plan. A loan from the 401(k) Plan is generally not
considered to be a distribution and is not subject to federal income tax when
made. Interest paid by the participant on a loan from the 401(k) Plan will
generally not be deductible.
1999 Stock Option Plan
(the "Stock Option Plan")
The Board adopted the Stock Option Plan on November 6, 1998. The Stock
Option Plan is not subject to ERISA. The shareholders of CH2M HILL approved the
Stock Option Plan on December 18, 1998. The Stock Option Plan was effective as
of January 1, 1999.
- --------------------------------------------------------------------------------
What is an Option?
- --------------------------------------------------------------------------------
A stock option is a contract between CH2M HILL and you, which allows you to buy
common stock at a price set when you receive the option, even if the value of
the stock has changed by the time you exercise the option. When you exercise
stock options, you are simply buying shares of common stock.
Shares issued when an option is exercised will be subject to the same transfer
restrictions as other shares of common stock.
- --------------------------------------------------------------------------------
Administration of the Stock Option Plan
The Stock Option Plan is administered by the O&IC Committee. The O&IC
Committee is appointed by the Board of Directors. The O&IC Committee consists
of two or more members of the Board of Directors and other individuals
appointed by the Board of Directors.
The following individuals are the current members of the O&IC Committee:
Ralph R. Peterson, Philip G. Hall, Susan D. King, Donald S. Evans, Kenneth F.
Durant, Joseph A. Ahearn, Robert G. Card, Michael D. Kennedy, Michael Y.
Marcussen, Steve Guttenplan, James J. Ferris, and Craig T. Zeien.
The O&IC Committee decides which of our eligible employees will be granted
options to buy common stock under the Stock Option Plan. The O&IC Committee
also determines all of the terms and conditions of each stock option granted
under the Stock Option Plan, such as:
. The manner in which the stock option may be exercised
. Whether there are conditions that must be met before the stock option may
be exercised
. The exercise price that must be paid in order to buy common stock upon
exercise of each stock option
. When the stock option becomes vested and may be exercised
We intend to grant stock options at the fair market value of the common
stock on the day that a stock option is granted, which is the formula price for
the common stock in effect at the time of the grant. In any case, the exercise
price cannot be less than 90% of the fair market value of the common stock on
the day that the stock option is granted. Although the Stock Option Plan
permits the issuance of both "incentive" and "nonqualified" stock options, the
O&IC Committee does not intend to issue incentive stock options, and no
incentive stock options will be granted unless we first provide appropriate
disclosure to potential recipients.
The O&IC Committee is not required to provide the same terms and conditions
in each stock option agreement. Stock options granted to
38
<PAGE>
different employees or at different times may contain different terms and
conditions, including different exercise prices.
Limits on Stock Options that May Be Granted Under the Stock Option Plan
Under the Stock Option Plan, the O&IC Committee may not grant stock options
for more than 8,000,000 shares of common stock, subject to certain adjustments.
As of March 15, 1999, no stock options had been issued under the Stock Option
Plan.
Stock Options May Be Restricted
The O&IC Committee may provide in the grant of a stock option that the
exercise of the stock option is restricted or conditional. For example, the
O&IC Committee may provide in the grant of a stock option that the stock option
cannot be exercised under certain circumstances unless the optionee agrees to
sell the common stock acquired as a result of the exercise in the internal
market on the next trade date or agrees to transfer the common stock acquired
to the After-Tax Deferred Compensation Trust.
- -------------------------------------------------------------------------------
What is Vesting?
- -------------------------------------------------------------------------------
An employee who receives options usually has to "earn" them over time by staying
with CH2M HILL. We expect that most options will be vested ("earned") over
three years:
. 25% vested one year from the date of grant
. 25% more vested two years from the date of grant
. The remaining 50% vested three years from the date of grant
You may not exercise an option until it is vested.
- -------------------------------------------------------------------------------
Exercise of Stock Options
If the O&IC Committee grants a stock option to an employee, the employee
may exercise the stock option after all conditions described in the stock
option agreement, including vesting, have been met and before the stock option
expires.
The employee may exercise a stock option by following the procedures for
exercise described in the stock option agreement. These procedures will include
providing written notice of exercise to CH2M HILL, paying the exercise price,
and paying any amount required for federal, state, or local income tax
withholding as a result of the employee's exercise of the stock option as
described below. The procedures may also include other requirements imposed by
the O&IC Committee from time to time.
Payment for Common Stock Bought Pursuant to the Exercise of a Stock Option
Granted Under the Stock Option Plan
Payment for shares of common stock bought pursuant to the exercise of a
stock option may be made in cash or a personal check payable to CH2M HILL.
Unless the O&IC Committee provides otherwise, payment may also be made by
returning to CH2M HILL shares of common stock already owned by the employee. If
the employee uses shares of common stock the employee already owns as payment
for the exercise of a stock option, then the number of shares given to the
employee as a result of the exercise will be the net number. The net number
will be the difference between the number of shares bought through the exercise
of the stock option and the number of shares already owned by the employee and
used as payment for the exercise.
39
<PAGE>
- --------------------------------------------------------------------------------
Examples of Option Exercises
- --------------------------------------------------------------------------------
Assumptions:
. Employee was granted 100 options at an exercise price of $10 per share
. Employee exercises 100 options with an exercise price of $10 per share when
the formula price is $20 per share
. Employee already owns 200 shares of common stock
. Combined federal, state and FICA tax rate is 42%
- --------------------------------------------------------------------------------
Stock for Stock Transaction:
1. Number of Options to be Exercised 100
2. Option Exercise Price $ 10
3. Cost to Employee (1x2) $1,000
4. Current Formula Price $ 20
5. Value of Options Exercised (1x4) $2,000
6. Gain (5-3) $1,000
7. Applicable Tax (6x42%) $ 420
8. Total Amount owed by Employee to
CH2M HILL (3+7) $1,420
9. Number of Shares to be Tendered to CH2M
HILL as payment for Option Exercise (8/4) 71
- --------------------------------------------------------------------------------
Cash Transaction:
1. Number of Options to be Exercised 100
2. Option Exercise Price $ 10
3. Cost to Employee (1x2) $1,000
4. Current Formula Price $ 20
5. Value of Options Exercised (1x4) $2,000
6. Gain (5-3) $1,000
7. Applicable Tax (6x42%) $ 420
8. Total Amount owed by Employee to CH2M
HILL (3+7) $1,420
9. Cash to be Paid by Employee as
Payment for Option Exercise $1,420
- --------------------------------------------------------------------------------
The shares exchanged in a stock-for-stock transaction are treated as a "Like
Kind" exchange which does not trigger the recognition of capital gains. The
shares exchanged carry their original tax basis and acquisition date. Newly
acquired shares have a basis equal to the fair market value at the time of
exercise. The shares sold to pay taxes represent new shares acquired through the
exercise of the option and would therefore not trigger any capital gains.
- --------------------------------------------------------------------------------
Payment may also be made in a combination of cash, a personal check, and
shares of common stock, unless the O&IC Committee provides that payment by
shares of common stock will not be allowed. If shares of common stock owned by
the employee are used to pay all or part of the purchase price, the value
assigned to each share will be equal to the formula price of the common stock
on the date of exercise of the stock option.
Expiration of Stock Options Granted Under the Stock Option Plan
A stock option granted to an employee may not be exercised after the stock
option expires. A stock option expires on the expiration date set forth in the
stock option agreement. The O&IC Committee generally intends to grant stock
options that expire five years after the date on which the stock options are
granted.
Regardless of the date stated in the stock option agreement, a stock option
granted under the Stock Option Plan and not previously exercised will
terminate when the employee terminates employment with us, unless the stock
option agreement provides that the stock option may be exercised after
termination of employment.
The O&IC Committee generally intends to permit the exercise of a stock
option granted under the Stock Option Plan within thirty days after
termination of employment with us for any reason other than for cause. If an
employee terminates employment with us due to disability or death, the O&IC
Committee generally intends to permit the stock option to be exercised within
one year after the date on which the employee's employment terminates due to
the disability or death.
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An employee may work for an affiliate of CH2M HILL that becomes ineligible
to participate in the Stock Option Plan (for example, because CH2M HILL's
interest in the affiliate is sold). In that case, stock options held by the
employee will become immediately exercisable, but the employee will be
considered to terminate employment with us on the day that the affiliate
becomes ineligible to participate in the Stock Option Plan. Therefore, the
employee will be able to exercise the stock options only if and to the extent
that the stock option agreement permits the employee to exercise the stock
options on termination of employment.
AMENDMENT AND TERMINATION OF THE STOCK OPTION PLAN
The Board of Directors may amend or terminate the Stock Option Plan at any
time. Any amendment or termination of the Stock Option Plan will not change the
terms of any stock option agreement already in place at the time of such
amendment or termination unless the employee agrees to such change. The
following changes may not be made by the Board without shareholder approval:
. Increasing the number of shares of common stock available under the Stock
Option Plan
. Reducing the minimum price at which stock options may be granted under
the Stock Option Plan
. Changing the class of employees who may be granted stock options under
the Plan
The Stock Option Plan will terminate on December 31, 2008. No stock options
will be granted under the Stock Option Plan after that date. Any stock option
agreement already in place on December 31, 2008, will remain in effect until
the stock options covered by that stock option agreement are exercised or
expire.
CORPORATE REORGANIZATION, SALE OF ASSETS, OR CHANGE IN CONTROL
If CH2M HILL experiences a stock split, a stock dividend, a
recapitalization, or a similar transaction that changes the number of
outstanding shares of common stock without receipt of payment by CH2M HILL, the
O&IC Committee will adjust the number of shares of common stock that may be
bought under outstanding stock options and the exercise price that must be paid
to buy shares of common stock under outstanding stock options, in order to
reflect the change in the common stock.
If a change in control of CH2M HILL occurs, then all outstanding stock
options granted under the Stock Option Plan may be exercised immediately, even
if the conditions on exercise stated in the stock option agreement have not
been met. A change in control of CH2M HILL occurs when one person or a group of
persons acting jointly (other than an employee benefit plan) acquires at least
50% of the common stock, or when CH2M HILL agrees to a merger in which CH2M
HILL is not the surviving company, or when CH2M HILL disposes of more than 50%
of its assets (measured by the value of the assets). The O&IC Committee will
determine whether a change in control of CH2M HILL has occurred.
For example, if CH2M HILL experiences a merger, liquidation,
reorganization, or similar transaction in which CH2M HILL is not the surviving
corporation, the O&IC Committee will either:
. Convert outstanding stock options into comparable options to buy stock in
the surviving corporation; or
. Require that outstanding stock options be exercised within a specific
period of time before the effective date of the transaction or be
forfeited.
In connection with the transaction, if there is not a change in control of
CH2M HILL, the O&IC Committee may (but is not required to) provide that any
outstanding stock options granted under the Stock Option Plan may be exercised
immediately, even if the conditions on exercise stated in the stock option
agreement have not been met.
FEDERAL, STATE, AND LOCAL INCOME TAX WITHHOLDING
The federal income tax consequences of the grant and exercise of stock
options under the Stock Option Plan are described below. Under
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certain circumstances, the exercise of a stock option or the sale of shares of
common stock bought through the exercise of a stock option may produce
compensation income to an employee. In that case, your employer may be required
to withhold federal, state, and local income taxes with respect to the amount
of compensation income you recognized, as though that amount was paid to you by
your employer. Your employer may satisfy this withholding obligation by
withholding the required amount from other amounts (such as other compensation
or wages) your employer paid to you. Alternatively, your employer may require
you to pay the amount necessary to satisfy the withholding obligation. The
payment of the amount necessary to satisfy the withholding obligation may be a
prerequisite to the exercise of a stock option granted under the Stock Option
Plan.
- --------------------------------------------------------------------------------
Are Options Taxable?
- --------------------------------------------------------------------------------
No. For tax purposes, options are not treated as having monetary value when they
are granted to employees. Thus, they do not have an impact on your taxes when
granted. After you exercise an option, however, the difference between the
exercise price and the formula price in effect at that time is taxed as ordinary
income.
- --------------------------------------------------------------------------------
Federal Income Tax Consequences of Stock Options Granted under the Stock Option
Plan
This summary of certain federal income tax consequences of the grant and
exercise of stock options under the Stock Option Plan does not address every
federal income tax issue that may arise and does not address foreign, state or
local tax issues, which may be significant.
This summary does not address the tax consequences for incentive stock
options because the O&IC Committee does not intend to grant incentive stock
options.
Each holder of stock options granted under the Stock Option Plan should
consider obtaining professional tax advice with respect to the tax impact of
their stock options.
Exercise of Nonqualified Stock Options with Cash. Generally, an individual
will not be taxed when a stock option is granted. Instead, at the time the
individual exercises a stock option, the individual will recognize ordinary
income for federal income tax purposes. The amount of ordinary income
recognized by the individual will be equal to the excess of the fair market
value of the common stock at the time of exercise over the exercise price. CH2M
HILL generally will be entitled to a federal income tax deduction at that time
and in the same amount that the individual realizes as ordinary income.
If common stock bought through the exercise of a stock option is later sold
or exchanged, then the difference between the sale price and the fair market
value of the common stock on the date of exercise will be recognized as gain or
loss to the seller. If the common stock is a capital asset in the seller's
hands, the gain or loss on the sale will be long-term or short-term capital
gain or loss, depending on whether the holding period for the common stock at
the time of sale is more than 12 months or 12 months or less, respectively.
Exercise of Nonqualified Stock Options With Shares of Common Stock. If
payment of the exercise price under a stock option is made by surrendering
previously owned shares of common stock, the following rules apply:
. No gain or loss will be recognized as a result of the tendering of shares
in exchange for an equal number of shares available through the exercise
of nonqualified stock options
. Any additional shares received will be taxed as ordinary income in an
amount equal to the fair market value of the shares at the time of
exercise
1999 Payroll Deduction Stock Purchase Plan (the "Stock Purchase Plan")
The Board of Directors expects to approve the Stock Purchase Plan and
submit the Stock Purchase Plan for the approval of the shareholders before any
common stock is sold under this prospectus. Under the Stock Purchase Plan, the
O&IC Committee may decide to let employees begin payroll deductions for
purchases of common stock as early as October 1, 1999.
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However, no common stock will be purchased under the Stock Purchase Plan until
after January 1, 2000. The Stock Purchase Plan is not subject to ERISA.
Administration of the Stock Purchase Plan
The Stock Purchase Plan is administered by the O&IC Committee, which is the
same committee that administers the Stock Option Plan, described above.
The O&IC Committee decides which affiliates of CH2M HILL will be eligible
to participate in the Stock Purchase Plan. The O&IC Committee also decides
whether employees must meet certain eligibility requirements in order to
participate in the Stock Purchase Plan.
The O&IC Committee may adopt rules for the administration of the Stock
Purchase Plan. The O&IC Committee interprets the Stock Purchase Plan. The O&IC
Committee's decisions on any questions that arise under the Stock Purchase Plan
are binding on all persons, including CH2M HILL and any employee who
participates in the Stock Purchase Plan.
Employees Eligible to Participate in the Stock Purchase Plan
Generally, all employees of CH2M HILL and any participating affiliate may
participate in the Stock Purchase Plan. The O&IC Committee decides which
affiliates of CH2M HILL may participate in the Stock Purchase Plan.
The O&IC Committee intends to exclude employees who normally work less than
20 hours per week and employees who normally work five or fewer months in a
year from participating in the Stock Purchase Plan.
Any employee who owns five percent or more of CH2M HILL or of any
subsidiary of CH2M HILL is excluded from participating in the Stock Purchase
Plan.
An employee who terminates employment with CH2M HILL and all participating
affiliates is no longer eligible to participate in the Stock Purchase Plan. For
this purpose, termination of employment includes death, disability, retirement,
transfer to an affiliate that is not eligible to participate in the Stock
Purchase Plan, or any other termination of employment. If an employee becomes
ineligible to continue participating in the Stock Purchase Plan, any amount
held in the employee's stock purchase account will be distributed to the
employee.
Participating in the Stock Purchase Plan
In order to participate in the Stock Purchase Plan, an employee must
deliver a written payroll deduction authorization form to the plan
administrator of the Stock Purchase Plan. The payroll deduction authorization
form will tell the eligible employee's employer to withhold a specific
percentage of the eligible employee's pay to be used to buy common stock under
the Stock Purchase Plan. The payroll deduction authorization form must provide
for the deduction of at least 1% of the employee's pay, but no more than 10% of
the employee's pay, in a whole number percentage. The employee may change the
specified percentage at any time. However, an employee cannot purchase more
than $25,000 of common stock under the Stock Purchase Plan in any calendar
year.
Purchases of Common Stock Under the Stock Purchase Plan
No shares of common stock will be bought under the Stock Purchase Plan
until after January 1, 2000, even though the O&IC Committee may decide to allow
employees to have amounts deducted from their paychecks and contributed to
their stock purchase accounts during the last quarter of 1999. Beginning in
2000, CH2M HILL will use the amount in the employee's stock purchase account to
buy common stock for the employee on each trade date.
Each year, the Board of Directors will decide what percentage of the
purchase price of common stock CH2M HILL will contribute toward the purchase of
common stock under the Stock Purchase Plan during that year. CH2M HILL's
percentage may be as low as 0% or as high as 15%. As of January 1, 2000, CH2M
HILL's percentage will be 10%.
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Reservation of Common Stock for Purchase Under the Stock Purchase Plan
CH2M HILL has reserved 1,000,000 shares of common stock to be sold under
the Stock Purchase Plan. This is in addition to any shares of common stock
bought in the internal market under the Stock Purchase Plan. The number of
shares of common stock reserved for sale under the Stock Purchase Plan can be
changed by the O&IC Committee to reflect any stock split, stock dividend,
recapitalization, or similar transaction that CH2M HILL may experience.
Distribution of Common Stock Bought Through the Stock Purchase Plan
When shares of common stock are bought through the Stock Purchase Plan,
they will initially be held by CH2M HILL in the name of the employee. Before
the next vote of shareholders, the shares of common stock bought through the
Stock Purchase Plan will be distributed to the employee. The employee may
petition the O&IC Committee for an earlier distribution of the shares.
Restrictions on Common Stock Bought Through the Stock Purchase Plan
All shares of common stock bought through the Stock Purchase Plan will be
subject to the restrictions on common stock contained in CH2M HILL's Restated
Bylaws. Those restrictions are described below, in the section of this
Prospectus called "Description of Capital Stock."
An employee is not permitted to purchase common stock under the Stock
Purchase Plan if doing so would cause the employee to own more shares of common
stock than the employee is permitted to own under CH2M HILL's Restated Bylaws
(350,000 shares of common stock).
Amendment and Termination of the Stock Purchase Plan
The Board of Directors of CH2M HILL may amend or terminate the Stock
Purchase Plan at any time. However, the Board of Directors may not increase the
number of shares of common stock reserved for sale under the Stock Purchase
Plan unless the shareholders of CH2M HILL also approve that change.
Unless previously terminated by CH2M HILL, the Stock Purchase Plan will
terminate on December 31, 2008.
Federal, State, and Local Income Tax Withholding
The federal income tax consequences of purchasing common stock under the
Stock Purchase Plan are described below. Under certain circumstances, the sale
of shares of common stock bought through the Stock Purchase Plan may produce
compensation income to an employee. In that case, the employee's employer may
be required to withhold federal, state, and local income tax with respect to
the amount of compensation income recognized by the employee, as though that
amount was paid to the employee by the employer as wages. The employer may
satisfy this withholding obligation by withholding the required amount from
other amounts (such as other compensation or wages) paid by the employer to the
employee or by having CH2M HILL withhold the required amount from any amount
that CH2M HILL may owe the employee upon a re-purchase of the shares of common
stock.
Federal Income Tax Consequences of Purchases of Common Stock Under the Stock
Purchase Plan
The following paragraphs summarize certain federal income tax consequences
of participation in the Stock Purchase Plan. This summary is intended to be
general and is not intended to address every federal income tax issue that may
arise from participation in the Stock Purchase Plan. This summary does not
address foreign, state or local tax issues, which may be significant. Each
participant in the Stock Purchase Plan should consider obtaining professional
tax advice with respect to the tax impact on that participant of participation
in the Stock Purchase Plan.
Federal Income Tax Consequences for the Participant. The federal income tax
consequences of participation in the Stock Purchase Plan depend in part on
whether the participant is participating in the portion of the Stock Purchase
Plan that is intended to qualify as an employee stock purchase plan under
Section
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423 of the Internal Revenue Code, or whether the participant is participating
in the portion of the Stock Purchase Plan that is not intended to qualify as
an employee stock purchase plan under that Section of the Internal Revenue
Code.
With respect to most of the participating affiliates, the Stock Purchase
Plan is intended to qualify as an employee stock purchase plan under Section
423 of the Internal Revenue Code. This means that, with respect to purchases
of common stock under the Stock Purchase Plan by employees of those
affiliates:
. The participant will not recognize income for federal income tax
purposes when the participant buys shares of common stock under the
Stock Purchase Plan.
. The participant will recognize ordinary income when the participant
disposes of the common stock bought under the Stock Purchase Plan. For
this purpose, a participant is considered to dispose of common stock
bought under the Stock Purchase Plan when the participant transfers
title to the common stock in any manner, including by sale, exchange, or
gift, except that a participant is not considered to dispose of common
stock bought under the Stock Purchase Plan when the participant
transfers the common stock to a spouse or into joint ownership if the
participant is one of the joint owners.
. The amount of ordinary income recognized by the participant when the
participant disposes of shares of common stock bought under the Stock
Purchase Plan depends on whether the participant held the shares for at
least two years before disposing of them. If the participant held the
shares for at least two years after the date on which the shares were
bought for the participant's account under the Stock Purchase Plan, the
participant will recognize ordinary income when the shares are sold or
otherwise disposed of. The amount of the ordinary income is equal to the
smaller of (1) the amount by which the fair market value on the purchase
date exceeded the amount paid for the shares, or (2) the amount by which
the fair market value on the date of disposition exceeds the amount paid
for the shares. If the participant dies while owning shares of common
stock bought under the Stock Purchase Plan, ordinary income is
recognized in the year of death in the amount described in the previous
sentence.
. If the participant disposes of shares of common stock bought under the
Stock Purchase Plan before the two year holding period expires, the
participant will recognize ordinary income at the time of the
disposition. The amount of the ordinary income recognized by the
participant will be the amount by which the fair market value of the
shares on the purchase date exceeded the amount paid for the shares,
even if the disposition is by gift or is at a loss.
. If the common stock is a capital asset in the hands of the participant,
additional gain on the disposition of the shares of common stock, if
any, will be short-term or long-term capital gain depending on whether
the participant held the shares of common stock for 12 months or less,
or for more than 12 months, respectively.
In the cases discussed above (other than in the case of the participant's
death), the amount of ordinary income recognized by the participant is added
to the purchase price paid by the participant in order to determine the amount
of gain or loss from the disposition of the shares.
With respect to the portion of the Stock Purchase Plan that is not intended
to be qualified as an employee stock purchase plan under Section 423 of the
Internal Revenue Code, a participant purchasing shares will recognize
compensation income at the time of the purchase of shares of common stock
under the Stock Purchase Plan. The amount of this compensation income will be
the amount by which the fair market value of the shares on the purchase date
exceeds the amount of the purchase price paid by the participant.
Tax Consequences for CH2M HILL. CH2M HILL will not be entitled to a
deduction at any time with respect to shares sold under the portion of
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the Stock Purchase Plan that is intended to qualify as an employee stock
purchase plan under Section 423 of the Internal Revenue Code, if the
participant buying the shares does not dispose of the shares before the two-
year holding period expires. If the participant disposes of the shares prior to
the expiration of the two-year holding period, CH2M HILL is allowed a federal
income tax deduction that is equal to the amount of ordinary income recognized
by the participant.
Pre-Tax and After-Tax Deferred Compensation Plans (the "Deferred Compensation
Plans")
CH2M HILL will adopt, in connection with this offering, the Deferred
Compensation Plans. In connection with the Deferred Compensation Plans, CH2M
HILL will establish the Pre-Tax and After-Tax Deferred Compensation Trusts
(referred to in this description as the "Deferred Compensation Trusts").
Neither the Pre-Tax nor the After-Tax Deferred Compensation Plan is subject to
ERISA.
Two Deferred Compensation Plans will be established to separately handle
pre-tax contributions in one plan and after-tax contributions in the other
plan. In effect, the pre-tax plan will hold contributions made through deferred
compensation and deferred bonus payments. CH2M HILL intends to administer
deferred compensation by participants in the pre-tax plan under the same terms
and conditions as the Stock Purchase Plan. In contrast, the after-tax plan will
hold contributions made directly by employees eligible to participate. All of
the terms of the pre-tax plan and the after-tax plan are generally the same,
however the tax treatment distributions from the pre-tax plan and the after-tax
plan will be different.
Employees who are eligible to participate in the Deferred Compensation Plan
may elect to invest by making after-tax contributions to the After-Tax Deferred
Compensation Plan. An employee who is eligible to participate in the Pre-Tax
Deferred Compensation Plan may elect to defer a portion of his or her
compensation by entering into a deferred compensation agreement and by filing
an annual election to defer compensation in accordance with that agreement. In
addition, CH2M HILL or its affiliates may provide that certain bonuses to
employees who are eligible to participate in the Pre-Tax Deferred Compensation
Plan will be deferred in accordance with the provisions of the plan.
Administration of the Deferred Compensation Plans
CH2M HILL will appoint a committee (the "Deferred Compensation Committee")
that will administer the Deferred Compensation Plans. The Deferred Compensation
Committee will designate the affiliates of CH2M HILL whose employees are
eligible to participate in the Deferred Compensation Plans.
The Deferred Compensation Trusts
The Deferred Compensation Trusts are irrevocable trusts established by CH2M
HILL. The Trustee will be named at a later date. Copies of the agreements
establishing the Deferred Compensation Trusts will be available from the
Deferred Compensation Committee.
Contributions to the Deferred Compensation Trusts
Under the agreement between CH2M HILL and the Trustee, the Trustee will
receive and hold common stock contributed to the Deferred Compensation Trusts
by CH2M HILL. When an eligible employee elects under the Pre-Tax Deferred
Compensation Plan to defer compensation, we will use the compensation that
would have been paid to the employee to purchase common stock, and will
contribute that common stock to the Pre-Tax Deferred Compensation Trust. We may
also contribute common stock to the Pre-Tax Deferred Compensation Trust as
bonuses on behalf of eligible employees.
When an eligible employee elects to make voluntary contributions to the
After-Tax Deferred Compensation Plan, we will use the cash contribution to
purchase common stock and contribute the common stock to the After-Tax Deferred
Compensation Trust.
Each contribution to the Deferred Compensation Trusts will be allocated to
an account in the name of the employee on behalf of whom the contribution is
made. However, the
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employee will not have a direct ownership interest in the shares of common
stock held in the Deferred Compensation Trusts.
Nature of the Deferred Compensation Trusts
All assets of the Deferred Compensation Trusts will be held by the Trustee
for the benefit of the participants in the Deferred Compensation Plans and for
the benefit of the general creditors of CH2M HILL in the event CH2M HILL
becomes insolvent. CH2M HILL is considered to be insolvent if it is unable to
pay its debts as they become due or if it is the subject of a bankruptcy
proceeding. If CH2M HILL becomes insolvent, the assets of the Deferred
Compensation Trusts will be available to pay the debts of CH2M HILL. In that
case, a participant in the Deferred Compensation Plans will not have any
priority rights with respect to the assets of the Deferred Compensation Trusts
or with respect to any other assets of CH2M HILL. Rather, in the event of
insolvency, a participant in the Deferred Compensation Plans will have only a
claim against CH2M HILL for the amount of compensation previously deferred and
the amount of any after-tax contribution made by the participant. This claim
will be treated like any other claim of a general unsecured creditor of CH2M
HILL. The assets of the Deferred Compensation Trusts are not guaranteed or
insured by any party, including CH2M HILL.
Voting of Common Stock Held in the Deferred Compensation Trusts
Shares of common stock held in the Deferred Compensation Trusts will be
voted by the Trustee, not by the participants in the Deferred Compensation
Plans. The Trustee will vote the shares of common stock held in the Deferred
Compensation Trusts in accordance with instructions given to the Trustee by the
Deferred Compensation Committee.
Dividends on Common Stock Held in the Deferred Compensation Trusts
Cash dividends, if any, paid with respect to shares of common stock held in
the Deferred Compensation Trusts will be returned to CH2M HILL and will not be
held in the Deferred Compensation Trusts or made available to participants in
the Deferred Compensation Plans. Other dividends, if any, paid with respect to
shares of common stock held in the Deferred Compensation Trusts will be
credited to the account in the Deferred Compensation Trusts in which the shares
of common stock are held.
Distributions from the Deferred Compensation Trusts
The common stock held in the Deferred Compensation Trusts in the name of a
participant in the Deferred Compensation Plans will be distributed to the
participant when a distribution event under the Deferred Compensation Plans
occurs. The following events are distribution events under each Deferred
Compensation Plan:
. The termination of the participant's affiliation with us, as defined in
the Restated Bylaws.
. The death of the participant. In this case, the distribution will be made
to the beneficiary of the participant, as designated on a form signed by
the participant and filed with the Deferred Compensation Committee before
the death of the participant. If the participant does not file a signed
designation of beneficiary with the Deferred Compensation Committee
before the participant's death, the distribution will be made to the
participant's estate.
. A change in the participant's employment status that makes the
participant ineligible to participate in the Deferred Compensation Plans.
. A request by the participant to exercise the participant's interest in
the Deferred Compensation Trusts. In this case a distribution will be
made only if (1) the Deferred Compensation Committee approves the
participant's request, and (2) the common stock held in the Deferred
Compensation Trusts in the name of the participant can be sold in the
internal market on the next trade date.
. The termination of the Deferred Compensation Plans. This will occur no
later than January 2, 2008. CH2M HILL, in its discretion, may terminate
the Deferred Compensation Plans before that date.
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. The date specified by the participant at the date of election to
participate in the Deferred Compensation Plans.
Distributions from the Deferred Compensation Trusts will be made in the
form of common stock. Shares of common stock distributed to a participant from
the Deferred Compensation Trusts will be subject to the restrictions on
ownership of common stock set forth in our Restated Bylaws.
Removal or Resignation of Trustee
CH2M HILL may remove the Trustee of the Deferred Compensation Trusts at any
time and for any reason, upon thirty days' notice to the Trustee. The Trustee
may resign at any time and for any reason, upon thirty days' notice to CH2M
HILL. If the Trustee is removed or resigns, CH2M HILL will appoint a new
Trustee.
Amendment of the Deferred Compensation Trusts
CH2M HILL and the Trustee may amend either Deferred Compensation Trust at
any time by executing a written amendment to the corresponding Deferred
Compensation Trust agreement.
Federal Income Tax Consequences
We have designed the Deferred Compensation Trusts to be Rabbi trusts under
the federal income tax laws. Such trusts are considered to be "grantor trusts."
This means that CH2M HILL's contribution of common stock to the Pre-Tax
Deferred Compensation Trust should not cause a participant in the Pre-Tax
Deferred Compensation Plan to recognize income at the time of the contribution.
Instead, the participant will recognize compensation income when an amount is
distributed or made available to the participant from the Pre-Tax Deferred
Compensation Trust. The assets of the both Deferred Compensation Trusts will be
treated as assets of CH2M HILL for federal income tax purposes.
In contrast, participants in the After-Tax Deferred Compensation Trust will
recognize compensation equal to the difference between the amount they
contributed and the value of cash or other property when it is distributed or
made available from the After-Tax Deferred Compensation Trust.
This treatment of participants in the Deferred Compensation Plans for
federal income tax purposes is based on certain private letter rulings issued
by the Internal Revenue Service. The Deferred Compensation Plans and the
Deferred Compensation Trusts are not identical to the arrangements involved in
those private letter rulings, however, and a private letter ruling is binding
on the Internal Revenue Service only with respect to the specific taxpayer to
whom the private letter ruling is issued. We do not plan to seek a private
letter ruling on the federal income tax consequences of participation in the
Deferred Compensation Plans. Therefore, while we believe that the federal
income tax consequences of participation in the Deferred Compensation Plans
should be as described above, there is no definite assurance that this will in
fact be the case. If the federal income tax consequences of participation in
the Deferred Compensation Plans are ultimately determined to be different from
those described above, participants in the Deferred Compensation Plans may be
liable for additional income taxes, interest, and penalties for tax years
during which they participate in the Deferred Compensation Plans.
This description is not intended to be a complete discussion of all federal
income tax or other tax consequences of participation in the Deferred
Compensation Plans. Each participant in the Deferred Compensation Plans should
consider discussing the federal, state, and local tax consequences of
participation in the Deferred Compensation Plans with that participant's tax
advisors.
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MANAGEMENT
Directors and Executive Officers
The current directors, director nominees, and executive officers of CH2M
HILL are:
<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
Philip G. Hall.......... 57 Chairman of the Board of Directors and Senior Vice President
Joseph A. Ahearn........ 62 Director and Senior Vice President
Robert G. Card.......... 45 Director and Senior Vice President
Kenneth F. Durant....... 60 Director and Senior Vice President
Donald S. Evans......... 48 Director and Senior Vice President
James J. Ferris......... 55 Director and Senior Vice President
Jerry D. Geist.......... 64 Director
Michael D. Kennedy...... 49 Director
Susan D. King........... 42 Director
Michael Y. Marcussen.... 46 Director
Jill T. Shapiro 59 Director Nominee
Sideman................
Barry L. Williams....... 54 Director
Ralph R. Peterson....... 53 President and Chief Executive Officer
Samuel H. Iapalucci..... 46 Senior Vice President, Chief Financial Officer and Secretary
Craig T. Zeien.......... 52 Senior Vice President
</TABLE>
Philip G. Hall has served as Chairman of the Board of Directors of CH2M
HILL since 1992, and as a director since 1987. Mr. Hall has served as Senior
Vice President of CH2M Hill, Inc. since 1995, and as its Southwest Regional
Manager since 1997.
Joseph A. Ahearn has served as a director of CH2M HILL since 1996, and as a
Senior Vice President since 1995. Mr. Ahearn has served as President of the
Transportation business of CH2M Hill, Inc. since 1996 and served as Eastern
Region Manager of CH2M Hill, Inc. from 1994 until 1996.
Robert G. Card has served as a director of CH2M HILL since 1996, and as a
Senior Vice President since 1995. Mr. Card has served as President of Kaiser-
Hill Company, LLC since 1994. He served as a director of CH2M HILL from 1992 to
1994.
Kenneth F. Durant has served as a director of CH2M HILL since 1995 and as a
Senior Vice President since 1997. Mr. Durant has served as the President of
Industrial Design Corporation, a subsidiary of CH2M HILL, since its formation
in 1985.
Donald S. Evans has served as a director of CH2M HILL since 1997 and as a
Senior Vice President since 1997. Mr. Evans has served as the President of the
Water business and the Operations and Maintenance business since 1985.
James J. Ferris has served as a director of CH2M HILL since 1998, and as
its Senior Vice President since 1995. Dr. Ferris has served as President of the
Energy, Environment and Systems business since 1995 and President of CH2M Hill
Constructors, Inc. since 1994. He served as President and Chief Executive
Officer of Ebasco Environmental from 1989 until 1994. Dr. Ferris also serves as
a director of Kaiser-Hill.
Jerry D. Geist has served as a director of CH2M HILL since 1989. Mr. Geist
has been Chairman of Santa Fe Center Enterprises, Inc. since 1990 and President
and Chief Executive Officer of Howard International Utilities/Projects since
1990. He serves on the Board of Directors of the Davis Family of Mutual Funds.
Michael D. Kennedy has served as a director of CH2M HILL since 1998, and
has served as the Northwest Regional Manager of CH2M Hill, Inc. since 1993. Mr.
Kennedy served as the Portland Regional Manager of CH2M Hill, Inc. from 1987
until 1992 and the Western Regional Business Development Director from 1992
until 1993.
49
<PAGE>
Susan D. King has served as a director of CH2M HILL since 1997. Ms. King
has served as the Chief Financial Officer of Industrial Design Corporation
since 1993, and as its Secretary and Treasurer since 1995.
Michael Y. Marcussen has served as a director of CH2M HILL since 1998. Mr.
Marcussen has served as the European Manager for CH2M Hill IDC Ltd., Dublin,
Ireland since 1977 and has been an employee of Industrial Design Corporation
since 1993.
Jill T. Shapiro Sideman is a director nominee who has served as a Vice
President and Client Service Manager of CH2M Hill, Inc. since 1993.
Barry L. Williams has served as a director of CH2M HILL since April 1995.
He has been President of Williams Pacific Ventures, Inc., a consulting firm,
since 1987. Mr. Williams has served as Senior Mediator for JAMS/Endispute since
1993 and a visiting lecturer for the Haas Graduate School of Business,
University of California since 1993. Mr. Williams has acted as a general
partner of WDG, a California limited partnership, since 1987 and a general
partner of Oakland Coliseum Joint Venture since 1998. He also serves on the
board of directors of Pacific Gas & Electronic Company, Northwestern Mutual
Life Insurance Company, Newhall Land & Farming Company, Simpson Manufacturing
Company, USA Group, Inc., Comp USA, R. H. Donnelly, and several not-for-profit
organizations.
Ralph R. Peterson has served as President and Chief Executive Officer of
CH2M HILL since 1991. Mr. Peterson also serves as a director of Kaiser-Hill.
Samuel H. Iapalucci has served as Senior Vice President, Chief Financial
Officer and Secretary of CH2M HILL since 1994. Mr. Iapalucci served as Vice
President and Chief Financial Officer for OHM Corporation, an engineering and
construction company, from 1991 to 1994.
Craig T. Zeien has served as a Senior Vice President of CH2M HILL since
1995. Mr. Zeien has served as President of Regional Operations since 1994, and
as President of CH2M Hill International, Ltd. since 1995. From 1991 to 1994,
Mr. Zeien served as Director of Technology for CH2M Hill, Inc.
50
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth information regarding annual incentive
compensation for the chief executive officer and the other four most highly
compensated executive officers of CH2M HILL.
Summary Compensation Table(1)
<TABLE>
<CAPTION>
Annual Compensation
-----------------------
(a) (b) (c) (d) (i)
All other
Name and principal position Year Salary(2) Bonus(2) compensation(3)
--------------------------- ---- --------- -------- ---------------
<S> <C> <C> <C> <C>
Ralph R. Peterson....................... 1998 $451,060 $344,802 $29,430
President & Chief Executive Officer 1997 438,437 293,631 36,877
1996 396,076 326,374 8,985
Kenneth F. Durant....................... 1998 273,000 281,465 7,885
Senior Vice President 1997 260,000 384,046 12,354
1996 230,000 391,440 14,242
Philip G. Hall.......................... 1998 316,786 128,157 8,112
Senior Vice President 1997 299,120 175,687 29,285
1996 295,479 201,300 11,122
Samuel H. Iapalucci..................... 1998 308,389 190,404 7,147
Senior Vice President, Chief Financial 1997 275,520 148,162 71,880
Officer & Secretary 1996 267,681 131,793 3,442
Donald S. Evans......................... 1998 305,654 148,860 6,874
Senior Vice President 1997 278,640 95,538 6,621
1996 254,099 114,761 1,690
</TABLE>
- --------
(1) Certain columns have been omitted because they are not applicable.
(2) Amounts shown include compensation earned by executive officers, whether
paid during or after such year, or deferred at the election of those
officers.
(3) Amounts shown for 1998 include:
<TABLE>
<CAPTION>
Group Term Life
and Split-
Employee Defined dollar Life
Stock 401(k) Contribution Insurance
Plan Plan Pension Plan Premiums
-------- ------ ------------ ---------------
<S> <C> <C> <C> <C>
Ralph R. Peterson............... $2,041 $1,296 $2,400 $3,615
Kenneth F. Durant............... 4,177 -- 3,200 508
Philip G. Hall.................. 2,041 1,296 2,400 2,375
Samuel H. Iapalucci............. 2,041 1,296 2,400 1,410
Donald S. Evans................. 1,610 1,296 2,400 1,568
</TABLE>
Retirement Plans
Messrs. Peterson and Hall are participants in the CH2M HILL Pension Plan.
Benefits under the CH2M HILL Pension Plan are equal to 1% of 1987-1991 average
base compensation (up to $150,000) multiplied by years of credited service
prior to 1992 plus 1% of each year's base compensation (up to $150,000) for
each year of credited service from January 1, 1992 through December 31, 1993.
Plan benefits were frozen as of December 31, 1993. The estimated annual
benefits payable at the earliest age when a participant may retire with an
unreduced benefit (age 65) are $37,849 to Mr. Peterson, and $34,955 to Mr.
Hall.
Mr. Durant is a participant in the CH2M HILL Pension Plan with respect to
credited service prior to February 25, 1985 and he is a participant in the CH2M
HILL Industrial Design Corporation Pension Plan with respect to credited
service from February 25, 1985 through January 31, 1994. The benefits under the
CH2M HILL Industrial Design Corporation Pension Plan are equal to 1.3% of each
year's base compensation (up to the legal limit) for each year of credited
service from February 25, 1985 through January 31, 1994. Plan
51
<PAGE>
benefits were frozen as of January 31, 1994. The estimated annual benefits
payable to Mr. Durant at the earliest age when a participant may retire with an
unreduced benefit (age 65) are $15,718 from the CH2M HILL Pension Plan and
$13,101 from the CH2M HILL Industrial Design Corporation Pension Plan, or a
total of $28,819.
Mr. Evans is a participant in the CH2M HILL Pension Plan with respect to
credited service prior to May 1, 1986 and he is a participant in the OMI
Retirement Plan with respect to credited service from May 1, 1986 through
December 31, 1995. The normal retirement benefits under the OMI Retirement Plan
are equal to 1.5% of average compensation (up to the IRS limit) for the first
20 years of credited service plus 0.5% of average compensation (up to the IRS
limit) for years of service in excess of 20. Mr. Evans' benefit under the OMI
plan was frozen as of December 31, 1995 upon his transfer from employment
covered by the plan. The estimated annual benefits payable to Mr. Evans at the
earliest age when a participant may retire with an unreduced benefit (age 65)
are $12,771 from the CH2M HILL Pension Plan and $23,521 from the OMI Retirement
Plan, or a total of $36,292.
Mr. Iapalucci is not a participant in a CH2M HILL Pension Plan.
Board of Directors
The Restated Bylaws provide that the Board of Directors shall consist of at
least nine and no more than thirteen directors and shall be subject to change
pursuant to resolutions of the Board of Directors. The current number of
directors is eleven. The Restated Bylaws provide that the directors shall be
elected to three-year staggered terms by dividing the directors into three
classes as equal in number as possible. At each annual meeting the same number
of directors shall be elected for a three-year term as the number whose term
expires. Each director shall serve until his respective successor is elected
and qualified. A decrease in the number of directors shall not shorten the term
of any incumbent director.
Compensation of Directors
Non-employee directors of CH2M HILL receive an annual retainer fee of
$14,000 as directors and $4,000 for each committee on which they serve as the
chairman. CH2M HILL also pays non-employee directors a meeting fee of $1,000
for attendance at each Board of Directors meeting and $1,000 per day for
attendance at committee meetings. Directors are reimbursed for expenses
incurred in connection with attendance at meetings and other CH2M HILL
functions. Non-employee directors are eligible to receive a discretionary cash
bonus each year which for 1998 was $12,000.
Directors and Officers Liability Insurance
CH2M HILL pays the premium for insurance in respect of claims against its
directors and officers and in respect of losses for which CH2M HILL may be
required or permitted by law to indemnify such directors and officers. The
directors to be insured are the directors named herein and all directors of
CH2M HILL's subsidiaries. The officers to be insured are all officers and
assistant officers of CH2M HILL and its subsidiaries. CH2M HILL does not expect
to allocate or segregate the premium with regard to specific subsidiaries or
individual directors and officers.
Compensation Committee Interlocks and Insider Participation
The members of CH2M HILL's Compensation Committee of the Board of Directors
are Joseph A. Ahearn, Kenneth F. Durant, Donald S. Evans, James F. Ferris,
Jerry D. Geist and Barry L. Williams. All members of the Compensation Committee
except Jerry D. Geist and Barry L. Williams are officers of CH2M HILL.
52
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following tables set forth information regarding the ownership of all
classes of CH2M HILL's securities as of March 15, 1999, by (a) any person or
group known to have beneficial ownership of more than five percent of the
common stock or Class A preferred stock and (b) beneficial ownership by
directors and executive officers individually and as a group.
Security Ownership of Certain Beneficial Owners
The following table presents information as of March 15, 1999, concerning
the only known beneficial owners of five percent or more of common stock.
<TABLE>
<CAPTION>
Name and Address Amount & Nature
of of Beneficial Percent of
Beneficial Owner Title of Class Ownership Class
---------------- -------------- --------------- ----------
<S> <C> <C> <C>
Trustees of the CH2M HILL Employee Common 10,048,670(1) 34.2%
Stock Plan..........................
6060 S. Willow Dr.
Greenwood Village, CO
80111
</TABLE>
- --------
(1) Common shares are held for the accounts of participants in the Employee
Stock Plan and will be voted in accordance with instructions received from
participants. Shares as to which no instructions are received will be voted
in the same proportions.
Security Ownership of Directors and Executive Officers
The following table sets forth certain information as of March 15, 1999 as
to the beneficial ownership of CH2M HILL's equity securities by each director,
director nominee, certain executive officers and by all directors, director
nominees and executive officers as a group. None of the individuals listed
below owns more than one percent of the outstanding shares of CH2M HILL. As a
group, all directors, director nominees and executive officers own less than
six percent of the outstanding shares of CH2M HILL.
<TABLE>
<CAPTION>
Total
Common Common Common
Stock Stock Stock
Name of Beneficial Owner Held Directly Held Indirectly(1) Held
------------------------ ------------- ------------------ ---------
<S> <C> <C> <C>
Joseph A. Ahearn................... 34,220 2,848 37,068
Robert G. Card..................... 128,490 13,286 141,776
Kenneth F. Durant.................. 250,000 24,915 274,915
Donald S. Evans.................... 180,240 13,381 193,621
James J. Ferris.................... 56,720 2,506 59,226
Jerry D. Geist..................... -- -- --
Philip G. Hall..................... 250,000 31,573 281,573
Samuel H. Iapalucci................ 50,590 2,381 52,971
Michael D. Kennedy................. 68,480 17,171 85,651
Susan D. King...................... 63,500 5,286 68,786
Michael Y. Marcussen............... 13,420 -- 13,420
Ralph R. Peterson.................. 250,000 29,873 279,873
Jill T. Shapiro Sideman............ 13,470 499 13,969
Barry L. Williams.................. -- -- --
Craig T. Zeien..................... 177,850 23,175 201,025
All directors, director nominees,
and executive officers as a group
(15 people)....................... 1,536,980 166,894 1,703,874
</TABLE>
- --------
(1) Includes common stock held through the Employee Stock Plan and the 401(k)
Plan. Shares are vested, except for shares held indirectly by Mr. Ferris
and Mr. Iapalucci, who indirectly hold 501 and 952 unvested shares,
respectively.
53
<PAGE>
SECURITIES OFFERED BY THE CURRENT SHAREHOLDERS
The current shareholders may sell up to an aggregate of 18,227,530 shares
of common stock. While we are registering all of the shares held by our current
shareholders, including all the shares currently held by our directors,
director nominees and executive officers, we do not know whether they intend to
sell any of their common stock, but they may sell some, none or all of their
shares.
We surveyed our significant shareholders informally on the number of shares
they actually expect to sell. These surveys indicate that current shareholders
intend to sell fewer than 10% of their shares in the next 12 months.
The following table sets forth, as of March 15, 1999, the number of shares
of common stock owned by the current CH2M HILL shareholders (excluding shares
allocated to them under the employee benefit plans), with all directors,
director nominees and executive officers individually identified. The table
does not reflect the sale of any shares of common stock being offered by CH2M
HILL. All of the shares are owned of record.
<TABLE>
<CAPTION>
Percent of Number
Number of Ownership Of Shares
Name of Beneficial Owner Shares Owned Before Offering Registered
------------------------ ------------ --------------- ----------
<S> <C> <C> <C>
Joseph A. Ahearn................. 34,220 * 34,220
Robert G. Card................... 128,490 * 128,490
Kenneth F. Durant................ 250,000 * 250,000
Donald S. Evans.................. 180,240 * 180,240
James J. Ferris.................. 56,720 * 56,720
Philip G. Hall................... 250,000 * 250,000
Samuel H. Iapalucci.............. 50,590 * 50,590
Michael D. Kennedy............... 68,480 * 68,480
Susan D. King.................... 63,500 * 63,500
Michael Y. Marcussen............. 13,420 * 13,420
Ralph R. Peterson................ 250,000 * 250,000
Jill T. Shapiro Sideman.......... 13,470 * 13,470
Craig T. Zeien................... 177,850 * 177,850
All directors, director nominees
and executive officers as a
group (13 people)............... 1,536,980(1) 5.23 1,536,980(1)
All other current shareholders... 16,690,550(2) 56.77 16,690,550(2)
</TABLE>
- --------
* Less than one percent.
(1) The 1,536,980 shares of common stock registered by the directors and
executive officers listed above represent the maximum number of shares that
they may sell. Based on the currently available information, the directors,
director nominees and executive officers intend to sell significantly less
than this maximum number of shares.
(2) The 16,690,550 shares of common stock registered by the current
shareholders (other than directors, director nominees and executive
officers) listed above, represent the maximum number of shares that they
may sell. Based on the currently available information, the other current
shareholders intend to sell significantly less than this maximum number of
shares.
54
<PAGE>
DESCRIPTION OF CAPITAL STOCK
General
The following is a summary of certain of the detailed provisions of CH2M
HILL's Restated Articles of Incorporation and Restated Bylaws regarding CH2M
HILL's capital stock. This summary may not contain all of the detailed
information that is important to you. You may find more detailed information by
reading the Restated Articles of Incorporation and the Restated Bylaws, copies
of which are filed as exhibits to the registration statement filed with the
Securities and Exchange Commission.
CH2M HILL is authorized to issue 150,000,000 shares of capital stock, of
which 100,000,000 shares are common stock, par value $.01 per share, and
50,000,000 shares are Class A preferred stock, par value $.02 per share. As of
March 15, 1999, 1,826,685 shares of common stock and 1,113,353 shares of Class
A preferred stock were outstanding and held of record by approximately 1,000
key employees and the employee benefit plan trusts.
As noted in the Prospectus Summary, the information in this prospectus has
been adjusted to reflect the conversion of each outstanding share of Class A
preferred stock into one share of common stock and a ten-for-one stock split of
the common stock, which will occur in connection with the effectiveness of the
offering pursuant to this prospectus. If the Class A preferred stock had been
converted into common stock and the ten-for-one stock split had been completed
on March 15, 1999, there would have been 29,400,380 shares of common stock and
no Class A preferred stock outstanding on that date.
Common Stock
General. Holders of common stock are entitled to one vote per share on all
matters submitted to the shareholders of CH2M HILL. Each share of common stock
is equal in respect of voting rights, liquidation rights and rights to
dividends and to distributions. Shareholders of CH2M HILL do not and will not
have any preferred or preemptive rights to subscribe for, purchase or receive
additional shares of any class of capital stock of CH2M HILL, or any securities
convertible into or exchangeable for such shares.
Restrictions on Common Stock. All the shares of common stock presently
outstanding are, and all shares of common stock offered hereby will be, subject
to certain restrictions (including restrictions on their transferability) set
forth in the Restated Bylaws:
1. Right of Repurchase upon Termination of Employment or Affiliation. All
shares of common stock are subject to CH2M HILL's right of repurchase upon the
termination of the shareholder's employment or affiliation with CH2M HILL. Such
right of repurchase will also be applicable to all shares of common stock which
such person has the right to acquire after his or her termination of employment
or affiliation pursuant to any of CH2M HILL's employee benefit plans (other
than an employee benefit plan or any other retirement or pension plan adopted
by CH2M HILL or any of its subsidiaries which pursuant to applicable law or by
its terms does not provide for CH2M HILL's right to repurchase shares issued
thereunder upon termination of employment or affiliation) or pursuant to any
option or other contractual right to acquire shares of common stock which was
outstanding at the date of such termination of employment or affiliation.
CH2M HILL's right of repurchase is exercised by mailing a written notice to
such holder within 60 days following termination of employment or affiliation.
If CH2M HILL repurchases the shares, the price will be the formula price per
share:
. in effect on the date of such termination of employment or affiliation,
in the case of shares owned by the holder at that date and shares
issuable to the holder after that date pursuant to any option or other
contractual right to acquire shares of common stock which were
outstanding at that date; or
. in effect on the date such shares are distributed to the holder, in the
case of shares distributable to the holder after his or her termination of
employment or affiliation pursuant to any of CH2M HILL's employee benefit
plans.
55
<PAGE>
CH2M HILL will, in the event it exercises its right of repurchase upon
termination of employment or affiliation, pay for such shares in cash or
promissory notes.
CH2M HILL and any holder of shares may agree to extend the time period of
CH2M HILL's right to repurchase such holder's shares or to alter the payment
terms.
2. Right of First Refusal. If a holder of common stock desires to sell any
of his or her shares to a third party other than in the internal market, such
holder must first give notice to the Secretary of CH2M HILL including:
. A signed statement indicating that such holder desires to sell his or her
shares of common stock and that he or she has received a bona fide offer
to purchase such shares
. A statement signed by the intended purchaser containing:
(i) the intended purchaser's full name, address and taxpayer
identification number
(ii) the number of shares to be purchased
(iii) the price per share to be paid
(iv) the other terms under which the purchase is intended to be made
(v) a representation that the offer, under the terms specified, is bona
fide; and
. If the purchase price is payable in cash, in whole or in part, a copy of
a certified check, cashier's check or money order payable to such holder
from the purchaser in the amount of the purchase price to be paid in cash
CH2M HILL then has the right, exercisable within 14 days, to purchase all
of the shares specified in the notice at the offer price and upon the same
terms as set forth in the notice. In the event CH2M HILL does not exercise such
right, the holder may sell the shares specified in the notice within 30 days
thereafter to the person specified in the notice at the price and upon the
terms and conditions set forth therein. The holder may not sell such shares to
any other person or at any different price or on any different terms without
first re-offering the shares to CH2M HILL.
If circumstances occur which would permit CH2M HILL to exercise its right
of repurchase upon termination of employment or affiliation and its right of
first refusal, then CH2M HILL may, in its sole discretion, elect which of these
rights it will exercise.
3. Other Transfers. Except for sales in the internal market or pursuant to
the repurchase right or right of first refusal procedure described above, no
holder of common stock may sell, assign, pledge, transfer or otherwise dispose
of or encumber any shares of common stock without the prior written approval of
CH2M HILL. Any attempt to do so without such prior approval will be null and
void. If any transfer of CH2M HILL's shares is not a sale by an employee,
director or consultant, or is by a person who acquired such shares other than
by purchase, directly or indirectly, from an employee, director or consultant,
CH2M HILL may condition its approval of such transfer upon the transferee's
agreement to hold such shares subject to CH2M HILL's right to repurchase such
shares upon the termination of employment or affiliation of the employee,
director or consultant.
4. Ownership Limit. The Restated Bylaws provide that no person may own more
than 350,000 shares of common stock, excluding such person's beneficial
interest in common stock held indirectly by an employee benefit trust.
Class A Preferred Stock
Holders of Class A preferred stock have no voting rights with respect to
matters submitted to the shareholders of CH2M HILL, except as required by law.
Upon the liquidation, dissolution, or winding up of CH2M HILL, whether
voluntary or involuntary, each holder of Class A preferred stock would be
entitled to be paid $.02 per share prior to any distributions to holders of
common stock. Rights granted to the holders of Class A preferred stock can only
be amended by a majority of the holders of common stock and a majority of the
holders of Class A preferred stock, each voting as a separate class. The Board
of Directors may elect at any time to convert each outstanding share of Class A
preferred stock into one share of common stock, without the prior consent of
the holders of either the Class A preferred stock or common stock.
56
<PAGE>
Limitation of Liability and Indemnification
Under the Oregon Business Corporation Act (the "Act"), a corporation may
provide for the limitation of liability of directors and indemnification of
directors and officers under some circumstances. CH2M HILL's Restated Articles
of Incorporation provide that directors are not personally liable to the
corporation or its shareholders for monetary damages for conduct as a director,
except for any act or omission for which the elimination of liability is not
permitted under the Act. Section 60.047(2)(d) of the Act sets forth the
following actions for which limitation of liability is not permitted, including
(i) any breach of a director's duty of loyalty to the corporation or its
shareholders; (ii) acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of the law; (iii) any unlawful
distributions to shareholders; or (iv) any transaction from which the director
received an improper or illegal personal benefit.
The Restated Bylaws allow CH2M HILL to indemnify any person who is or was a
party, or is threatened to be made a party, to any civil, administrative, or
criminal proceeding by reason of the fact that the person is or was a director
or officer of CH2M HILL or any of its subsidiaries, or is or was serving at
CH2M HILL's request as a director, officer, partner, agent, or employee of
another corporation or entity. The indemnification may include expenses,
including attorneys' fees, judgments, fines, and amounts paid in settlement,
actually and reasonably incurred by that person. Under the Section 60.391(1) of
the Act, indemnification is available if (i) the person acted in good faith;
(ii) the person reasonably believed the conduct was in the corporation's best
interests, or at least was not opposed to its best interests; and (iii) in the
case of a criminal proceeding, the person had no reasonable cause to believe
the conduct was unlawful. In addition, a person who is wholly successful, on
the merits or otherwise, in the defense of a proceeding in which the person was
a party because the person was a director, is entitled to indemnification for
expenses actually and reasonably incurred by the person in connection with the
proceeding.
Commission Position on Indemnification
Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended (the "Securities Act"), may be permitted to directors,
officers and controlling persons of CH2M HILL pursuant to provisions described
above, or otherwise, CH2M HILL has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other than
the payment by CH2M HILL of expenses incurred or paid by a director, officer or
controlling person of CH2M HILL in the successful defense of any action, suit
or proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, CH2M HILL will, unless in the
opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
Anti-Takeover Provisions -- Legislation
The Act provides that corporate directors, when evaluating a proposed tender
or exchange offer, merger, acquisition, or similar proposal, "may, in
determining what they believe to be in the best interests of the corporation,
give due consideration to the social, legal, and economic effects on employees,
clients, and suppliers of the corporation and on the communities and
geographical areas in which the corporation and its subsidiaries operate, the
economy of the state and nation, the long-term as well as short-term interests
of the corporation and its shareholders, including the possibility that these
interests may be best served by the continued independence of the corporation
and other relevant factors." Consequently, when evaluating a proposal for the
merger, consolidation, or sale of CH2M HILL, the Board of Directors may
consider the interests of groups or constituents other than CH2M HILL's
shareholders. Such consideration may cause the Board of Directors to reject an
acquisition proposal for reasons other than the price being offered.
CH2M HILL is also subject to the Oregon Business Combination Act (the
"OBCA"). The OBCA generally provides that if a person (an "Interested
Shareholder") acquires voting stock of
57
<PAGE>
an Oregon corporation in a transaction resulting in such person owning 15% or
more of the total voting stock of such corporation, then the corporation and
the Interested Shareholder may not engage in certain business combination
transactions for three years following the date of such acquisition. "Business
combination transactions" include (i) a merger or plan of share exchange; (ii)
any sale, lease, mortgage, or other disposition of corporate assets where the
assets have an aggregate market value of 10% or more of the aggregate market
value of the corporation's assets or outstanding capital stock; and (iii)
certain transactions that result in the issuance of capital stock of, or loans
by, the corporation to the Interested Shareholder. These restrictions do not
apply if:
. the Interested Shareholder, as a result of the acquisition, owns at least
85% of the outstanding voting stock of the corporation (excluding shares
owned by directors who are also officers, and certain employee benefit
plans)
. prior to the completion of the acquisition the Board of Directors
approves either the business combination transaction or the acquisition
. after the completion of the acquisition the Board of Directors and the
holders of at least two-thirds of the outstanding voting stock of the
corporation (excluding shares owned by the Interested Shareholder)
approve the business combination transaction
A corporation may provide in its Articles of Incorporation or bylaws that
the OBCA does not apply to its shares. CH2M HILL has not adopted such a
provision and does not presently plan to do so.
In addition, the Oregon Control Share Act (the "OCSA") also applies to CH2M
HILL. The OCSA provides that a person or persons who acquire no less than 20%
of the voting shares of a corporation in a "control share acquisition," lose
the right to vote the shares unless such voting rights are restored through a
majority vote of the remaining shareholders. A person (the "Acquiring Person")
who acquires voting stock of an Oregon corporation in a transaction which
results in such Acquiring Person holding more than 20%, 33%, or 50% of the
total voting power of the corporation (a "Control Share Acquisition") cannot
vote such shares ("Control Shares") unless voting rights are accorded to the
Control Shares by the holders of a majority of the outstanding voting shares,
excluding such Control Shares and shares held by insiders. The vote is required
at the time an Acquiring Person's holdings exceed 20% of the total voting power
of a company, and again at the time the Acquiring Person's holdings exceed 33%
and 50%, respectively. "Acquiring Person" is broadly defined to include persons
acting as a group. The Acquiring Person may, but is not required to, submit to
CH2M HILL an "Acquiring Person Statement" setting forth certain information
about the Acquiring Person and its plans with respect to CH2M HILL. The
Acquiring Person Statement may also request that CH2M HILL call a special
meeting of shareholders to determine whether the Control Shares will be allowed
to retain voting rights. If the Acquiring Person does not request a special
meeting of shareholders, the issue of voting rights of Control Shares will be
considered at the next annual meeting or special meeting of shareholders that
is held more than 60 days after the date of the Control Share Acquisition. If
the Acquiring Person's Control Shares are accorded voting rights and represent
a majority of all voting power, shareholders who vote against restoring such
voting rights are entitled to the appraised "fair value" of their shares, which
may not be less than the highest price paid per share by the Acquiring Person
for the Control Shares.
The OCSA and the OBCA effectively encourage any potential acquirer to
negotiate with CH2M HILL's Board of Directors, and discourage certain potential
acquirers unwilling to comply with their provisions. A corporation may provide
in its Articles of Incorporation or bylaws that these laws shall not apply to
its shares. CH2M HILL has not adopted such provisions and does not currently
intend to do so. These laws may make CH2M HILL less attractive for takeover,
and shareholders, therefore, may not benefit from a rise in the price of the
common stock that could result from a takeover.
58
<PAGE>
Anti-Takeover Provisions -- Restated Articles of Incorporation and Restated
Bylaws
In addition to the laws discussed above, CH2M HILL's Restated Articles of
Incorporation and Restated Bylaws contain provisions that could make the
acquisition of CH2M HILL through a tender offer, proxy contest, or merger
difficult for a potential suitor opposed by the Board of Directors. These
provisions are:
. The restriction on the sale of common stock outside of the internal
market
. CH2M HILL's right to repurchase shares of common stock upon the holder's
termination of employment with CH2M HILL
. CH2M HILL's right of first refusal on shares of common stock (except for
shares sold in the internal market)
. CH2M HILL's right to refuse to allow the transfer of shares of common
stock to proposed transferees (except for shares sold in the internal
market or pursuant to the right of first refusal)
. The restated Articles of Incorporation's prohibition on any shareholder
owning more than 350,000 shares of the common stock
. The existence of staggered terms for directors of CH2M HILL
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the offering, CH2M HILL will have outstanding up to
33,400,380 shares of common stock. Of these shares, the maximum 24,227,530
shares sold in the offering will be freely tradable in the internal market
without restriction or further registration under the Securities Act except for
any shares purchased by an "affiliate" of CH2M HILL, as defined in Rule 144
under the Securities Act. The remaining 9,172,850 shares of common stock are
held by our employee benefit plan trusts and may be sold in the internal market
from time to time either under Rule 144 (subject to volume or holding period
limitations) or pursuant to a future registration statement declared effective
under the Securities Act.
As of March 15, 1999, no options to purchase common stock were outstanding.
A total of 8,000,000 shares of common stock are currently available for future
grants of options.
VALIDITY OF COMMON STOCK
The validity of the common stock offered hereby will be passed upon for
CH2M HILL by Holme Roberts & Owen LLP.
EXPERTS
The financial statements and schedules included in this prospectus and
elsewhere in this registration statement have been audited by Arthur Andersen
LLP, independent public accountants, as indicated in their reports with respect
thereto, and are included herein in reliance upon the authority of said firm as
experts in giving said reports.
59
<PAGE>
AVAILABLE INFORMATION
CH2M HILL has filed with the Securities and Exchange Commission (the
"Commission") a registration statement (which term shall include any amendments
thereto) on Form S-1 under the Securities Act, with respect to the common stock
offered hereby. This prospectus, which constitutes a part of the registration
statement, does not contain all of the information set forth in the
registration statement, certain items of which are contained in exhibits to the
registration statement as permitted by the rules and regulations of the
Commission. For further information with respect to CH2M HILL and the common
stock offered hereby, reference is made to the registration statement,
including the exhibits thereto, and the financial statements and notes and
schedules filed as a part thereof. Statements made in this prospectus
concerning the contents of any document referred to herein are not necessarily
complete. With respect to each such document filed with the Commission as an
exhibit to the registration statement, reference is made to the exhibit for a
more complete description of the matter involved, and each such statement shall
be deemed qualified in its entirety by such reference.
The registration statement, including the exhibits thereto, and the
financial statements and notes and schedules filed as a part thereof, as well
as such reports and other information filed with the Commission, may be read
and copied at the SEC's Public Reference Room at 450 Fifth Street, N.W.,
Washington, D.C. 20549. Information on the operation of the Public Reference
Room may be obtained by calling the Commission at 1-800-SEC-0330. The
Commission maintains a Web site at http://www.sec.gov that contains reports,
proxy and information statements and other information regarding issuers that
file electronically with the Commission.
As a result of the offering, CH2M HILL will become subject to the
information and reporting requirements of the Exchange Act, and will file
periodic reports, proxy statements and other information with the Commission.
CH2M HILL intends to furnish to its shareholders annual reports containing
audited financial statements and quarterly reports containing unaudited
financial information for the first three quarters of each fiscal year.
60
<PAGE>
CH2M HILL COMPANIES, LTD.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Report of Independent Public Accountants.................................. F-2
Audited Financial Statements:
Consolidated Balance Sheets at December 31, 1997 and 1998............... F-3
Consolidated Statements of Income for the Years Ended December 31, 1996,
1997 and 1998.......................................................... F-4
Consolidated Statements of Shareholders' Equity for the Years Ended
December 31, 1996, 1997 and 1998....................................... F-5
Consolidated Statements of Cash Flows for the Years Ended December 31,
1996, 1997 and 1998.................................................... F-6
Notes to Consolidated Financial Statements.............................. F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To CH2M HILL Companies, Ltd.:
We have audited the accompanying consolidated balance sheets of CH2M HILL
Companies, Ltd. (an Oregon corporation) and subsidiaries as of December 31,
1997 and 1998 and the related consolidated statements of income, shareholders'
equity and cash flows for each of the three years in the period ended December
31, 1998. These financial statements are the responsibility of CH2M HILL's
management. Our responsibility is to express an opinion on these financial
statements based on our audits. We did not audit the financial statements of
CH2M HILL Industrial Design Corporation, which statements reflect total assets
and total revenues of 15 percent and 28 percent in 1996, 17 percent and 27
percent in 1997, and 8 percent and 20 percent in 1998, respectively, of the
related consolidated totals. Those statements were audited by other auditors
whose report has been furnished to us and our opinion, insofar as it relates to
the amounts included for this entity, is based solely on the report of the
other auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits and the report of other
auditors provide a reasonable basis for our opinion.
In our opinion, based on our audits and the report of other auditors, the
financial statements referred to above present fairly, in all material
respects, the financial position of CH2M HILL Companies, Ltd. and subsidiaries
as of December 31, 1997 and 1998, and the results of their operations and their
cash flows for each of the three years in the period ended December 31, 1998 in
conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Denver, Colorado,
February 12, 1999.
F-2
<PAGE>
CH2M HILL COMPANIES, LTD.
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1998 1998
------------ ------------ ------------
(UNAUDITED)
ASSETS (NOTE 1)
<S> <C> <C> <C>
CURRENT ASSETS:
Cash & cash equivalents................. $ 38,327 $ 16,595
Receivables, net--
Client accounts........................ 141,830 136,882
Unbilled revenue....................... 78,265 87,635
Other.................................. 3,923 4,567
Prepaid expenses & other................ 6,957 8,059
-------- --------
Total current assets.................. 269,302 253,738
-------- --------
Property, plant & equipment, at cost
Land................................... 229 229
Building & land improvements........... 2,848 2,845
Furniture, fixtures & equipment........ 40,645 31,466
Leasehold improvements................. 7,880 7,522
-------- --------
51,602 42,062
Less: Accumulated depreciation and
amortization.......................... (35,385) (28,072)
-------- --------
Net property, plant & equipment....... 16,217 13,990
-------- --------
Other assets, net....................... 25,598 30,056
Deferred income taxes................... -- 541
-------- --------
Total assets.......................... $311,117 $298,325
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt....... $ 5,296 $ 4,512
Current portion of notes payable to
former shareholders.................... 4,414 4,527
Accounts payable........................ 34,468 29,187
Billings in excess of revenues.......... 43,782 30,556
Accrued incentive compensation.......... 19,768 18,065
Employee related liabilities............ 35,595 42,013
Other accrued liabilities............... 22,792 27,725
Current deferred income taxes........... 20,789 23,855
-------- --------
Total current liabilities............. 186,904 180,440
Deferred income taxes................... 511 --
Other long-term liabilities............. 36,695 24,404
Long-term debt.......................... 6,665 2,286
Notes payable to former shareholders.... 18,039 16,063
-------- --------
Total liabilities..................... 248,814 223,193
-------- --------
Commitments and contingencies (Notes 3,
6 and 13)
SHAREHOLDERS' EQUITY:
Preferred stock, Class A $.02 par value,
50,000,000 shares authorized; 9,911,710
and 11,068,580 issued and outstanding
at December 31, 1997 and 1998,
respectively........................... 198 221 $ --
Common stock, $.01 par value,
100,000,000 shares authorized;
17,347,000 and 16,957,360 issued and
outstanding at December 31, 1997 and
1998, respectively; 28,025,940 issued
and outstanding pro forma.............. 174 170 391
Additional paid-in capital.............. 15,022 20,283 20,283
Retained earnings....................... 50,336 56,148 56,148
Accumulated other comprehensive loss.... (3,427) (1,690) (1,690)
-------- -------- -------
Total shareholders' equity............ 62,303 75,132 $75,132
-------- -------- =======
Total liabilities and shareholders'
equity............................. $311,117 $298,325
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE>
CH2M HILL COMPANIES, LTD.
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands except per share)
<TABLE>
<CAPTION>
December 31, December 31, December 31,
1996 1997 1998
------------ ------------ ------------
<S> <C> <C> <C>
Gross revenue.......................... $ 931,922 $ 908,854 $ 926,630
Equity in earnings of joint ventures
and affiliated companies.............. 5,276 8,724 8,400
---------- ---------- ----------
Total revenues....................... 937,198 917,578 935,030
Operating expenses:
Direct cost of services and
overhead............................ (643,365) (617,356) (629,468)
General and administrative........... (280,389) (286,276) (290,760)
---------- ---------- ----------
Operating income................... 13,444 13,946 14,802
Other income (expense):
Interest income...................... 1,200 570 1,735
Interest expense..................... (2,644) (2,505) (2,154)
---------- ---------- ----------
Income before provision for income
taxes................................. 12,000 12,011 14,383
Provision for income taxes............. (7,291) (7,295) (8,571)
---------- ---------- ----------
Net income............................. $ 4,709 $ 4,716 $ 5,812
========== ========== ==========
Net income per common and preferred
share:
Basic and Diluted...................... $ 0.17 $ 0.17 $ 0.21
Weighted average number of common and
preferred shares:
Basic and Diluted...................... 27,698,970 27,688,780 28,330,940
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE>
CH2M HILL COMPANIES, LTD.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(Dollars in thousands)
<TABLE>
<CAPTION>
Class A Total Class A Accumulated
Preferred Stock Common Stock Preferred and Additional Other
------------------ ------------------ Common Paid-in Comprehensive Retained Comprehensive
Shares Amount Shares Amount Shares Capital Income Earnings Loss
---------- ------ ---------- ------ ------------- ---------- ------------- -------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balances, December
31, 1995.......... 7,800,100 $156 20,000,200 $200 27,800,300 $ 15,948 $ -- $40,911 $(1,044)
Shares issued in
connection with
stock based
compensation and
employee benefit
plans............. 953,750 19 1,240,700 12 2,194,450 7,343 -- -- --
Shares purchased
and retired....... (11,840) -- (3,028,450) (30) (3,040,290) (10,009) -- -- --
Comprehensive
income:
Net income........ -- -- -- -- -- -- 4,709 4,709 --
Other
comprehensive
loss:
Foreign currency
translation
adjustments..... -- -- -- -- -- -- (85) -- (85)
-------
Comprehensive
income......... -- -- -- -- -- -- 4,624 -- --
---------- ---- ---------- ---- ---------- -------- ======= ------- -------
Balances, December
31, 1996.......... 8,742,010 175 18,212,450 182 26,954,460 13,282 45,620 (1,129)
Shares issued in
connection with
stock based
compensation and
employee benefit
plans............. 1,210,540 24 1,218,390 12 2,428,930 9,151 -- -- --
Shares purchased
and retired....... (40,840) (1) (2,083,840) (20) (2,124,680) (7,411) -- -- --
Comprehensive
income:
Net income........ -- -- -- -- -- -- 4,716 4,716 --
Other
comprehensive
loss:
Foreign currency
translation
adjustments..... -- -- -- -- -- -- (2,298) -- (2,298)
-------
Comprehensive
income......... -- -- -- -- -- -- 2,418 -- --
---------- ---- ---------- ---- ---------- -------- ======= ------- -------
Balances, December
31, 1997.......... 9,911,710 198 17,347,000 174 27,258,710 15,022 50,336 (3,427)
Shares issued in
connection with
stock based
compensation and
employee benefit
plans............. 1,203,830 24 1,341,720 13 2,545,550 11,693 -- -- --
Shares purchased
and retired....... (46,960) (1) (1,731,360) (17) (1,778,320) (6,432) -- -- --
Comprehensive
income:
Net income........ -- -- -- -- -- -- 5,812 5,812 --
Other
comprehensive
income:
Foreign currency
translation
adjustments..... -- -- -- -- -- -- 1,737 -- 1,737
-------
Comprehensive
income......... -- -- -- -- -- -- $ 7,549 -- --
---------- ---- ---------- ---- ---------- -------- ======= ------- -------
Balances, December
31, 1998.......... 11,068,580 $221 16,957,360 $170 28,025,940 $ 20,283 $56,148 $(1,690)
========== ==== ========== ==== ========== ======== ======= =======
<CAPTION>
Total
Shareholders'
Equity
-------------
<S> <C>
Balances, December
31, 1995.......... $ 56,171
Shares issued in
connection with
stock based
compensation and
employee benefit
plans............. 7,374
Shares purchased
and retired....... (10,039)
Comprehensive
income:
Net income........ 4,709
Other
comprehensive
loss:
Foreign currency
translation
adjustments..... (85)
Comprehensive
income......... --
-------------
Balances, December
31, 1996.......... 58,130
Shares issued in
connection with
stock based
compensation and
employee benefit
plans............. 9,187
Shares purchased
and retired....... (7,432)
Comprehensive
income:
Net income........ 4,716
Other
comprehensive
loss:
Foreign currency
translation
adjustments..... (2,298)
Comprehensive
income......... --
-------------
Balances, December
31, 1997.......... 62,303
Shares issued in
connection with
stock based
compensation and
employee benefit
plans............. 11,730
Shares purchased
and retired....... (6,450)
Comprehensive
income:
Net income........ 5,812
Other
comprehensive
income:
Foreign currency
translation
adjustments..... 1,737
Comprehensive
income......... --
-------------
Balances, December
31, 1998.......... $ 75,132
=============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE>
CH2M HILL COMPANIES, LTD.
Consolidated Statements of Cash Flows
(Dollars in thousands)
<TABLE>
<CAPTION>
December 31, December 31, December 31,
1996 1997 1998
------------ ------------ ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income.............................. $ 4,709 $ 4,716 $ 5,812
Adjustments to reconcile net income to
net cash provided by (used in)
operating activities--
Depreciation and amortization.......... 9,518 9,605 8,558
Stock issued in connection with stock
based compensation and employee
benefit plans......................... 7,628 8,520 10,725
Bad debt expense....................... 57 (1,441) 5,224
Deferred income taxes and other........ 4,698 829 2,983
Loss on sale of assets................. 159 217 1,727
Change in--
Receivables........................... 1,454 13,170 (7,336)
Prepaid expenses and other............ (2,862) (1,713) (9,327)
Accounts payable...................... (6,694) (10,479) (5,373)
Billings in excess of revenues........ 7,005 12,990 (13,226)
Other current liabilities............. 6,752 2,448 (4,143)
-------- -------- --------
Net cash provided by (used in) operating
activities............................. 32,424 38,862 (4,376)
-------- -------- --------
Cash flows from investing activities:
Proceeds from the sale of assets........ 646 75 372
Capital expenditures.................... (4,908) (2,612) (4,723)
Other investing activities.............. (2,583) (898) --
-------- -------- --------
Net cash used in investing activities... (6,845) (3,435) (4,351)
-------- -------- --------
Cash flows from financing activities:
Borrowing on long-term debt............. 132 843 111
Principal payments on notes payable to
former shareholders.................... (4,420) (4,968) (4,966)
Principal payments on long-term debt.... (6,148) (5,652) (5,274)
Purchases and retirements of stock...... (3,610) (2,561) (2,342)
-------- -------- --------
Net cash used in financing activities... (14,046) (12,338) (12,471)
-------- -------- --------
Cash effect of cumulative translation
adjustment............................. (17) (437) (534)
-------- -------- --------
Increase (decrease) in cash and cash
equivalents............................ 11,516 22,652 (21,732)
Cash and cash equivalents, beginning of
year................................... 4,159 15,675 38,327
-------- -------- --------
Cash and cash equivalents, end of year.. $ 15,675 $ 38,327 $ 16,595
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE>
CH2M HILL COMPANIES, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
(1) Summary of Business and Significant Accounting Policies
CH2M HILL Companies, Ltd. and its wholly owned subsidiaries is a
multinational infrastructure and environmental services firm. CH2M HILL's
predominant line of business is providing engineering services related to
water, environmental, transportation, infrastructure and management services.
CH2M HILL also provides facility design and construction management services
to the electronics, food processing and biopharmaceutical related industries
and provides utility system operations and maintenance services primarily for
water and wastewater treatment facilities.
CH2M HILL provides the above services for clients in private industry,
federal government agencies, as well as state, municipal and local government
entities. A substantial portion of professional fees arises from projects that
are funded directly or indirectly by governmental entities.
Unaudited Pro Forma Information
On November 6, 1998, the Board of Directors approved a new ownership
program for CH2M HILL and certain resolutions that were subsequently ratified
by a vote of the shareholders on December 18, 1998. Such resolutions included,
but were not limited to, the adoption of the 1999 Stock Option Plan and the
adoption of the Restated Bylaws and the Restated Articles of Incorporation
which provide for the:
. termination of the existing Key Employee Policy and Agreement,
. authorization to convert all outstanding Class A preferred stock into
shares of common stock on a one-for-one basis,
. increase in the authorized shares of common stock to 100,000,000, par
value $.01 per share, and Class A preferred stock to 50,000,000, par
value $.02 per share,
. authorization of a ten-for-one stock split on CH2M HILL's common stock
and Class A preferred stock, and,
. imposition of certain restrictions on the stock including, but not
limited to, the right but not the obligation to repurchase shares upon
termination of employment or affiliation, the right of first refusal,
and ownership limits.
The effective date of the above resolutions will be decided at the
discretion of the Board of Directors based on its evaluation of the
effectiveness of the stock registration process, which includes an effective
registration statement on Form S-1 filed with the Securities and Exchange
Commission and the state Blue Sky commissions.
Common and preferred stock amounts, equivalent share amounts and per share
amounts have been adjusted retroactively to give effect to the stock split.
The conversion of outstanding Class A preferred stock to common stock has been
reflected in the unaudited pro forma balance sheet at December 31, 1998.
Principles of Consolidation
The consolidated financial statements include the accounts of CH2M HILL and
all of its wholly owned subsidiaries after elimination of all intercompany
accounts and transactions. Investments in affiliates which are 50 percent or
less owned are reported using the equity method. Certain 1996 and 1997 amounts
have been reclassified to conform with the current year presentation.
F-7
<PAGE>
CH2M HILL COMPANIES, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
(Dollars in thousands)
Currency Translation
All assets and liabilities of CH2M HILL's foreign subsidiaries are
translated into U.S. dollars at the period-end exchange rate. Revenues and
expenses are translated at the average exchange rate for the year. Translation
gains and losses are reflected in shareholders' equity as part of accumulated
other comprehensive loss. Deferred taxes are not provided on the translation
gains and losses. Gains and losses on foreign currency transactions are not
significant.
Accounting for Revenue
Contract revenue is recognized primarily on a percentage-of-completion
basis by relating the actual cost of work performed to date to the current
estimated total cost of the respective contracts. Unbilled revenue represents
the excess of contract revenue recognized over billings to date. Billings in
excess of revenues represent the excess of billings to date over revenue
recognized. Losses on contracts in process are recognized in their entirety
when the loss becomes evident and the amount of loss can be reasonably
estimated.
Receivables are stated at net realizable values, reflecting reserves of
$2,977 and $8,201 in 1997 and 1998, respectively.
Cash and Cash Equivalents
CH2M HILL maintains a cash management system which provides for cash in the
bank sufficient to pay checks as they are submitted for payment and invests
cash in excess of this amount in interest bearing short-term investments such
as certificates of deposit, commercial paper and repurchase agreements. These
investments are principally invested with original short-term maturities of
less than three months and are considered cash equivalents in the consolidated
balance sheets and statements of cash flows.
<TABLE>
<CAPTION>
1996 1997 1998
------ ------- -------
<S> <C> <C> <C>
Cash paid for interest............................... $2,716 $ 2,431 $ 1,777
====== ======= =======
Cash paid for income taxes........................... $8,916 $11,869 $16,352
====== ======= =======
</TABLE>
The following noncash transactions have been excluded from the accompanying
statements of cash flows:
. Stock purchases for debt of $6,683, $4,204 and $3,103 in 1996, 1997 and
1998, respectively
. Decrease of an additional minimum pension liability and related asset at
December 31, 1996, 1997 and 1998, of $1,464, $2,122 and $198,
respectively
Property, Plant and Equipment
All additions, including betterments to existing facilities, are recorded
at cost. Maintenance and repairs are charged to expense as incurred. When
assets are retired or otherwise disposed of, the cost of the assets and the
related accumulated depreciation are removed from the accounts. Any gain or
loss on retirements is reflected in income in the year of disposition.
F-8
<PAGE>
CH2M HILL COMPANIES, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
(Dollars in thousands)
Depreciation for owned property is based on the estimated useful lives of
the assets using both straight-line and accelerated methods for financial
statement purposes. Useful lives for buildings and land improvements range from
15 to 30 years with an average life of 25 years. Leasehold improvements are
depreciated over the remaining term of the associated lease. Useful lives on
other assets range from two to ten years with an average of approximately five
years.
Other Assets
Other Assets includes capitalized software costs and goodwill which are
amortized on a straight-line basis over five to seven years. The historical
cost of these assets at December 31, 1997 and 1998 totaled $17,116 and $14,789,
respectively. The amortization reflected in the statements of income and the
statements of cash flows totaled $1,439 in 1996, $2,195 in 1997 and $2,778 in
1998.
Fair Value of Financial Instruments
The carrying amounts of cash and cash equivalents, accounts receivable,
accounts payable and accrued liabilities approximate fair value due to the
short-term maturities of these assets and liabilities. The interest rates on
CH2M HILL's bank borrowings are adjusted regularly to reflect current market
rates. Accordingly, the carrying amount of CH2M HILL's short-term and long-term
borrowings also approximate fair value. At December 31, 1997 and 1998, the fair
value of CH2M HILL's notes payable to former shareholders was $20,579 and
$19,237, respectively, based on a discount rate that is estimated using the
rates currently offered for debt with similar remaining maturities.
Pervasiveness of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Asset Impairment
CH2M HILL reviews its assets for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. Assets which are held and used in operations would be impaired if
the undiscounted future cash flows related to the asset did not exceed the net
book value.
New Accounting Standards
The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards (SFAS) No. 130, "Reporting Comprehensive Income". SFAS No.
130 requires that all changes in equity, other than transactions with owners,
be reported as comprehensive income in the financial statements. Other
comprehensive income items include foreign currency translation adjustments and
minimum pension liability adjustments. CH2M HILL has adopted SFAS No. 130
during fiscal 1998.
SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information," establishes standards for reporting information about operating
segments. It also establishes standards for enterprise-wide disclosures related
to geographic areas and major customers. CH2M HILL has adopted SFAS No. 131
during fiscal 1998.
F-9
<PAGE>
CH2M HILL COMPANIES, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
(Dollars in thousands)
SFAS No. 132, "Employers Disclosure About Pensions and Other Postretirement
Benefits, an Amendment of FASB Statements No. 87, 88 and 106," revises
employers' disclosures about pension and other postretirement benefit plans. It
does not change the measurement or recognition of these plans. CH2M HILL has
adopted SFAS No. 132 during fiscal 1998.
SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities," establishes fair value accounting and reporting standards for
derivative instruments and hedging activities. CH2M HILL will adopt SFAS No.
133 in the first quarter of fiscal 2000. CH2M HILL is currently assessing the
effect of adoption, if any, on its financial position, results of operations,
and cash flows.
Statement of Position (SOP) 98-5, "Reporting on the Costs of Start-Up
Activities," requires costs of start-up activities, including organization
costs, to be expensed as incurred. CH2M HILL will adopt SOP 98-5 during fiscal
1999. Such adoption is expected to have no impact on earnings.
(2) Segment Information
CH2M HILL operates in three reportable segments that offer different
services to different customer bases. They are managed separately because each
business requires different business and marketing strategies. Environmental,
Energy, and Infrastructure (EE&I) includes management, consulting, design,
construction, procurement, and operations and maintenance services to the
environmental, nuclear, energy, systems, and transportation industries. Water
focuses on the planning, design and implementation of water supply systems and
wastewater treatment facilities as well as providing operations and maintenance
services to water and wastewater facility operators. Industrial provides
design, construction, specialized manufacturing support and sustained facility
services support to high-technology manufacturing companies, food and beverage
processing businesses, and fine chemical and pharmaceutical manufacturers.
CH2M HILL evaluates performance based on several factors, of which the
primary financial measure is profit before tax. The accounting policies of the
segments are the same as those described in the summary of significant
accounting policies. Intersegment sales are accounted for at fair value as if
the sales were to third parties. Other includes the elimination of intersegment
sales and unallocable corporate expenses.
Certain financial information for each segment is provided below:
<TABLE>
<CAPTION>
Financial
Statement
1996 EE&I Water Industrial Other Balances
---- -------- -------- ---------- -------- ---------
<S> <C> <C> <C> <C> <C>
Revenues from external
customers................... $384,244 $289,342 $258,336 $ -- $931,922
Intersegment sales........... 29,026 22,241 1,316 (52,583) --
Equity in earnings of
investees accounted for by
the equity method........... 5,386 -- (110) -- 5,276
Depreciation and
amortization................ 4,605 3,429 1,484 -- 9,518
Interest income.............. 349 361 490 -- 1,200
Interest expense............. 1,090 411 1,143 -- 2,644
Segment profit............... 7,192 2,236 8,248 (5,676) 12,000
Segment assets............... 155,332 102,420 51,612 -- 309,364
</TABLE>
F-10
<PAGE>
CH2M HILL COMPANIES, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
(Dollars in thousands)
<TABLE>
<CAPTION>
Financial
Statement
1997 EE&I Water Industrial Other Balances
---- -------- -------- ---------- -------- ---------
<S> <C> <C> <C> <C> <C>
Revenues from external
customers.................. $352,343 $310,014 $246,497 $ -- $908,854
Intersegment sales.......... 16,025 22,764 1,088 (39,877) --
Equity in earnings of
investees accounted for by
the equity method.......... 7,886 (144) 982 -- 8,724
Depreciation and
amortization............... 4,729 2,684 2,192 -- 9,605
Interest income............. 159 159 252 -- 570
Interest expense............ 804 736 965 -- 2,505
Segment profit.............. 5,853 5,011 7,174 (6,027) 12,011
Segment assets.............. 136,119 113,725 61,273 -- 311,117
<CAPTION>
Financial
Statement
1998 EE&I Water Industrial Other Balances
---- -------- -------- ---------- -------- ---------
<S> <C> <C> <C> <C> <C>
Revenues from external
customers.................. $378,276 $362,668 $185,686 $ -- $926,630
Intersegment sales.......... 21,301 18,586 1,342 (41,229) --
Equity in earnings of
investees accounted for by
the equity method.......... 7,785 124 491 -- 8,400
Depreciation and
amortization............... 4,034 3,423 1,101 -- 8,558
Interest income............. 582 720 433 -- 1,735
Interest expense............ 928 677 549 -- 2,154
Segment profit.............. 9,259 7,230 3,648 (5,754) 14,383
Segment assets.............. 142,124 128,967 27,234 -- 298,325
</TABLE>
CH2M HILL derived approximately 11% in 1996, 15% in 1997 and 16% in 1998,
of its total revenues from contracts with federal government agencies.
Revenues are attributed to the country in which the services are performed.
Although CH2M HILL provides services in numerous countries, no single country
outside of the United States accounted for a significant portion of the total
consolidated revenues.
<TABLE>
<CAPTION>
1996 1997 1998
-------- -------- --------
<S> <C> <C> <C>
United States..................................... $853,687 $803,844 $877,794
International..................................... 83,511 113,734 57,236
-------- -------- --------
Total............................................. $937,198 $917,578 $935,030
======== ======== ========
</TABLE>
(3) Lines Of Credit
CH2M HILL has an unsecured revolving credit agreement with a maximum
borrowing capacity of $85,000, which expires December 31, 1999. Interest
accrues on outstanding borrowings at variable rates, which as of December 31,
1997 and 1998, ranged from 6.0% to 8.5%, and from 5.4% to 7.8%, respectively,
based on maturity and a liabilities to earnings ratio. At December 31, 1997 and
1998, no amounts were outstanding under this line.
The agreement requires CH2M HILL to maintain, among other restrictions,
prescribed liabilities to earnings, tangible net worth, working capital, and
fixed cost coverage ratios.
F-11
<PAGE>
CH2M HILL COMPANIES, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
(Dollars in thousands)
The agreement allows CH2M HILL to issue letters of credit to back various
trade activities and insurance policies. Issued letters of credit are reserved
against the borrowing base of the line of credit. As of December 31, 1997 and
1998, there were $4,735 and $5,125 issued and outstanding letters of credit,
respectively.
A subsidiary of CH2M HILL has a commitment for a line of credit for general
corporate purposes. The agreement is unsecured, and provides for aggregate
borrowings of $9,500, at an annual interest rate of prime (8.5% and 7.8% at
December 31, 1997 and 1998, respectively). No amounts were outstanding on the
line at December 31, 1997 and 1998.
(4) Notes Payable to Former Shareholders
CH2M HILL issues interest-bearing notes to former shareholders for the
purchase price of stock redeemed by CH2M HILL. The total amount outstanding for
notes payable to former shareholders at December 31, 1997 and 1998 was $22,453
and $20,590, respectively. The interest on the notes is adjusted annually (on
the anniversary dates of the notes) based upon the U.S. Federal Reserve
Discount Rate on the first business day of each calendar year. At January 1,
1997 and 1998 the interest rate of the notes was 3.8%. The notes are unsecured,
and payable in varying annual installments through 2008.
Future minimum principal payments on notes payable to former shareholders
are as follows:
<TABLE>
<CAPTION>
Year Ending
-----------
<S> <C>
1999........................................................... $ 4,527
2000........................................................... 3,745
2001........................................................... 3,502
2002........................................................... 3,054
2003........................................................... 2,019
Thereafter...................................................... 3,743
-------
$20,590
=======
</TABLE>
(5) Long-Term Debt
Long-term debt consisted of the following at December 31:
<TABLE>
<CAPTION>
1997 1998
------- ------
<S> <C> <C>
Note payable to bank, 7.1%, payable in quarterly installments
through 2000.................................................. $10,000 $6,000
Other notes payable, various rates between 5.0% and 7.8%,
payable through 2000.......................................... 1,961 798
------- ------
Total long-term debt......................................... 11,961 6,798
Less: current portion of long-term debt........................ 5,296 4,512
------- ------
$ 6,665 $2,286
======= ======
</TABLE>
Future minimum principal payments on long-term debt are as follows:
<TABLE>
<CAPTION>
Year Ending
-----------
<S> <C>
1999............................................................ $4,512
2000............................................................ 2,286
------
$6,798
======
</TABLE>
F-12
<PAGE>
CH2M HILL COMPANIES, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
(Dollars in thousands)
(6) Operating Lease Obligations
CH2M HILL has entered into certain noncancelable leases, which are being
accounted for as operating leases.
At December 31, 1998, future minimum operating lease payments are as
follows:
<TABLE>
<CAPTION>
Year Ending
-----------
<S> <C>
1999.......................................................... $ 28,325
2000.......................................................... 25,767
2001.......................................................... 20,659
2002.......................................................... 17,166
2003.......................................................... 12,214
Thereafter..................................................... 41,748
--------
$145,879
========
</TABLE>
Total lease and rental expense charged to operations was $42,534, $40,561
and $41,475 during 1996, 1997 and 1998, respectively.
Certain of CH2M HILL's operating leases contain provisions for a specific
rent free period. In accordance with generally accepted accounting principles,
CH2M HILL accrues rental expense during the rent free period based on total
expected rent payments to be made over the life of the related lease. The
excess of expense over actual cash payments to date is shown in the
accompanying balance sheets in other long-term liabilities. The cash payments
expected to exceed rental expense in the next year are included in other
accrued liabilities.
(7) Shareholders' Equity
The bylaws and key employee agreements of CH2M HILL currently restrict
ownership of CH2M HILL's Class A preferred and common stock to active
employees and further provide that the following applies to such stock:
. Upon death, withdrawal, legal incapacity, retirement or discharge, a
shareholder's shares must be sold back to CH2M HILL.
. Upon death, legal incapacity or retirement, the purchase price is
determined by a formula calculated as of December 31 of each year, based
on the net book value of CH2M HILL and a multiple of the average of the
past five years' earnings.
. The purchase price of stock from employees withdrawing to compete or who
are discharged is the greater of the net book value of the shares or the
price of the shares at acquisition by the employee.
. The purchase price of stock returned to CH2M HILL generally becomes
interest-bearing debt to be paid over a ten-year period. Subject to
Board of Directors approval, the payout period can be shortened upon
occurrence of certain criteria.
As discussed in Note 1, CH2M HILL and the shareholders have approved
changes to the features of its stock that will take affect once certain
contingencies have been removed.
(8) Income Taxes
CH2M HILL accounts for income taxes in accordance with SFAS No. 109,
"Accounting for Income Taxes." SFAS No. 109 uses an asset and liability
approach that requires the recognition of deferred tax
F-13
<PAGE>
CH2M HILL COMPANIES, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
(Dollars in thousands)
assets and liabilities for the expected future tax effects of events that have
been recognized in the financial statements or tax returns. In estimating
future tax consequences, CH2M HILL generally considers all expected future
events other than enactment of changes in the tax laws or rates.
Income (loss) from continuing operations before income taxes includes the
following:
<TABLE>
<CAPTION>
1996 1997 1998
------- ------- -------
<S> <C> <C> <C>
U.S. income....................................... $17,124 $13,703 $14,461
Foreign loss...................................... (5,124) (1,692) (78)
------- ------- -------
Net income before taxes........................... $12,000 $12,011 $14,383
======= ======= =======
</TABLE>
The provision for income taxes for the years ended December 31 is comprised
of the following:
<TABLE>
<CAPTION>
1996 1997 1998
------- ------- ------
<S> <C> <C> <C>
Current income tax expense:
Federal............................................ $10,171 $ 9,343 $4,195
Foreign............................................ 949 1,224 1,458
State & local...................................... 2,191 2,012 903
------- ------- ------
Total current taxes................................ 13,311 12,579 6,556
Deferred income tax (benefit) expense.............. (6,020) (5,284) 2,015
------- ------- ------
Total tax expense.................................. $ 7,291 $ 7,295 $8,571
======= ======= ======
</TABLE>
The reconciliation of income tax computed at the U.S. federal statutory tax
rate to CH2M HILL's effective income tax rate for the years ended December 31
were as follows:
<TABLE>
<CAPTION>
1996 1997 1998
------- ------- -------
<S> <C> <C> <C>
Pretax income................................... $12,000 $12,011 $14,383
Federal statutory rate.......................... 35% 35% 35%
------- ------- -------
Expected tax expense............................ 4,200 4,204 5,034
Reconciling items:
State income taxes.............................. 1,479 1,358 610
Disallowance of meals and entertainment
expenses....................................... 1,667 1,589 1,665
Foreign operating losses........................ 396 630 991
Other........................................... (451) (486) 271
------- ------- -------
Provision for income taxes...................... $ 7,291 $ 7,295 $ 8,571
======= ======= =======
</TABLE>
F-14
<PAGE>
CH2M HILL COMPANIES, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
(Dollars in thousands)
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and liabilities at December 31 were as
follows:
<TABLE>
<CAPTION>
1997 1998
------- -------
<S> <C> <C>
Deferred tax assets:
Foreign net operating losses............................. $ 2,934 $ 2,800
Depreciation and amortization............................ -- 1,133
Investments in affiliates................................ 2,980 4,413
------- -------
Total deferred tax assets................................ 5,914 8,346
Valuation allowance...................................... (2,934) (2,800)
------- -------
Net deferred tax assets.................................. 2,980 5,546
------- -------
Deferred tax liabilities:
Deferred recognition of net income until collection or
payment occurs.......................................... 22,838 28,860
Depreciation and amortization............................ 1,442 --
------- -------
Total deferred tax liabilities........................... 24,280 28,860
------- -------
Net deferred tax liability............................... $21,300 $23,314
======= =======
</TABLE>
A valuation allowance is required to be established for those deferred tax
assets that it is more likely than not that they will not be realized based
upon certain estimated circumstances. The above valuation allowances relate to
foreign net operating losses of $7,500 and $9,000 for the years ended December
31, 1997 and 1998, respectively, which will require taxable income within the
applicable foreign subsidiary in order for the deferred tax asset to be
realized. The foreign net operating losses generally may be carried forward
indefinitely.
At December 31, 1998, CH2M HILL has no material tax carryforwards.
Undistributed earnings of CH2M HILL's foreign subsidiaries amounted to
approximately $4,200 at December 31, 1998. Those earnings are considered to be
indefinitely reinvested and accordingly, no provision for U.S. federal and
state income taxes or foreign withholding taxes has been made. Upon
distribution of those earnings, CH2M HILL would be subject to U.S. income taxes
(subject to a reduction for foreign tax credits) and withholding taxes payable
to the various foreign countries. Determination of the amount of unrecognized
deferred U.S. income tax liability is not practicable; however, unrecognized
foreign tax credit carryovers would be available to reduce some portion of the
U.S. tax liabilities.
(9) Earnings Per Share
The computation of basic income per share is based on the weighted average
number of common and preferred shares outstanding during the year. The
outstanding preferred shares are included in the basic income per share
calculation since the preferred shares do not have any preferences over common
shares, other than in liquidation, and CH2M HILL anticipates conversion to
common shares on a one-for-one basis. Diluted income per share is based on the
weighted average number of common and preferred shares outstanding during the
year and, to the extent dilutive, common stock equivalents consisting of stock
options, stock awards subject to restrictions and stock appreciation rights. At
December 31, 1996, 1997 and 1998, CH2M HILL did not have dilutive securities
outstanding.
F-15
<PAGE>
CH2M HILL COMPANIES, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
(Dollars in thousands)
(10) Employee Incentive and Benefit Plans
Stock Based Compensation Plans
The Financial Accounting Standards Board has issued SFAS No. 123,
"Accounting for Stock-Based Compensation." SFAS No. 123 requires that stock-
based compensation plans be accounted for based on the fair value based method
of accounting. CH2M HILL continues to measure compensation cost using the
intrinsic value based method of accounting prescribed by Accounting Principles
Board Opinion No. 25, "Accounting for Stock Issued to Employees," as permitted
by SFAS No. 123. CH2M HILL has three stock-based compensation plans as
described below. Had compensation cost been determined in accordance with SFAS
No. 123, CH2M HILL's net income and earnings per share for 1996, 1997 and 1998
would not have changed.
Incentive Plan
CH2M HILL, at the discretion of the Board of Directors, provides stock
bonuses to certain designated key employees of CH2M HILL. Expenses under this
program amounted to $4,365, $4,784 and $5,550 in 1996, 1997 and 1998,
respectively.
Employee Stock Plan
CH2M HILL has a profit sharing plan ("ESP") for all eligible employees and
has established an Employee Stock Plan and Trust to administer the ESP.
Contributions to the ESP are made to the Trust as determined by the Board of
Directors. Contributions to the ESP were $2,650, $2,804, and $3,513 in 1996,
1997 and 1998, respectively. The contributions are to be made primarily through
the issuance of Class A preferred stock.
Retirement and Tax-Deferred Savings Plan (the "401(k) Plan")
CH2M HILL has a 40l(k) Plan that provides for company matching
contributions, which range from 0.5% to 2.0% of eligible employees' base pay.
Contributions for 1996, 1997 and 1998 were $1,493, $1,589 and $1,996,
respectively, and vest equally over a five year period, beginning with the
employees' second year of service. The contributions were made primarily
through the issuance of Class A preferred stock.
Defined Contribution Savings Plan
CH2M HILL has a defined contribution plan that provides for contributions
generally equal to 1.5% of eligible employees' base pay. These contributions
vest equally over a five-year period, beginning with the employees' second year
of service. For the years ended December 31, 1996, 1997 and 1998, CH2M HILL
recorded $5,591, $6,045 and $5,084 in expense, respectively. Contributions are
made in cash.
(11) Other Employee Benefits
Pension and Other Postretirement Benefits
CH2M HILL has several noncontributory defined benefit pension plans, of
which one remains active. Benefits are based on years of service and
compensation during the span of employment. Funding for these plans is provided
through contributions based on recommendations from the plans' independent
F-16
<PAGE>
CH2M HILL COMPANIES, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
actuary. Plan assets consist primarily of common stock, corporate debt
instruments and U.S. government securities.
CH2M HILL sponsors a medical benefit plan for retired employees of three
subsidiaries. The plan is contributory, with retiree premiums based on service
at retirement. The benefits contain limitations and a cap on future cost
increases. CH2M HILL continues to fund postretirement medical benefits on a
pay-as-you-go basis.
<TABLE>
<CAPTION>
PENSION BENEFITS OTHER BENEFITS
-------------------- -----------------
1997 1998 1997 1998
--------- --------- ------- --------
<S> <C> <C> <C> <C>
Plan Assets in Excess of Benefit Ob-
ligations:
Benefit obligation at December 31.... $ (49,858) $ (59,054)
Fair value of plan assets at December
31.................................. 52,856 59,808
--------- ---------
Funded status........................ $ 2,998 $ 754
========= =========
Benefit Obligations in Excess of Plan
Assets:
Benefit obligation at December 31.... $ (10,558) $ (14,759) $(8,932) $(11,680)
Fair value of plan assets at December
31.................................. 9,015 10,566 -- --
--------- --------- ------- --------
Unfunded status...................... $ (1,543) $ (4,193) $(8,932) $(11,680)
========= ========= ======= ========
Prepaid (accrued) benefit cost recog-
nized in the balance sheet.......... $ 1,958 $ 8,155 $(4,728) $ (6,104)
Weighted-average assumptions at De-
cember 31:
Discount rate........................ 7.00-8.25% 6.75-7.20% 8.25% 7.20%
Expected return on plan assets....... 8.00-9.00% 8.00-9.00% -- --
</TABLE>
For measurement purposes, an 11.14% annual rate of increase in the per
capita cost of covered health care benefits was assumed for 1999. The rate was
assumed to decrease gradually to 5.45% for 2010 and remain at that level
thereafter.
<TABLE>
<CAPTION>
PENSION OTHER
BENEFITS BENEFITS
-------------- --------------
1997 1998 1997 1998
------ ------ ------ ------
<S> <C> <C> <C> <C>
Net periodic benefit cost.................... $2,245 $ 674 $1,365 $1,633
Employer contributions....................... 3,498 8,593 -- --
Participant contributions.................... -- -- 258 257
Benefit payments............................. (2,426) (1,996) (545) (514)
</TABLE>
(12) INVESTMENTS IN UNCONSOLIDATED AFFILIATES
CH2M HILL has investments in affiliated companies that are 50% or less
owned, which are accounted for under the equity method. These investments
consist primarily of a 50% ownership interest in Kaiser-Hill Company, LLC and
MK/IDC (PSI), which are domestic organizations, a 49% ownership interest in
CH2M Gore and Storrie Limited, a 50% ownership interest in CH2M HILL BECA, Ltd.
and TDC International of Israel, which are foreign organizations. As of
December 31, 1997 and 1998, the total investments in these material
unconsolidated affiliates were approximately $3,000 and $2,629, respectively,
and are included in other assets in the accompanying consolidated balance
sheets. As of December 31, 1997 and 1998, CH2M HILL received distributions from
Kaiser-Hill Company, LLC of $13,950 and $8,335, respectively.
F-17
<PAGE>
CH2M HILL COMPANIES, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
(Dollars in thousands)
Summarized financial information for these affiliates is as follows:
<TABLE>
<CAPTION>
1997 1998
-------- --------
<S> <C> <C>
Financial Position:
Current assets............................................ $113,150 $148,784
Noncurrent assets......................................... 4,910 9,339
-------- --------
$118,060 $158,123
======== ========
Current liabilities....................................... $102,012 $139,561
Noncurrent liabilities.................................... 9,647 7,041
Shareholders' equity...................................... 6,401 11,521
-------- --------
$118,060 $158,123
======== ========
</TABLE>
<TABLE>
<CAPTION>
1996 1997 1998
---------- -------- --------
<S> <C> <C> <C>
Results of Operations:
Revenues...................................... $1,354,337 $874,534 $873,524
Direct costs.................................. 1,169,601 698,600 681,091
---------- -------- --------
Gross margin.................................. 184,736 175,934 192,433
General and administrative expenses........... 174,105 158,822 174,790
---------- -------- --------
Operating income.............................. 10,631 17,112 17,643
Other income (expense)........................ (14) 483 348
---------- -------- --------
Net income.................................... $ 10,617 $ 17,595 $ 17,991
========== ======== ========
</TABLE>
(13) CONTINGENCIES
General
CH2M HILL is party to various legal actions arising in the normal course of
its business, some of which involve claims for substantial sums. Damages
assessed in connection with and the cost of defending any such actions could be
substantial. CH2M HILL's management believes that the levels of insurance
coverage (after retentions and deductibles) are generally adequate to cover
CH2M HILL's liabilities, if any, with regard to such claims. Any amounts that
are probable of payment by CH2M HILL related to retentions and deductibles are
accrued when such amounts are estimable.
Guarantor
CH2M HILL has an equity investment in an affiliate. The affiliate has a
facility which allows it to borrow up to $5,000. The facility is comprised of a
$3,000 line of credit and a $2,000 term loan. As of December 31, 1997, the
outstanding balance on the term loan was $2,000, which was paid off during
1998. No amounts were outstanding under the line of credit as of December 31,
1997 and 1998. The facility is guaranteed by CH2M HILL.
CH2M HILL has guaranteed a $6,000 credit facility between a subsidiary and
a joint venture partner. The facility is secured by assets of the joint venture
and is used for general project purposes. CH2M HILL has joint and several
liability with the joint partner for the full amount. At December 31, 1998,
$2,400 was
F-18
<PAGE>
CH2M HILL COMPANIES, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
(Dollars in thousands)
outstanding on the credit facility which bears interest at varying rates, as
defined, and ranged from 6.6% to 7.8%.
Performance Bonds
In the normal course of business, CH2M HILL purchases performance bonds to
comply with client mandated contractual obligations. At December 31, 1997 and
1998, the performance bonds purchased were $55,000.
F-19
<PAGE>
Kaiser-Hill Company, LLC
and Subsidiary
Consolidated Financial Statements
as of December 31, 1998 and 1997 and for each of
the three years in the period ended December 31, 1998
together with Report of Independent Accountants
F-20
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Members of
Kaiser-Hill Company, LLC:
We have audited the accompanying consolidated balance sheets of Kaiser-Hill
Company, LLC (a Colorado limited liability company) (the "Company") and
subsidiary as of December 31, 1998 and 1997, and the related consolidated
statements of income, members' equity and cash flows for each of the three
years in the period ended December 31, 1998. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of Kaiser-Hill Company, LLC and subsidiary as of December 31, 1998 and 1997,
and the consolidated results of their operations and their cash flows for each
of the three years in the period ended December 31, 1998, in conformity with
generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Denver, Colorado,
January 22, 1999.
F-21
<PAGE>
KAISER-HILL COMPANY, LLC AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
as of December 31, 1998 and 1997
(amounts in thousands of dollars)
<TABLE>
<CAPTION>
1998 1997
-------- -------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.................................... $ 3,644 $10,182
Contract receivables......................................... 124,352 87,389
Receivable from Member....................................... 396 --
-------- -------
Total current assets......................................... 128,392 97,571
Organization costs, net of accumulated amortization of $2,578
and $1,791, respectively.................................... 1,004 1,791
-------- -------
$129,396 $99,362
======== =======
LIABILITIES AND MEMBERS' EQUITY
Current liabilities:
Accounts payable and payable to subcontractors............... $114,988 $78,391
Accrued vacation............................................. 7,627 7,794
Accrued salaries and employee benefits....................... 5,039 8,351
Payable to Members........................................... 742 2,656
-------- -------
Total current liabilities.................................... 128,396 97,192
Contingencies (Note 6)
Members' equity.............................................. 1,000 2,170
-------- -------
$129,396 $99,362
======== =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-22
<PAGE>
KAISER-HILL COMPANY, LLC AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
for the years ended December 31, 1998, 1997 and 1996
(amounts in thousands of dollars)
<TABLE>
<CAPTION>
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Gross revenue................................ $ 636,190 $ 584,739 $ 543,756
Subcontractor costs and direct material
costs....................................... (464,692) (421,800) (376,000)
--------- --------- ---------
Service revenue.............................. 171,498 162,939 167,756
Direct cost of service and overhead.......... (156,072) (145,708) (155,995)
--------- --------- ---------
Operating income............................. 15,426 17,231 11,761
Other income (expense):
Interest income.............................. 295 661 539
Interest expense............................. (221) (128) (134)
--------- --------- ---------
Net income................................... $ 15,500 $ 17,764 $ 12,166
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-23
<PAGE>
KAISER-HILL COMPANY, LLC AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF MEMBERS' EQUITY
for the years ended December 31, 1998 and 1997
(amounts in thousands of dollars)
<TABLE>
<CAPTION>
ICF Kaiser CH2M Hill
Government Constructors,
Programs, Inc. Inc. Total
-------------- ------------- --------
<S> <C> <C> <C>
Members' equity, December 31, 1995...... $ 2,142 $ 2,498 $ 4,640
Net income.............................. 6,083 6,083 12,166
Distributions........................... (2,072) (2,428) (4,500)
-------- -------- --------
Members' equity, December 31, 1996...... 6,153 6,153 12,306
Net income.............................. 8,882 8,882 17,764
Distributions........................... (13,950) (13,950) (27,900)
-------- -------- --------
Members' equity, December 31, 1997...... 1,085 1,085 2,170
Net income.............................. 7,750 7,750 15,500
Distributions........................... (8,335) (8,335) (16,670)
-------- -------- --------
Members' equity, December 31, 1998...... $ 500 $ 500 $ 1,000
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-24
<PAGE>
KAISER-HILL COMPANY, LLC AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
for the years ended December 31, 1998, 1997 and 1996
(amounts in thousands of dollars)
<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income...................................... $ 15,500 $ 17,764 $ 12,166
Adjustments to reconcile net income to net cash
provided by operating activities:
Amortization................................... 787 627 764
Changes in assets and liabilities:
Increase in contract receivables............... (36,963) (12,402) (703)
Increase in receivable from Member............. (396) -- --
Decrease in prepaid expenses and other current
assets........................................ -- -- 2,017
Increase in accounts payable and payable to
subcontractors................................ 36,597 18,987 15,899
Increase (decrease) in accrued salaries and
employee benefits............................. (3,479) 627 (8,315)
Increase (decrease) in payable to Members...... (1,914) 511 2,145
-------- -------- --------
Net cash provided by operating activities....... 10,132 26,114 23,973
-------- -------- --------
Cash flows from financing activities:
Distributions to Members........................ (16,670) (27,900) (4,500)
Repayment of operating expenses and organization
costs paid by Members.......................... -- -- (8,512)
-------- -------- --------
Net cash used in financing activities........... (16,670) (27,900) (13,012)
-------- -------- --------
Net increase (decrease) in cash and cash
equivalents.................................... (6,538) (1,786) 10,961
Cash and cash equivalents, beginning of year.... 10,182 11,968 1,007
-------- -------- --------
Cash and cash equivalents, end of year.......... $ 3,644 $ 10,182 $ 11,968
======== ======== ========
Supplemental cash flow information:
Cash paid for interest.......................... $ 221 $ 128 $ 134
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-25
<PAGE>
KAISER-HILL COMPANY, LLC AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Organization
Kaiser-Hill Company, LLC (the "Company") was formed on October 24, 1994.
The principal business of the Company is to procure, execute, deliver, and
perform under a five-year contract, commencing July 1, 1995, with the
Department of Energy ("DOE") to manage the programs and operate the DOE
facilities at Rocky Flats Environmental Technology Site ("RFETS") in Golden,
Colorado ("DOE contract"). The mission of the RFETS is directed toward cleanup,
deactivation, and preparation for decontamination and disposition of these DOE
facilities.
The Company's contract will expire on June 30, 2000. The DOE is currently
considering its options which could include an extension of the Company's
contract or re-bid under a competitive process. While the Company believes that
its relationship with the DOE is good, the outcome will not be finalized until
after the release of these financial statements.
At December 31, 1998, the Company employed 1,439 hourly workers and 321
salaried workers. Approximately 93% of the hourly employees are represented by
United Steel Works of America (the "Union") under a collective bargaining
agreement which expires on October 3, 2001.
The Company maintains its cash accounts primarily with banks located in
Colorado, New York and North Carolina. The total cash balances are insured by
the FDIC up to $100,000 per bank. The Company had cash balances on deposit with
one Colorado bank in eight accounts at December 31, 1998 and 1997.
The Company is a limited liability company owned equally by ICF Kaiser
Government Programs, Inc., a wholly owned subsidiary of ICF Kaiser
International, Inc. ("ICF Kaiser"), and CH2M Hill Constructors, Inc., an
indirect wholly owned subsidiary of CH2M Hill Companies, Ltd. ("CH2M Hill")
(collectively, the "Members"). Net profits and/or losses are allocated equally
to the Members, except for the 1994 bid and proposal costs which were allocated
to the Members based upon the actual amount incurred by such Members.
Distributions of Company earnings are allocated equally to the Members, except
for the 1996 distribution which adjusted the Members' equity balances for the
1994 bid and proposal costs.
2. Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements include the wholly owned subsidiary
of the Company, Kaiser-Hill Funding Company, LLC. All intercompany accounts and
transactions have been eliminated in the consolidated financial statements.
Revenue Recognition
Revenue is recognized using the percentage of completion method whereby
revenue is accrued in an amount equal to cost plus management's best estimate
of base fee, performance based incentive fees and cost reduction proposal fees
to be received.
Statements of Cash Flows
For purposes of the statements of cash flows, the Company considers cash in
checking and short-term investments with original maturities of three months or
less to be cash and cash equivalents.
Organization Costs and New Accounting Policy
Organization costs are nonreimbursable costs, including legal, consulting,
financing and pre-transition costs incurred by the Company prior to the
commencement of the DOE contract, recorded at historical
F-26
<PAGE>
KAISER-HILL COMPANY, LLC AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
cost and amortized on a straight line basis over five years. Amortization
expense was $787,000, $627,000 and $764,000 for the years ended December 31,
1998, 1997 and 1996, respectively.
In April 1998, the American Institute of Certified Public Accountants
issued Statement of Position 98-5 ("SOP 98-5"), Reporting on the Costs of
Start-Up Activities, which states that costs of start-up activities, including
organization costs, should be expensed as incurred. This statement is effective
for fiscal years beginning after December 15, 1998, and the initial adoption of
SOP 98-5 should be reported as a cumulative effect of a change in accounting
principle. Management believes that the Company's adoption of this new
accounting policy will result in costs of $1,004,000 to be written off in 1999.
Income Taxes
The financial statements do not include a provision for income taxes
because the Company is treated as a partnership for income tax purposes and
does not incur federal or state income taxes. Instead, its earnings and losses
are included in the Members' separate income tax returns.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
3. Related Party Transactions
In 1998 and 1997, the Members were subcontracted by the Company to perform
certain tasks under the DOE contract. The "Payable to Members" in the
accompanying balance sheets as of December 31, 1998 and 1997 consists of
$742,000 and $1,742,000, respectively, to ICF Kaiser and $-0- and $914,000,
respectively, to CH2M Hill for these subcontracted tasks. These payables are
non-interest bearing. The "Receivable from Member" in the accompanying balance
sheet as of December 31, 1998 consists of $396,000 due from CH2M Hill relating
to advance payment of general and administrative expenses, less operating
payables.
In addition, costs incurred related to work performed by ICF Kaiser and
CH2M Hill, the majority of which are reimbursable and billed under the DOE
contract in 1998 were approximately $3,600,000 and $960,000, respectively, in
1997 were approximately $2,600,000 and $1,100,000, respectively, and in 1996
were approximately $1,300,000 and $1,000,000, respectively.
4. Contract Receivables and Receivables Purchase Facility Agreement
Contract receivables as of December 31, 1998 and 1997 represent unbilled
receivables due under the DOE contract. Unbilled receivables result from
revenue that has been earned by the Company but not billed to the DOE as of the
end of the period. The unbilled receivables can be invoiced at contractually
defined intervals and milestones. Management anticipates that the unbilled
receivables will be billed and collected in less than one year.
The Company's trade receivables result primarily from its long-term
contract with the DOE. As a consequence, management believes that credit risk
is minimal.
F-27
<PAGE>
KAISER-HILL COMPANY, LLC AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
Through its wholly owned subsidiary, Kaiser-Hill Funding Company, LLC, the
Company has available at a financial institution a receivables purchase
facility agreement which provides temporary financing for the payment of the
Company's costs incurred under the DOE contract. This financing is utilized
throughout the year for periods of less than one month as, under the terms of
the DOE contract, the DOE must pay the Company's invoices within three days of
receipt. Contract receivables are collateral for the financed amount. The
maximum funding level for this agreement is $50,000,000, of which approximately
$50,000,000 and $27,000,000 were the unused portions at December 31, 1998 and
1997, respectively.
5. Contingencies
The Company's reimbursable costs are subject to audit in the ordinary
course of business by various U.S. Government agencies. The Company is not
presently aware of any significant costs which have been, or may be, disallowed
by any of these agencies.
6. Employee Benefit Plans
In accordance with the DOE contract, the Company sponsors several benefit
plans covering substantially all employees who meet length of service
requirements. These plans include the following defined benefit pension plans:
The Rocky Flats Multiple Employer Salaried Retirement Plan and the Kaiser-Hill
Retirement Plan for Hourly Production and Maintenance Employees. The Company
also sponsors the following defined contribution plans: Kaiser-Hill Company,
LLC Savings Plan for Hourly Employees, which includes no Company matching; and
Rocky Flats Multiple Employer Salaried Thrift Plan, which includes Company
matching. The Company contribution amounts for the Savings Plan/Thrift Plan
were approximately $413,000, $482,000 and $615,000 for 1998, 1997 and 1996,
respectively. No amounts were contributed to the Retirement Plans during 1998
and 1997 because the Plans were overfunded. In 1996, contributions of
$6,917,000 were made to the retirement plans.
The Company administers these benefit plans with benefits equivalent to the
RFETS contractor benefit plans maintained by the contractor that preceded the
Company at RFETS. Under the DOE contract, the Company recognizes the cost of
benefit plans when paid, and such costs are reimbursed by the DOE. Any excess
pension plan assets or unfunded pension plan liability which may currently
exist or is remaining at the end of the DOE contract is the responsibility of
the DOE.
F-28
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
24,227,530 Shares
CH2M HILL Companies, Ltd.
Common Stock
[CH2MHILL LOGO APPEARS HERE]
--------
PROSPECTUS
--------
, 1999
Prospective investors may rely only on the information contained in this
prospectus. CH2M HILL has not authorized anyone to provide prospective
investors with information different from that contained in this prospectus.
This prospectus is not an offer to sell nor is it seeking an offer to buy these
securities in any jurisdiction where the offer or sale is not permitted. The
information contained in this prospectus is correct only as of the date of this
prospectus, regardless of the time of delivery of this prospectus or any sale
of these securities.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution
Estimated expenses payable by CH2M HILL in connection with the sale of the
common stock offered hereby are as follows:
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee............ $ 29,029
Blue Sky fees and expenses..................................... 75,000
Legal fees and expenses........................................ 575,000
Accounting fees and expenses................................... 275,000
Directors' and Officers' liability insurance premium........... 110,000
Printing and engraving expenses................................ 100,000
Miscellaneous.................................................. 200,000
----------
Total........................................................ $1,364,029
==========
</TABLE>
Item 14. Indemnification of Directors and Officers
Under the Oregon Business Corporation Act (the "Act"), a corporation's
Articles of Incorporation may provide for the limitation of liability of
directors and indemnification of directors and officers under some
circumstances. In accordance with Oregon law, CH2M HILL's Restated Articles of
Incorporation provide that directors are not personally liable to the
corporation or its shareholders for monetary damages for conduct as a director,
except for any act or omission for which the elimination of liability is not
permitted under the Act. Section 60.047(2)(d) of the Act sets forth the
following actions for which limitation of liability is not permitted, including
(i) any breach of a director's duty of loyalty to the corporation or its
shareholders; (ii) acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of the law; (iii) any unlawful
distributions to shareholders; or (iv) any transaction from which the director
received an improper or illegal personal benefit.
CH2M HILL's Restated Bylaws allow it to indemnify any person who is or was
a party, or is threatened to be made a party, to any civil, administrative, or
criminal proceeding by reason of the fact that the person is or was a director
or officer of CH2M HILL or any of its subsidiaries, or is or was serving at
CH2M HILL's request as a director, officer, partner, agent, or employee of
another corporation or entity. The indemnification may include expenses,
including attorneys' fees, judgments, fines, and amounts paid in settlement,
actually and reasonably incurred by that person. Under the Section 60.391(1) of
the Act, indemnification is available if (i) the person acted in good faith;
(ii) the person reasonably believed the conduct was in the corporation's best
interests, or at least was not opposed to its best interests; and (iii) in the
case of a criminal proceeding, the person had no reasonable cause to believe
the conduct was unlawful. In addition, a person who is wholly successful, on
the merits or otherwise, in the defense of a proceeding in which the person was
a party because the person was a director, is entitled to indemnification for
expenses actually and reasonably incurred by the person in connection with the
proceeding.
CH2M HILL intends to purchase and pay the premium for insurance in respect
of claims against its directors and officers and in respect of losses for which
CH2M HILL may be required or permitted by law to indemnify such directors and
officers. The directors to be insured are the directors named herein and all
directors of CH2M HILL's subsidiaries. The officers to be insured are all
officers and assistant officers of CH2M HILL and its subsidiaries. CH2M HILL
does not expect to allocate or segregate the premium with regard to specific
subsidiaries or individual directors and officers.
II-1
<PAGE>
Item 15. Recent Sales of Unregistered Securities
As of December 31, 1997, CH2M HILL sold 783 shares of common stock to
Robert G. Card for $28,081.11 and 300 shares of common stock to Nancy R. Tuor
for $10,758.00. As of December 31, 1998, CH2M HILL sold 1,318 shares of common
stock to Robert G. Card for $50,373.96 and 184 shares of common stock to Nancy
R. Tuor for $7,032.48. Mr. Card and Ms. Tuor are former employees of CH2M HILL
who were key employee shareholders when employed by CH2M HILL and who currently
work for its affiliate, Kaiser-Hill Company, LLC. Mr. Card is also a director
of CH2M HILL. The issuance of such shares was exempt from registration under
Section 4(2) of the Securities Act of 1933, as amended, as a transaction by the
issuer not involving a public offering.
Item 16. Exhibits and Financial Statement Schedules
(a) Exhibits. The following is a list of exhibits to this Registration
Statement:
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S>
*3.1 Form of Restated Articles of Incorporation of CH2M HILL Companies,
Ltd.
*3.2 Form of Restated Bylaws of CH2M HILL Companies, Ltd.
**5.1 Opinion of Holme Roberts & Owen LLP with respect to legality of
securities being registered
**5.2 Opinion of Holland & Hart LLP with respect to compliance with
ERISA for the CH2M HILL Employee Stock Plan and the CH2M HILL
Retirement and Tax-Deferred Savings Plan
*10.1 Form of CH2M HILL Retirement and Tax-Deferred Savings Plan
*10.2 Form of CH2M HILL Employee Stock Plan
*10.3 CH2M HILL Companies, Ltd. 1999 Stock Option Plan
*10.4 Form of CH2M HILL Companies, Ltd. 1999 Payroll Deduction Stock
Purchase Plan
*10.5 Form of CH2M HILL Companies, Ltd. Pre-Tax Deferred Compensation
Plan
*10.6 Form of Trust Under CH2M HILL Companies, Ltd. Pre-Tax Deferred
Compensation Plan
*10.7 Form of CH2M HILL Companies, Ltd. After-Tax Deferred Compensation
Plan
*10.8 Form of Trust Under CH2M HIll Companies, Ltd. After-Tax Deferred
Compensastion Plan
*21 Subsidiaries of CH2M HILL Companies, Ltd.
*23.1 Consent of Arthur Andersen LLP
*23.2 Report of KPMG Peat Marwick LLP with respect to the financial
statements of CH2M Hill Industrial Design Corporation
*23.3 Consent of KPMG Peat Marwick LLP
**23.4 Consent of Holme Roberts & Owen LLP with respect to the legality
of the securities being registered (included in Exhibit 5.1)
**23.5 Consent of Holland & Hart LLP with respect to compliance with
ERISA for the CH2M HILL Employee Stock Plan and the CH2M Hill
Retirement and Tax-Deferred Savings Plan (included in Exhibit 5.2)
*24 Powers of Attorney (included on signature page)
*27 Financial Data Schedule
*99 Form of Internal Market Rules
</TABLE>
- --------
*Filed herewith.
**To be filed by amendment.
II-2
<PAGE>
(b) Financial Statement Schedules.
All schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission are not required under
the related instructions, are inapplicable and therefore have been omitted, or
the information required by the applicable schedule is included in the notes
to the consolidated financial statements.
Item 17. Undertakings
The undersigned hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement;
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933, as amended;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement; and
(iii) To include any material information with respect to the plan of
distribution not previously enclosed in the registration statement or any
material change to such information in the registration statement;
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof;
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of
the offering.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that any claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the
registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with
the securities being registered, the registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Act and will be governed by
the final adjudication of such issue.
For purposes of determining any liability under the Securities Act of 1933,
the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City and County of Denver, State
of Colorado, on the 15th day of March, 1999.
CH2M HILL Companies, Ltd.
/s/ Ralph R. Peterson
By: ____________________________________
Ralph R. Peterson
President and Chief Executive
Officer
In accordance with the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates stated. Each person whose signature appears below
does hereby make, constitute and appoint each of Philip G. Hall and Samuel H.
Iapalucci as such person's true and lawful attorney-in-fact and agent, with
full power of substitution, resubstitution and revocation to execute, deliver
and file with the Securities and Exchange Commission, for and on such person's
behalf, and in any and all capacities, a Registration Statement on Form S-1,
any and all amendments (including post-effective amendments) thereto and any
abbreviated registration statement in connection with this Registration
Statement pursuant to Rule 462(b) under the Securities Act of 1933, with all
exhibits thereto and other documents in connection therewith, granting unto
said attorneys-in-fact and agents full power and authority to do and perform
each and every act and thing requisite and necessary to be done as fully to all
intents and purposes as such person might or could do in person, hereby
ratifying and confirming all that said attorney-in-fact and agent or such
person's substitute or substitutes may lawfully do or cause to be done by
virtue hereof.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
* President and Chief February 12, 1999
______________________________________ Executive Officer
Ralph R. Peterson (Principal Executive
Officer)
* Chairman of the Board of February 12, 1999
______________________________________ Directors and Senior Vice
Philip G. Hall President
* Chief Financial Officer February 12, 1999
______________________________________ (Principal Financial and
Samuel H. Iapalucci Principal Accounting
Officer)
* Director February 12, 1999
______________________________________
Joseph A. Ahearn
* Director February 12, 1999
______________________________________
Robert G. Card
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
* Director February 12, 1999
______________________________________
Kenneth F. Durant
* Director February 12, 1999
______________________________________
Donald J. Evans
* Director February 12, 1999
______________________________________
James J. Ferris
* Director February 12, 1999
______________________________________
Jerry D. Geist
* Director February 12, 1999
______________________________________
Michael D. Kennedy
* Director February 12, 1999
______________________________________
Susan D. King
* Director February 12, 1999
______________________________________
Michael Y. Marcussen
* Director February 12, 1999
______________________________________
Barry L. Williams
By: /s/ Samuel H. Iapalucci
______________________________________
Samuel H. Iapalucci, as attorney-in-
fact
</TABLE>
II-5
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S>
*3.1 Form of Restated Articles of Incorporation of CH2M HILL Companies,
Ltd.
*3.2 Form of Restated Bylaws of CH2M HILL Companies, Ltd.
**5.1 Opinion of Holme Roberts & Owen LLP with respect to legality of
securities being registered
**5.2 Opinion of Holland & Hart LLP with respect to compliance with ERISA
for the CH2M HILL Employee Stock Plan and the CH2M HILL Retirement and
Tax-Deferred Savings Plan
*10.1 Form of CH2M HILL Retirement and Tax-Deferred Savings Plan
*10.2 Form of CH2M HILL Employee Stock Plan
*10.3 CH2M HILL Companies, Ltd. 1999 Stock Option Plan
*10.4 Form of CH2M HILL Companies, Ltd. 1999 Payroll Deduction Stock
Purchase Plan
*10.5 Form of CH2M HILL Companies, Ltd. Pre-Tax Deferred Compensation Plan
*10.6 Form of Trust Under CH2M HILL Companies, Ltd. Pre-Tax Deferred
Compensation Plan
*10.7 Form of CH2M HILL Companies, Ltd. After-Tax Deferred Compensation Plan
*10.8 Form of Trust Under CH2M HILL Companies, Ltd. After-Tax Deferred
Compensation Plan
*21 Subsidiaries of CH2M HILL Companies, Ltd.
*23.1 Consent of Arthur Andersen LLP
*23.2 Report of KPMG Peat Marwick LLP with respect to the financial
statements of CH2M HILL Industrial Design Corporation
*23.3 Consent of KPMG Peat Marwick LLP
**23.4 Consent of Holme Roberts & Owen LLP with respect to the legality of
the securities being registered (included in Exhibit 5.1)
**23.5 Consent of Holland & Hart LLP with respect to compliance with ERISA
for the CH2M HILL Employee Stock Plan and the CH2M HILL Retirement and
Tax-Deferred Savings Plan (included in Exhibit 5.2)
*24 Powers of Attorney (included on signature page)
*27 Financial Data Schedule
*99 Form of Internal Market Rules
</TABLE>
- --------
*Filed herewith.
**To be filed by amendment.
<PAGE>
Exhibit 3.1
RESTATED
ARTICLES OF INCORPORATION
OF
CH2M HILL COMPANIES, LTD.
Pursuant to the Oregon Business Corporation Act, CH2M HILL Companies, Ltd.
adopts the following Restated Articles of Incorporation which supersede the
heretofore existing Articles of Incorporation and all amendments thereto:
ARTICLE I
The name of this Corporation is CH2M HILL Companies, Ltd. and its duration
shall be perpetual.
ARTICLE II
The purpose for which the Corporation is organized is to conduct any lawful
activities for which corporations may be organized under Oregon law.
ARTICLE III
The aggregate number of shares which the Corporation shall have authority to
issue is 100,000,000 shares of voting Common Stock of the par value of $.01 per
share, and 50,000,000 shares of nonvoting Class A Preferred Stock of the par
value of $.02 per share.
The nonvoting Class A Preferred Stock shall have the following rights and
restrictions:
A. That, except as expressly provided by these Restated Articles of
Incorporation or as required by law, the Class A Preferred Stock shall not be
entitled to vote on any matter submitted to a vote at a meeting of
stockholders.
B. That upon liquidation, dissolution, or winding up of the Corporation, whether
voluntary or involuntary, the Class A Preferred Stock shall be entitled,
before any distribution is made to any Common Stockholder, to be paid the sum
of $.02 per share. In case the net assets of the Corporation are insufficient
to pay all holders of outstanding Class A Preferred Stock the amount to which
they are entitled, then the entire net assets of the Corporation shall be
distributed ratably to all holders of outstanding shares of Class A Preferred
Stock.
C. That the rights granted to said Class A Preferred Stock cannot be amended
except by affirmative vote of the holders of at least a majority of the
Common Stock voting as one class, and at least a majority of the Class A
Preferred Stock voting as one class.
D. The Board of Directors may, at any time, by majority vote, convert each
outstanding share of nonvoting Class A Preferred Stock into one share of
voting Common Stock without the consent of the holders of nonvoting Class A
Preferred Stock or voting Common Stock.
ARTICLE IV
No stockholder of this Corporation shall have any preemptive rights to purchase
any shares to be sold or issued by the Corporation, either of the presently
existing classes or a class established in the future whether the issuance be as
original sale or distribution or sale or distribution of treasury stock.
ARTICLE V
Voting rights of Common Stock are denied while such stock is held or has been
acquired in violation of any provision of these Restated Articles, the Restated
Bylaws, any stockholders agreement, benefit plan, any other Corporation document
or policy, or applicable law.
PAGE1
<PAGE>
ARTICLE VI
This Corporation shall have the right to purchase, take, receive, or otherwise
acquire its own stock to the extent and in any manner allowed under applicable
law.
Unless approved by the Board of Directors and a majority of shares entitled to
vote and represented at the meeting, the Corporation shall not sell or in any
other way transfer any of its stock to any person other than, directly or
indirectly such as through an employee benefit trust, an employee or director
of, or consultant to, the Corporation or any of its affiliates.
ARTICLE VII
The number of directors of the Corporation shall be no fewer than nine and no
more than thirteen, as specified from time to time by resolution of the Board of
Directors. Nine of the directors shall be employees of the Corporation or its
affiliates; any additional directors cannot be employees.
ARTICLE VIII
No director of the Corporation shall be personally liable to the Corporation or
its shareholders for monetary damages for conduct as a director, provided that
this Section shall not eliminate the liability of a director for any act or
omission for which such elimination of liability is not permitted under the
Oregon Business Corporation Act. No amendment of the Oregon Business Corporation
Act that further limits the acts or omissions for which elimination of liability
is permitted shall affect the liability of a director for any act or omission
which occurs prior to the effective date of the amendment.
ARTICLE IX
Any vacancy created by death, resignation, removal or incapacity of a director
may be filled by the affirmative vote of a majority of the remaining directors,
though less than a quorum of the Board of Directors, or by a sole remaining
director. A director appointed to fill a vacancy shall serve until the next
shareholders' meeting at which directors are elected. Any such vacancy not so
filled by the directors shall be filled by election, in accordance with the
provisions of the Restated Bylaws entitled "Nomination of Directors" and
"Election of Directors," at the next annual meeting of stockholders or at a
special meeting of stockholders called for that purpose.
Any directorship to be filled by reason of an increase in the specified number
of directors shall be filled by election, in accordance with the provisions of
the Restated Bylaws entitled "Nomination of Directors" and "Election of
Directors," at the next annual meeting of stockholders or at a special meeting
of stockholders called for that purpose.
To be elected as a director, a nominee must receive at least the number of votes
equal to a majority of the shares entitled to vote and represented at the
meeting.
ARTICLE X
The Board of Directors shall have the power to adopt, amend and repeal the
Restated Bylaws of the Corporation (except so far as the Restated Bylaws of the
Corporation adopted by the stockholders shall otherwise provide). The
Corporation's shareholders may amend or repeal the Corporation's Restated
Bylaws. The Corporation shall hold a special meeting of shareholders if the
holders of at least ten percent (10%) of all votes entitled to be cast on
amendment or repeal of the Restated Bylaws sign, date and deliver to the
Corporation's Secretary one or more written demands for such meeting.
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As restated by stockholder action on February 9, 1974, and as amended:
February 15, 1975
February 14, 1976
February 12, 1977
February 19, 1978
February 23, 1980
February 21, 1981
February 20, 1982
February 26, 1983
December 15, 1983
February 25, 1984
February 23, 1985
March 8, 1993
September 6, 1994
January 1, 1996
October 23, 1997
December 18, 1998
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Exhibit 3.2
RESTATED BYLAWS
OF
CH2M HILL COMPANIES, LTD.
ARTICLE I - OFFICES
The principal office of the Corporation shall be 6060 South Willow Drive,
Greenwood Village, Colorado 80111, or such other place as the Board of Directors
may designate. The Corporation may have offices in other states.
ARTICLE 2 -STOCKHOLDERS
Section 1 - Annual Meeting.
The annual regular meeting of stockholders to elect directors and transact other
business shall be held in May of each year at such hour and place as designated
by the Board of Directors. The Chairman of the Board may change the time of the
annual meeting, provided notice is given to the stockholders in accordance with
applicable law.
Section 2 - Special Meetings.
Special meetings of the stockholders may be called by the Chairman of the Board,
by the President, by three directors, or by the holders of at least one-tenth
(1/10) of the outstanding stock.
Section 3 - Notice of Meeting.
The Secretary or such person as may be designated by the Chairman of the Board,
the President, or persons calling special meetings shall give written notice to
all stockholders of any regular or special meeting, stating the location, time
and purpose or purposes of the meeting, at least ten (10) days but not more than
sixty (60) days prior to such meeting. Such notice shall be deemed delivered
when deposited in the United States mail addressed to the stockholder as the
address appears in the stock transfer books of the Corporation.
Section 4 - Voting Lists.
The Secretary or such other person as may be designated by the Chairman of the
Board, the President, or the Board of Directors shall within two business days
after notice is given for each meeting prepare a list of stockholders entitled
to vote at such meeting and the number of shares of stock held by each.
Section 5 - Quorum.
A majority of the outstanding stock of the Corporation entitled to vote on a
matter, represented in person or by proxy, shall constitute a quorum at any
meeting of stockholders with respect to that matter. Stockholders present at a
duly organized meeting may continue to transact business until adjournment,
notwithstanding the withdrawal of stockholders so as to leave less than a
quorum.
Section 6 - Proxies.
At all meetings of stockholders, a stockholder may vote by proxy executed in
writing by the stockholder or a duly authorized attorney-in-fact. Such proxy
shall be filed with the Secretary of the Corporation before or at the time of
the meeting. No proxy shall be valid after 11 months from the date of its
execution, unless otherwise provided in the proxy.
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Section 7 - Voting of Shares.
Except as provided in the Restated Articles of Incorporation, each outstanding
share entitled to vote shall be entitled to one vote upon each matter submitted
to a vote at a meeting of stockholders.
ARTICLE 3 - BOARD OF DIRECTORS
Section 1 - General Powers.
The business and affairs of the Corporation shall be managed by its Board of
Directors. Notwithstanding, the Board of Directors may delegate such authority
as it deems appropriate.
Section 2 - Number and Tenure.
The number of directors of the Corporation shall be no less than nine and no
more than thirteen, as specified from time to time by resolution of the Board of
Directors. Nine of the directors shall be employees of the Corporation or its
affiliates; any additional directors cannot be employees. No decrease in the
number of directors shall have the effect of shortening the term of any
incumbent director. The directors shall be elected to three-year staggered terms
by dividing the directors into three classes as equal in number as possible. At
each annual meeting the same number of directors shall be elected for a three-
year term as the number whose term expires.
Directors shall serve until their successors shall have been elected and
qualified. Directors need not be residents of the state of Oregon. Directors may
be reelected and there shall be no limit on the number of terms a director may
serve.
Section 3 - Nomination of Directors.
The Chairman of the Board, with the concurrence of the Board of Directors, shall
appoint a nominating committee for employee positions on the Board of Directors
by November 1 of each year, consisting of the President, two directors, and two
stockholders of the Corporation who are not directors. The Chairman of the Board
shall be the nonvoting Chairman of the nominating committee. This nominating
committee shall review the available candidates for the Board of Directors and
propose a nominee for each position to be filled, which shall be submitted to
the stockholders by not less than one hundred twenty (120) days prior to the
date of the annual meeting. Thereafter, thirty (30) days shall be allowed for
the additional nomination of candidates by petitions signed by stockholders
representing at least ten (10) percent of the shares of Common Stock
outstanding. Such petitions shall be submitted to the Secretary of the
Corporation. The Secretary shall notify all stockholders not less than ten (10)
days prior to the date set for the annual meeting of the names of those
additional persons nominated by petition.
Nonemployee director candidates (also known as outside directors) shall be
nominated by the Board of Directors. Nomination of additional outside director
candidates by petition will not be allowed. The Secretary shall notify all
stockholders not less than ten (10) days prior to the date set for the annual
meeting or the special meeting of the names of the outside director candidates
nominated by the Board of Directors.
In addition, nominations for the election of directors may be made at the annual
meeting by any stockholder entitled to vote in the election of directors
generally. However, any such stockholder may nominate one or more persons for
election as directors at a meeting only if such stockholder has given timely
notice in proper written form of his intent to make such nomination or
nominations. To be timely, a stockholder's notice must be delivered to or mailed
and received by the Secretary of the Corporation not later than one hundred
twenty (120) days prior to the anniversary date of the Corporation's notice of
annual meeting provided with respect to the previous year's annual meeting;
provided, however, that in the event that less than forty (40) days' notice or
prior public disclosure of the date of the meeting is given or made to
stockholders, notice by the stockholder to be timely must be received not later
than the close of business on the tenth (10th) day
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following the date on which such notice of the date of such meeting was mailed
or such public disclosure was made. To be in proper written form, a
stockholder's notice to the Secretary shall set forth: (i) the name and address
of the stockholder who intends to make the nomination and of the person or
persons to be nominated; (ii) a representation that the stockholder is a holder
of record of stock of the Corporation entitled to vote at such meeting and
intends to appear in person or by proxy at the meeting to nominate the person or
persons specified in the notice; (iii) a description of all arrangements or
understandings between the stockholder and each nominee and any other person or
persons (naming such person or persons) pursuant to which the nomination or
nominations are to be made by the stockholder; (iv) such other information
regarding each nominee proposed by such stockholder as would be required to be
included in a proxy statement filed pursuant to the proxy rules of the
Securities and Exchange Commission had the nominee been nominated, or intended
to be nominated, by the Board of Directors; and (v) the consent of each nominee
to serve as a director of the Corporation if so elected. The chairman of the
meeting may refuse to acknowledge the nomination at the annual meeting of any
person not made in compliance with the foregoing procedure. Except as provided
above, nomination of additional candidates from the floor at the stockholders'
meeting will not be accepted.
Section 4 - Election of Directors.
The nominees for directors shall be separated into a slate of employee
candidates and a slate of outside director candidates and shall be voted upon by
the stockholders. Except as restricted in the Restated Articles of
Incorporation, each stockholder shall have the right to vote, in person or by
proxy, the number of shares owned for as many nominees as there are directors to
be elected on each slate. To be elected, nominees must receive at least the
number of votes equal to a majority of the shares entitled to vote and
represented at the meeting.
If, after balloting, one or more directors' posts remain unfilled, the nominee
receiving the fewest votes on that slate shall be removed from the list of
nominees. Subsequent balloting will be held with each stockholder entitled to
vote casting a ballot, in person or by proxy, for as many nominees as there are
directors remaining to be elected. Such stockholders shall have the right to
vote (one vote per share) for each of the positions to be filled. Such process
shall be continued until all directors' positions are filled. If a tie vote
between two or more nominees results in an inconclusive election, e.g. two (2)
or more nominees receive the same number of votes and all nominees so tied
receive sufficient votes for election, but the number of nominees being so tied
exceeds the number of directorships to be filled, a separate runoff election
will be held between the tied nominees only.
Section 5 - Annual and Regular Meetings.
The regular annual meeting of the Board of Directors shall be held without other
notice than these Restated Bylaws immediately after the annual meeting of
stockholders. The Board of Directors may provide for other regular meetings to
be held elsewhere.
Section 6 - Special Meetings.
A special meeting of the Board of Directors may be called at the request of the
Chairman of the Board, the President, or any two directors. The persons
authorized to call such meetings of the Board of Directors may fix any place as
the place of meeting.
Section 7 - Notice.
Notice of any special meeting shall be given at least two days prior to the
meeting by personal delivery, telephone, mail, facsimile transmission or
telegram. If mailed, notice shall be deemed to be given on the third business
day after deposited in the United States mail addressed to the director at the
directors business address, with postage thereon prepaid. If by telegram, notice
shall be deemed to be given when the telegram is delivered to the telegraph
company. The attendance of a director at a meeting shall constitute a waiver of
notice of such meeting, except where a director attends a meeting for the
express purpose of objecting to the transaction of any business because the
meeting is not lawfully called or convened. Neither the business to be
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transacted at, nor the purpose of, any regular or special meeting of the Board
of Directors need be specified in the notice or waiver of notice of such
meeting.
Section 8 - Quorum.
A majority of directors shall constitute a quorum for the transaction of any
business. An affirmative vote of not less than a majority of the entire Board of
Directors is required for the Board to act for and on behalf of the Corporation,
except as may be otherwise specifically provided by statute, by the Restated
Articles of Incorporation, or by these Restated Bylaws.
Section 9 - Participation by Telephone.
Members of the Board of Directors may hold a board meeting by conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other. Participation in such a manner
shall constitute presence in person at the meeting.
Section 10 - Action Without a Meeting.
Any action that may be taken by the Board of Directors at a meeting may be taken
without a meeting if one or more consents in writing, setting forth the action
so to be taken, shall be signed by each of the directors. Such consent, which
shall have the same effect as a unanimous vote of the directors, shall be filed
with the minutes of the Corporation.
Section 11 - Vacancies and Increases.
Any vacancy created by death, resignation, removal or incapacity of a director
may be filled by the affirmative vote of a majority of the remaining directors,
though less than a quorum, or by a sole remaining director. A director appointed
to fill a vacancy shall serve until the next shareholders' meeting at which
directors are elected. Any such vacancy not so filled by the directors shall be
filled by election, in accordance with the provisions of the Restated Bylaws
entitled "Nomination of Directors" and "Election of Directors," at the next
annual meeting of stockholders or at a special meeting of stockholders called
for that purpose.
Any directorship to be filled by reason of an increase in the specified number
of directors (e.g., from nine directors to ten directors) shall be filled by
election, in accordance with the provisions of the Restated Bylaws entitled
"Nomination of Directors" and "Election of Directors," at the next annual
meeting of stockholders or at a special meeting of stockholders called for that
purpose.
Section 12 - Removal from Office.
An employee director shall no longer serve as a director effective upon the date
of termination of employment. However, a retired stockholder who does not
compete with the business of the Corporation may, upon approval of the majority
of the remaining directors, complete the term as an employee director;
thereafter, if re-elected, the director shall be an outside director. All or any
number of the directors may be removed, with or without cause, at a meeting of
the stockholders called expressly for that purpose, by a vote of the holders of
a majority of the shares then entitled to vote at an election of directors.
Section 13 - Presumption of Assent.
A director present at a meeting of the Board of Directors shall be presumed to
have assented to any action taken unless a dissent be recorded or unless a
written dissent is filed with the Secretary. The right to dissent shall not
apply to a director who voted in favor of the action.
ARTICLE 4 - OFFICERS
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Section 1 - Number.
The officers of the Corporation shall be a Chairman of the Board, a President,
one or more Vice Presidents, such Senior Vice Presidents, Executive Vice
Presidents or Assistant Vice Presidents as determined by the Board of Directors,
a Secretary, such Assistant Secretaries as may be determined by the Board of
Directors, a Treasurer, such Assistant Treasurers as may be determined by the
Board of Directors, and such other officers as may be determined by the Board of
Directors.
Section 2 - Election and Term of Office.
The officers of the Corporation shall be elected by a majority of the Board of
Directors at its regular annual meeting. If the election of officers shall not
then be held, such election shall be held as soon thereafter as convenient. Each
officer shall hold office until resignation, death, or removal. The Board of
Directors may authorize the President of the Corporation to appoint officers.
Any officer or agent of the Corporation may be removed by the Board of Directors
or the person appointing the officer or agent, whenever the best interests of
the Corporation, in the opinion of the Board of Directors or the person
appointing the officer or agent, will be served thereby.
Section 3 - Chairman of the Board.
The Chairman of the Board shall be a director of the Corporation and, subject to
the policies, duties and goals set by the Board of Directors, shall be
responsible for all duties incident to the office of Chairman.
Section 4 - President.
The President shall be the Corporation's chief executive officer and shall be
responsible for the general and active management of the business of the
Corporation, under the general direction of the Board of Directors. The
President shall perform all duties incident to the office of the President and
will carry out such other duties as the Board of Directors may determine. The
President shall vote the shares of stock of any other corporation that are held
by this Corporation, or appoint proxies for such purposes, unless other
provisions are made by the Board of Directors.
Section 5 - Vice Presidents.
The Vice Presidents shall perform such duties as the Chairman of the Board, the
President or the Board of Directors may designate. Any Vice President may sign
certificates for shares of stock of the Corporation and other documents
requiring a signature of the President. The Senior, Executive, and Assistant
Vice Presidents shall have such additional responsibilities as may be designated
by the Board of Directors.
Section 6 - Secretary.
The Secretary shall keep the minutes of the Stockholders' and Board of
Directors' meetings, provide notices as required, be custodian of the corporate
records and of the seal of the Corporation, and perform all duties incident to
the office of Secretary and such other duties as from time to time may be
assigned. The duties of the Secretary may be delegated to other persons by the
Board of Directors except as may be prohibited by this Article.
Section 7 - Treasurer.
The Treasurer shall perform all the duties incident to the office of the
Treasurer and such other duties as from time to time may be assigned by the
Chairman of the Board, the President, or the Board of Directors.
Section 8 - Assistant Secretaries and Assistant Treasurers.
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The Assistant Secretaries and Assistant Treasurers, in general, shall perform
such duties as shall be assigned to them by the Secretary or the Treasurer,
respectively, or by the Chairman of the Board, the President, or the Board of
Directors.
Section 9 - Salaries.
From time to time a Committee of the Board of Directors shall recommend to the
Board of Directors and the Board of Directors shall review and approve salaries
of the President, Chairman and such other officers as may be decided by the
Board of Directors. An officer who is a director may receive a salary.
ARTICLE 5 - CONTRACTS, LOANS, CHECKS, AND DEPOSITS
Section 1 - Contracts.
The Board of Directors may authorize any officer or officers, agent or agents,
or designated class of employees, to enter into any contract or execute and
deliver any instrument in the name of and on behalf of the Corporation and such
authority may be general or confined to specific instances.
Section 2 - Loans.
Loans and evidence of same shall not be contracted on behalf of the Corporation
unless authorized by a resolution of the Board of Directors. Such authority and
delegation of authority to bind the Corporation may be general or confined to
specific instances.
Section 3 - Checks, Drafts, etc.
All checks, drafts, or other orders for the payment of money, notes, or other
evidences of indebtedness issued in the name of the Corporation shall be signed
in such manner as shall from time to time be determined by resolution of the
Board of Directors.
Section 4 - Deposits.
All funds of the Corporation not otherwise employed shall be deposited from time
to time to the credit of the Corporation in such banks, trust companies, or
other depositories as the Board of Directors may select.
ARTICLE 6 - CERTIFICATES FOR STOCK AND THEIR TRANSFER
Section 1 - Certificates for Stock.
The Board of Directors may authorize the issue of shares without certificates.
If certificates representing stock of the Corporation are used, they shall be
consecutively numbered and in such form as shall be determined by the Board of
Directors or in accordance with these Bylaws. Such certificates shall be signed
as the Board of Directors may determine. The name and address of the person to
whom the shares represented thereby are issued, with the number of shares and
date of issue, shall be entered on the stock transfer books of the Corporation.
All certificates surrendered to the Corporation for transfer shall be canceled
and no new certificate shall be issued until the former certificate for a like
number of shares shall have been surrendered and canceled, except that in case
of lost, destroyed, or mutilated certificates a new one may be issued therefor
upon such terms and indemnity to the Corporation as the Board of Directors may
prescribe. Section 2 - Transfer of Stock.
Transfer of stock of the Corporation shall be made only on the stock transfer
books of the Corporation. Transfers will not be made in violation of these
Restated Bylaws, any stockholder agreement, benefit plan, any
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other Corporation document or policy, or applicable law. The name under which
shares stand on the books of the Corporation shall be deemed by the Corporation
to be the name of the owner thereof.
ARTICLE 7 - SPECIAL PROVISIONS RELATIVE TO STOCK
Section 1 - Ownership Policy.
The purpose of this Article is to define the policy of the Corporation to
maintain ownership of its stock by compatible persons actively contributing to
its success. This policy is based on the belief that stock ownership by
competent, loyal, contributing employees and directors of, and consultants to,
the Corporation and its affiliates will be of continuing benefit to the
Corporation.
Section 2 - Restrictions on Stock.
A. Corporation's Right to Repurchase upon Termination of Affiliation. As used
in this Article, "Stock" shall mean the Common Stock and any class or
series of Preferred Stock issued or to be issued by the Corporation. All
shares of Stock held of record by a person who is an employee or director
of, or a consultant to, the Corporation or any of its affiliates shall be
subject to the Corporation's right to repurchase all of such shares in the
event that such holder's affiliation with the Corporation as an employee,
director or consultant is terminated. Such right of repurchase upon
termination of affiliation shall also be applicable to all shares of Stock
which such person has the right to acquire subsequent to termination of
affiliation pursuant to any of the Corporation's employee benefit plans
(other than shares distributable to such person under any benefit plan
adopted by the Corporation or any of its affiliates which, by law or its
terms, prohibits the Corporation's right to repurchase shares issued
thereunder upon termination of affiliation) or pursuant to any option or
other contractual right to acquire shares of Stock which was outstanding at
the date of such termination of affiliation. An authorized leave of absence
approved in accordance with the Corporation's policy shall not constitute a
termination of affiliation for purposes of this subparagraph 'A'; provided,
--------
however, that the issuance of a formal personnel action notice by the
-------
Corporation's human resources department advising an employee that the
leave of absence is terminated shall constitute a termination of
affiliation for purposes of this subparagraph 'A'. The Corporation's right
of repurchase shall be exercised by mailing written notice to such holder
at his address of record on the Corporation's stock record books within
sixty (60) days following the termination of such affiliation, which notice
shall request delivery of certificates representing the shares of Stock,
duly endorsed in blank or to the Corporation, free and clear of all liens,
claims, charges and encumbrances of any kind whatsoever. If the Corporation
repurchases the shares, the price shall be the Formula Price (as
hereinafter defined) per share (i) on the date of such termination of
affiliation, in the case of shares held of record by such holder at that
date and shares issuable to such holder subsequent to that date pursuant to
any option or other contractual right to acquire shares of Stock which was
outstanding at that date; or (ii) on the date such shares are distributed
to such holder, in the case of shares distributable to such holder
subsequent to his termination of affiliation pursuant to any of the
Corporation's employee benefit plans. The Corporation shall, if it
exercises its right to repurchase such shares of Stock as provided in this
subparagraph 'A', pay for such shares in cash or promissory notes issued
within ninety (90) days after (i) the date of such termination of
affiliation (such ninety (90)-day period shall commence on such date of
termination of affiliation and shall not be extended by accrued vacation,
sick days or similar accruals), in the case of shares held of record by
such holder at that date and shares issuable to such holder subsequent to
that date pursuant to any option or other contractual right to acquire
shares of Stock which was outstanding at that date; or (ii) the date such
shares are distributed to such holder, in the case of shares distributable
to such holder subsequent to his termination of affiliation pursuant to any
of the Corporation's employee benefit plans. If the Corporation is unable
to make such payment directly to such holder, then the Corporation may
satisfy its obligation to make such payment by depositing the purchase
price in cash or promissory notes within such ninety (90) day period in an
account for the benefit of such holder and such shares of Stock shall
thereby be deemed to have been transferred to the Corporation and no longer
outstanding with all rights of such holder with regard to such shares
terminated. The Corporation and any holder of Stock may by
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contract mutually agree to extend the time period of the Corporation's right to
repurchase such holder's Stock, and to alter payment terms from those contained
in this subparagraph 'A'.
B. Corporation's Right of First Refusal. If at any time a holder of Stock
desires to sell any of such shares (other than through the limited market
maintained by the Corporation), such holder shall first give notice to the
Secretary of the Corporation containing:
(1) A statement signed by such holder notifying the Corporation that
such holder desires to sell shares of Stock and has received a bona
fide offer to purchase such shares.
(2) A statement signed by the intended purchaser containing:
a) the intended purchaser's full name, address and taxpayer
identification number;
b) the number of shares to be purchased;
C) the price per share to be paid;
d) other terms under which the purchase is intended to be
made; and
e) a representation that the offer, under the terms
specified, is bona fide.
(3) If the purchase price is payable in cash, in whole or in part, a
copy of a certified check, cashier's check or money order payable
to such holder from the purchaser in the aggregate amount of the
purchase price which is to be paid in cash.
The Corporation shall thereupon have an option exercisable within
fourteen (14) days of receipt of such notice by the Secretary to
purchase all, but not less than all, of the shares specified in the
notice at the offer price and upon the same terms as set forth in the
notice, accompanied by payment of the purchase price; provided, however,
-------- -------
that if the offer price is payable, in whole or in part, other than in
cash, the Corporation shall pay the equivalent value of any noncash
consideration as mutually agreed upon between the holder and the
Corporation. Such option shall be exercised by the Corporation by
mailing written notice to such holder at his address of record on the
Corporation's stock record books. In the event the Corporation does not
exercise such option, such holder may sell the shares specified in the
notice within thirty (30) days thereafter to the person, at the price
and upon the terms and conditions set forth therein. The holder may not
sell such shares to any other person, or at any different price, or on
any different terms without first re-offering such shares to the
Corporation. All shares sold pursuant to this subparagraph 'B' shall
continue to be subject to this Article 7, further transfers of the
shares can be made only in accordance with this Article 7 and each
purchaser is required to execute an agreement to be bound by the terms
of this Article 7.
C. Election of Rights by Corporation. If circumstances shall occur which would
ordinarily permit the Corporation to exercise its rights under either
subparagraphs 'A' or 'B' of this Article at a time when the Corporation's
rights under the other subparagraph have become and remain exercisable, the
Corporation in its sole discretion may elect which of such rights it shall
exercise. The Corporation may designate one or more nominees to purchase
any shares of Stock which it has the right to purchase pursuant to
subparagraphs 'A' or 'B' of this Article, in lieu of purchasing such shares
itself.
D. Other Transfers. Except for sales in the limited market maintained by the
Corporation and as provided in subparagraphs 'A' or 'B' of this Article,
no holder of shares of Stock may sell, assign, pledge, transfer or
otherwise dispose of or encumber any shares of Stock without the prior
written approval of the Corporation, and any attempt to so sell, assign,
pledge, transfer or otherwise dispose of or encumber such shares without
such prior approval shall be null and void. If any transfer of the
Corporation's Stock is (1) not a sale by an employee or director of, or
consultant to, the Corporation or (2) by a person who acquired such Stock
other than by purchase, directly or indirectly, from an
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employee or director of, or consultant to the Corporation, then the
Corporation is expressly authorized to condition its approval of such
transfer upon the transferee's agreement to hold such Stock subject to this
Article upon the termination of affiliation of the employee, director, or
consultant. All shares transferred with the Corporation's prior written
approval pursuant to this subparagraph 'D' shall continue to be subject to
this Article 7, further transfers of the shares can be made only in
accordance with this Article 7, and each transferee is required to execute
an agreement to be bound by the terms of this Article 7.
E. Definition of Formula Price. As used in this Article, "Formula Price" shall
mean the price determined pursuant to the formula adopted by the Board of
Directors of the Corporation for the purpose of determining the fair market
value of the Corporation's Stock, as such formula may be modified from time
to time by the Board of Directors.
F. Ownership Limit.
No person may own more than three hundred fifty thousand (350,000) shares
of Common Stock of the Corporation, excluding the person's beneficial
interest in any class or series of stock of the Corporation held by an
employee benefit trust.
ARTICLE 8 - FISCAL YEAR
The fiscal year of the Corporation shall begin on the first day of January and
end on the 31st day of December in each year or such other period as may be
determined by the Board of Directors.
ARTICLE 9 - DIVIDENDS
The Board of Directors may from time to time declare, and the Corporation may
pay, dividends on its outstanding stock in the manner and upon the terms and
conditions provided by law.
ARTICLE 10 - SEAL
The corporate seal shall be circular and have inscribed thereon the name of the
Corporation, the state of incorporation, and the words "Corporate Seal."
ARTICLE 11 - WAIVER OF NOTICE
Any notice required under these Restated Bylaws, by statute, or the Restated
Articles of Incorporation may be waived at any time in writing, signed by the
person entitled to such notice. Stockholders and directors may take action
without meeting if subsequent consent in writing is executed by the stockholders
or directors for said action. Attendance at meetings shall be a waiver of
notice.
ARTICLE 12 - AMENDMENTS
Subject to the provisions of the Restated Articles of Incorporation and Oregon
law, these Restated Bylaws may be altered, amended or repealed or new Bylaws may
be adopted by the stockholders or by the Board of Directors, when such power is
conferred upon the Board of Directors by the Restated Articles of Incorporation,
at any regular meeting of the Board of Directors, at any annual meeting of the
stockholders or
PAGE9
<PAGE>
at any special meeting of the Board of Directors or stockholders duly called for
that purpose if notice of such alteration, amendment, repeal or adoption of new
Bylaws is contained in the notice of such special meeting.
ARTICLE 13 - PARTIAL INVALIDITY - SAVING CLAUSE
Should any portion, section, paragraph, or part of these Restated Bylaws be held
invalid, the remainder of these Restated Bylaws shall remain valid and
enforceable.
ARTICLE 14 - INDEMNIFICATION
Section 1 - Indemnification of Officers and Directors.
To the extent permitted by Oregon law, the Corporation shall indemnify and hold
harmless each person now or hereafter serving as a director or officer of the
Corporation, or at the request of the Corporation now or hereafter serving as a
director, officer, employee, or agent of any other corporation, partnership,
joint venture, trust, or other enterprise of which the Corporation is a
stockholder, partner, trustee, owner, or creditor from and against any and all
liabilities and counsel fees, costs, and legal and other expenses (including,
without limitation, fines, penalties, judgments and amounts paid in settlement)
reasonably incurred or imposed in connection with or resulting from (i) any
claim, action, suit, or proceeding, whether civil, criminal or investigative, or
any appeal therefrom, in which the person may be or become involved or with
which the person may be threatened, as a party, or otherwise, by reason of the
person now or hereafter being or having heretofore been a director or officer of
the Corporation or a director, officer, employee or agent of such other
corporation, partnership, joint venture, trust, or other enterprise or by reason
of the person's alleged acts or omissions as a director, officer, employee, or
agent, as aforesaid, whether or not the person continues to be such at the time
such liabilities, fees, costs, or expenses shall have been incurred, and (ii)
any action, suit, or proceeding, or any appeal therefrom, brought by the person
to recover the indemnity provided for by this Article 14.
Section 2 - Exclusivity of Rights.
The right of indemnification provided for by this Article 14 shall not be deemed
exclusive of any other rights to which any director or officer may otherwise be
entitled, nor shall this Article 14 be deemed to exclude or limit any power that
the Corporation may lawfully exercise to provide any additional or other
indemnity or right for any director, officer, or other person.
Section 3 - Benefit.
The indemnification provided by this Article 14 shall inure to the benefit of
the heirs, executors, and administrators of any such director or officer.
As restated by stockholder action on February 9, 1974, and as amended:
February 15, 1975
February 14, 1976
February 12, 1977
February 18, 1978
February 23, 1980
February 21, 1981
February 20, 1982
February 26, 1983
December 15, 1983
February 25, 1984
February 23, 1985
March 8, 1993
September 6, 1994
January 1, 1996
October 23, 1997
PAGE10
<PAGE>
December 18, 1998
PAGE11
<PAGE>
Exhibit 10.1
FORM OF
CH2M HILL RETIREMENT AND TAX-DEFERRED
-------------------------------------
SAVINGS PLAN
-------------
(As Amended and Restated Effective January 1, 1999)
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
Article 1. Name, Effective Date, Purpose and Construction.............................. 1-1
1.1 Plan Name.......................................................................... 1-1
1.2 Effective Date..................................................................... 1-1
1.3 Purpose and History................................................................ 1-1
1.4 Construction....................................................................... 1-1
1.5 Employment Relationship Not Affected............................................... 1-2
1.6 Terminated Participants Not Affected............................................... 1-2
Article 2. Definitions................................................................. 2-1
2.1 Account............................................................................ 2-1
2.2 Adjustment Factor.................................................................. 2-1
2.3 Affiliated Employer................................................................ 2-1
2.4 Allowable Compensation............................................................. 2-1
2.5 Alternate Payee.................................................................... 2-2
2.6 Beneficiary........................................................................ 2-2
2.7 Board.............................................................................. 2-2
2.8 Break in Service................................................................... 2-2
2.9 Code............................................................................... 2-2
2.10 Company........................................................................... 2-2
2.11 Date of Hire...................................................................... 2-2
2.12 Deferred Retirement Date.......................................................... 2-2
2.13 Determination Date................................................................ 2-3
2.14 Disability........................................................................ 2-3
2.15 Eligible Employee................................................................. 2-3
2.16 Eligible Participant.............................................................. 2-3
2.17 Employee.......................................................................... 2-4
2.18 Employee Account.................................................................. 2-4
2.19 Employer.......................................................................... 2-4
2.20 Employer Account.................................................................. 2-4
2.21 Employer Stock.................................................................... 2-4
2.22 Employer Stock Fund............................................................... 2-4
2.23 Entry Date........................................................................ 2-4
2.24 ERISA............................................................................. 2-4
2.25 Fiscal Year....................................................................... 2-4
2.26 Forfeiture........................................................................ 2-4
2.27 GATT.............................................................................. 2-4
2.28 General Trust Fund................................................................ 2-4
2.29 Hour of Service................................................................... 2-4
2.30 Inactive Participant.............................................................. 2-5
2.31 Key Employee...................................................................... 2-5
2.32 Leased Employee................................................................... 2-6
2.33 Matching Account.................................................................. 2-6
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
2.34 Non-Elective Account.............................................................. 2-6
2.35 Member Employer................................................................... 2-6
2.36 Non-Key Employee.................................................................. 2-6
2.37 Normal Retirement Date............................................................ 2-6
2.38 OBRA '93.......................................................................... 2-6
2.39 Owner............................................................................. 2-6
2.40 Participant....................................................................... 2-6
2.41 Plan.............................................................................. 2-6
2.42 Plan Administrator................................................................ 2-7
2.43 Plan Compensation................................................................. 2-7
2.44 Profit Sharing Account............................................................ 2-7
2.45 Qualified Domestic Relations Order................................................ 2-8
2.46 Quarter........................................................................... 2-8
2.47 REA............................................................................... 2-8
2.48 Rollover Account.................................................................. 2-8
2.49 Salary Deferral Account........................................................... 2-8
2.50 SBJPA............................................................................. 2-8
2.51 Service........................................................................... 2-8
2.52 Spousal Consent................................................................... 2-8
2.53 Suspended Participant............................................................. 2-8
2.54 TEFRA............................................................................. 2-8
2.55 Testing Compensation.............................................................. 2-8
2.56 Top-Heavy Plan.................................................................... 2-9
2.57 TRA '86........................................................................... 2-10
2.58 Trust............................................................................. 2-10
2.59 Trust Agreement................................................................... 2-10
2.60 Trust Fund........................................................................ 2-10
2.61 Trustees.......................................................................... 2-10
2.62 USERRA............................................................................ 2-10
2.63 Valuation Date.................................................................... 2-10
2.64 List of Terms Defined Elsewhere................................................... 2-10
Article 3. Eligibility, Participation and Beneficiary Designation...................... 3-1
3.1 Definitions........................................................................ 3-1
3.2 Participation...................................................................... 3-1
3.3 Beneficiary Designation............................................................ 3-1
3.4 Change from Ineligible to Eligible Employee........................................ 3-2
3.5 Former Employee Rehired............................................................ 3-2
3.6 Trustees Determine Eligibility..................................................... 3-2
Article 4. Contributions............................................................... 4-1
4.1 Definitions........................................................................ 4-1
4.2 Employer Contributions............................................................. 4-4
4.3 Timing of, Limitations on, and Return of Employer Contributions.................... 4-6
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
4.4 Salary Deferral Contributions...................................................... 4-6
4.5 Non-Discrimination Tests for Elective Deferrals.................................... 4-7
4.6 Non-Discrimination Tests for Employer Matching Contributions....................... 4-10
4.7 Adjustment to Corrective Payments.................................................. 4-13
4.8 Overriding Limitations............................................................. 4-13
4.9 Record Requirements................................................................ 4-14
4.10 Rollover Contributions............................................................ 4-14
Article 5. Allocation of Contributions and Forfeitures................................. 5-1
5.1 Definitions........................................................................ 5-1
5.2 Allocation Methods................................................................. 5-3
5.3 Limitations on Annual Allocations.................................................. 5-4
5.4 Overall Limitation for Different Types of Plans.................................... 5-5
5.5 Restoration Procedures............................................................. 5-5
Article 6. Vesting of Accounts......................................................... 6-1
6.1 Automatic Vesting.................................................................. 6-1
6.2 Vesting Based on Service........................................................... 6-1
6.3 Years of Service for Vesting....................................................... 6-1
6.4 Forfeitures and Restorations....................................................... 6-2
6.5 No Divestment...................................................................... 6-3
6.6 Amendment to Vesting............................................................... 6-3
6.7 Lost Participants.................................................................. 6-3
Article 7. Participants' Accounts...................................................... 7-1
7.1 Separate Accounts.................................................................. 7-1
7.2 Determination of Value of Participant Accounts..................................... 7-1
7.3 Statement of Accounts.............................................................. 7-1
7.4 Valuation of Account When Payment Due.............................................. 7-1
Article 8. Distributions and Withdrawals............................................... 8-1
8.1 General............................................................................ 8-1
8.2 Administrative Rules............................................................... 8-1
8.3 Timing of Distributions............................................................ 8-1
8.4 Treatment of Deferred Amounts...................................................... 8-3
8.5 Methods of Distribution............................................................ 8-3
8.6 Distribution Upon Death of Participant............................................. 8-4
8.7 Distributions to Minors or Legally Incompetents.................................... 8-4
8.8 Tax Information To Be Provided..................................................... 8-4
8.9 In Service Withdrawals............................................................. 8-5
8.10 Limitations on Distributions Upon Plan Termination................................ 8-6
8.11 Direct Rollovers.................................................................. 8-7
</TABLE>
iii
<PAGE>
<TABLE>
<S> <C>
Article 9. Service.................................................................... 9-1
9.1 General Definitions............................................................... 9-1
9.2 Crediting of Hours Subject to DOL Regulation...................................... 9-2
9.3 Elapsed Time Service Definitions.................................................. 9-2
Article 10. Fiduciary Responsibility.................................................. 10-1
10.1 Named Fiduciaries................................................................ 10-1
10.2 Fiduciary Standards.............................................................. 10-1
10.3 Fiduciaries Liable for Breach of Duty............................................ 10-1
10.4 Fiduciary May Employ Agents...................................................... 10-1
10.5 Authority Outlined............................................................... 10-1
10.6 Fiduciaries Not to Engage in Prohibited Transactions............................. 10-2
10.7 Duties of Plan Administrator..................................................... 10-3
Article 11. Administration of the Plan................................................ 11-1
11.1 Selection of Trustees............................................................ 11-1
11.2 Trustees' Operating Rules........................................................ 11-1
11.3 Trustees' Administrative Authority............................................... 11-1
11.4 Trustees to Establish Funding Policy............................................. 11-1
11.5 Trustees May Retain Advisors..................................................... 11-1
11.6 Claims Procedure................................................................. 11-2
Article 12. Investments............................................................... 12-1
12.1 Investment Authority............................................................. 12-1
12.2 Use of Mutual or Commingled Funds Permitted...................................... 12-1
12.3 Trustees May Hold Necessary Cash................................................. 12-1
12.4 Appointment of Investment Manager................................................ 12-1
12.5 Loans to Participants or Beneficiaries........................................... 12-2
12.6 Separate Investment Funds........................................................ 12-4
Article 13. Trustee................................................................... 13-1
13.1 Trustees' Duties With Respect to Trust Assets.................................... 13-1
13.2 Indicia of Ownership Must Be in the United States................................ 13-1
13.3 Permissible Trustees' Actions.................................................... 13-1
13.4 Voting of Employer Stock......................................................... 13-1
13.5 Trustees' Fees for Services and Advisors Retained................................ 13-2
13.6 Annual Accounting and Asset Valuation............................................ 13-2
13.7 Trustee Removal or Resignation................................................... 13-2
13.8 Approval of Trustees' Accounting................................................. 13-2
13.9 Trust Not Terminated Upon Trustees' Removal or Resignation....................... 13-2
13.10 Trustees May Consult With Legal Counsel......................................... 13-3
13.11 Trustees Not Required to Verify Identification or Addresses..................... 13-3
</TABLE>
iv
<PAGE>
<TABLE>
<S> <C>
13.12 Individual Trustee Rules......................................................... 13-3
13.13 Indemnification of Trustees and Insurance........................................ 13-3
13.14 Income Tax Withholding........................................................... 13-3
Article 14. Amendment, Termination and Merger.......................................... 14-1
14.1 Trust Is Irrevocable.............................................................. 14-1
14.2 Employer May Amend Trust Agreement................................................ 14-1
14.3 Employer May Terminate Plan or Discontinue Matching and Profit
Sharing Contributions....................................................... 14-1
14.4 Timing of Plan Termination........................................................ 14-1
14.5 Action Required Upon Plan Termination............................................. 14-2
14.6 Non-Reversion of Assets........................................................... 14-2
14.7 Merger or Consolidation Cannot Reduce Benefits.................................... 14-2
14.8 Employer Contributions Conditioned Upon Initial Plan Approval..................... 14-2
Article 15. Assignments................................................................ 15-1
15.1 No Assignment..................................................................... 15-1
15.2 Qualified Domestic Relations Order Permitted...................................... 15-1
Article 16. Adoption of the Plan by Affiliated Employers............................... 16-1
16.1 Purpose........................................................................... 16-1
16.2 Conditions of Subscription Agreement.............................................. 16-1
16.3 Participation of Affiliated Employers............................................. 16-1
16.4 Termination of Member Employer's Participation.................................... 16-3
Article 17. Miscellaneous.............................................................. 17-1
17.1 Special Rule Relating to Veterans Reemployment Rights Under USERRA................ 17-1
</TABLE>
v
<PAGE>
CH2M HILL RETIREMENT AND TAX-DEFERRED SAVINGS PLAN
(As Amended and Restated Effective January 1, 1999)
THIS PLAN AND TRUST AGREEMENT is made and entered into by and between CH2M
HILL COMPANIES, LTD. (Employer) and FRED K. BERRY, SAMUEL H. IAPALUCCI, SHARON
SCHLECHTER, CLIFF THOMPSON, and STAN VINSON (Trustees).
Article 1.
Name, Effective Date, Purpose and Construction
1.1 Plan Name. The Plan set forth in this Agreement shall be designated
----------
as the CH2M HILL RETIREMENT AND TAX-DEFERRED SAVINGS PLAN.
1.2 Effective Date.
---------------
(a) In General. The Effective Date of this amended and restated Plan
-----------
and Trust Agreement shall be January 1, 1999.
(b) Specific Articles. Notwithstanding the above, certain Articles
------------------
within this Plan and Trust are effective as of the dates specified within those
Articles. The Articles providing for Employer Matching and Profit Sharing
Contributions are effective January 1, 1994, but only with respect to Member
Employers who have specifically adopted them.
1.3 Purpose and History.
--------------------
(a) Purpose. The Plan and Trust are intended to qualify as a Profit
--------
Sharing 401(k) Plan under Code Sections 401(a) and 501(a) and are created and
maintained for the exclusive benefit of Eligible Employees of the Employer and
their Beneficiaries to enable them to share in Employer profits, to provide
Eligible Employees with a means to accumulate retirement savings, to provide
retirement funds, and to provide benefits in the event of the death or
Disability of the Employee.
(b) History. The original Plan and Trust Agreement was first
-------
effective July 1, 1985, and was originally designated as the CH2M Hill Tax-
Deferred Savings Plan. This Plan and Trust Agreement is an amendment and
restatement of the Plan and Trust Agreement effective January 1, 1999.
(c) Purposes of Restatement. The principal purpose of this amendment
------------------------
and restatement is to comply with the requirements of SBJPA, GATT and USERRA and
all regulations in effect at the time of this amendment and restatement.
1.4 Construction. The following miscellaneous provisions shall apply in
-------------
the construction of this Trust Agreement:
1-1
<PAGE>
(a) State Jurisdiction. All matters respecting the validity, effect,
-------------------
interpretation and administration of this Plan shall be determined in accordance
with the laws of the State of Colorado except where preempted by ERISA or other
federal statutes.
(b) Gender. Wherever appropriate, words used in the singular may
-------
include the plural or the plural may be read as the singular, the masculine may
include the feminine, and the neuter may include both the masculine and the
feminine.
(c) Application of ERISA and Code References. All references to
---------------------------------------
sections of ERISA or the Code, or any regulations or rulings thereunder, shall
be deemed to refer to such sections as they may subsequently be modified,
amended, replaced or amplified by any federal statutes, regulations or rulings
of similar application and import enacted by the Government of the United States
or any duly authorized agency of the Government.
(d) Enforceable Provisions Remain Effective. If any provision of this
----------------------------------------
Plan and Trust shall be held by a court of competent jurisdiction to be invalid
or unenforceable, the remaining provisions of the Plan shall continue to be
fully effective.
(e) Headings. Headings are inserted for reference only and constitute
---------
no part of the construction of this Agreement.
1.5 Employment Relationship Not Affected. Nothing in the Plan or Trust
-------------------------------------
shall be deemed a contract between the Employer and any Employee, nor shall the
rights or obligations of the Employer or any Employee to continue or terminate
employment at any time be affected hereby.
1.6 Terminated Participants Not Affected. Notwithstanding anything to
-------------------------------------
the contrary herein, the rights and remedies, if any, of any person hereunder
shall be determined as of the date his participation ceased or the date he
ceased to be an Eligible Employee, whichever occurs first, and shall be based on
the terms and conditions of the Plan in effect on such date, without regard to
any changes made by Articles which have specific effective dates subsequent to
such date.
* * * * End of Article 1 * * * *
1-2
<PAGE>
Article 2.
Definitions
Definitions. Terms which are used only in a single Article (beginning with
------------
Article 3) are generally defined at the beginning of that Article. Article 2.58
lists the terms so defined. The following words and phrases are used throughout
this Trust Agreement and are defined below:
2.1 "Account" means the aggregate of all records maintained by the
-------
Trustees for purposes of determining a Participant's or Beneficiary's interest
in the Trust Fund and shall include the Employer Account and Employee Account,
as adjusted by such other amounts properly credited or debited to such Account.
Each subaccount is defined alphabetically in Article 2.
2.2 "Adjustment Factor" means the cost of living factor prescribed by the
-----------------
Secretary of the Treasury under Code Section 415(d) for years beginning after
December 31, 1987, as applied to such items and in such manner as the Secretary
shall provide. For purposes of the OBRA '93 annual compensation limit under
Code Section 401(a)(17), the Adjustment Factor shall be applied as provided in
Code Section 401(a)(17)(B) for calendar years after 1994.
2.3 "Affiliated Employer" means any corporation which is a member of a
-------------------
controlled group of corporations (as defined in Code Section 414(b)) which
includes the Employer, any trade or business (whether or not incorporated) which
is under common control (as defined in Code Section 414(c)) with the Employer,
any organization (whether or not incorporated) which is a member of an
affiliated service group (as defined in Code Section 414(m)) which includes the
Employer, and any other entity required to be aggregated with the Employer
pursuant to regulations under Code Section 414(o).
2.4 "Allowable Compensation" for purposes of determining the Top-Heavy
----------------------
minimum contributions, and for purposes of determining the limitations on
allocations pursuant to Article 5.3, means the total of all wages, salaries,
fees for professional services and other amounts paid by the Employer or an
Affiliated Employer during a Limitation Year to a Participant for services
actually rendered in the course of employment including (but not limited to)
bonuses, overtime, commissions and incentive compensation, but excluding
severance pay and amounts which are contributed to a retirement plan, deferred
compensation plan or other plan and which are not included as taxable income for
such year, or amounts which are not deemed to be income for current services
rendered such as amounts realized from the sale, exercise or exchange of
Employer Stock or stock options. Allowable Compensation shall not include
amounts which a Participant elected to have the Employer contribute on his
behalf for the Fiscal Year as a Salary Deferral Contribution under Article 4.4.
2-1
<PAGE>
Notwithstanding the foregoing, amounts earned in the Limitation Year but
paid during the first few weeks of the next year because of the timing of pay
periods and pay days may be included on a uniform and consistent basis in the
Allowable Compensation of all similarly situated Participants for the Limitation
Year. In addition, for Limitation Years beginning before December 31, 1991, the
requirement that the amounts earned in a Limitation Year be paid in the first
few weeks of the next year shall not apply.
Notwithstanding the foregoing, the amount determined above shall be reduced
by any amounts paid or reimbursed by the Employer and/or Affiliated Employer for
moving expenses incurred by the Participant, but only to the extent that it is
reasonable to believe that such expenses are deductible by the Participant under
Code Section 217.
Notwithstanding the foregoing, for Fiscal Years beginning on or after
January 1, 1998, Allowable Compensation shall include any elective deferral (as
defined in Section 402(g)(3) of the Code) and any amount which is contributed or
deferred by the Employer at the election of the Employee which is not includible
in the gross income of the Employee by reason of Section 125 or 457 of the Code.
2.5 "Alternate Payee" means any spouse, former spouse, child or other
---------------
dependent of a Participant recognized by a Qualified Domestic Relations Order as
having a right to receive all, or a portion of, a Participant's benefits under
the Plan.
2.6 "Beneficiary" means any person designated by a Participant to receive
-----------
benefits upon the death of such Participant, subject to the provisions of
Article 3.3.
2.7 "Board" means the Board of Directors of the Company.
-----
2.8 "Break in Service" means for purposes of Article 6, a Fiscal Year in
----------------
which an Employee of the Employer and an Affiliated Employer is credited with
500 or fewer Hours of Service.
2.9 "Code" means the Internal Revenue Code of 1986, as amended (and
----
regulations issued thereunder).
2.10 "Company" means CH2M HILL COMPANIES, LTD.
-------
2.11 "Date of Hire" means the date on which an Employee first performs an
------------
Hour of Service for the Employer or any Member Employer. For purposes of
applying the rules in Article 3.1 and Article 3.2 to determine an Eligible
Employee's Entry Date, the Date of Hire for any employee hired during the first
five days of January shall be deemed to be January 1.
2.12 "Deferred Retirement Date" means the date of actual retirement from
------------------------
the Employer by a Participant who remains in the employ of the Employer after
attaining his Normal Retirement Date.
2-2
<PAGE>
2.13 "Determination Date" means, with respect to any Fiscal Year, the last
------------------
day of the preceding Fiscal Year. If the Employer maintains two or more
qualified plans which have different fiscal years and which either must be
aggregated or which are allowed to be aggregated when determining top-heaviness
pursuant to this Trust Agreement, the Determination Date to be used for this
Plan for aggregation purposes shall be the Determination Date which falls within
the same calendar year as the determination dates for all such plans which are
required or permitted to be aggregated.
2.14 "Disability" means the permanent incapacity of a Participant, by
----------
reason of physical or mental illness, to perform his usual duties for the
Employer, resulting in termination of his service with the Employer. Disability
shall be determined by the Trustees in a uniform and nondiscriminatory manner
after consideration of such evidence as it may require, which shall include a
report of such physician or physicians as it may designate.
2.15 "Eligible Employee" has the meaning set forth in Article 3.1.
-----------------
2.16 "Eligible Participant" means:
--------------------
(a) For purposes of Employer Profit Sharing Contributions under
Article 4.2(a), (i) an Eligible Employee who completed at least 1,000 Hours of
Service in the Fiscal Year and who is an Employee and a Participant on the last
day of the Fiscal Year, or (ii) a Participant who was an Eligible Employee who
terminated employment during the Fiscal Year due to death or Disability, or
after reaching his Normal Retirement Date or after attaining age 55 and
completing five Years of Service; or (iii) a Participant who terminated
employment and was rehired during the Fiscal Year and who remained employed
until the end of the Fiscal Year at an annual rate of 1,000 Hours of Service or
more.
(b) For purposes of Employer Matching Contributions under Article
4.2(c), a Participant who was an Eligible Employee on the last day of the
Quarter, or a Participant who was an Eligible Employee who terminated employment
during the Quarter due to death or Disability, or after reaching his Normal
Retirement Date.
(c) In the event the Plan does not otherwise meet the coverage
requirements of Code Section 410(b) for a Fiscal Year, and to the extent the
Trustees determine it necessary to meet such requirements, each other Eligible
Employee who:
(i) Is a Participant at any time during the year, and/or
(ii) Completed a number of Hours of Service (as determined by the
Trustees) during the Fiscal Year, which is less than 1,000.
(d) Suspended Participants, but only for purposes of Article 4.1(a)
and (b).
2-3
<PAGE>
(e) Eligible Employees who were Participants at any time during the
Fiscal Year but did not meet the requirements of (a) or (b) above but only for
purposes of Article 4.1(a) and/or 4.1(b).
2.17 "Employee" means any person in the Service of the Employer including
--------
Leased Employees and officers, but excluding directors who are not in the
Employer's employ in any other capacity. Sub-categories of "Employee" are
defined alphabetically in Article 2.
2.18 "Employee Account" means that portion of an Account attributable to a
----------------
Participant's Salary Deferral Account and Rollover Account.
2.19 "Employer" means the Company, and such of its successors or assigns as
--------
may expressly adopt this Plan and Trust Agreement and agree in writing to
continue this Plan and Trust.
2.20 "Employer Account" means that portion of an Account attributable to
----------------
Employer contributions and Forfeitures. A Participant's Employer Account shall
include such Participant's Matching Account, Non-Elective Account and Profit
Sharing Account.
2.21 "Employer Stock" means shares of any classes of preferred or common,
--------------
voting or nonvoting, stock issued by the Employer.
2.22 "Employer Stock Fund" means that portion of the Trust Fund established
-------------------
by the Trustees for the investment of Employer Stock pursuant to Section 12.6.
2.23 "Entry Date" means, for purposes of Profit Sharing contributions, the
----------
first day of any month.
2.24 "ERISA" means the Employee Retirement Income Security Act of 1974 and
-----
regulations issued thereunder.
2.25 "Fiscal Year" means the accounting year of the Plan and Trust, which
-----------
is the 12-consecutive month period ending December 31.
2.26 "Forfeiture" is described in Article 6.4(a).
----------
2.27 "GATT" means the Uruguay Round Agreements Act, implementing Agreements
----
under the General Agreement on Tariffs and Trade.
2.28 "General Trust Fund" means that portion of the Trust Fund other than
------------------
property and income held as or for segregated Accounts or under separate
investment funds under the provisions of this Trust Agreement.
2.29 "Hour of Service" has the meaning set forth in Article 9.1(b).
---------------
2-4
<PAGE>
2.30 "Inactive Participant" means a Participant who remains an Employee,
--------------------
but who ceases to be an Eligible Employee because of a change in employment
status. Accounts of Inactive Participants shall share in allocations of
contributions and Forfeitures to the extent provided in Article 5, and such
Accounts shall continue to be adjusted by other amounts properly credited or
debited to such Accounts pursuant to Article 7. Inactive Participants shall not
be permitted to have Salary Deferral Contributions made on their behalf.
2.31 "Key Employee" means, with respect to a Fiscal Year, any Employee or
------------
former Employee (including any deceased Employee) who at any time during the
"testing period," consisting of the Fiscal Year containing the Determination
Date and the four preceding Fiscal Years (or, if the Plan has been in effect for
fewer than four Fiscal Years, for the number of preceding Fiscal Years since the
Plan's effective date), is or was:
(a) Officer. An officer of the Employer, or an Employee with the
--------
authority of an officer, with Testing Compensation of more than 50% of the
applicable dollar limit under Code Section 415(b)(1)(A) for the applicable
Fiscal Year. However, no more than 50 Employees (or if less, the greater of 3
Employees or 10% of the total number of Employees, including Leased Employees,
who performed services for the Employer at any time during the "testing period")
shall be treated as officers. In addition, such Employees who meet the
requirements of this paragraph and who had the largest annual Testing
Compensation from the Employer in any Fiscal Year during the "testing period"
shall first be counted as officers, without regard to whether they are Key
Employees for any other reason; or
(b) Owner.
------
(i) A 5% owner; or
(ii) A 1% owner with annual Testing Compensation from the
Employer for the applicable Fiscal Year of more than $150,000;
(iii) A 1/2% owner who (1) is one of the 10 Employees who have
the largest ownership interest in the Employer, (2) has annual Testing
Compensation from the Employer which is greater than the dollar limitation under
Code Section 415(c)(1)(A) for the applicable Fiscal Year, and (3) does not meet
the criteria in (i) or (ii). For purposes of this (iii), if two Employees have
the same ownership interest in the Employer during the "testing period," then
the Employee with the greater annual Testing Compensation from the Employer for
the Fiscal Year during which the ownership interest existed shall be considered
to have a larger ownership interest in the Employer.
(c) Beneficiary. A Beneficiary of a deceased Key Employee shall be
-----------
considered to be a Key Employee, and a Beneficiary of a deceased Non-Key
Employee shall be considered a Non-Key Employee. Notwithstanding the above, the
Trustees shall
2-5
<PAGE>
be guided by the Code in determining Key Employees for any Fiscal Year and shall
maintain records adequate to determine Key Employees for any Fiscal Year.
2.32 "Leased Employee," for Fiscal Years beginning before January 1, 1997,
---------------
means any individual who would not otherwise be considered an Employee but who
has provided services to the Employer of a type historically performed by
employees in the Employer's field of business, pursuant to an agreement between
the Employer and any other entity, on a substantially full-time basis for a
period of at least one year.
For Fiscal Years beginning on or after January 1, 1997, the term "Leased
Employee" means any person (other than an employee of the recipient) who
pursuant to an agreement between the recipient and any other person has
performed services for the recipient (or for the recipient and related persons
determined in accordance with Section 414(n)(6) of the Code) on a substantially
full time basis for a period of at least one (1) year and such services are
performed under the primary direction or control of the recipient.
However, Leased Employees will not be considered Employees if they
constitute less than 20% of the Employer's Non-Highly Compensated Employees as
defined in Code section 414(q) and if they are covered by a plan described in
Code Section 414(n)(5).
2.33 "Matching Account" means that portion of an Account attributable to
----------------
Employer Matching Contributions and attributable Forfeitures.
2.34 "Non-Elective Account" means that portion of an Account attributable
--------------------
to the Employer's Non-Elective contributions as provided in Article 4.5.
2.35 "Member Employer" shall mean the Employer and any Affiliated Employer
---------------
who adopts this Plan and Trust Agreement.
2.36 "Non-Key Employee" means any Employee who is not a Key Employee,
----------------
including Employees who are former Key Employees.
2.37 "Normal Retirement Date" means the date of a Participant's 65th
----------------------
birthday.
2.38 "OBRA '93" means the Omnibus Budget Reconciliation Act of 1993.
--------
2.39 "Owner" means any person who owns (within the meaning of Code Sections
-----
318 and 416(i)(1)(B)), or has owned within the four Fiscal Years prior to the
Fiscal Year under consideration, a portion of the outstanding stock or voting
power of the Employer. The ownership percentage of a "5%" Owner means greater
than a 5% interest, that of a "1%" Owner means greater than a 1% interest and
that of a "1/2%" Owner means greater than a 1/2% interest.
2-6
<PAGE>
2.40 "Participant" means any Employee or former Employee who has entered
-----------
the Plan in accordance with Article 3, and whose Account, if any, hereunder has
not subsequently been liquidated.
2.41 "Plan" means the Plan created by this Agreement.
----
2.42 "Plan Administrator" means the Trustees.
------------------
2.43 "Plan Compensation" for purposes of Salary Deferral Contributions for
-----------------
any Fiscal Year means all amounts paid by the Employer to an Eligible Employee
while a Participant with respect to services rendered during such Fiscal Year
including all amounts contributed by the Employer pursuant to salary reduction
agreement which are not includible in the Employee's gross income under Code
Section 125, 402(a)(8), 402(b) or 403(b). For purposes of determining the
amount of Matching Contributions to be allocated to an Employee under Article
4.2(c), an Employee's Plan Compensation for any Quarter shall equal his basic
hourly rate of pay on the last day of the Quarter times the number of regular
work hours for such Quarter. For purposes of Profit Sharing contributions, an
Employee's Plan Compensation for any Fiscal Year shall equal his basic hourly
rate of pay on the last day of the year, times the lesser of:
(i) the number of regular work hours for such year after his
Entry Date, or
(ii) the number of Hours of Service for which he was paid during
such year while he was a Participant and an Eligible Employee.
Periods of disability during which the Participant is eligible to receive
Disability benefits under a plan maintained by the Employer or Affiliated
Employer, or would have been eligible if covered by such plan, and periods of
unpaid leave of absence shall be excluded in determining the multiplier in (i)
and (ii) above.
Notwithstanding the above, Plan Compensation shall not exceed $200,000,
multiplied by the Adjustment Factor. For Fiscal Years beginning on or after
January 1, 1994, Plan Compensation shall not exceed OBRA '93 annual compensation
limit of $150,000, multiplied by the Adjustment Factor.
The total of the Plan Compensation received by (1) a Highly Compensated
Employee (as defined in Article 4.1) who is one of the 10 most Highly
Compensated Employees, and/or a 5% Owner, (2) his spouse, and (3) his lineal
descendants who have not attained the age of 19 by the end of the Fiscal Year,
shall not exceed $200,000 ($150,000 for Fiscal Years beginning on or after
January 1, 1994) multiplied by the Adjustment Factor. For Fiscal Years
beginning on or after January 1, 1997, the limitations of this paragraph shall
be applied without regard to sections (2) and (3).
Notwithstanding the above, for Fiscal Years beginning on or after January
1, 1997, Plan Compensation for any owner-employee as defined in Section
401(c)(3) shall
2-7
<PAGE>
include only earned income of such owner-employee that is derived from the trade
or business with respect to which this Plan is established.
2.44 "Profit Sharing Account" means that portion of an Account resulting
----------------------
from Employer Profit Sharing Contributions and attributable Forfeitures.
2.45 "Qualified Domestic Relations Order" ("QDRO") has the meaning set
--------------------------------------------
forth in Code Section 414(p).
2.46 "Quarter" means a calendar year quarter ending on March 31, June 30,
-------
September 30 or December 31.
2.47 "REA" means the Retirement Equity Act of 1984.
---
2.48 "Rollover Account" means that portion of an Account attributable to an
----------------
Employee's rollover contributions and to the direct transfer of benefits to this
Plan from another qualified plan on an Employee's behalf.
2.49 "Salary Deferral Account" means that portion of an Account
-----------------------
attributable to Salary Deferral Contributions.
2.50 "SBJPA" means the Small Business Job Protection Act of 1996.
-----
2.51 "Service" has the meaning set forth in Article 9.
-------
2.52 "Spousal Consent" means the revocable written consent of the
---------------
Participant's spouse to an action taken by the Participant hereunder which
requires such consent under the terms of the Plan; provided that:
(i) Such consent shall acknowledge the Beneficiary designated
by the Participant and the effect of such consent;
(ii) Any change in the designated Beneficiary, other than to
make the spouse the Beneficiary of 100% of the Participant's vested Account,
shall require a new spousal consent;
(iii) Such consent shall be effective only with respect to that
spouse;
(iv) Such consent shall be witnessed by a notary public; and
(v) Such written consent shall not be required if it is
established to the satisfaction of a Plan representative that such consent
cannot be obtained because (1) there is no spouse or, (2) the spouse cannot be
located, or (3) such other circumstances exist as may be prescribed by
applicable regulations.
2-8
<PAGE>
2.53 "Suspended Participant" means a Participant who has been suspended
---------------------
from deferring amounts to his Salary Deferral Account because he made a hardship
withdrawal under the provisions of Article 8.
2.54 "TEFRA" means the Tax Equity and Fiscal Responsibility Act of 1982.
-----
2.55 "Testing Compensation" for purposes of determining (1) whether an
--------------------
Employee is a Key Employee, (2) whether an Employee is a Highly Compensated
Employee, and (3) each Participant's Contribution Percentage and Deferral
Percentage pursuant to Article 4.1(c) and 4.1(d) means Allowable Compensation,
except that:
(a) Amounts contributed by the Employer pursuant to a salary reduction
agreement which are not includible in the Employee's income under Code Section
125, 402(e)(3), 402(h) or 403(b) shall be included.
(b) Amounts attributable to periods during which an individual was not
eligible to be a Participant shall be excluded for purposes of determining his
Contribution Percentage under Article 4.1(c) and Article 4.1(d).
Testing Compensation shall not exceed $200,000, multiplied by the
Adjustment Factor. For Fiscal Years beginning on or after January 1, 1994,
Testing Compensation shall not exceed the OBRA '93 limit of $150,000, multiplied
by the Adjustment Factor.
The total of the Testing Compensation received by (1) a Highly Compensated
Employee in a group consisting of the 10 most Highly Compensated Employees
and/or a 5% Owner and (2) his spouse, and (3) his lineal descendants who have
not attained the age of 19 by the end of the Fiscal Year, shall not exceed
$200,000 ($150,000 for Fiscal Years beginning on or after January 1, 1994),
multiplied by the Adjustment Factor. For Fiscal Years beginning on or after
January 1, 1997, the limitations of this paragraph shall be applied without
regard to sections (2) and (3).
2.56 "Top-Heavy Plan" means the Plan during each Fiscal Year in which the
--------------
aggregate value of the Accounts of Key Employees exceeds 60% of the aggregate
value of all Accounts under the Plan as of the Determination Date for such
Fiscal Year. For purposes of determining the value of Employees' Accounts in the
Plan, the following shall be excluded: (1) rollover contributions from a non-
related employer; (2) the Accounts of Participants who have not performed any
services for the Employer within the five year period ending on the
Determination Date; and (3) the Account of any individual who was a Key Employee
with respect to the Plan for any prior Fiscal Year but is not a Key Employee
with respect to the Plan for the applicable Fiscal Year. For purposes of
determining the aggregate value of Accounts and/or accrued benefits under this
Article, distributions made within a 5 year period ending on the Determination
Date shall be included to the extent required by applicable law and regulation.
(a) Required Aggregation to Determine Top-Heaviness. If a Key
--- ------------------------------------------------
Employee is a Participant in this Plan for any Fiscal Year and the Employer
maintains or
2-9
<PAGE>
has maintained any other plans (including terminated plans), (1) in which a Key
Employee is or was a participant within the 5 year period ending on the
Determination Date, or (2) which must be combined with this Plan in order to
meet the requirements of Code Sections 401(a)(4) or 410(b) for any Fiscal Year,
then this Plan's top-heaviness shall be determined for such Fiscal Year by
aggregating the Accounts and/or present value of accrued benefits of
participants in this Plan and all other such plans.
(b) Permissive Aggregation to Determine Top-Heaviness. If the
--------------------------------------------------
Employer maintains or has maintained any plans (including terminated plans)
other than one described in (a) above, the Trustees may aggregate the accounts
and/or present value of accrued benefits of participants in any such plan with
those of this Plan to determine whether this Plan is a Top-Heavy Plan for any
Fiscal Year, provided that the requirements of Code Sections 401(a)(4) and
410(b) would continue to be met by treating this Plan, any plan that must be
aggregated with the Plan under (a) above and any other plan referred to in this
sentence as one unit. In determining top-heaviness and the aggregate value of
Accounts and/or accrued benefits under this Article, the Trustees shall be
guided by the provisions of the Code, including but not limited to Code Section
416(g)(3)(B).
2.57 "TRA '86" means the Tax Reform Act of 1986.
-------
2.58 "Trust" means the legal entity created by this Trust Agreement as part
-----
of the Plan.
2.59 "Trust Agreement" means this Agreement.
---------------
2.60 "Trust Fund" means all property and income held by the Trustees under
----------
the Trust Agreement.
2.61 "Trustees" means FRED K. BERRY, SAMUEL H. IAPALUCCI, SHARON
--------
SCHLECHTER, CLIFF THOMPSON, and STAN VINSON, and any duly appointed successor,
as provided in Article 14.
2.62 "USERRA" means the Uniformed Services Employment and Reemployment
------
Rights Act of 1994.
2.63 "Valuation Date" means the last day of the year.
--------------
2.64 List of Terms Defined Elsewhere: Article
-------------------------------- -------
(a) "Annual Addition" 5.1
(b) "Annual Amount" 5.1
(c) "Annual Benefit" 5.1
(d) "Average Contribution Percentage" 4.1
(e) "Average Deferral Percentage" 4.1
(f) "Contribution Percentage" 4.1
(g) "Deferral Percentage" 4.1
2-10
<PAGE>
(h) "Defined Benefit Fraction" 5.1
(i) "Defined Contribution Fraction" 5.1
(j) "Dollar Limitation" 5.1
(k) "Eligibility Computation Fraction" 3.1
(l) "Eligible Employee" 3.1
(m) "Employer Matching Contributions" 4.1
(n) "Employer Profit Sharing Contributions" 4.1
(o) "Excess Contribution" 4.1
(p) "Excess Deferrals" 4.1
(q) "Excess Matching Contributions" 4.1
(r) "Family Group" 4.1
(s) "Highly Compensated Employee" 4.1
(t) "Limitation Account" 5.1
(u) "Limitation Year" 5.1
(v) "Limited Market" 17.2
(w) "Non-Highly Compensated Employee" 4.1
(x) "Percentage Limitation" 5.1
(y) "Projected Annual Benefits" 5.1
(z) "Salary Deferral Contributions" 4.1
(aa) "Social Security Normal Retirement Age" 5.1
(bb) "Super Top-Heavy" 5.1
(cc) "Trade Date" 17.2
(dd) "Transition Amount" 5.1
* * * * End of Article 2 * * * *
2-11
<PAGE>
Article 3.
Eligibility, Participation and Beneficiary Designation
3.1 Definitions.
------------
(a) "Eligible Employee" means any Employee, except an Employee who is
-----------------
a Leased Employee, who is classified as a temporary employee, or whose
compensation and conditions of employment are established by the terms of a
collective bargaining agreement to which the Employer is a party and which does
not specifically provide for coverage of such Employee under the Plan.
(b) "Eligibility Computation Period" means, for purposes of
------------------------------
Profit Sharing contributions, the 12 consecutive month period beginning with the
Employee's Date of Hire, and each Fiscal Year starting after the Employee's Date
of Hire.
3.2 Participation.
--------------
(a) Continuing Plan Participation. Each individual who was an
------------------------------
Eligible Employee and a Participant in the Plan immediately preceding the
effective date of this amendment and restatement shall continue to be a
Participant on such effective date.
(b) Plan Entry. Each other Eligible Employee shall become a
-----------
Participant in the Plan as follows:
(i) For purposes of Salary Deferral Contributions and Matching
Contributions:
For Employees of Industrial Design Corporation and Paragon
Structural Design, Inc., the first day of the first full pay
period coinciding with or next following the Employee's Date
of Hire;
For Employees of Operations Management International, Inc.,
the first day of the calendar month next following the
Employee's Date of Hire; and
For all other Employees, the Employee's Date of Hire, and
(ii) For purposes of Profit Sharing contributions, on the Entry
Date coinciding with or next following the last day of the Eligibility
Computation Period in which he completes 1,000 Hours of Service.
3.3 Beneficiary Designation.
------------------------
(a) Designation Procedure. Each Eligible Employee, upon becoming a
----------------------
Participant, shall designate a Beneficiary or Beneficiaries to receive benefits
under the
3-1
<PAGE>
Plan after his death. A Participant may change his Beneficiary designation at
any time. Each Beneficiary designation shall be in a form prescribed by the
Trustees and will be effective only when filed with the Trustees during the
Participant's lifetime. Each Beneficiary designation filed with the Trustees
will cancel all previously filed Beneficiary designations.
(b) Spousal Consent. In the event that a married Participant wishes
----------------
to designate a Beneficiary other than his spouse for any portion of his vested
Account, such designation shall include Spousal Consent.
(c) Lack of Designation. In the absence of a valid designation by an
--------------------
unmarried Participant or if no designated Beneficiary survives an unmarried
Participant, his interest shall be distributed to his estate. In the absence of
a valid designation by a married Participant or if no designated Beneficiary
survives a married Participant, his interest shall be distributed to his
surviving spouse, or if there is no surviving spouse, then to his estate.
3.4 Change from Ineligible to Eligible Employee. An Employee who is
--------------------------------------------
excluded under Article 3.1 for any period shall be eligible to participate on
the first date he is no longer excluded, provided that the requirements of
Article 3.2 have been satisfied, but not earlier than the Entry Date on which he
would have entered the Plan had he not been excluded under Article 3.1.
3.5 Former Employee Rehired. A former Employee who had completed the
------------------------
eligibility requirements of Article 3.2 with the Employer and who is reemployed
by the Employer shall become a Participant as of the date of reemployment as an
Eligible Employee, but not earlier than the Entry Date on which he would have
entered the Plan had his employment not terminated.
3.6 Trustees Determine Eligibility. Compliance with the eligibility
-------------------------------
requirements shall be determined by the Trustees in their capacity as Plan
Administrator.
* * * * End of Article 3 * * * *
3-2
<PAGE>
Article 4.
Contributions
4.1 Definitions.
------------
(a) "Average Contribution Percentage" ("ACP") means the average of the
---------------------------------------
Contribution Percentages of a group of Eligible Participants.
(b) "Average Deferral Percentage" ("ADP") means the average of the
------------------------------------
Deferral Percentages of a group of Eligible Participants.
(c) "Contribution Percentage" means the ratio (expressed as a
-----------------------
percentage) of (i) the Matching Contributions allocated to a Participant's
Accounts for such Fiscal Year, to (ii) his Testing Compensation for such Fiscal
Year. The determination and treatment of the Contribution Percentage of any
Participant shall satisfy such other requirements as may be prescribed by the
Secretary of the Treasury. Effective for Fiscal Years beginning on or after
January, 1, 1997 the Employer may elect whether to use data from the current
Fiscal Year or data from the previous Fiscal Year in determining the
Contribution Percentage of Non-HCEs, provided that is such an election is made,
it may not be changed except as provided by the Secretary of the Treasury,
except that if current year data was used to determine the Contribution
Percentage of Non-HCEs for the Fiscal Year beginning January 1, 1997, the
Employer may use prior year data to determine the Contribution Percentage of
Non-HCEs for the Fiscal Year beginning January 1, 1998 without obtaining
approval from the Secretary.
(d) "Deferral Percentage" means the ratio (expressed as a percentage)
-------------------
of (i) the contributions made under the Plan to a Participant's Salary Deferral
and Non-Elective Accounts for such Fiscal Year, to (ii) such Participant's
Testing Compensation for such Fiscal Year. The determination and treatment of
the Deferral Percentage of any Participant shall also satisfy such other
requirements as may be prescribed by the Secretary of the Treasury. Effective
for Fiscal Years beginning on or after January, 1, 1997, the Employer may elect
whether to use data from the current Fiscal Year or data from the previous
Fiscal Year in determining the Deferral Percentage of Non-HCEs, provided that is
such an election is made, it may not be changed except as provided by the
Secretary of the Treasury, except that if current year data was used to
determine the Deferral Percentage of Non-HCEs for the Fiscal Year beginning
January 1, 1997, the Employer may use prior year data to determine the Deferral
Percentage of Non-HCEs for the Fiscal Year beginning January 1, 1998 without
obtaining approval from the Secretary.
(e) "Employer Matching Contributions" means contributions made by the
-------------------------------
Employer to the Plan pursuant to Article 4.2(c).
(f) "Employer Profit Sharing Contributions" means contributions made
-------------------------------------
by the Employer to the Plan pursuant to Article 4.2(a).
4-1
<PAGE>
(g) "Excess Contributions" means Salary Deferral Contributions that
--------------------
exceed those permitted by the non-discrimination tests in Article 4.5.
(h) "Excess Deferrals" means Salary Deferral Contributions for a
----------------
calendar year that exceed the dollar limit provided under Article 4.4(a). If
Salary Deferral Contributions are made on behalf of a Participant under two or
more plans during a calendar year and the sum of these amounts exceed the dollar
limit in Article 4.4(a), then the Trustees shall establish a claims procedure so
that the Participant can designate the amounts and the Plans from which such
Excess Deferrals shall be returned. The Participant's claim shall be in
writing; shall be submitted to the Plan Administrator not later than the
following April 15/th/; shall specify the amount of the Participant's Excess
Deferrals for the preceding calendar year; and shall be accompanied by the
Participant's written statement that if such Excess Deferrals are not
distributed, the amounts deferred under this Plan and other plans or
arrangements described in Code Sections 401(k), 408(k), or 403(b), will exceed
the limit imposed on the Participant by Code Section 402(g) for the year in
which the deferral occurred.
(i) "Excess Matching Contributions" means Employer Matching
-----------------------------
Contributions that exceed those permitted by the non-discrimination tests in
Article 4.6.
(j) "Family Group" means a group of two or more Participants which
------------
includes a 5% Owner and/or one of the 10 most Highly Compensated Employees, and
one or more of his family members. For this purpose, a Participant's family
members include his spouse, his lineal ascendant and descendants and spouses of
such lineal ascendant and descendants.
(k) "Highly Compensated Employee ("HCE")"for Fiscal Years before
-----------------------------------
January 1, 1997 includes:
(i) A 5% Owner in the current or the preceding Fiscal Year;
(ii) An Employee whose Testing Compensation exceeds $75,000,
multiplied by the Adjustment Factor in the current or the preceding Fiscal Year;
(iii) An Employee (A) whose Testing Compensation exceeds $50,000,
multiplied by the Adjustment Factor in the current Fiscal Year, and (B) who is
currently a member of the Top Paid Group, or (C) who met both of the
requirements of (A) and (B) in the preceding Fiscal Year;
(iv) An officer described in Article 2.26(a). If no officer
meets the compensation requirement of Article 2.26(a) and this Article 4.1(h),
then the highest paid officer shall be treated as a Highly Compensated Employee
regardless of his Testing Compensation.
Notwithstanding the foregoing, an Employee who is not a 5% Owner in the
current or the preceding Fiscal Year, who is not in the top 100 Employees of the
Employer when ranked by Testing Compensation in the current Fiscal Year and who
was
4-2
<PAGE>
not a HCE in the preceding Fiscal Year will not be considered a HCE in the
current year. The Employer may elect to determine who is a HCE on the basis of
the calendar year coinciding with or ending within the current Fiscal Year. If
the Fiscal Year coincides with the calendar year, then this Article 4.1(h) will
apply only to the current Fiscal Year and not to the preceding Fiscal Year.
(l) "Highly Compensated Employee" ("HCE") for fiscal years beginning
-------------------------------------
on or after January 1, 1997 (except that, in determining whether an employee is
a Highly Compensated Employee in 1997, the following is treated as having been
in effect in 1996), the term "Highly Compensated Employee" shall include highly
compensated active Employees and highly compensated former Employees.
(i) A highly compensated active employee means any employee who
(1) was a 5% Owner of the Employer at any time during the
current or preceding Fiscal Year, or
(2) for the preceding Fiscal Year, (a) had Testing
Compensation from the Employer in excess of $80,000 (as adjusted by the
Secretary pursuant to Section 415(d) of the Code, except that the base period
shall be the calendar quarter ending September 30, 1996), and (b) if the
Employer elects the application of this clause for such preceding year, was in
the Top Paid group of Employees for such preceding year.
(ii) A former Employee shall be treated as a Highly Compensated
Employee if: (1) such Employee was a Highly Compensated Employee when such
Employee separated from service, or (2) such Employee was a Highly Compensated
Employee at any time after attaining age 55.
(m) "Non-Highly Compensated Employee" ("Non-HCE") means an Employee
-------------------------------------------
who is not a Highly Compensated Employee.
(n) "Salary Deferral Contributions" means contributions made to the
-----------------------------
Plan pursuant to Article 4.4.
(o) "Top Paid Group" for a Fiscal Year is equal to 20% of the total
--------------
number of Employees of the Employer for the Fiscal Year. In determining the
total number of Employees for such year, the following Employees may be
excluded:
(i) Those who have not completed six months of service at the
end of such year;
(ii) Those who normally work less than 17 1/2 hours per week;
(iii) Those who normally work less than six months per year;
4-3
<PAGE>
(iv) Those who have not reached their 21st birthday;
(v) Non-resident aliens; and
(vi) Collectively bargained Employees, provided that this
exclusion may be used only if at least 90% of the Employees of the Employer are
covered by bona fide collective bargaining agreements.
The Top Paid Group will be determined by listing all of the Employees of
the Employer (including those excluded above) in descending order by Testing
Compensation and selecting the 20% of the total number of Employees as
determined above who are the highest paid. An Employee may be in the Top Paid
Group even though he falls in one of the groups which have been excluded in
determining the number of Employees. The resolution of any ambiguity relating
to the determination of HCEs shall be based on IRS regulation 1.414(q).
4.2 Employer Contributions.
-----------------------
(a) Employer Profit Sharing Contributions. As of the last day of each
--------------------------------------
Fiscal Year, a Member Employer may make a Profit Sharing contribution to the
Trust for its own Employees in such amount, if any, as is determined by the
Member Employer. The Profit Sharing contribution shall be reduced by any Profit
Sharing contribution amounts in Limitation Accounts under Article 5,
attributable to Employees of such Member Employer. These contributions will be
allocated to such Member Employer's Participants' Profit Sharing Accounts as
provided in Article 5.2.
(b) Non-Elective Contributions. A Member Employer may make Non-
---------------------------
Elective contributions for its own Employees in accordance with Article 4.5(b),
which shall be allocated to its Participants' Non-Elective Accounts.
(c) Employer Matching Contributions. As of the last day of each
--------------------------------
Quarter, a Member Employer may make a Matching Contribution to the Trust for its
own Employees which will reduced by any Matching Contribution amounts in
Limitation Accounts under Article 5 attributable to Employees of such Member
Employer. Such Matching Contributions shall be allocated each Quarter to the
Matching Accounts of the Member Employer's Eligible Participants either (1) in
the proportion to the Participant's elected rate of Salary Deferral
Contributions for the Quarter, up to 3%, multiplied by the Participant's Plan
Compensation for the Quarter, or (2) effective July 1, 1995, as a uniform
percentage of a flat dollar amount of the Participant's Salary Deferral
Contributions for the Quarter.
(i) Notwithstanding the above, an Employee whose Salary Deferral
Contributions were stopped during the Fiscal Year due to the dollar limit under
Article 4.4(a) will be deemed to have an elected rate of Salary Deferral
Contributions in effect for the Quarter equal to his rate prior to reaching the
limit.
(ii) No Matching contribution amount shall knowingly be made:
4-4
<PAGE>
(1) on Excess Deferrals or Excess Contributions, or
(2) to the extent they would cause any non-discrimination test
under 401(m) or 401(a)(4) to fail.
(iii) The rate of the Matching Contribution shall be determined
annually by the Member Employer and announced before the beginning of the
applicable Fiscal Year.
(iv) Employer Matching Contributions may be made in cash or in
Employer Stock.
(d) Restoration Contribution. The Member Employer shall make the
------------------------
contributions required to restore the Accounts of its Participants as described
in Article 5.5 and Article 6. These contributions will be allocated in
accordance with their purpose.
(e) Top-Heavy Minimum Contribution. For any Fiscal Year during which
------------------------------
the Plan is a Top-Heavy Plan, the sum of the Member Employer's Profit Sharing
contributions, Non-Elective contributions, and Forfeitures allocated on behalf
of each of its Participants who is a Non-Key Employee, but is employed by the
Member Employer as an Eligible Employee on the last day of the Fiscal Year shall
not be less than the lesser of:
(i) 5% of the Allowable Compensation paid or accrued to such
Employee during the Fiscal Year; or
(ii) The highest percentage of Allowable Compensation which is
allocated during the Fiscal Year on behalf of any Key Employee in the aggregate:
(1) To his Employer Account under Article 5.2 of this Plan; and
(2) To his Salary Deferral Account under this Plan; and
(3) From contributions by the Employer to his account in any
other defined contribution plan.
To the extent that these minimum allocations are not provided by other
provisions of this Plan, the Employer shall make a minimum contribution in an
amount which is determined to meet the requirements of this Article 4.2(e),
which shall be allocated to the Accounts of Participants who are Non-Key
Employees to carry out the purpose of this Article.
4-5
<PAGE>
4.3 Timing of, Limitations on, and Return of Employer Contributions.
---------------------------------------------------------------
(a) Amount and Timing of Contributions. Employer contributions shall
-----------------------------------
not exceed an amount which is estimated to constitute the maximum allowable
deduction under Code Section 404(a). Employer contributions shall be paid to
the Trustee on or prior to the last day for filing the Member Employer's federal
income tax return for such year, including any extensions of time granted for
such filing. Contributions shall be made in cash.
(b) Return of Employer Contributions. If an amount is contributed by
---------------------------------
the Employer due to a mistake of fact, the Employer shall be entitled to recover
such amount within one year of the date such contribution is made. Unless
otherwise provided in a resolution of the Board, any amounts contributed by the
Employer which are disallowed as a deduction under Code Section 404 shall be
returned to the Employer within one year of the date such deduction is
disallowed. Trust income attributable to the amount to be recovered shall not
be paid to the Employer, but Trust loss attributable thereto shall reduce such
amount.
4.4 Salary Deferral Contributions.
------------------------------
(a) General Rules. Each Participant may elect in writing to have the
--------------
Employer make Salary Deferral Contributions on his behalf in an amount from 1%
to 15% of such Participant's Plan Compensation. Notwithstanding the foregoing,
effective January 1, 1987, no more than $7,000, multiplied by the Adjustment
Factor, of Salary Deferral Contributions may be made on behalf of any
Participant during any calendar year.
(b) Administrative Guidelines. The Trustees have the power to
--------------------------
establish uniform and nondiscriminatory rules and from time to time to modify or
change such rules governing the manner and method by which Salary Deferral
Contributions shall be made, as well as the manner and method by which Salary
Deferral Contributions may be changed or discontinued temporarily or
permanently. Participants who do not elect to begin making Salary Deferrals as
of the date their participation begins in accordance with Article 3.1(b)(i), can
begin making such contributions only as of any subsequent January 1, April 1,
July 1, or October 1. Participants who have stopped making Salary Deferral
Contributions can again begin making such contributions only as of any
subsequent January 1, April 1, July 1, or October 1. All Salary Deferral
Contributions shall be authorized by the Participant in writing, made by payroll
deduction, deducted from the Participant's Plan Compensation without reduction
for any taxes or withholding (except to the extent required by law or the
regulations) and paid over to the Trust by the Employer within a reasonable
period following the date of deduction, but in no event later than 90 days after
the date on which such salary would otherwise have been paid. All Salary
Deferral Contributions shall be credited to such Participant's Salary Deferral
Account and shall be treated as Employer contributions for purposes of their
deductibility and tax treatment under the Code.
4-6
<PAGE>
(c) Payment of Excess Deferrals. Notwithstanding any other provision
----------------------------
of the Plan, Excess Deferral Amounts plus any income or less any loss allocable
thereto, as determined under Article 4.7, may be paid to Participants who have
such Excess Deferrals for a calendar year no later than the following April
15/th/. If not paid by such date, these amounts must remain in the
Participant's Account until otherwise withdrawable or payable under the terms of
the Plan. Because of the double income tax treatment that a Participant will
encounter if these amounts are not returned to him by the following April
15/th/, the Trustees shall make every effort to meet this deadline.
4.5 Non-Discrimination Tests for Elective Deferrals.
------------------------------------------------
(a) General Rule. The Deferral Percentages for any Fiscal Year shall
-------------
satisfy the table below:
<TABLE>
<CAPTION>
Then, ADP of Eligible
If ADP of Eligible Participants Participants
Who are Non-HCEs is: Who are HCEs Cannot Exceed:
-------------------------------------------------------------------------------------
<S> <C>
(1) (2)
Less than 2% Two times column (1) ADP
2% but less than 8% Column (1) ADP plus 2%
8% or greater 1.25 times column (1) ADP
</TABLE>
(b) Family Aggregation. For Fiscal Years beginning before January 1,
-------------------
1997, a single Deferral Percentage shall apply to all members of a Family Group
and shall be determined by totaling the amounts credited to the Salary Deferral
Accounts of all members of the Family Group and dividing by the sum of the
Testing Compensation received by such members. This limitation shall not apply
for Fiscal Years beginning on or after January 1, 1997.
(c) Inclusion of Non-Elective Deferrals. Amounts allocated to a
------------------------------------
Participant's Non-Elective Account for a Fiscal Year may be included in
computing his Deferral Percentage.
(d) Participation in Multiple 401(k) Plans. The Deferral Percentage
---------------------------------------
for any Employee who is a Participant under two or more Code Section 401(k)
arrangements of the Employer shall be the sum of the Deferral Percentages for
such Employee under such arrangements.
(e) Aggregation of Plans. In the event that one or more other plans
---------------------
are aggregated with this Plan to satisfy Code Sections 401(a)(4) and 410(b), the
Deferral Percentages of Eligible Participants shall be determined as if all such
plans were a single plan. All such plans must have the same plan year.
Notwithstanding the foregoing, if Section 4.5(a) would otherwise not be met
for Fiscal Years commencing on or before December 31, 1991, the Trustees may
restructure the Plan into component plans based on employee groups in accordance
with Internal
4-7
<PAGE>
Revenue Service Proposed and Temporary Regulations 1.401(a)(4)-(9). Each such
component plan must meet the tests in this Article 4.5(a).
(f) Corrective Actions.
-------------------
(i) If the Salary Deferral Contributions for any Fiscal Year would
otherwise cause the Plan to fail to meet the non-discrimination tests of this
Article 4.5 then the Trustees may, at their discretion within the period
permitted by applicable law or regulation, take one or more of the following
actions, but only as necessary: (1) reduce Salary Deferral Contributions made
on behalf of Participants who are HCEs for the remainder of the Fiscal Year; or
(2) return Excess Contributions to the affected Participants in accordance with
Article 4.5(h).
(ii) A Member Employer may make a Non-Elective contribution for any
Fiscal Year for its own Employees. Such contribution shall be allocated to the
Non-Elective Accounts of a group of Eligible Participants who are Non-HCEs and
who are selected on a basis that is not prohibited by law or by regulation.
Each Participant who is entitled to share in such contribution for a Fiscal Year
shall receive an allocation in the same ratio to such contribution as his
Testing Compensation bears to the Testing Compensation of all those eligible for
such an allocation.
(iii) If the Trustees have restructured the Plan into component
plans in accordance with (e), the Trustees may take the actions in (f)(i) with
respect to the HCEs of any component plan which would not otherwise pass the
non-discrimination tests of Article 4.5 or the Employer may make a Non-Elective
contribution which shall be allocated in accordance with (f)(ii) but only to
Participants who are included in any component plan which would not otherwise
pass the non-discrimination tests of Article 4.5.
(g) Determination of Excess Contributions.
--------------------------------------
(i) The maximum Deferral Percentage for a Participant who is a HCE
is calculated by reducing the Deferral Percentage of the HCE with the highest
Deferral Percentage to the extent required to (1) enable the Plan to satisfy the
non-discrimination test in Article 4.5(a), or (2) cause such HCE's Deferral
Percentage to equal the Deferral Percentage of the HCE with the next highest
Deferral Percentage. This process will be repeated as necessary until the Plan
satisfies the non-discrimination test in Article 4.5(a).
(ii) The reduction of the Deferral Percentage of members of a Family
Group, if required under (i), shall be accomplished by making proportionate
reductions in the amounts allocated to the Salary Deferral Account of each
member of the Family Group.
(iii) A HCE's Excess Contribution is equal to the difference between
(1) the amount of contribution actually made under the Plan to his Salary
4-8
<PAGE>
Deferral Account for such Fiscal Year, and (2) the amount determined by
multiplying the maximum Deferral Percentage calculated in (i) by such HCE's
Testing Compensation.
(iv) If the Trustees have restructured the Plan into component plans
in accordance with (e), the computations in (j)(i), (ii) and (iii) shall be made
only for the HCEs of any component plan which does not otherwise meet the non-
discrimination tests of Article 4.5.
(h) Payment of Excess Contributions.
--------------------------------
(i) For Fiscal Years beginning before January 1, 1997, Excess
Contributions shall be distributed in proportion to the relevant Participants'
Elective Deferrals for the relevant Fiscal Year.
(ii) Effective for Fiscal Years beginning on or after January 1,
1997, any distribution of Excess Contributions for any Fiscal Year shall be made
to Highly Compensated Employees on the basis of the amount of contributions by,
or on behalf of, such Highly Compensated Employees. Excess Contributions will be
distributed according to the following procedures:
(1) The dollar amount of Excess Contributions is computed for
each affected Highly Compensated Employee in accordance with the provisions of
the Plan currently in effect.
(2) The Salary Deferral Contributions of the Highly Compensated
Employee with the highest dollar amount of Salary Deferral Contributions shall
be reduced until all Excess Contributions have been distributed or until such
Salary Deferral Contributions equal the dollar amount of Salary Deferral
Contributions made by the Highly Compensated Employee with the next highest
dollar amount of contributions, whichever comes first. This amount will be
distributed to the Highly Compensated Employee with the highest dollar amount of
Salary Deferral Contributions.
(3) This process shall be repeated until total Excess
Contributions are distributed.
(4) If these distributions are made, the Actual Deferral
Percentage is treated as meeting the nondiscrimination test of Section 401(k)(3)
of the Code regardless of whether the Actual Deferral Percentage, if
recalculated after distributions, would satisfy Section 401(k)(3) of the Code.
(5) The above procedures are used for the purposes of
recharacterizing excess contributions under Section 401(k)(8)(A)(ii) of the
Code.
(6) For purposes of Section 401(m)(9) of the Code, if a
corrective distribution of excess contributions has been made, or a
recharacterization
4-9
<PAGE>
has occurred, the Actual Deferral Percentage for Highly Compensated Employees is
deemed to be the largest amount permitted under Section 401(k)(3) of the Code.
(iii) Notwithstanding any other provision of the Plan, Excess
Contributions, plus any income or less any loss allocable thereto as determined
in Article 4.7, shall be paid in accordance with the following procedures:
(A) Excess Contributions for a Fiscal Year shall be paid to
Participants on whose behalf such Excess Contributions were made, no
later than the last day of the succeeding Fiscal Year.
(B) The Excess Contributions which would otherwise be paid
shall be reduced, in accordance with regulations, by any Excess
Deferral Amounts paid to the Participant.
(iv) Payments under this Article 4.5(h) shall be made from the
Participant's Salary Deferral Account.
4.6 Non-Discrimination Tests for Employer Matching Contributions.
-------------------------------------------------------------
(a) General Rule. Employer Matching Contributions for any Fiscal Year
-------------
shall satisfy the table below:
<TABLE>
<CAPTION>
Then, ACP of Eligible
If ACP of Eligible Participants Participants Who are HCEs
Who are Non-HCEs is: Cannot Exceed:
-------------------------------------------------------------------------
<S> <C>
(1) (2)
Less than 2% Two times column (1) ACP
2% but less than 8% Column (1) ACP plus 2%
8% or greater 1.25 times column (1) ACP
</TABLE>
(b) Family Aggregation. For Fiscal Years beginning before January 1,
-------------------
1997, a single Contribution Percentage shall apply to all members of a Family
Group and shall be determined by totalling the amounts credited to the Matching
Accounts of all members of the Family Group and dividing by the total of the
Testing Compensation received by such members. This limitation shall not apply
in Fiscal Years beginning on or after January 1, 1997.
(c) Inclusion of Non-Elective Contributions. Any amounts allocated to
----------------------------------------
a Participants' Non-Elective Accounts for a Fiscal Year and not used to meet the
tests in Article 4.5 shall be included in the Contribution Percentage.
(d) Aggregation of 401(m) Arrangements. The Contribution Percentage
-----------------------------------
for any Employee who is a Participant under two or more Code Section 401(m)
4-10
<PAGE>
arrangements of the Employer shall be the sum of the Contribution Percentages
for such Employee under such arrangements.
(e) Aggregation of Plans. In the event that one or more other plans
---------------------
are aggregated with this Plan to satisfy Code Sections 401(a)(4) and 410(b),
this Article 4.6 shall be applied by determining the Contribution Percentages of
Eligible Participants as if all such plans were a single plan. All such plans
must have the same plan year, starting with the Fiscal Year which commences in
1989.
(f) Component Plans. Notwithstanding the foregoing, if the Plan has
----------------
been restructured into component plans in accordance with Article 4.5(a)(v), the
same component plans must be used for purposes of this Article 4.6 and separate
tests performed for each component plan under Article 4.6(a) and (g). In a
similar fashion, corrective actions under (h) below, determination of the amount
of Excess Matching Contributions under (i) below and corrective payments under
(j) below shall apply only to HCEs of any component plans that do not meet the
tests in Article 4.6(a) and/or (g).
(g) Multiple Use of Alternative Limitation. If the provisions of
---------------------------------------
Articles 4.5 and 4.6 apply to one or more HCEs and if both the ADP and the ACP
of HCEs exceed the corresponding ADP and ACP of Non-HCEs multiplied by 1.25,
then an additional non-discrimination test must be met, as follows:
(i) The sum of the ADP and ACP of Eligible Participants who are HCEs
shall not exceed the sum of A & B; where A = 1.25 times the greater of the ADP
or the ACP of Eligible Participants who are Non-HCEs, and B = two time the
smaller of the ADP or ACP of Eligible Participants who are Non-HCEs or, if less,
two percent plus such smaller percentage.
(ii) The ACPs and ADPs used in this Article 4.6(b) shall be
determined after any corrective distributions have been made of Excess
Deferrals, Excess Contributions, and Excess Matching Contributions.
(iii) Notwithstanding the provisions of (i) above, the words
"greater" and "smaller" in (i) above may be transposed.
(h) Corrective Actions.
-------------------
(i) If the Matching Contributions for any Fiscal Year would otherwise
cause the Plan to fail to meet the non-discrimination tests of this Article 4.6,
the Trustees may at their discretion within the period permitted by applicable
law or regulation, take one or more of the following actions, but only as
necessary:
(A) Reduce Salary Deferral Contributions that would
otherwise be permitted for HCEs for the remainder of the Fiscal Year
and the Matching Contributions that would have been made based on such
Salary Deferral Contributions.
4-11
<PAGE>
(B) Pay any fully vested matching contributions to the
affected HCEs, as provided in Article 4.6(j).
(C) Forfeit as necessary any non-vested Matching
Contributions that were made on behalf of the affected HCEs.
(ii) If Salary Deferral Contributions for any year would otherwise
cause the Plan to fail to meet the multiple use of alternative limitation
provisions of (g) above, procedures similar to those detailed in Article 4.5(f),
(g) and (h) shall be used to bring the Plan into compliance with such
provisions. Any Salary Deferral Contributions which must be returned to
Participants pursuant to this Article 4.6(h) shall be considered Excess
Contributions for purposes of this Plan.
(i) Determination of the Amount of Excess Matching Contributions.
-------------------------------------------------------------
(i) The maximum Contribution Percentage for a Participant who is a
HCE is calculated by reducing the Contribution Percentage of the HCE with the
highest Contribution Percentage to the extent required to (1) enable the Plan to
satisfy the non-discrimination tests in Articles 4.6(a) and (g), or (2) cause
such HCE's Contribution Percentage to equal the Contribution Percentage of the
HCE with the next highest Contribution Percentage. This process will be
repeated, as necessary, until the Plan satisfies the non-discrimination tests in
Articles 4.6(a) and (g).
(ii) The reduction of the Contribution Percentage of members of a
Family Group, if required under (i), shall be accomplished by making
proportionate reductions in the Matching Contributions allocated to the Account
of each member of the Family Group.
(iii) A HCE's Excess Matching contribution is equal to the difference
between (1) the amount of Matching contribution actually made to his Account
under the Plan for such Fiscal Year and (2) the amount determined by multiplying
the maximum Contribution Percentage calculated in (i) above by such HCE's
Testing Compensation.
(j) Corrective Payments.
--------------------
(i) Effective for Fiscal Years beginning before January 1, 1997, any
distribution of Excess Matching Contributions for any Fiscal Year shall be made
to HCEs on the basis of the respective portions of such amounts attributable to
each of such Employees.
(ii) Effective for Fiscal Years beginning on or after January 1,
1997, any distribution of Excess Matching Contributions for any Fiscal Year
shall be made to Highly Compensated Employees on the basis of the amount of
contributions by, or on behalf of, such Highly Compensated Employees.
Forfeitures of Excess Matching Contributions may not be allocated to
Participants whose contributions are reduced
4-12
<PAGE>
under this Section. Excess Matching Contributions will be distributed according
to the following procedures:
(1) The dollar amount of Excess Matching Contributions is computed for
each affected Highly Compensated Employee in accordance with the provisions of
the Plan currently in effect.
(2) The Matching Contributions of the Highly Compensated Employee with
the highest dollar amount of Matching Contributions shall be reduced until all
Excess Matching Contributions have been distributed or until such Matching
Contributions equal the dollar amount of Matching Contributions of the Highly
Compensated Employee with the next highest dollar amount of contributions,
whichever comes first. This amount will be distributed to the Highly
Compensated Employee with the highest dollar amount of Matching Contributions.
(3) This process shall be repeated until total Excess Matching
Contributions are distributed.
(4) If these distributions are made, the Actual Contribution
Percentage is treated as meeting the nondiscrimination test of Section 401(m)(2)
of the Code regardless of whether the Actual Contribution Percentage, if
recalculated after distributions, would satisfy Section 401(m)(2) of the Code.
(5) For purposes of Section 401(m)(9) of the Code, if a corrective
distribution of Excess Matching Contributions has been made, the Actual
Contribution Percentage for Highly Compensated Employees is deemed to be the
largest amount permitted under Section 401(m)(2) of the Code.
Notwithstanding any other provisions of the Plan, Excess Matching
Contributions, plus any income and less any loss allocable thereto, as
determined under Article 4.5, shall be paid or forfeited in a nondiscriminatory
manner. Excess Matching Contributions shall be paid, if appropriate, to
Participants for whom such contributions have been made during a Fiscal Year, or
forfeited, if appropriate, no later than the last day of the succeeding Fiscal
Year. If such Matching Contributions are not vested, they will be forfeited.
If such Matching Contributions are vested, they will be paid to the Participant.
4.7 Adjustment to Corrective Payments. Excess Deferrals and Excess
----------------------------------
Contributions shall all be paid to the appropriate Participants, together with
an investment adjustment. Such adjustment shall be computed by the Trustees to
establish a proportionate crediting of Trust income or loss between the excess
amounts and the amounts which are not to be returned for the Fiscal Year in
which such excess occurred.
4.8 Overriding Limitations.
-----------------------
(a) Corrective Actions. When Salary Deferral Contributions made on
--- -------------------
behalf of Participants who are HCEs are reduced for the remainder of a Fiscal
Year, no
4-13
<PAGE>
Matching Contributions shall be made with respect to the Salary Deferral
Contributions not permitted because of such reduction.
(b) Excess Deferrals. When Excess Deferrals are paid to a
-----------------
Participant, any Matching Contributions that are attributable to such Excess
Deferrals shall be forfeited.
(c) Excess Contributions. When Excess Contributions are paid to a
---------------------
Participant, any Matching Contributions that are attributable to such Excess
Contributions shall be forfeited.
4.9 Record Requirements. The Trustees shall maintain such records as
--------------------
may be needed to prove that for each Fiscal Year commencing on or after January
1, 1987, the requirements of Article 4.5 and Article 4.6 are met.
4.10 Rollover Contributions.
-----------------------
(a) Rollover Contributions Permitted. The Trustees may accept a
---------------------------------
rollover contribution from an Employee who is or is to become a Participant, in
accordance with the subject to the limitations of applicable sections of the
Code.
(b) General Rules. A rollover contribution shall be made within 60
--------------
days of the Participant's receipt of the distribution (unless made as a Direct
Rollover) and shall not include any amounts contributed by the Employee, except
to the extent permitted by the Code and applicable regulations. An Employee may
be required to furnish evidence satisfactory to the Trustees that the amount to
be transferred meets all of the requirements.
(c) Rollovers Credited to Rollover Account. A rollover contribution
---------------------------------------
may be made in cash and shall be credited to such Rollover Account as of the
date such contribution is received. The Participant's Rollover Account shall be
fully vested and shall be valued pursuant to Article 7.
(d) Investment of Rollover Contributions. If a Participant makes a
-------------------------------------
rollover contribution to the Trust, the Trustee shall invest the contributions
as part of the Participant's Account in the Trust Fund.
4-14
<PAGE>
(e) Direct Transfer From Another Trust. The Trustees may accept on
-----------------------------------
behalf of any Participant, or Employee who is to become a Participant, the
direct transfer of amounts from any other trust qualified under Code Section
501(a), which is part of any plan qualified under Code Section 401(a). In no
event, however, may the Trustees accept a direct transfer from: (i) a defined
benefit pension plan, (ii) a defined contribution plan subject to the minimum
funding standards of Code Section 412, or (iii) any other defined contribution
plan to which the requirements of Code Section 401(a)(11)(A) apply with respect
to such Participant or Employee, unless such a direct transfer may be made under
applicable law and regulation without jeopardizing this Plan's exempt status
under Code Section 401(a)(11)(B).
* * * * End of Article 4 * * * *
4-15
<PAGE>
Article 5.
Allocation of Contributions and Forfeitures
5.1 Definitions.
------------
(a) "Annual Addition" means the sum for the Limitation Year to which
---------------
the allocation pertains (whether or not allocated in such year) of all Employer
and Employee contributions and Forfeitures allocated to the Participant's
Account in this Plan for such year and any other similar contributions to any
other defined contribution plan maintained by the Employer and an Affiliated
Employer, including Excess Contributions and Excess Matching Contributions
(regardless of when corrected or returned) and Excess Deferrals if not returned
or otherwise corrected by the April 15 following the calendar year in which
made.
Annual Addition also includes amounts allocated, for Fiscal Years
---------------
beginning after March 31, 1984, to a Participant's:
(i) Individual medical account (as defined in Code Section
415(l)) which is part of a defined benefit plan maintained by the Employer, for
purposes of the maximum dollar limit under Code Section 415(c)(1)(A); and
(ii) Separate account maintained for a Key Employee, to the extent
required by the Code, which is attributable to post-retirement medical or life
insurance benefits under a welfare benefit fund (as defined in Code Section
419A(d)) maintained by the Employer.
(b) "Annual Amount" means the lesser of 35% (1.4 x 25%) of the
-------------
Participant's Allowable Compensation (as defined in Article 2) for such
Limitation Year or $37,500 (125% of $30,000) (or such other amount as may be
established for such Limitation Year under Code Section 415(d) for any
Limitation Year).
(c) "Annual Benefit" means the sum of all annual benefits payable in
--------------
the form of a single life annuity from all defined benefit plans (whether or not
terminated) maintained by a Member Employer. Benefits payable in any other
form, except a qualified joint and survivor annuity as defined in Code Section
417(b), shall be adjusted to the actuarial equivalent of a single life annuity
beginning at the same age. The Annual Benefit shall not be adjusted for any
pre-retirement death or disability benefits provided.
(d) "Defined Benefit Fraction" means the fraction in which the:
------------------------
(i) Numerator equals the Participant's Projected Annual Benefit
in the defined benefit plan determined as of the close of the Limitation Year,
and
(ii) Denominator equals the lesser of 140% of the Percentage
Limitation or 125% of the Dollar Limitation.
5-1
<PAGE>
(e) "Defined Contribution Fraction" means the fraction in which the:
-----------------------------
(i) Numerator equals the sum of a Participant's Annual Additions for
each Limitation Year to date from all defined contribution plans (whether or not
terminated) maintained by the Employer, less any Transition Amounts, and
(ii) Denominator equals the sum of the Annual Amounts for each
Limitation Year included in the Participant's Service, plus any Transition
Amounts.
(f) "Dollar Limitation" means the adjusted value of $90,000 (or such
-----------------
other amount as may be in effect on the last day of the Limitation Year pursuant
to Code Section 415(d)) based on the age of the Participant when the benefit
begins as follows:
<TABLE>
<CAPTION>
Age Limitation Adjustment Under the Defined Benefit Plan
- --- ----------------------------------------------------
<S> <C>
Over the Social Security limitation is actuarially increased based on the mortality table used for
Normal Retirement Age actuarial equivalence in the Plan and 5% interest, but not more than the
actuarial increase (if any) specified in the Defined Benefit Plan
Social Security Normal no adjustment
Retirement Age
Age 62 and over but below limitation is reduced by 5/9% for each of the first 36 months and by 5/12%
Social Security Normal for each of the next 24 months that the age precedes Social Security Normal
Retirement Age Retirement Age
Under 62 the lesser of:
(i) actuarial equivalent of limitation for age 62, based on the mortality
table used for actuarial equivalence in the Plan and 5% interest, and
(ii) the limitation at age 62 multiplied by the ratio of the Plan's early
retirement factor at age of commencement to the Plan's early retirement
factor at age 62
</TABLE>
If a Participant has completed less than ten years of Service in the Defined
Benefit Plan, the Dollar Limitation shall be adjusted by multiplying such
limitation by a fraction, the numerator of which is the Participant's number of
years (or part thereof) of Service not to exceed ten, and the denominator of
which is ten.
(g) "Limitation Account" means an account expressly set up and
------------------
maintained to hold Excess Annual Addition amounts contributed in error pursuant
to Article 5.3(b).
(h) "Limitation Year" means the Fiscal Year.
---------------
(i) "Percentage Limitation" means 100% of the average of Allowable
---------------------
Compensation (as defined in Article 2) paid or accrued over the three (or the
Participant's actual number of years of Service, if fewer) consecutive
Limitation Years included in the Participant's Service which produce the highest
average. If a Participant
5-2
<PAGE>
has completed less than ten years of Service with a Member Employer, this
limitation shall be adjusted by multiplying such amounts by a fraction, the
numerator of which is the Participant's number of years of Service (or part
thereof), and the denominator of which is ten. In no event shall the reduction
for less than 10 years of Service reduce this limitation to an amount less than
one-tenth of the applicable limitation (as determined without regard to this
paragraph).
(j) "Projected Annual Benefit" means the Annual Benefit that a
------------------------
Participant in a defined benefit plan would be entitled to under the terms of
that plan based on the following assumptions:
(i) The Participant will continue employment until normal retirement
age (or his current age, if later) under the terms of that plan;
(ii) The Participant's compensation for the applicable limitation
year will remain the same until his normal retirement age under (i) above; and
(iii) All other relevant factors used to determine benefits under that
plan for the applicable limitation year will remain constant for all future
limitation years.
(k) "Social Security Normal Retirement Age" means the age when
-------------------------------------
unreduced old-age benefits are available from Social Security, rounded to the
next higher year, according to the following table:
<TABLE>
<CAPTION>
Social Security
Year of Birth Normal Retirement Age
------------- ---------------------
<S> <C>
1937 and Before 65
1938-1954 66
1955 and After 67
</TABLE>
(l) "Super Top-Heavy" means a Plan which is Top-Heavy after substituting
-----------------
90% for 60% in the definition for Top-Heavy in Article 2.
(m) "Transition Amount" means an amount which is permanently subtracted
-----------------
from the numerator or added to the denominator of the Defined Contribution
Fraction pursuant to transition rules related to the amendments of Code Section
415.
5.2 Allocation Methods.
-------------------
(a) Salary Deferral, Non-Elective, Matching, Top-Heavy Minimum and
--------------------------------------------------------------
Restoration Contributions. Salary Deferral, Non-Elective, Matching, Top-Heavy
- --------------------------
Minimum and Restoration Contributions are allocated as provided in Article 4.
(b) Profit Sharing Allocation. Member Employer Profit Sharing
--------------------------
Contributions and amounts in Limitation Accounts attributable to Member Employer
Profit Sharing Accounts for any Fiscal Year shall be allocated as of the last
day of such Fiscal Year to the Profit Sharing Accounts of all Eligible
Participants of the Member
5-3
<PAGE>
Employer in the ratio that each such Eligible Participant's Plan Compensation
bears to the aggregate Plan Compensation of all Eligible Participants of the
Member Employer.
(c) Overriding Top-Heavy Minimum Allocation. Notwithstanding the
----------------------------------------
provisions of Article 5.2(b), for any Fiscal Year during which the Plan is a
Top-Heavy Plan the requirements of Article 4.2(e) shall be met.
5.3 Limitations on Annual Allocations.
----------------------------------
(a) Limitation Amount.
------------------
(i) Notwithstanding any other provision of this Plan to the
contrary, for Fiscal Years beginning before January 1, 1995, the Annual Addition
to a Participant's Account for any Limitation Year shall not exceed the lesser
of 25% of the Employee's Allowable Compensation or $30,000 (or, if greater, 1/4
of the dollar limitation in effect under Code Section 415(b)(1)(A)), or such
other amount for the Limitation Year as may be established by regulations under
Code Section 415(d).
(ii) Notwithstanding any other provision of this Plan to the
contrary, for Fiscal Years beginning on or after January 1, 1995, the Annual
Addition to a Participant's Account for any Limitation Year shall not exceed the
lesser of 25% of the Employee's Allowable Compensation or $30,000, or such other
amount for the Limitation Year as may be established by regulations under Code
Section 415(d).
(b) Treatment of Excess Annual Addition Made in Error. In the event
that (as a result of the allocation of Forfeitures, a reasonable error in
estimating a Participant's compensation, a reasonable error in determining the
amount of elective deferrals or other limited facts and circumstances which the
Internal Revenue Service finds to be applicable) an amount would otherwise be
allocated which would result in the Annual Addition limitation being exceeded
with respect to any Participant, the excess amount shall be eliminated:
(i) First, by returning to such Participant, to the extent
necessary his Salary Deferral Contributions, if any. A return of Salary Deferral
Contributions shall include investment gains attributable to such contributions
determined as provided in Article 4.7;
(ii) Second, by holding any excess Profit Sharing and/or Matching
amounts in a Limitation Account. Any amounts in the Limitation Accounts shall
be reallocated among the appropriate Accounts of Eligible Participants pursuant
to Article 5.2 as of the last day of each succeeding Fiscal Year until the
excess if exhausted, provided that the Annual Addition limitation with respect
to any Participant may not be exceeded in any Limitation Year. No allocation of
contributions may be credited to the Accounts of Eligible Participants in
succeeding years until such excess has been exhausted.
5-4
<PAGE>
5.4 Overall Limitation for Different Types of Plans.
------------------------------------------------
(a) General Limitation. If a Participant in this Plan is also a
-------------------
Participant in a qualified defined benefit pension plan maintained by the
Employer or an Affiliated Employer (or was at any time a Participant in such a
defined benefit pension plan maintained by the Employer or an Affiliated
Employer which has since been terminated), the sum of the Defined Contribution
Fraction and the Defined Benefit Fraction for any Limitation Year shall not
exceed 1.0. If a restriction on contributions or benefits is required for any
Employee, such restriction will first be applied to the Retirement and Tax-
Deferred Savings Plan.
(b) Super Top-Heavy Limitation. For each Fiscal Year in which the
---------------------------
Plan is Super Top-Heavy or if the Plan is Top-Heavy and the minimum contribution
under Article 4.2(e) is less than 7.5%, 100% shall be substituted for 125%
wherever it appears in Articles 5.1(b) and (d), unless no additional allocations
or benefits accrue to any affected Participant.
5.5 Restoration Procedures.
-----------------------
(a) Computing Amounts. In the event that a Participant's Account was
------------------
improperly excluded in any year from an allocation of Employer contributions and
Forfeitures pursuant to Article 5.2, such Participant's Account shall be
restored to its correct status by the addition of amounts that are determined as
follows:
(i) First, an amount will be computed on the same basis as
Employer contributions and Forfeitures that were allocated to the Accounts of
other Eligible Participants under Article 5.2 in each year for which restoration
is necessary, and
(ii) Second, Trust Fund income, gain or loss attributable to
amounts that should have been allocated under (i) above will be computed on the
same basis that Trust Fund income, gain or loss was allocated to other
Participants' Accounts in the valuation process described in Article 7.2 in each
year for which restoration is necessary.
(b) Income, Gain or Loss. In the event that a Participant's Account
---------------------
was improperly excluded in any year from an allocation of Trust Fund income,
gain or loss pursuant to the valuation process described in Article 7.2, such
Participant's Account shall be restored to its correct status by the addition or
subtraction of amounts that should have been allocated under Article 7.2 in each
year for which restoration is necessary.
(c) Source of Amounts. Such amounts shall be restored first from
------------------
Forfeitures, if any; and then, if necessary, the Member Employer shall
contribute an amount which is necessary to fully restore each improperly
excluded Account.
* * * * End of Article 5 * * * *
5-5
<PAGE>
Article 6.
Vesting of Accounts
6.1 Automatic Vesting.
------------------
(a) Retirement, Death or Disability. The value of a Participant's
--------------------------------
Account shall become fully vested (i) when the Participant attains his Normal
Retirement Date or reaches age 55 and completes 5 Years of Service while an
Employee, or (ii) upon his termination of employment by reason of death or
Disability.
(b) Employee Account. A Participant's Employee Account shall be fully
-----------------
vested at all times.
(c) Non-Elective Account. A Participant's Non-Elective Account shall
---------------------
be fully vested at all times.
6.2 Vesting Based on Service.
-------------------------
(a) General Rule. Except as otherwise provided in Article 6.4(d) and
-------------
Article 14.3, a Participant's Employer Account shall become vested in accordance
with the following schedule:
<TABLE>
<CAPTION>
Years of Service Vested Percentage
---------------- -----------------
<S> <C>
Less than 2 years 0%
2 years 20%
3 years 40%
4 years 60%
5 years 80%
6 years or more 100%
</TABLE>
(b) Special Rule. Notwithstanding the foregoing, effective July 1,
-------------
1995, Participants employed by Member Employer Operations Management
International, Inc. shall vest in accordance with the following schedule:
<TABLE>
<CAPTION>
Years of Service Vested Percentage
---------------- -----------------
<S> <C>
Less than 1 year 0%
1 year 20%
2 years 40%
3 years 60%
4 years 80%
5 years or more 100%
</TABLE>
6.3 Years of Service for Vesting.
-----------------------------
(a) Year of Service. An Employee shall be credited with one year of
----------------
Service for vesting for each full year in his Period of Service, as defined in
Article 9.3.
6-1
<PAGE>
(b) Termination Prior to Vesting. If the vested percentage applicable
-----------------------------
to a Participant's Employer Account is 0% at the time his service terminates,
his Service prior to such termination shall be disregarded for vesting purposes
if he is reemployed after he has incurred 5 consecutive Breaks in Service.
6.4 Forfeitures and Restorations.
-----------------------------
(a) Forfeitures on Date of Termination. Any remainder of a
-----------------------------------
terminating Participant's Account which is not vested shall be forfeited on the
earliest to occur of the following dates:
(i) The date of termination of the Participant, provided that
this date applies only if the Participant did not then have a vested interest in
his Account;
(ii) The date on which the terminated Participant receives
payment of his entire vested interest;
(iii) The date on which the Participant completes five consecutive
one-year Breaks in Service.
(b) Matching Contribution Forfeitures Used to Pay Administrative
------------------------------------------------------------
Expenses. Forfeitures of a Member Employer's own employees' Matching Accounts
- ---------
during a Fiscal Year (including forfeitures of Matching Contributions under
Article 4) which are not used to restore any of its Participants' Account as of
the last day of such Fiscal year shall be used to pay such Member Employer's
share of the reasonable expenses of administering the Plan.
(c ) Profit Sharing Forfeitures Used to Pay Administrative Expenses.
---------------------------------------------------------------
Forfeitures of a Member Employer's own Employees' Profit Sharing Accounts during
a Fiscal Year which are not used to restore any of its Participants' Accounts as
of the last day of such Fiscal Year shall be used to pay such Member Employer's
share of the reasonable expenses of administering the Plan.
(d) Reemployment After Forfeiture. If a Participant is reemployed
------------------------------
before incurring 5 consecutive Breaks in Service, any amounts forfeited shall be
treated as follows:
(i) Restoration If No Distribution. In the event a Participant did
not receive a distribution of his vested interest, any amounts previously
forfeited shall be fully restored as provided in (iv) below and shall be
recredited to the Participant's Account as of his reemployment date.
(ii) Restoration If Total Distribution Repaid. In the event a
distribution of a Participant's entire vested Account was made to him, the
forfeited amount shall be fully restored as provided in (iv) below if he makes
an after-tax contribution (which shall not be subject to Code Section 401(m)) of
the full amount of the prior distribution before the date which is 5 years after
he is reemployed by the
6-2
<PAGE>
Employer or before the date on which he incurs 5 consecutive Breaks in Service,
if earlier. If the Participant does not make such contribution by that date, the
forfeited amount will not be restored.
(iii) Source of Restored Amounts. Forfeited amounts to be restored
for any Fiscal Year may be restored from Forfeitures as of the last day of a
Fiscal Year, from additional Employer contributions for such Fiscal Year, from
Trust income, or from a combination of these methods, as determined by the
Trustees.
(e) No Partial Repayments Permitted. A Participant shall not be
--------------------------------
permitted to repay part of a distribution.
(f) No Restoration After 5 Consecutive Breaks in Service. If a
-----------------------------------------------------
Participant is reemployed after 5 consecutive Breaks in Service, no portion of
his non-vested Account shall be restored and any undistributed vested interest
shall be maintained as a separate fully vested Account.
6.5 No Divestment. Except as provided under Articles 4.2(b), 6.7 and
--------------
14.8, a Participant's vested rights shall not be subject to divestment for any
reason.
6.6 Amendment to Vesting. Notwithstanding any other provisions of this
---------------------
Article 6, the vested percentage of an individual who was a Participant
immediately preceding the effective date of any amendment to the Plan is
determined by the provisions of the Plan existing immediately prior to such
amendment if such provisions provide a greater vested percentage at any relevant
time.
6.7 Lost Participants.
------------------
(a ) Participant's Account. If all or a portion of a Participant's
----------------------
Account becomes payable under Article 8 and the Trustees, after a reasonable
search, cannot locate the Participant or his Beneficiary (if such Beneficiary is
entitled to payment), the vested Account shall:
(i) Be used to establish an Individual Retirement Account in the
Participant's name; or
(ii) Remain in the Plan for a sufficient period of time so that
under state law the Account would escheat, at which point the Account shall be
forfeited and reallocated, in accordance with Articles 4 and 5, as of such date
as the Trustees may decide.
(b) Search for Participants. The Trustees shall make a reasonable
------------------------
attempt to find such a Participant, including securing any assistance available
from the Internal Revenue Service.
(c) Restoration. If an Account is forfeited under this Article 6.7,
-----------
and the Participant or his Beneficiary subsequently presents a valid claim for
benefits to the
6-3
<PAGE>
Trustees, the Trustees shall cause the vested Account, equal to the amount that
was forfeited under this Article 6, to be restored in accordance with the
provisions of Article 5.5.
* * * * End of Article 6 * * * *
6-4
<PAGE>
Article 7.
Participants' Accounts
7.1 Separate Accounts. The Trustees shall open and maintain a separate
------------------
Account for each Participant. Each Participant's Account shall reflect the
amounts allocated thereto and distributed therefrom and the market value of the
investments of such Account.
7.2 Determination of Value of Participant Accounts. As of each
-----------------------------------------------
Valuation Date, the Trustees shall determine the value of each Participant
Account based on:
(a) contributions credited to the Account through such date
(b) withdrawals or other distributions paid from the Account through
such date, and
(c) the net asset value as of such date of each separate investment
fund (established as provided in Article 13) in which the Participant Account is
invested on such date.
7.3 Statement of Accounts. As soon as practicable after the end of each
----------------------
calendar quarter, the Trustees shall furnish to each Participant a statement of
his Account, determined as of the end of such calendar quarter. Upon the
discovery of any error or miscalculation in an Account, the Trustees shall
correct it, to the extent correction is practically feasible. Statements to
Participants are for reporting purposes only, and no allocation, valuation or
statement shall vest any right or title in any part of the Trust Fund, nor
require any segregation of Trust assets, except as is specifically provided in
this Agreement.
7.4 Valuation of Account When Payment Due. The amount of the payment
--------------------------------------
shall be based on the value of the Participant's Account at the time the payment
is processed.
* * * * End of Article 7 * * * *
7-1
<PAGE>
ARTICLE 8.
DISTRIBUTIONS AND WITHDRAWALS
8.1 General. Benefits under the Plan shall be distributed solely from
--------
the Trust. The Employer has no liability or responsibility for Plan benefits or
for the Trust. No distribution shall be made or commenced prior to the
Participant's termination of employment, except as required under Article 8.3(d)
and permitted under Article 15.2(b) and except for withdrawals in accordance
with Article 8.9. Distributions can also be made upon termination of the Plan
subject to the provisions of Article 8.10. All distributions from the Plan will
be made in accordance with Code Section 401(a)(9) and the regulations thereunder
including the transition rules in proposed regulation 1.401(a)(9)-l and the
incidental death benefit requirements of proposed regulation 1.401(a)(9)-2. The
provisions of Code Section 401(a)(9) shall override any distribution option
under the Plan which might be inconsistent with such provisions.
A distribution to a Participant shall be made solely from his Account.
When a distribution is to be made, his Account shall be valued in accordance
with Article 7.2. The amount to be paid to him shall be based on his vested
interest as determined in Article 6.
8.2 Administrative Rules.
---------------------
(a) Authority. Distributions shall be made only in accordance with
----------
the directions of the Trustees. The Trustees have the authority to direct the
distributions in accordance with the terms and conditions of the Plan, but the
Trustees shall have no power of discretion or consent with regard to a
Participant's or Beneficiary's choice of the form or timing of a distribution,
except as specifically stated herein or to the extent that the Trustees are
constrained by the options available under the Plan or by the requirements of
law or regulation.
(b) Claims. A Participant, Beneficiary or Alternate Payee has the
-------
right to file a claim for benefits as set forth in Article 11.6.
8.3 Timing of Distributions.
------------------------
(a) Cashout of Amounts Under $5,000. If the Participant's vested
--------------------------------
Account does not exceed $5,000, and at the time of any prior distribution, if
any, has not exceeded $5,000, distribution shall be made in a lump sum as soon
as practicable after the Participant's termination of employment.
(b) Amounts Over $5,000. If the Participant's vested Account exceeds
--------------------
the cashout requirements of Article 8.3(a), the Participant may elect to:
(i) Receive a distribution as soon as practicable after the amount
can be determined, or
8-1
<PAGE>
(ii) Defer receipt of his distribution in accordance with (d)
below. Unless otherwise elected by the Participant under (d) below, the payment
of benefits under the Plan to the Participant will not begin later than the 60th
day after the end of the Fiscal Year in which the latest of the following
occurs:
(1) The date on which the Participant attains the earlier of
Age 65 or his Normal Retirement Date,
(2) The date which is the 10th anniversary of his
commencement of participation in the Plan, or
(3) The date of termination of his service with the
Employer;
However, if the amount of the payment cannot be ascertained and/or the
Participant cannot be located by the date required above, payment shall be made
within 60 days after all of these facts are known.
Notwithstanding the foregoing, no payments may be made to a Participant
prior to his Normal Retirement Date or his 62nd birthday, whichever is later, if
his vested Account exceeds the cashout requirements of Article 8.3(a), unless
the written consent of the Participant is obtained by the Trustees within the
90-day period prior to commencement of the distribution.
(c) Information and Rights. The following applies to the
-----------------------
Participant's written consent:
(i) The Participant must be informed of his right to defer
receipt of the distribution. If a Participant fails to consent, it shall be
deemed an election to defer commencement of the distribution.
(ii) Notice of the rights specified herein shall be provided no
less than 30 days and no more than 90 days before the first day on which all
events have occurred which entitle the Participant to such distribution.
(iii) Written consent of the Participant to the distribution must
not be made before the Participant receives the notices and must not be made
more than 90 days before the first day on which all events have occurred which
entitle the Participant to such distribution.
(iv) No consent shall be valid if a significant detriment is
imposed under the Plan on any Participant who does not consent to the
distribution.
(v) If a distribution is one to which Section 401(a)(11) and 417
of the Internal Revenue Code do not apply, such distribution may commence less
than 30 days after the notice required under Section 1.411(a)-11(c) of the
Income Tax Regulations is given, provided that:
8-2
<PAGE>
(1) the Plan Administrator clearly informs the Participant that
the Participant has a right to a period of at least 30 days after receiving the
notice to consider the decision of whether or not to elect a distribution (and,
if applicable, a particular distribution option), and
(2) the Participant, after receiving the notice, affirmatively
elects a distribution.
(vi) Notwithstanding anything in this Article 8.3 to the contrary,
effective for Plan Years beginning on or after January 1, 1997, the written
explanation described in Section 417(a)(3)(A) of the Code may be provided after
the annuity starting date. In such event, the 90-day applicable election period
to waive the qualified joint and survivor annuity described in Section
417(a)(3)(A) of the Code shall not end before the 30/th/ day after the date on
which such explanation is provided. Effective for Plan Years beginning on or
after January 1, 1997, a Participant may elect (with any applicable spousal
consent) to waive any requirement that the written explanation be provided at
least 30 days before the annuity starting date (or to waive the 30-day
requirement in the preceding sentence) if the distribution commences more than 7
days after such explanation is provided.
(d) Required Distributions. A Participant who meets the requirements
-----------------------
of Article 8.3(b) may defer a distribution by providing the Trustees with a
written, signed notice specifying the date on which the distribution is to
commence, provided that the distribution shall be made no later than the April 1
following the last day of the calendar year in which a Participant attains age
70 1/2 even though such Participant may still be an Employee.
8.4 Treatment of Deferred Amounts. Where the distribution of a
------------------------------
Participant's Account is to be deferred, the vested portion shall continue to be
held and invested as an Account of the Trust subject to revaluation as provided
in Article 7.
8.5 Methods of Distribution.
------------------------
(a) Method. Distribution to any Participant or Beneficiary shall be
-------
made in a lump sum, in cash and kind.
(b) Timing. If the amount of a distribution cannot be determined by
-------
the date specified under Article 8.3, payment of benefits shall be made no later
than 60 days after the earliest date on which the amount of the distribution can
be determined.
(c) In Kind Distributions. In kind distributions shall be (i) made
----------------------
only in a form of investment that was held on behalf of the Participant in a
separate investment fund pursuant to Article 12.6 immediately preceding the date
of distribution, (ii) limited to the amount of such investment so held, and
(iii) based on the fair market value of the distributable property, as
determined by the Trustees at the time of
8-3
<PAGE>
distribution. Notwithstanding the foregoing, no distribution shall be made in
the form of Employer Stock.
(d) Distribution Delayed Until Trade Date. To the extent that a
--------------------------------------
Participant is entitled to a distribution of all or a portion of his Account
that is invested in Employer Stock, the Participant shall receive such
distribution as soon as reasonably practicable after the Trustees are able to
liquidate sufficient shares of Employer Stock to permit the distribution.
8.6 Distribution Upon Death of Participant.
---------------------------------------
(a) Distribution Made to Participant's Beneficiary. The vested
-----------------------------------------------
portion of a Participant's Account which remains at his death shall be
distributed to the Participant's Beneficiary in accordance with the provisions
of this Article 8.6.
(b) General Rules. If a Participant dies before his distribution has
--------------
been made, his vested Account shall be distributed within 5 years after the
death of the Participant. In addition:
(1) If the Beneficiary is the deceased Participant's
surviving spouse, distributions may be deferred until the date o which the
Participant would have attained age 70 1/2, and
(2) If such surviving spouse dies before receiving any
distributions, the provisions of this Article 8.6 shall be applied as if such
spouse were the Participant.
8.7 Distributions to Minors or Legally Incompetents. In case of any
------------------------------------------------
distribution to a minor or to a legally incompetent person, the Trustees may
make the distribution to his legal representative, to a designated relative, or
directly to such person for his benefit. The Trustees shall not be required to
oversee the application, by any third party, of any distributions made pursuant
to this Article 8.7. Distributions made under this Article 8.7 shall be in
accordance with the provisions of this Article 8.
8.8 Tax Information To Be Provided. The Trustees shall provide to each
-------------------------------
Participant, Beneficiary or Alternate Payee who receives an eligible rollover
distribution (as defined in Code Section 402(f)), at the time such distribution
is made, a written explanation of the (1) provisions under which the
distribution will not be subject to tax if timely transferred to an eligible
retirement plan and, if applicable; (2) provisions regarding the availability of
10-year averaging or 5-year averaging tax treatment of the distribution.
8-4
<PAGE>
8.9 In Service Withdrawals.
-----------------------
(a) Withdrawals Permitted for Hardship.
-----------------------------------
(i) At the request of a Participant, the Trustee shall authorize
a withdrawal at any time from his Salary Deferral or Rollover Account, provided
that authorization for such withdrawal and the amount thereof shall be given
only on account of hardship incurred by the Participant which imposes immediate
and heavy financial needs which may not reasonably be met by the Participant's
other resources. Such withdrawal shall not exceed the amount required to meet
the immediate financial need created by the hardship including any taxes or
penalties created by such withdrawal. The amount which may be withdrawn from
such Participant's Salary Deferral and Rollover Account shall not exceed the
lesser of:
(1) The value of his Salary Deferral and Rollover Account;
or
(2) The value of his Salary Deferral and Rollover Account as
of December 31, 1998, plus the total of the Salary Deferral Contributions made
for the Participant since December 31, 1998, less any amounts withdrawn after
such date.
(ii) A distribution shall be deemed to be due to an immediate and
heavy financial need if it is on account of:
(1) Medical expenses incurred or anticipated by the Employee
or his spouse or other dependent or the need of these persons to obtain medical
care;
(2) Costs directly related to the purchase (excluding
mortgage payments) of the Employee's principal residence;
(3) Payment of tuition and related education fees for the
next 12 months of post-secondary education for the Employee or his spouse or
dependents;
(4) The need to prevent the eviction from or the foreclosure
on the mortgage of the Employee's principal residence;
(5) Such other needs to be added by the Commissioner of
Internal Revenue.
(iii) A distribution shall be treated as necessary to satisfy a
financial need if:
(1) The Employee has obtained all distributions, other than
for hardship, and all non-taxable loans currently available under the Plan and
any other plan maintained by the Employer;
8-5
<PAGE>
(2) No contributions shall be added to the Employee's Salary
Deferral Account and no elective contributions shall be made by such participant
to any other plan sponsored by the Employer for a period of 12 months after
receipt of the hardship distribution, and such Employee shall be a Suspended
Participant during this 12-month period; and
(3) The maximum amount of Salary Deferrals that the Employee
can made in the calendar year immediately following the year in which the
hardship distribution is received is equal to the applicable maximum amount for
such calendar year less the Salary Deferrals made by the Employee in the
calendar year in which the distribution was received.
(b) Withdrawals Permitted Without Hardship. A Participant who has
---------------------------------------
attained age 59 1/2 may withdraw amounts from his Salary Deferral or Rollover
Account regardless of hardship by giving the Trustees notice of his intention to
make such a withdrawal at least 30 days prior to the withdrawal.
(c) Consent Required. All withdrawals are subject to written
-----------------
Participant Consent to the extent required by applicable law and regulation.
(d) Withdrawal Charged to Participant's Account. The Trustees shall
--------------------------------------------
to make a distribution to a Participant of the amount which such Participant is
eligible to withdraw, and the amount of such withdrawal shall be charged by the
Trustees against the Salary Deferral or Rollover Accounts of the Participant.
Withdrawals under this Article 8.9 will be charged against the Participant's
Account as of the specified date of withdrawal, but no interest or other income
credit shall accrue with respect to such amounts to be withdrawn on account of
any period elapsing between the withdrawal date and the actual date of payment.
(e) Trustees Establish Rules. The Trustees have the power to
-------------------------
establish uniform and nondiscriminatory rules and from time to time to modify or
change such rules governing the manner and method by which in service
withdrawals may be made.
8.10 Limitations on Distributions Upon Plan Termination. Distributions
---------------------------------------------------
of a Participant's Salary Deferral and Non-Elective Accounts upon termination of
the Plan shall not commence prior to the Participant's termination of employment
or his attainment of age 59 1/2 except for hardship withdrawals in accordance
with Article 8.9, unless payment is made in a lump sum and (i) no successor
defined contribution plan (as defined in IRS regulations) is adopted; (ii) the
only successor plan (as defined in IRS regulations) is an ESOP as defined in
Code Section 4975(e)(7); or (iii) the distribution is:
(1) After the date of all of all Employer assets used in its
trade or business to a non-Affiliated Employer by whom the Participant is still
employed;
8-6
<PAGE>
(2) After the date of sale of an incorporated Affiliated
Employer's interest in a subsidiary by whom the Participant is employed; or
(3) Otherwise permitted by applicable law and regulations.
8.11 Direct Rollovers.
-----------------
(a) In General. This Article applies to distributions made on or
-----------
after January 1, 1993. Notwithstanding any provision of the Plan to the
contrary that would otherwise limit a distributee's election under this Article,
a distributee may elect, at the time and in the manner prescribed by the
Trustees, to have an eligible rollover distribution paid directly to an eligible
retirement plan specified by the distributee in a direct rollover.
(b) Definitions Pertaining to Direct Rollovers.
-------------------------------------------
(i) Eligible rollover distribution: An eligible rollover
-------------------------------
distribution is any distribution of the balance to the credit of the
distributee, except that an eligible rollover distribution does not include: any
distribution that is one of a series of substantially equal periodic payments
(not less frequently than annually) made for the life (or life expectancy) of
the distributee or the joint lives (or joint life expectancies) of the
distributee and the distributee's designated beneficiary, or for a specified
period of ten years or more; any distribution to the extent such distribution is
required under Section 401(a)(9) of the Code; and the portion of any
distribution that is not includible in gross income (determined without regard
to the exclusion for net unrealized appreciation with respect to Employer
securities).
(ii) Eligible retirement plan: An eligible retirement plan is an
-------------------------
individual retirement account described in Section 408(a) of the code, an
annuity plan described in Section 403(a) of the Code, an individual retirement
annuity described in Section 408(b) of the code, or a qualified trust described
in Section 401(a) of the Code, that accepts the distributee's eligible rollover
distribution. However, in the case of an eligible rollover distribution to the
surviving spouse, an eligible retirement plan is an individual retirement
account or individual retirement annuity.
(iii) Distributee: A distributee includes an Employee or former
------------
Employee. In addition, the Employee's or former Employee's surviving spouse and
the Employee's or former Employee's spouse or former spouse who is the
Alternative Payee under a qualified domestic relations order, as defined in
Section 414(p) of the code, are distributees with regard to the interest of the
spouse or former spouse.
(iv) Direct rollover: A direct rollover is a payment by the Plan
----------------
to the eligible retirement plan specified by distributee.
* * * * End of Article 8 * * * *
8-7
<PAGE>
ARTICLE 9.
SERVICE
9.1 General Definitions.
--------------------
(a) "Service" means an Employee's total period of employment with the
-------
Employer, including service with a predecessor entity or an Affiliated Employer.
Throughout this Article 9, Employer shall include Affiliated Employer and any
predecessor entity.
(b) "Hour of Service" means:
---------------
(i) Each hour for which an Employee is paid, or entitled to
payment, for the performance of duties for the Employer.
(ii) Each hour for which an Employee is paid, or entitled to
payment, by the Employer on account of a period of time during which no duties
are performed (regardless of whether the employment relationship has terminated)
due to vacation, holiday, illness, incapacity (including disability), layoff,
jury duty, military duty or leave of absence; provided that no Hours of Service
shall be credited to an Employee:
(1) For a period during which no duties are performed if
payment is made or due under a plan maintained solely for purpose of complying
with applicable worker's compensation, unemployment compensation, or disability
insurance laws;
(2) On account of any payment made or due an Employee solely
as reimbursement for medical or medically related expenses incurred by the
Employee,
(3) On account of any payment made to an Employee as
severance pay, unless the severance pay is in lieu of advance notice of
termination.
(iii) Each hour not otherwise credited under the Plan for which
back pay, irrespective of mitigation of damages, has either been awarded or
agreed to by the Employer. Such hours are to be credited to the period or
periods to which the award or agreement pertains. If this provision results in
an Employee becoming an Eligible Participant for a Fiscal Year in which he was
not otherwise an Eligible Participant under Article 5 or if this provision
results in an increase in the vested percentage applicable to a Participant's
Account which has been forfeited under Article 6, the Trustees shall establish
equitable procedures for determining and allocating any resulting amounts to
such Employee's Account.
9-1
<PAGE>
(iv) No more than 501 Hours of Service shall be credited under
Articles 9.1(b)(ii), (iii), (iv) or (v) to an Employee on account of any single
continuous period of time during which the Employee performs no duties for the
Employer.
9.2 Crediting of Hours Subject to DOL Regulation. The calculation of
---------------------------------------------
the number of Hours of Service to be credited under Articles 9.1(b)(ii) and
(iii) for periods during which no duties are performed, and the crediting of
such Hours of Service to periods of time for purposes of computations under the
Plan, shall be determined by the Trustees in accordance with the rules set forth
in the Department of Labor Regulation Section 2530.200b-2 paragraphs (b) and
(c), which rules shall be consistently applied with respect to all employees
within the same job classifications.
9.3 Elapsed Time Service Definitions.
---------------------------------
(a) "Break in Service" means a one year Period of Severance. Solely
----------------
for purposes of determining whether a Break in Service has occurred, a one year
period of absence shall be disregarded, provided such absence is:
(1) By reason of pregnancy or the birth of a child of the
Employee;
(2) By reason of the placement of a child with the Employee
in connection with his adoption of such child; or
(3) For purposes of caring for any such child for a period
beginning immediately following such birth or placement, and further provided
that the Employee provides the Committee with such timely information as the
Committee may reasonably require to establish that the absence is for a reason
described above.
(b) "Employment Commencement Date" means each of the following:
----------------------------
(i) The date on which an Employee first performs an Hour of
Service for an Employer with respect to which such Employee is compensated or
entitled to compensation by the Employer.
(ii) In the case of an Employee who incurs a Period of Severance
and who is subsequently reemployed by the Employer, the term Employment
Commencement Date means the first day following such Period of Severance on
which such Employee performs an Hour of Service for the Employer with respect to
which he is compensated or entitled to compensation.
(c) "Period of Service" shall mean the period of time beginning on an
-----------------
Employee's Employment Commencement Date and ending on his Severance Date.
Periods of Service shall be measured under the elapsed time method as authorized
under regulations promulgated by the Secretary of Labor.
Periods of Service shall also be subject to the following:
9-2
<PAGE>
(i) If an Employee severs from service by quit, discharge or
retirement and returns to service within 12 months, that Period of Severance
shall be considered as part of that Employee's Period of Service.
(ii) Notwithstanding the rule in subparagraph (i) above, if an
Employee severs from service by reason of quit, discharge or retirement after a
period of absence from service of 12 months or less, which period of absence
occurred for reasons other than a quit, discharge or retirement, such period of
absence shall be considered as part of the Employee's Period of Service only if
such Employee performs an Hour of Service within 12 months of the date on which
the Employee was first absent from service.
An Employee is considered to have returned to service on his new Employment
Commencement Date.
(d) "Period of Severance" means the period of time beginning on an
-------------------
Employee's Severance Date and ending on the Employee's new Employment
Commencement Date, if any, following thereafter.
(e) "Severance Date" means the date on which an Employee quits,
--------------
retires, is discharged or dies, or, if earlier, the first anniversary of the
beginning of a period of absence from service (for reasons other than a quit,
retirement, discharge or death, such as vacation, holiday, sickness, disability,
leave of absence or lay off).
* * * * End of Article 9 * * * *
9-3
<PAGE>
ARTICLE 10.
FIDUCIARY RESPONSIBILITY
10.1 Named Fiduciaries. The authority to control and manage the
------------------
operation and administration of the Plan shall be allocated as provided in this
Agreement between the Employer and the Trustees, all of whom are named
fiduciaries under ERISA.
In addition, procedures for the appointment of another fiduciary, an
investment manager, are set forth in Article 12.3.
10.2 Fiduciary Standards. Each fiduciary shall discharge its duties
--------------------
with respect to the Plan solely in the interest of the Participants and
Beneficiaries as follows:
(1) For the exclusive purpose of providing benefits to
Participants and their Beneficiaries and defraying reasonable expenses of
administering the Plan;
(2) With the care, skill, prudence and diligence under the
circumstances then prevailing that a prudent man acting in a like capacity and
familiar with such matters would use in the conduct of an enterprise of a like
character and with like aims;
(3) By diversifying the investments of the Trust Fund so as
to minimize the risk of large losses, unless under the circumstances it is
clearly prudent not to do so; and
(4) In accordance with this Trust Agreement.
10.3 Fiduciaries Liable for Breach of Duty. A fiduciary shall be
--------------------------------------
liable, as provided in ERISA, for any breach of his fiduciary responsibilities.
In addition, a fiduciary under this Plan shall be liable for a breach of
fiduciary responsibility of another fiduciary under this Plan as provided under
ERISA Section 405.
10.4 Fiduciary May Employ Agents. Any person or group of persons may
----------------------------
serve in more than one fiduciary capacity with regard to the Plan. A fiduciary
may, with the consent of the Employer, employ one or more persons to render
advice and assistance with regard to any function such fiduciary has under the
Plan. The expenses of such persons shall be paid by the Trust if not paid by
the Employer, provided that only reasonable expenses of administering the Plan
may be paid from the Trust.
10.5 Authority Outlined.
-------------------
(a) Employer Authority. The Employer has the authority to amend and
-------------------
terminate the Plan. The chief executive officer of the Company has the
authority to appoint and remove Trustees.
10-1
<PAGE>
(b) Trustees' Administrative Authority. The Trustees, in their role
-----------------------------------
as Plan Administrator, have the authority to:
(i) Allocate the Employer contributions;
(ii) Establish rules pertaining to Salary Deferral
Contributions and their suspension and withdrawals;
(iii) Determine the method for allocation of the Trust income or
loss;
(iv) Maintain separate Accounts for Participants;
(v) Furnish, and correct errors in, statements of Accounts;
(vi) Direct the method, timing and media of distributions
pursuant to Article 8;
(vii) Direct the segregation of assets;
(viii) Direct distribution of the interests of incompetent
persons and minors;
(ix) Construe the Plan and Trust Agreement and determine
questions thereunder;
(x) Establish a funding policy;
(xi) Appoint and delegate duties to an investment manager; and
(xii) Employ advisors and assistants.
Article 11 further describes the administrative authority and duties of the
Trustees.
(c) Trustees' Authority With Respect to Plan Assets. The
------------------------------------------------
Trustees have the authority to establish the fair market value of the Trust
Fund, to value segregated Accounts, to employ advisors, agents and counsel, to
hold the Trust assets and to render accounts of their administration of the
Trust. Article 13 further describes the authority and duties of the Trustees
with respect to Plan assets.
10.6 Fiduciaries Not to Engage in Prohibited Transactions. A fiduciary
-----------------------------------------------------
shall not cause the Plan to engage in a transaction if he knows or should know
that such transaction constitutes a prohibited transaction under ERISA Section
406 or Code Section 4975, unless such transaction is exempted under ERISA
Section 408 or Code Section 4975.
10-2
<PAGE>
10.7 Duties of Plan Administrator. The Trustees are the Plan
-----------------------------
Administrator under ERISA and shall have the duty and authority to comply, with
those reporting and disclosure requirements of ERISA and the Code which are
specifically required of the Plan Administrator. The Plan Administrator is the
agent for the service of legal process. The Plan Administrator shall keep on
file a copy of this Plan and Trust Agreement, including any subsequent
amendments, all annual and interim reports of the Trustee and the latest annual
report required under Title I of ERISA for examination by Participants during
business hours.
* * * * End of Article 10 * * * *
10-3
<PAGE>
ARTICLE 11.
ADMINISTRATION OF THE PLAN
11.1 Selection of Trustees. There shall be five Trustees to manage and
---------------------
administer this Plan. The Trustees shall be appointed by the chief executive
officer of the Company, who shall also select a successor Trustee upon
resignation, death or removal of a Trustee.
11.2 Trustees' Operating Rules. The Trustees shall act by agreement of
--------------------------
a majority of their members, either by vote at a meeting or in writing without a
meeting. By such action, the Trustees may authorize one or more members to
execute documents on their behalf, or may delegate such authority to another
person. A Trustee, who is also a Participant hereunder, shall not vote or act
upon any matter relating solely to himself. In the event of a deadlock or other
situation which prevents agreement of a majority of the Trustees, the matter
shall be decided by the Employer.
11.3 Trustees' Administrative Authority. The Trustees have the
-----------------------------------
authority and duty to do all things necessary or convenient to effect the intent
and purpose of this Plan, whether or not such authority and duties are
specifically set forth herein. Not in limitation but in amplification of the
foregoing, the Trustees shall have the discretionary power to construe the Plan
and Trust Agreement and to determine all questions that shall arise hereunder.
Decisions of the Trustees made in good faith upon any matters within the scope
of its authority shall be final and binding on the Employer, the Participants,
their Beneficiaries and all others. The Trustees shall at all times act in a
uniform and nondiscriminatory manner in making and carrying out their decisions
and directions, and may from time to time prescribe and modify uniform rules of
interpretation and administration. The Trustees are the Plan Administrator and
have the duties outlined in Article 3.
11.4 Trustees to Establish Funding Policy. The Trustees shall establish
-------------------------------------
a funding policy for the Trust Fund bearing in mind both the short-run and long-
run needs and goals of the Plan. The Trustees shall review such policy prior to
the end of each Fiscal Year for its appropriateness under the circumstances then
prevailing. The funding policy shall be communicated to the investment manager
of the Trust Fund, if one has been appointed, so that the investment policy of
the Trust Fund can be coordinated with Plan needs.
11.5 Trustees May Retain Advisors. With the approval of the Employer,
-----------------------------
the Trustees may from time to time or on a continuing basis, retain such agents
or advisors including, specifically, attorneys, accountants, actuaries,
investment counsel, consultants and administrative assistants, as it considers
necessary to assist it in the proper performance of its duties. The expenses of
such agents or advisors shall be paid by the Trust if not paid by the Employer,
provided that only reasonable expenses of administering the Plan may be paid
from the Trust.
11-1
<PAGE>
11.6 Claims Procedure.
-----------------
(a) Claim Must Be Submitted Within 60 Days. The Trustees shall
---------------------------------------
determine Participants', Alternate Payees' and Beneficiaries' rights to benefits
under the Plan. In the event of a dispute over benefits, a Participant,
Beneficiary or Alternate Payee may file a written claim for benefits with the
Trustees, provided that such claim is filed within 60 days of the date the
Participant, Beneficiary or Alternate Payee receives notification of the
Trustees' determination.
(b) Requirements for Notice of Denial. If a claim is wholly or
----------------------------------
partially denied, the Trustees shall provide the claimant with a Notice of
Denial, written in a manner calculated to be understood by the claimant, setting
forth:
(i) The specific reason for such denial;
(ii) Specific references to the pertinent Plan provisions on
which the denial is based;
(iii) A description of any additional material or information
necessary for the claimant to perfect the claim with an explanation of why such
material or information is necessary; and
(iv) Appropriate information as to the steps to be taken if the
claimant wishes to submit his claim for review.
The Notice of Denial shall be given within a reasonable time period but no
later than 90 days after the claim is filed, unless special circumstances
require an extension of time for processing the claim. If such extension is
required, written notice shall be furnished to the claimant within 90 days of
the date the claim was filed stating the special circumstances requiring an
extension of time and the date by which a decision on the claim can be expected,
which shall be no more than 180 days from the date the claim was filed. If no
Notice of Denial is provided as herein described, the claimant may appeal the
claim as though the claim had been denied.
(c) Claimant's Rights If Claim Denied. The claimant and/or his
----------------------------------
representative may appeal the denied claim and may:
(i) Request a review upon written application to the Trustees;
(ii) Review pertinent documents; and
(iii) Submit issues and comments in writing;
provided that such appeal is made within 60 days of the date the claimant
receives notification of the denied claim.
11-2
<PAGE>
(d) Time Limit on Review of Denied Claim. Upon receipt of a request
-------------------------------------
for review, the Trustees shall provide written notification of its decision to
the claimant stating the specific reasons and referencing specific Plan
provisions on which its decision is based, within a reasonable time period but
not later than 60 days after receiving the request, unless special circumstances
require an extension for processing the review. If such an extension is
required, the Trustees shall notify the claimant of such special circumstances
and of the date, no later than 120 days after the original date the review was
requested, on which the Trustees will notify the claimant of its decision.
(e) No Legal Recourse Until Claims Procedure Exhausted. In the event
---------------------------------------------------
of any dispute over benefits under this Plan, all remedies available to the
disputing individual under this Article 11.6 must be exhausted before legal
recourse of any type is sought.
* * * * End of Article 11 * * * *
11-3
<PAGE>
ARTICLE 12.
INVESTMENTS
12.1 Investment Authority. The Trustees are hereby granted full power
---------------------
and authority to invest and reinvest the Trust Fund or any part thereof in
accordance with the standards set forth in Article 10. Without limiting the
generality of the foregoing, the Trustees may invest in bonds, notes, mortgages,
commercial or federal paper, preferred stock, common stock, or other securities,
rights, obligations or property, real or personal, including shares and
certificates of participation issued by investment companies or investment
trusts. The Trustees are expected to accept and hold Employer Stock contributed
to the Trust as Employer Matching Contributions and Employer Stock purchased
with Employer Matching Contributions, if such stock, at the time contributed,
constitutes no more than 10 percent of the fair market value of the Trust
assets.
12.2 Use of Mutual or Commingled Funds Permitted. The Trustees may
--------------------------------------------
cause any part or all of the assets of this Trust to be invested in mutual
funds; or commingled with the assets of similar Trusts qualified under Code
Sections 401(a) and 501(a) by causing such assets to be invested as part of a
common fund of a custodian or other fiduciary. To the extent that Trust assets
are invested in any collectively investment fund for which the Trust is
eligible, the declaration of trust establishing such funds is hereby adopted.
Any assets of the Trust that are invested in any such fund will be held and
administered by the Trustee under the terms of the fund's governing instrument.
12.3 Trustees May Hold Necessary Cash. The Trustees may hold in a cash
---------------------------------
or cash equivalent account such portion of the Trust Fund as may be deemed
necessary for the ordinary administration of the Trust and disbursement of
funds. Such funds may be deposited in any bank or savings and loan institution
subject to the rules and regulations governing such deposits.
12.4 Appointment of Investment Manager. The power of the Trustees to
----------------------------------
direct, control or manage the investment of the Trust Fund may be delegated to
one or more investment managers appointed by the Trustees. Any such investment
manager, if appointed, must acknowledge in writing that he is a fiduciary with
respect to the Trust Fund and shall then have the power to manage, acquire, or
dispose of any asset of the Trust Fund. An investment manager must be a person
who is (1) registered as an investment advisor under the Investment Advisors Act
of 1940; (2) a bank, as defined in that Act; or (3) an insurance company
qualified to perform such services under the laws of more than one state. If an
investment manager has been appointed, the Trustee shall neither be liable for
acts or omissions of such investment manager nor be under any obligation to
invest or otherwise manage any asset of the Trust Fund. The Trustees shall not
be liable for any act or omission of the investment manager in carrying out such
responsibility except to the extent that the Trustees violated Article 10.2 of
this Trust Agreement with respect to:
(1) Such designation,
12-1
<PAGE>
(2) The establishment or implementation of the procedures
for the designation of an investment manager, or
(3) Continuing the designation, in which case the Trustees
would be liable in accordance with Article 10.3.
12.5 Loans to Participants or Beneficiaries.
---------------------------------------
(a) Limit on Amount of Loan. The Trustee shall make a loan or loans
------------------------
to a Participant who is an active Employee (the Borrower) upon such terms as the
Trustees may determine in a uniform and nondiscriminatory manner. Such loan or
loans shall be limited to the lesser of (1) 50% of the Borrower's vested
Account; (2) the Borrower's Salary Deferral Account and/or Rollover Account, or
(3) $50,000. However, the amount of any new loan shall not exceed $50,000,
reduced by the highest outstanding loan balance of the Borrower during the
preceding 12 months. In determining whether the limitations of this Article
have been exceeded at any date, all loans made at any time from the Plan (or
from any other qualified plans maintained by the Employer or by an Affiliated
Employer) to the Borrower and still outstanding on such date shall be
aggregated, and the Borrower's vested interest in all qualified plans maintained
by the Employer or an Affiliated Employer, shall be aggregated.
(b) Repayment of Loan. All loans shall be evidenced by the Borrower's
------------------
promissory note. Such note shall provide for repayment of principal and
interest in substantially level installment payments made at least quarterly.
Loans to Participants who are Employees shall be repaid by payroll deduction.
The terms of any loan shall provide that repayment is to be made within five
years of the date of the loan, unless the loan is used to acquire a dwelling to
be used within a reasonable time (as determined at the date of the loan) as the
principal residence of the Participant, in which case the term of such loan may
be up to 25 years.
(c) Loan Policies and Procedures. The Participant loan program will
-----------------------------
be administered in a uniform and nondiscriminatory manner by the Trustees,
according to the policies and procedures set forth below:
(i) Application Procedure. A Borrower may apply for a loan from
the Plan in the form and manner prescribed by the Plan Administrator.
(ii) Limitations. Loans are available for any purpose. No loans
will be made in amounts less than $1,000. A Borrower may have only one loan
outstanding at one time.
(iii) Interest Rate. The interest rate shall be based on a
reference interest rate. The interest rate for loans issued shall be based on
the reference interest rate in effect on the date the application for the loan
is received. The reference interest rate and the interest rate charged by the
Plan are:
12-2
<PAGE>
(1) For loans with terms of 5 years or less, the reference
interest rate shall be the interest rate charged by the CH2M Hill Federal Credit
Union for a loan secured by new titled equipment and having the same term as the
loan from the Plan. The interest rate charged by the Plan shall be equal to the
reference interest rate. If a loan from the Plan is for a term for which a
reference interest rate is not set, the interest rate shall be equal to the
interest rate for the next higher term for which there is a reference interest
rate.
(2) For loans with terms of over 5 years, the reference
interest rate shall be the interest rate charged by the CH2M Hill Federal Union
for a second mortgage loan. The interest rate charged by the Plan shall be equal
to the reference interest rate. If a reference interest rate is established for
different terms, the interest rate charged by the Plan shall be based on the
reference interest rate for the term that is the closest to the term of the loan
from the Plan.
The Trustees shall review the interest rates charged by the Plan to
determine that such rates meet the requirements of Section 408(b)(1) of ERISA
for a reasonable interest rate on loans from the Plan and the Trustees may adopt
a new basis for interest rates if they determine that a change is necessary to
meet such requirements.
(iv) Security for Loan. The loan shall be secured by up to 50% of the
Borrower's vested Account Balance. No additional collateral or other form of
collateral will be accepted or allowed to secure the loan.
(v) Default. A loan shall be in default if the Borrower fails to make
principal and /or interest payments pursuant to the promissory note for a period
of 3 months. In the event of default, the Trustees:
(1) Shall deduct the full unpaid balance of the loan from any
distribution made to the Participant due to his termination of employment.
(2) May, if permitted by the terms of the promissory note which
has been signed by the Participant:
(A) Distribute to a terminating Participant the full unpaid
balance of the loan, notwithstanding that the Participant might otherwise
have the right to defer receipt of payment as provided in Article 8;
(B) Make a deemed distribution to the Borrower, which will
not involve an actual payment to him but will be currently taxable to the
Borrower, and will not reduce the unpaid balance of the loan.
(vi) Loan Fees. Any costs relating to the establishment of a separate
loan account and to transactions within such an account can be passed on to the
12-3
<PAGE>
Borrower in a nondiscriminatory manner. A Borrower shall receive a clear
statement of all charges involved in the loan transaction before the loan is
made.
(d) Loans Are Segregated. Any loan under this Article 12.6 shall be
---------------------
accounted for as a segregated loan Account in the Trust. Repayments of the
principal amount of the loan will (1) reduce the total amount of principal due
in the segregated loan Account by the amount of such payments, and (2) increase
by an equal amount the value of the Borrower's Account. Payments of interest on
such loan will reduce the total amount of interest due in the segregated loan
Account. Such interest payments will be credited directly to the Borrower's
Account.
(e) Loans Made Prior to October 19, 1989. Notwithstanding the
-------------------------------------
foregoing, any loan made pursuant to the rules in effect prior to October 19,
1989 must comply only with the requirements of the Plan and the laws in effect
at the time the loan was made, until such time as that loan is repaid or
renegotiated.
12.6 Separate Investment Funds.
--------------------------
(a) Trustees May Establish Separate Funds. The Trustees may, in their
--------------------------------------
sole discretion, designate for the Trust's investment, one or more separate
investment funds, having such different specific investment objectives as the
Trustees shall from time to time determine. From time to time the Trustees may
add or delete funds without amending the Plan. Participants will be informed of
the various investment options available. One such separate investment fund
shall be the Employer Stock Fund. The Trustees shall establish an Employer
Stock Fund for the investment of Employer Matching Contributions made for Plan
years after 1995, and for the optional investment of other contributions to the
Participants' Accounts.
(b) Participant Direction Permitted. Each Participant has the right
--------------------------------
to direct the investment of his Account into one or more of the Plan's separate
investment funds, provided, however, that:
(i) All Employer Matching Contributions made for Plan years
after 1995 shall be invested in the Employer Stock Fund,
(ii) The Trustees shall establish rules governing Participant
direction of investments in the Employer Stock Fund, which rules may specify
that transfers into or out of the Employer Stock Fund may be made only at
certain times and only to the extent that the Trustees are able to buy or sell
sufficient shares of Employer Stock to permit such transfers, and
(iii) If any Participant fails to make an investment direction
pursuant to this Article for all or any part of his Account not automatically
invested in the Employer Stock Fund in accordance with (i) above, the undirected
portion of such Account shall be invested in the money market fund.
12-4
<PAGE>
Each directed investment Account shall be valued separately under
the provision of Article 7.
(c) Trustees to Establish Rules. The Trustees may at any time make
----------------------------
such uniform and nondiscriminatory rules as it determines necessary regarding
the administration of this directed investment option. The Trustees shall
develop and maintain rules governing the rights of Participants to make or to
change their investment directions and the frequency with which changes can be
made.
* * * * End of Article 12 * * * *
12-5
<PAGE>
ARTICLE 13.
TRUSTEE
13.1 Trustees' Duties With Respect to Trust Assets. The duties of the
----------------------------------------------
Trustees with respect to Trust assets shall be to direct the receipt and payment
of funds of the Trust, the safeguarding and valuing Trust assets, and the
investing and reinvesting the Trust Funds. The directions of the Trustees shall
be in writing and bear the signature of one or more persons designated as its
authorized signatory or signatories, as provided in Article 11.2. The
directions of an investment manager shall be in writing or in such other form as
is acceptable to the Trustee. The Employer may, however, authorize the Trustees
to act with respect to any specific matter or class of matters by delivering to
the Trustees a certified copy of a resolution authorizing the Trustees so to
act.
13.2 Indicia of Ownership Must Be in the United States. The Trustees
--------------------------------------------------
shall not maintain the indicia of ownership of any Trust assets outside the
jurisdiction of the district courts of the United States, except as authorized
by regulations issued by the Department of Labor.
13.3 Permissible Trustees' Actions. In the discharge of its duties, the
------------------------------
trustees have all the powers, authority, rights and privileges of an absolute
owner of the Trust Fund and, not in limitation of but in amplification of the
foregoing, may (i) receive, hold, manage, invest and reinvest, sell, exchange,
dispose of, encumber, hypothecate, pledge, mortgage, lease, grant options
respecting, repair, alter, insure, or distribute any and all property in the
Trust Fund; (ii) borrow money, participate in reorganizations, pay calls and
assessments, vote or execute proxies, exercise subscription or conversion
privileges and register in the name of a nominee any securities in the Trust
Fund; (iii) renew, extend the due date, compromise, arbitrate, adjust, settle,
enforce or foreclose by judicial proceedings or otherwise or defend against the
same, any obligations or claims in favor of or against the Trust Fund; (iv)
exercise options, employ agents; and, (v) whether herein specifically referred
to or not, do all such acts, take all such actions and proceedings and exercise
all such rights and privileges as if the Trustees were the absolute owner of any
and all property in the Trust Fund. The Trustees have no authority or duty to
determine the amount of the Employer contribution or to enforce the payment of
any Employer contribution to it.
13.4 Voting of Employer Stock. Every Participant shall have the right
-------------------------
to direct the Trustees with respect to the voting of the Employer Stock
allocated to his Account. At the time of the mailing to shareholders of the
notice of any shareholders' meeting of the Employer, the Employer shall cause to
be prepared and delivered to each Participant a notice of the shareholders'
meeting with a descriptive statement of the items upon which the Participant has
the right to exercise his right to vote. The Trustees shall vote any Employer
Stock which a Participant fails to vote as authorized by this Article in the
same proportion as the allocated shares for which voting instructions have been
received and are voted.
13-1
<PAGE>
13.5 Trustees' Fees for Services and Advisors Retained. Individual
--------------------------------------------------
Trustees shall serve without compensation for their service as such. However,
with the approval of the Employer, the Trustees may from time to time or on a
continuing basis, retain such agents or advisors, including specifically
accountants, attorneys, investment counsel and administrators, as they consider
necessary to assist them in the proper performance of their duties. The
expenses of such agents or advisors and all other expenses of the Trustees shall
be paid by the Trust is not paid by the Employer, provided that only reasonable
expenses of administering the Plan may be paid from the Trust.
13.6 Annual Accounting and Asset Valuation. Within 60 days or within a
--------------------------------------
reasonable period following the close of each Fiscal Year, the Trustees shall
render to the Employer an accounting of the administration of the Trust during
the preceding year. The Trustees shall also determine the value of the Trust
Fund, at the close of the Fiscal Year in Article 7. Notwithstanding any other
provisions of this Agreement, if the Trustees find that the Trust Fund consists,
in whole or in part, of property not traded freely on a recognized market or
that information necessary to ascertain the fair market value thereof is not
readily available to the Trustees, the Trustees shall take such action as is
required to ascertain the fair market value of such property including the
retention of such counsel and independent appraisers as it considers necessary;
and in such event the fair market value so determined shall be conclusive and
binding.
13.7 Trustee Removal or Resignation. A Trustee may resign at any time
-------------------------------
upon 30 days written notice to the Employer and the Trustees or such shorter
period as may be agreeable to the Employer. Upon receipt of instructions or
directions from the Employer with which the Trustees are unable or unwilling to
comply, a Trustee may resign upon written notice to the Employer, given within a
reasonable time under the circumstances then prevailing. After resignation, a
Trustee shall have no liability to the Employer, or any person interested herein
for failure to comply with any instructions or directions. The Employer may
remove a Trustee without cause at any time upon 30 days written notice. In case
of resignation or removal of all the Trustees, the Trustees shall have the right
of a settlement of their accounts, which may be made at the option of the
Trustees, either by judicial settlement in an action in a court of competent
jurisdiction or by agreement of settlement between the Trustees and the
Employer. The Trustees shall not be required to transfer assets of the Trust
Fund to a successor Trustee under Article 13.8 or otherwise until its accounts
have been settled.
13.8 Approval of Trustees' Accounting. The written approval of any
---------------------------------
Trustees' accounting by the Employer shall be final as to all matters and
transactions stated or shown therein and binding upon the Employer, and all
persons who then shall be or thereafter shall become interested in this Trust.
Failure of the Employer to notify the Trustees of its disapproval of an
accounting within 90 days after it has been received shall be the equivalent of
written approval.
13.9 Trust Not Terminated Upon Trustees' Removal or Resignation.
-----------------------------------------------------------
Resignation or removal of all of the Trustees shall not terminate the Trust. If
any or all
13-2
<PAGE>
of the Trustees have died, resigned, or been removed, the chief executive
officer of the Company shall appoint a successor Trustee pursuant to Article
11.1. Any successor Trustee shall have all the powers and duties herein
conferred upon the former Trustee. The title to all Trust property shall
automatically vest in a successor Trustee without the execution or filing of any
instrument or the doing of any act, but the former Trustee shall, nevertheless,
execute all instruments and do all acts which would otherwise be necessary to
vest such title in any successor. The appointment of a successor Trustee may be
effected by amendment to this Trust Agreement or by a board resolution of the
Employer, with the agreement of the successor Trustee to act as such being
evidenced by its execution of such amendment or acceptance of such board
resolution.
13.10 Trustees May Consult With Legal Counsel. The Trustees may consult
----------------------------------------
with legal counsel (who may or may not be counsel to the Employer) concerning
any question which may arise with reference to its duties under this Agreement.
13.11 Trustees Not Required to Verify Identification or Addresses. The
------------------------------------------------------------
Trustees shall not be required to make any investigation to determine the
identity or mailing address of any person entitled to benefits under this
Agreement and shall be entitled to withhold making payments until the identity
and mailing address of any person entitled to benefits are certified by the
Employer. In the event that any dispute shall arise as to the identity or
rights of persons entitled to benefits hereunder, the Trustees may withhold
payment of benefits until such dispute has been determined by a court of
competent jurisdiction or shall have been settled by written stipulation of the
parties concerned.
13.12 Individual Trustee Rules. The action of individual Trustees shall
-------------------------
be determined by the vote or other affirmative expression of the majority
thereof, and they shall designate one of their members, or some other person, to
keep a record of their decision on matters to be determined hereunder and of all
dates, documents and other matters pertaining to their administration of this
Trust. However, no Trustee who is a Participant shall vote on any action
relating specifically to himself, and in the event the remaining Trustees by
majority vote thereof are unable to come to a determination of any such
question, the matter shall be decided by the Employer.
13.13 Indemnification of Trustees and Insurance. To the fullest extent
------------------------------------------
permitted by law, the Employer agrees to indemnify, to defend, and to hold
harmless the Trustees, individually and collectively, against any liability
whatsoever for any action taken or omitted by such Trustees in good faith in
connection with this Plan and Trust or duties hereunder and for any expenses or
losses for which the Trustees may become liable as a result of any such actions
or non-actions unless resultant from willful misconduct. The Employer may
purchase insurance for the Trustees to cover any of their potential liabilities
with regard to the Plan and Trust.
13.14 Income Tax Withholding. In directing payments from the Trust, the
-----------------------
Trustees shall be liable for federal income tax withholding, and shall withhold
the
13-3
<PAGE>
appropriate amount of tax, if any, as provided by applicable law and
regulation, from any payment made to a Participant, Beneficiary or Alternate
Payee.
* * * * End of Article 13 * * * *
13-4
<PAGE>
Article 14.
Amendment, Termination and Merger
14.1 Trust Is Irrevocable. The Trust shall be irrevocable but shall be
---------------------
subject to amendment and termination as provided in this Article 14.
14.2 Employer May Amend Trust Agreement. The Employer reserves the right
-----------------------------------
to amend this Trust Agreement to any extent and in any manner that it may deem
advisable by action of its Board of Directors. The Employer, the Trustees, all
Participants, their Beneficiaries and all other persons having any interest
hereunder shall be bound by any such amendment; provided, however, that no
amendment shall:
(1) Cause or permit any part of the principal or income of
the Trust to revert to the Employer or to be used for, or be diverted to, any
purpose other than the exclusive benefit of Participants or their Beneficiaries
except as permitted by ERISA;
(2) Change the duties or liabilities of the Trustees without
their written assent to such amendment;
(3) Adversely affect the then accrued benefits of any
Participants; or
(4) Eliminate an optional form of distribution for Account
balances accrued before such amendment, except as allowed under the Code.
14.3 Employer May Terminate Plan or Discontinue Matching and Profit
--------------------------------------------------------------
Sharing Contributions. The Employer has established the Plan with the bona fide
- ----------------------
intention and expectation that the Plan will continue indefinitely, and that it
will be able to make its Matching and Profit Sharing contributions indefinitely,
but the Employer shall be under no obligation to continue its Matching and
Profit Sharing contributions or to maintain the Plan for any given length of
time and may, in its sole discretion, completely discontinue its Matching or
Profit Sharing contributions or terminate the Profit Sharing and/or Salary
Deferral portion of the Plan at any time without any liability whatsoever. In
the event of the earlier of (1) the termination of the Profit Sharing portion of
this Plan, or (2) the complete discontinuance of matching and Profit Sharing
contributions hereunder, the full value of the applicable Accounts of all
Participants of the terminated portion or portions of the Plan shall become
fully vested and nonforfeitable. In the event of partial termination of the
Profit Sharing portion of the Plan, the full value of the applicable Accounts of
the Participants involved in the partial termination shall become fully vested
and nonforfeitable.
14.4 Timing of Plan Termination. The Plan or either portion thereof
---------------------------
shall terminate:
14-1
<PAGE>
(a) By Written Notice. Upon the date specified in a written notice of
------------------
such termination, executed by the Employer and delivered to the Trustee; or
(b) Purpose of Trust Accomplished. Upon the earlier of (i) the
------------------------------
complete accomplishment of all purposes for which the Plan was created, or (ii)
the death of the last person entitled to receive any benefits hereunder who is
living at the date of execution of the Trust Agreement. However, if, upon the
death of such last survivor, the Trust may continue for a longer period without
violation of any law of the jurisdiction to which the Trust is subject, the
Trust shall continue until the complete accomplishment of all the purposes for
which the Plan and Trust are created, unless sooner terminated under the other
provisions hereof.
14.5 Action Required Upon Plan Termination. Upon the termination of
--------------------------------------
this Plan and after payment of all expenses of the Trust, including any amounts
then due the Trustees and agents of the Trustees, the Trust assets and all
Participants' Accounts shall be revalued according to the procedures provided in
Article 7. Limitation Accounts held pursuant to Article 5 shall be allocated as
of the date the Plan is terminated in accordance with Articles 4 and 5. The
Trustee shall hold and distribute such Accounts as directed by the Trustees in
accordance with the provisions of Article 8. Upon such termination, if the
Employer has ceased to exist, all rights, powers, and duties to be exercised or
performed by the Employer shall thereafter be exercised or performed by the
Trustees, including the filling of vacancies on the Trustees and the amending of
the Plan.
14.6 Non-Reversion of Assets. Except as provided in Article 4.4(b) and
------------------------
14.8, in no event shall any part of the principal or income of the Trust revert
to the Employer or be used for or diverted to any purpose other than the
exclusive benefit of Participants or their Beneficiaries.
14.7 Merger or Consolidation Cannot Reduce Benefits. In no event shall
-----------------------------------------------
this Plan or either portion thereof be merged or consolidated with any other
plan, nor shall there be any transfer of assets or liabilities from this Plan,
or either portion thereof to any other plan unless immediately after such
merger, consolidation or transfer, each Participant's benefits, if such other
plan were then to terminate, are at least equal to or greater than the benefits
which the Participant would have been entitled to had this Plan or such
applicable portion thereof been terminated immediately before such merger,
consolidation or transfer.
14.8 Employer Contributions Conditioned Upon Initial Plan Approval.
--------------------------------------------------------------
Notwithstanding any other provisions of the Agreement to the contrary, the
Employer's obligation to make contributions hereunder is conditioned upon the
Employer receiving an initial notification from the United States Department of
the Treasury that this Plan is considered to be qualified Plan under Code
Section 401(a) and that this Trust is considered exempt from taxation under Code
Section 501(a). If such initial notification is not received, the Employer and
any Employee who has made contributions hereunder shall be entitled to recover
from the Trustee the full amount of the then value of such
14-2
<PAGE>
contributions. Prior to the receipt of such initial notification, no Participant
hereunder or his Beneficiary has any vested interest in, or shall be entitled
to, any benefit payments based on Employer contributions made hereunder;
provided, however, that upon receipt of such notification, such vestings or
entitlements shall be retroactive to the date of their occurrence in accordance
with the other provisions of this Plan, and this Article 14.8 shall be no
further force or effect.
* * * * End of Article 14 * * * *
14-3
<PAGE>
Article 15.
Assignments
15.1 No Assignment. Except as provided in Article 12.5(d) regarding
--------------
loans and below, the interest herein, whether vested or not, of any Participant,
former Participant or Beneficiary, shall not be subject to alienation,
assignment, pledging, encumbrance, attachment, garnishment, execution,
sequestration, or other legal or equitable process, or transferability by
operation of law in the event of bankruptcy, insolvency or otherwise.
15.2 Qualified Domestic Relations Order Permitted. The provisions of
---------------------------------------------
Article 15.1 above shall not prevent the creation, assignment or recognition of
any individual's right to a benefit payable with respect to a Participant
pursuant to a Qualified Domestic Relations Order (QDRO).
(a) Not All Domestic Relations Orders Qualify as QDROs. The Trustees
---------------------------------------------------
shall establish reasonable procedures to determine whether a domestic relations
order is a QDRO and to administer distributions under a QDRO. If any domestic
relations order is received by the Plan, the Trustees shall promptly notify the
Participant and each Alternate Payee that the order has been received, and shall
determine within a reasonable period after receipt of the order whether it is a
QDRO and notify the Participant and each Alternate Payee of the Trustees'
determination.
(b) Payments May Occur Before Termination of Service. The Plan may
-------------------------------------------------
make benefit payments to an Alternate Payee under a QDRO before the
Participant's termination of Service if such payments are made on or after the
earlier of (i) the date specified in the QDRO; (ii) the earliest date on which
the Participant is entitled to a distribution under the Plan; or (iii) the later
of (A) the Participant's 50th birthday, or (B) the earliest date on which the
Participant could receiving benefits under the Plan if the Participant separated
from Service; in accordance with applicable law or regulations.
(c) Separate Accounting of Alternate Payee's Account. During any
-------------------------------------------------
period in which the issue of whether a domestic relations order is a QDRO is
being determined by the Trustees, a court of competent jurisdiction or
otherwise, the Trustees shall separately account for (herein referred to as "the
separate amounts") the amounts which would have been payable to the Alternate
Payee during such period if the order had been determined to be a QDRO. If the
order, or a modification of the order, is determined within the 18 month period
described herein to be a QDRO, the Trustees shall pay the separate amounts (as
adjusted by attributable investment income or loss), in accordance with the
Plan's provisions, to the entitled individuals). If, within the 18 month period
described herein, the order is determined not to be a QDRO or its status as a
QDRO is not resolved, the Trustees shall return the separate amounts (as
adjusted by attributable investment income or loss) to his Account; or if
applicable, the Trustees shall pay such separate amounts to the individuals who
would have been entitled to receive such amounts absent such order. Any
determination that an order is a QDRO made after the close of the 18-month
period described herein shall be applied
15-1
<PAGE>
prospectively only. For purposes of this Article 15.2(c), the 18-month period
shall be the 18-month period beginning with the date on which the first payment
would be required to be made under the QDRO.
(d) Consent Requirements. Except as otherwise provided in a QDRO,
---------------------
payments made to an Alternate Payee shall not be subject to (1) Spousal Consent,
or (2) consent of the Alternate Payee.
* * * * End of Article 15 * * * *
15-2
<PAGE>
Article 16.
Adoption of the Plan by Affiliated Employers
16.1 Purpose. The purpose of this Article 16 is to describe the terms
--------
and conditions under which an Affiliated Employer may adopt the Plan for the
benefit of its Eligible Employees.
16.2 Conditions of Subscription Agreement. Any Affiliated Employer may,
-------------------------------------
with the written consent of the Board, execute a Subscription Agreement under
which it shall agree:
(a) To be bound by all the provisions of the adopted Plan and Trust in
the manner set forth herein:
(b) To pay its share of the expenses of the Plan and Trust as they may
be determined from time to time in the manner specified in this Article 16; and
(c) To provide the Board and the Trustees with full, complete and
timely information on all matters necessary to them in the operation of the Plan
and Trust.
16.3 Participation of Affiliated Employers. In the event of the
--------------------------------------
adoption of the Plan and Trust by an Affiliated Employer, the following shall
apply with respect to the participation of such Affiliated Employer hereunder:
(a) All the terms and conditions of the Plan and Trust shall apply to
the participation of such Member Employer and its Employees in the same manner
as set forth for the Employer and its Employees, except as follows:
(i) The right to designate an Affiliated Employer is
specifically reserved to the Board.
(ii) An Affiliated Employer which adopts the Plan shall have the
right to designate for purposes of Article 3 alternative requirements which
shall be met by its Eligible Employees in order to qualify as Participants. In
the event that no such designation is made, the current requirements set forth
in Article 2.41 and Article 3 shall apply to Employees of such Member Employer.
(iii) An Affiliated Employer which adopts the Plan shall have the
right to designate that it does not adopt Article 4.2(a) permitting Employer
---
Profit Sharing Contributions and/or Article 4.2(c) permitting Employer Matching
Contributions, and all applicable provisions related to such Profit Sharing
and/or Matching Contributions.
(iv) The right to appoint the Trustees as Plan Administrator is
specifically reserved to the Board, provided that a Member Employer may appoint
an
16-1
<PAGE>
Advisory Committee of such composition and size as it may determine to advise
the Trustees on any matters affecting such Member Employer or its Employees who
are Participants under the Plan. The Trustees shall be entitled to rely on any
information furnished it by any such Advisory Committee in the same manner as if
furnished by the Member Employer appointing such Advisory Committee, but in no
event shall the existence of any such Advisory Committee modify or otherwise
limit any of the powers or duties of the Trustees under the Plan.
(v) The right to direct, appoint, remove, approve the account of
or otherwise deal with the Trustees are specifically reserved to the Board.
(vi) The right to amend the Plan and Trust is specifically
reserved to the Board, and any such amendment, unless otherwise specified
therein, shall be fully binding with respect to the participation of any Member
Employer, provided that this reservation shall in no event be construed to
prevent any Member Employer from terminating at any time its participation in
the Plan and Trust.
(b) In the operation of the Plan with respect to a Member Employer,
the term "effective date" shall mean the effective date in this Restatement or
such later date as specified in such Member Employer's Subscription Agreement.
(c) The Trustees shall at all times maintain separate Accounts
reflecting the participation of the Eligible Employees of the Member Employer
and in no event shall there be a commingling of the Accounts of the Eligible
Employees of the Employer or any Member Employer, provided that this requirement
shall in no event be construed to be a limitation on the commingling of any
contributions of the Trust Fund for investment purposes nor shall it require the
Trustees to maintain separate accounts with respect to the Trust Fund except as
otherwise provided herein.
(d) Notwithstanding any other provisions of this Agreement to the
contrary, it is specifically understood that the participation of any Affiliated
Employer hereunder, the obligation of such Affiliated Employer to make
contributions hereunder, and the vesting and entitlements of any Participant
based on such contributions are conditional to the extent that if a notification
is received from the United States Treasury that its Subscription Agreement as
part of the Plan, or the same as it may have been amended, is not part of a
qualified plan under Section 401 of the Code, as amended by ERISA, with respect
to its participation, such Affiliated Employer shall not be a Member Employer
hereunder and the then value of any contributions made by such Affiliated
Employer or its Employees shall be returned from the Trust Fund, and no
Participant hereunder or his Beneficiary shall have any vested interest in, or
be entitled to, any benefit payments based on such contributions. Further, it
is understood and provided that upon receipt of an initial notification from the
United States Treasury Department that such Subscription Agreement and the Plan
and Trust, as they may have been amended in order to receive such notification,
are qualified and exempt from taxation under the applicable sections of the
Code, the participation of such Affiliated Employer as a Member Employer and the
vestings and entitlement of all Participants
16-2
<PAGE>
employed by such Member Employer and their Beneficiaries shall be retroactive to
the date of their occurrence in accordance with the other provisions of the
Plan, and this Article 16.3 shall be of no further force or effect with respect
to such Member Employer and its Employees.
16.4 Termination of Member Employer's Participation. Any Member
-----------------------------------------------
Employer may at any time elect to terminate its participation in the Plan and
Trust, or any Member Employer may elect at any time by appropriate amendment or
action affecting only its own status hereunder to disassociate itself from the
Plan and Trust but to continue the Plan and the portion of the Trust as it
pertains to itself and its Employees as an entity separate and distinct from the
Plan and Trust if otherwise permitted by law. Termination of the participation
of any Member Employer shall not affect the participation of any other Member
Employer nor terminate the Plan or Trust with respect to them and their
Employees; provided that, if Employer shall terminate its participation, or
disassociate itself, then each remaining Member Employer shall make such
arrangement and take such action as may be necessary to assume the duties of
providing for the operation and continued administration of the Plan and Trust
as the same pertains to the Member Employer.
* * * * End of Article 16 * * * *
16-3
<PAGE>
Article 17.
Miscellaneous
17.1 Special Rule Relating to Veterans Reemployment Rights Under USERRA.
-------------------------------------------------------------------
Notwithstanding any provision of this Plan to the contrary, effective as of
December 12, 1994, contributions, benefits and service credit with respect to
qualified military service will be provided in accordance with Section 414(u) of
the Code.
* * * * End of Article 17 * * * *
17-1
<PAGE>
IN WITNESS WHEREOF, the Employer and the Trustees have caused this
Agreement to be executed by their respective duly authorized parties on this
_____ day of ___________________, 1999.
CH2M HILL COMPANIES, LTD.
(Employer)
By____________________________________
Its___________________________________
FRED K. BERRY
SAMUEL H. IAPALUCCI
SHARON SCHLECHTER
CLIFF THOMPSON
STAN VINSON
(Trustees)
By____________________________________
By____________________________________
By____________________________________
By____________________________________
By____________________________________
<PAGE>
Exhibit 10.2
FORM OF
CH2M HILL EMPLOYEE STOCK PLAN
-----------------------------
(as amended and restated effective January 1, 1999)
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
Article 1. Name, Effective Date, Purpose and Construction................................................... 1-1
1.1 Plan Name........................................................................................... 1-1
1.2 Effective Date...................................................................................... 1-1
1.3 Purpose and History................................................................................. 1-1
1.4 Construction........................................................................................ 1-1
1.5 Employment Relationship Not Affected................................................................ 1-2
1.6 Terminated Participants Not Affected................................................................ 1-2
Article 2. Definitions...................................................................................... 2-1
2.1 Account............................................................................................. 2-1
2.2 Adjustment Factor................................................................................... 2-1
2.3 Affiliated Employer................................................................................. 2-1
2.4 Allowable Compensation.............................................................................. 2-1
2.5 Alternate Payee..................................................................................... 2-2
2.6 Beneficiary......................................................................................... 2-2
2.7 Board............................................................................................... 2-2
2.8 Break in Service.................................................................................... 2-2
2.9 Code................................................................................................ 2-2
2.10 Company............................................................................................ 2-2
2.11 Date of Hire....................................................................................... 2-2
2.12 Deferred Retirement Date........................................................................... 2-2
2.13 Determination Date................................................................................. 2-2
2.14 Disability......................................................................................... 2-3
2.15 Eligible Employee.................................................................................. 2-3
2.16 Eligible Participant............................................................................... 2-3
2.17 Employee........................................................................................... 2-3
2.18 Employer........................................................................................... 2-3
2.19 Employer Stock..................................................................................... 2-3
2.20 Entry Date......................................................................................... 2-4
2.21 ERISA.............................................................................................. 2-4
2.22 Fiscal Year........................................................................................ 2-4
2.23 Forfeiture......................................................................................... 2-4
2.24 GATT............................................................................................... 2-4
2.25 General Trust Fund................................................................................. 2-4
2.26 Hour of Service.................................................................................... 2-4
2.27 Inactive Participant............................................................................... 2-4
2.28 Key Employee....................................................................................... 2-4
2.29 Leased Employee.................................................................................... 2-5
2.30 Member Employer.................................................................................... 2-5
2.31 Non-Key Employee................................................................................... 2-6
2.32 Normal Retirement Date............................................................................. 2-6
2.33 OBRA '93........................................................................................... 2-6
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
2.34 Owner.............................................................................................. 2-6
2.35 Participant........................................................................................ 2-6
2.36 Plan............................................................................................... 2-6
2.37 Plan Administrator................................................................................. 2-6
2.38 Plan Compensation.................................................................................. 2-6
2.39 Quarter............................................................................................ 2-7
2.40 Qualified Domestic Relations Order................................................................. 2-7
2.41 REA................................................................................................ 2-7
2.42 Savings Plan....................................................................................... 2-7
2.43 SBJPA.............................................................................................. 2-7
2.44 Service............................................................................................ 2-7
2.45 Spousal Consent.................................................................................... 2-7
2.46 [Reserved]......................................................................................... 2-8
2.47 TEFRA.............................................................................................. 2-8
2.48 Testing Compensation............................................................................... 2-8
2.49 Top-Heavy Plan..................................................................................... 2-8
2.50 TRA '86............................................................................................ 2-9
2.51 Trust.............................................................................................. 2-9
2.52 Trust Agreement.................................................................................... 2-9
2.53 Trust Fund......................................................................................... 2-9
2.54 Trustees........................................................................................... 2-9
2.55 USERRA............................................................................................. 2-9
2.56 Valuation Date..................................................................................... 2-9
2.57 List of Terms Defined Elsewhere.................................................................... 2-9
Article 3. Eligibility, Participation and Beneficiary Designation........................................... 3-1
3.1 Definitions......................................................................................... 3-1
3.2 Participation....................................................................................... 3-1
3.3 Beneficiary Designation............................................................................. 3-1
3.4 Change from Ineligible to Eligible Employee......................................................... 3-2
3.5 Former Employee Rehired............................................................................. 3-2
3.6 Trustees Determine Eligibility...................................................................... 3-2
Article 4. Contributions.................................................................................... 4-1
4.1 Employer Contribution............................................................................... 4-1
4.2 Top-Heavy Minimum Contribution...................................................................... 4-1
4.3 Timing of, Limitations on, and Return of Employer Contributions..................................... 4-1
Article 5. Allocation of Contributions and Forfeitures...................................................... 5-1
5.1 Definitions......................................................................................... 5-1
5.2 Allocation Methods.................................................................................. 5-3
5.3 Limitations on Annual Allocations................................................................... 5-4
5.4 Overall Limitation for Different Types of Plans..................................................... 5-4
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
5.5 Restoration Procedures.............................................................................. 5-5
Article 6. Vesting of Accounts.............................................................................. 6-1
6.1 Automatic Vesting on Retirement, Death or Disability................................................ 6-1
6.2 Vesting Based on Service............................................................................ 6-1
6.3 Forfeitures and Restorations........................................................................ 6-1
6.4 No Divestment....................................................................................... 6-2
6.5 Amendment to Vesting................................................................................ 6-2
6.6 Lost Participants................................................................................... 6-3
Article 7. Participants' Account Valuation.................................................................. 7-1
7.1 Separate Accounts................................................................................... 7-1
7.2 Determination of Value of Participant Accounts...................................................... 7-1
7.3 Valuation Dates..................................................................................... 7-1
7.4 Special Valuation Dates............................................................................. 7-1
7.5 Accounts to be Valued............................................................................... 7-1
7.6 Statement of Accounts............................................................................... 7-1
7.7 Valuation of Account When Payment Due............................................................... 7-2
Article 8. Distributions and Withdrawals.................................................................... 8-1
8.1 General............................................................................................. 8-1
8.2 Administrative Rules................................................................................ 8-1
8.3 Timing of Distributions............................................................................. 8-1
8.4 Treatment of Deferred Amounts....................................................................... 8-3
8.5 Methods of Distribution............................................................................. 8-3
8.6 Distribution Upon Death of Participant.............................................................. 8-4
8.7 Distributions to Minors or Legally Incompetents..................................................... 8-4
8.8 Tax Information To Be Provided...................................................................... 8-4
8.9 Direct Rollovers.................................................................................... 8-4
Article 9. Service.......................................................................................... 9-1
9.1 General Definitions................................................................................. 9-1
9.2 Crediting of Hours Subject to DOL Regulation........................................................ 9-2
9.3 Elapsed Time Service Definitions.................................................................... 9-2
Article 10. Fiduciary Responsibility........................................................................10-1
10.1 Names Fiduciaries..................................................................................10-1
10.2 Fiduciary Standards................................................................................10-1
10.3 Fiduciaries Liable for Breach of Duty..............................................................10-1
10.4 Fiduciary May Employ Agents........................................................................10-1
10.5 Authority Outlined.................................................................................10-1
10.6 Fiduciaries Not to Engage in Prohibited Transactions...............................................10-2
</TABLE>
iii
<PAGE>
<TABLE>
<S> <C>
10.7 Duties of Plan Administrator.......................................................................10-2
Article 11. Administration of the Plan......................................................................11-1
11.1 Selection of Trustees..............................................................................11-1
11.2 Trustees' Operating Rules..........................................................................11-1
11.3 Trustees' Administrative Authority.................................................................11-1
11.4 Trustees to Establish Funding Policy...............................................................11-1
11.5 Trustees May Retain Advisors.......................................................................11-1
11.6 Claims Procedure...................................................................................11-2
Article 12. Investments.....................................................................................12-1
12.1 Investment Authority...............................................................................12-1
12.2 Trustees May Hold Necessary Cash...................................................................12-1
12.3 Appointment of Investment Manager..................................................................12-1
Article 13. Trustee.........................................................................................13-1
13.1 Trustees' Duties With Respect to Trust Assets......................................................13-1
13.2 Indicia of Ownership Must Be in the United States..................................................13-1
13.3 Permissible Trustees' Actions......................................................................13-1
17.8 Voting of Employer Stock...........................................................................13-1
13.4 Trustees' Fees for Services and Advisors Retained..................................................13-2
13.5 Annual Accounting and Asset Valuation..............................................................13-2
13.6 Trustee Removal or Resignation.....................................................................13-2
13.7 Approval of Trustees' Accounting...................................................................13-2
13.8 Trust Not Terminated Upon Trustees' Removal or Resignation.........................................13-2
13.9 Trustees May Consult With Legal Counsel............................................................13-3
13.10 Trustees Not Required to Verify Identification or Addresses.......................................13-3
13.11 Individual Trustee Rules..........................................................................13-3
13.12 Indemnification of Trustees and Insurance.........................................................13-3
13.13 Income Tax Withholding............................................................................13-3
Article 14. Amendment, Termination and Merger...............................................................14-1
14.1 Trust Is Irrevocable...............................................................................14-1
14.2 Employer May Amend Trust Agreement.................................................................14-1
14.3 Employer May Terminate Plan........................................................................14-1
14.4 Timing of Plan Termination.........................................................................14-1
14.5 Action Required Upon Plan Termination..............................................................14-2
14.6 Non-Reversion of Assets............................................................................14-2
14.7 Merger or Consolidation Cannot Reduce Benefits.....................................................14-2
Article 15. Assignments.....................................................................................15-1
15.1 No Assignment......................................................................................15-1
</TABLE>
iv
<PAGE>
<TABLE>
<S> <C>
15.2 Qualified Domestic Relations Order Permitted.......................................................15-1
Article 16. Adoption of the Plan by Affiliated Employers....................................................16-1
16.1 Purpose............................................................................................16-1
16.2 Conditions of Subscription Agreement...............................................................16-1
16.3 Participation of Affiliated Employers..............................................................16-1
16.4 Termination of Member Employer's Participation.....................................................16-3
Article 17. Miscellaneous...................................................................................17-1
17.1 Special Rule Relating to Veterans Reemployment Rights Under USERRA.................................17-1
</TABLE>
v
<PAGE>
CH2M HILL EMPLOYEE STOCK PLAN
(As Amended and Restated Effective January 1, 1999)
THIS PLAN AND TRUST AGREEMENT is made and entered into by and between
CH2M HILL COMPANIES, LTD. (Employer) and FRED K. BERRY, SAMUEL H. IAPALUCCI,
SHARON SCHLECHTER, CLIFF THOMPSON, and STAN VINSON (Trustees).
Article 1.
Name, Effective Date, Purpose and Construction
1.1 Plan Name. The Plan set forth in this Agreement shall be designated
----------
as the CH2M HILL EMPLOYEE STOCK PLAN.
1.2 Effective Date.
---------------
(a) In General. The Effective Date of this amended and restated
-----------
Plan and Trust Agreement shall be January 1, 1999.
(b) Specific Articles. Notwithstanding the above, certain
------------------
Articles within this Plan and Trust are effective as of the dates specified
within those Articles.
1.3 Purpose and History.
--------------------
(a) Purpose. The Plan and Trust are intended to qualify as a
--------
Profit Sharing Plan under Code Sections 401(a) and 501(a) and are created and
maintained for the exclusive benefit of Eligible Employees of the Employer and
their Beneficiaries to enable them to share in Employer profits, to provide
Eligible Employees with a means to accumulate retirement savings, to provide
retirement funds, and to provide benefits in the event of the death or
Disability of the Employee.
(b) History. The original Plan and Trust Agreement was adopted
--------
as an Employee Stock Ownership Plan effective January 1, 1977, and was
subsequently amended and restated effective in 1983 to convert it to a profit
sharing plan authorized to invest entirely in Employer Stock. The Plan and
Trust Agreement was restated effective January 1, 1989, and again effective
January 1, 1996.
(c) Purposes of Restatement. The principal purposes of this
------------------------
amendment and restatement are to recognize the limited trading market for
Employer Stock and to amend the Plan and Trust Agreement to comply with SBJPA,
GATT and USERRA.
1.4 Construction. The following miscellaneous provisions shall apply in
-------------
the construction of this Trust Agreement:
(a) State Jurisdiction. All matters respecting the validity,
-------------------
effect, interpretation and administration of this Plan shall be determined in
accordance with the
1-1
<PAGE>
laws of the State of Colorado except where preempted by ERISA or other federal
statutes.
(b) Gender. Wherever appropriate, words used in the singular may
-------
include the plural or the plural may be read as the singular, the masculine may
include the feminine, and the neuter may include both the masculine and the
feminine.
(c) Application of ERISA and Code References. All references to
-----------------------------------------
sections of ERISA or the Code, or any regulations or rulings thereunder, shall
be deemed to refer to such sections as they may subsequently be modified,
amended, replaced or amplified by any federal statutes, regulations or rulings
of similar application and import enacted by the Government of the United States
or any duly authorized agency of the Government.
(d) Enforceable Provisions Remain Effective. If any provision of
----------------------------------------
this Plan and Trust shall be held by a court of competent jurisdiction to be
invalid or unenforceable, the remaining provisions of the Plan shall continue to
be fully effective.
(e) Headings. Headings are inserted for reference only and
---------
constitute no part of the construction of this Agreement.
1.5 Employment Relationship Not Affected. Nothing in the Plan or Trust
-------------------------------------
shall be deemed a contract between the Employer and any Employee, nor shall the
rights or obligations of the Employer or any Employee to continue or terminate
employment at any time be affected hereby.
1.6 Terminated Participants Not Affected. Notwithstanding anything to
-------------------------------------
the contrary herein, the rights and remedies, if any, of any person hereunder
shall be determined as of the date his participation ceased or the date he
ceased to be an Eligible Employee, whichever occurs first, and shall be based on
the terms and conditions of the Plan in effect on such date, without regard to
any changes made by Articles which have specific effective dates subsequent to
such date.
* * * * End of Article 1 * * * *
1-2
<PAGE>
Article 2.
Definitions
Definitions. Terms which are used only in a single Article (beginning
------------
with Article 3) are generally defined at the beginning of that Article. Article
2.59 lists the terms so defined. The following words and phrases are used
throughout this Trust Agreement and are defined below:
2.1 "Account" means the aggregate of all records maintained by the
-------
Trustees for purposes of determining a Participant's or Beneficiary's interest
in the Trust Fund and shall be adjusted by all amounts properly credited or
debited to such Account.
2.2 "Adjustment Factor" means the cost of living factor prescribed by the
-----------------
Secretary of the Treasury under Code Section 415(d) for years beginning after
December 31, 1987, as applied to such items and in such manner as the Secretary
shall provide. For purposes of the OBRA '93 annual compensation limit under
Code Section 401(a)(17), the Adjustment Factor shall be applied as provided in
Code Section 401(a)(17)(B) for calendar years after 1994.
2.3 "Affiliated Employer" means any corporation which is a member of a
-------------------
controlled group of corporations (as defined in Code Section 414(b)) which
includes the Employer, any trade or business (whether or not incorporated) which
is under common control (as defined in Code Section 414(c)) with the Employer,
any organization (whether or not incorporated) which is a member of an
affiliated service group (as defined in Code Section 414(m)) which includes the
Employer, and any other entity required to be aggregated with the Employer
pursuant to regulations under Code Section 414(o).
2.4 "Allowable Compensation" for purposes of determining the Top-Heavy
----------------------
minimum contributions, and for purposes of determining the limitations on
allocations pursuant to Article 5.3, means the total of all wages, salaries,
fees for professional services and other amounts paid by the Employer or an
Affiliated Employer during a Limitation Year to a Participant for services
actually rendered in the course of employment including (but not limited to)
bonuses, overtime, commissions and incentive compensation, but excluding
severance pay and amounts which are contributed to a retirement plan, deferred
compensation plan or other plan and which are not included as taxable income for
such year, or amounts which are not deemed to be income for current services
rendered such as amounts realized from the sale, exercise or exchange of
Employer Stock or stock options.
Notwithstanding the foregoing, amounts earned in the Limitation Year
but paid during the first few weeks of the next year because of the timing of
pay periods and pay days may be included on a uniform and consistent basis in
the Allowable Compensation of all similarly situated Participants for the
Limitation Year. In addition, for Limitation Years beginning before December
31, 1991, the requirement that the
2-1
<PAGE>
amounts earned in a Limitation Year be paid in the first few weeks of the next
year shall not apply.
Notwithstanding the foregoing, the amount determined above shall be
reduced by any amounts paid or reimbursed by the Employer and/or Affiliated
Employer for moving expenses incurred by the Participant, but only to the extent
that it is reasonable to believe that such expenses are deductible by the
Participant under Code Section 217.
Notwithstanding the foregoing, for Fiscal Years beginning on or after
January 1, 1998, Allowable Compensation shall include any elective deferral (as
defined in Section 402(g)(3) of the Code) and any amount which is contributed or
deferred by the Employer at the election of the Employee which is not includible
in the gross income of the Employee by reason of Section 125 or 457 of the Code.
2.5 "Alternate Payee" means any spouse, former spouse, child or other
---------------
dependent of a Participant recognized by a Qualified Domestic Relations Order as
having a right to receive all, or a portion of, a Participant's benefits under
the Plan.
2.6 "Beneficiary" means any person designated by a Participant to receive
-----------
benefits upon the death of such Participant, subject to the provisions of
Article 3.3.
2.7 "Board" means the Board of Directors of the Company.
-----
2.8 "Break in Service" for purposes of applying the provisions of Article
----------------
6 for vesting credit applicable to a Participant's Account is defined in Article
9.3.
2.9 "Code" means the Internal Revenue Code of 1986, as amended (and
----
regulations issued thereunder).
2.10 "Company" means CH2M HILL COMPANIES, LTD.
-------
2.11 "Date of Hire" means the date on which an Employee first performs an
------------
Hour of Service for the Employer.
2.12 "Deferred Retirement Date" means the date of actual retirement from
------------------------
the Employer by a Participant who remains in the employ of the Employer after
attaining his Normal Retirement Date.
2.13 "Determination Date" means, with respect to any Fiscal Year, the last
------------------
day of the preceding Fiscal Year. If the Employer maintains two or more
qualified plans which have different fiscal years and which either must be
aggregated or which are allowed to be aggregated when determining top-heaviness
pursuant to this Trust Agreement, the Determination Date to be used for this
Plan for aggregation purposes shall be the Determination Date which falls within
the same calendar year as the determination dates for all such plans which are
required or permitted to be aggregated.
2-2
<PAGE>
2.14 "Disability" means the permanent incapacity of a Participant, by
----------
reason of physical or mental illness, to perform his usual duties for the
Employer, resulting in termination of his service with the Employer. Disability
shall be determined by the Trustees in a uniform and nondiscriminatory manner
after consideration of such evidence as it may require, which shall include a
report of such physician or physicians as it may designate.
2.15 "Eligible Employee" has the meaning set forth in Article 3.1.
-----------------
2.16 "Eligible Participant" means:
--------------------
(a) For purposes of Employer contributions under Article 4.1:
(i) an Eligible Employee who completed at least 1,000 Hours of
Service in the Fiscal Year and who is an Employee and a Participant on the last
day of the Fiscal Year;
(ii) a Participant who was an Eligible Employee who terminated
employment during the Fiscal Year due to death or Disability, or after reaching
his Normal Retirement Date or after attaining age 55 and completing five Years
of Service; or
(iii) a Participant who terminated employment and was rehired
during the Fiscal Year and who remained employed until the end of the Fiscal
Year at an annual rate of 1,000 Hours of Service or more.
(b) In the event the Plan does not otherwise meet the coverage
requirements of Code Section 410(b) for a Fiscal Year, and to the extent the
Trustees determine it necessary to meet such requirements, each other Eligible
Employee who:
(i) Is a Participant at any time during the year, and/or
(ii) Completed a number of Hours of Service (as determined by the
Trustees) during the Fiscal Year, which is less than 1,000.
2.17 "Employee" means any person in the Service of the Employer including
--------
Leased Employees and officers, but excluding directors who are not in the
Employer's employ in any other capacity. Sub-categories of "Employee" are
defined alphabetically in Article 2.
2.18 "Employer" means the Company, and such of its successors or assigns as
--------
may expressly adopt this Plan and Trust Agreement and agree in writing to
continue this Plan and Trust.
2.19 "Employer Stock" means shares of any classes of preferred or common,
--------------
voting or nonvoting, stock issued by the Employer.
2-3
<PAGE>
2.20 "Entry Date" means the first day of any month.
----------
2.21 "ERISA" means the Employee Retirement Income Security Act of 1974 and
-----
regulations issued thereunder.
2.22 "Fiscal Year" means the accounting year of the Plan and Trust, which
-----------
is the 12-consecutive month period ending December 31.
2.23 "Forfeiture" is described in Article 6.4(a).
----------
2.24 "GATT" means the Uruguay Round Agreements Act, implementing Agreements
----
under the General Agreement on Tariffs and Trade.
2.25 "General Trust Fund" means that portion of the Trust Fund other than
------------------
property and income held as or for segregated Accounts or under separate
investment funds under the provisions of this Trust Agreement.
2.26 "Hour of Service" has the meaning set forth in Article 9.1(b).
---------------
2.27 "Inactive Participant" means a Participant who remains an Employee,
--------------------
but who ceases to be an Eligible Employee because of a change in employment
status. Accounts of Inactive Participants shall share in allocations of
contributions and Forfeitures to the extent provided in Article 5, and such
Accounts shall continue to be adjusted by other amounts properly credited or
debited to such Accounts pursuant to Article 7.
2.28 "Key Employee" means, with respect to a Fiscal Year, any Employee or
------------
former Employee (including any deceased Employee) who at any time during the
"testing period", consisting of the Fiscal Year containing the Determination
Date and the four preceding Fiscal Years (or, if the Plan has been in effect for
fewer than four Fiscal Years, for the number of preceding Fiscal Years since the
Plan's effective date), is or was:
(a) Officer. An officer of the Employer, or an Employee with the
--------
authority of an officer, with Testing Compensation of more than 50% of the
applicable dollar limit under Code Section 415(b)(1)(A) for the applicable
Fiscal Year. However, no more than 50 Employees (or if less, the greater of 3
Employees or 10% of the total number of Employees, including Leased Employees,
who performed services for the Employer at any time during the "testing period")
shall be treated as officers. In addition, such Employees who meet the
requirements of this paragraph and who had the largest annual Testing
Compensation from the Employer in any Fiscal Year during the "testing period"
shall first be counted as officers, without regard to whether they are Key
Employees for any other reason; or
(b) Owner.
------
(i) A 5% owner; or
2-4
<PAGE>
(ii) A 1% owner with annual Testing Compensation from the
Employer for the applicable Fiscal Year of more than $150,000;
(iii) A 1/2% owner who (1) is one of the 10 Employees who
have the largest ownership interest in the Employer, (2) has annual Testing
Compensation from the Employer which is greater than the dollar limitation under
Code Section 415(c)(1)(A) for the applicable Fiscal Year, and (3) does not meet
the criteria in (i) or (ii). For purposes of this (iii), if two Employees have
the same ownership interest in the Employer during the "testing period", then
the Employee with the greater annual Testing Compensation from the Employer for
the Fiscal Year during which the ownership interest existed shall be considered
to have a larger ownership interest in the Employer.
(c) Beneficiary. A Beneficiary of a deceased Key Employee shall
------------
be considered to be a Key Employee, and a Beneficiary of a deceased Non-Key
Employee shall be considered a Non-Key Employee. Notwithstanding the above, the
Trustees shall be guided by the Code in determining Key Employees for any Fiscal
Year and shall maintain records adequate to determine Key Employees for any
Fiscal Year.
2.29 "Leased Employee", for Fiscal Years beginning before January 1, 1997,
---------------
means any individual who would not otherwise be considered an Employee but who
has provided services to the Employer of a type historically performed by
employees in the Employer's field of business, pursuant to an agreement between
the Employer and any other entity, on a substantially full-time basis for a
period of at least one year.
For Fiscal Years beginning on or after January 1, 1997, the term
"Leased Employee" means any person (other than an employee of the recipient) who
pursuant to an agreement between the recipient and any other person has
performed services for the recipient (or for the recipient and related persons
determined in accordance with Section 414(n)(6) of the Code) on a substantially
full time basis for a period of at least one (1) year and such services are
performed under the primary direction or control of the recipient.
However, Leased Employees will not be considered Employees if they
constitute less than 20% of the Employer's Non-Highly Compensated Employees as
defined in Code section 414(q) and if they are covered by a plan described in
Code Section 414(n)(5).
2.30 "Member Employer" shall mean the Employer and any Affiliated Employer
---------------
who adopts this Plan and Trust Agreement. As of the Effective Date of this
January 1, 1999 restatement, the Member Employers participating in the Plan in
addition to the Employer are: CH2M HILL, INC., QUALITY ANALYTICAL LABORATORIES,
INC., CH2M HILL FEDERAL GROUP, LTD., CH2M HILL INTERNATIONAL, LTD., CH2M HILL
INTERNATIONAL SERVICES, INC., INDUSTRIAL DESIGN CORPORATION, and IDC
CONSTRUCTION MANAGEMENT, INC.
2-5
<PAGE>
2.31 "Non-Key Employee" means any Employee who is not a Key Employee,
----------------
including Employees who are former Key Employees.
2.32 "Normal Retirement Date" means the date of a Participant's 65th
----------------------
birthday.
2.33 "OBRA '93" means the Omnibus Budget Reconciliation Act of 1993.
--------
2.34 "Owner" means any person who owns (within the meaning of Code Sections
-----
318 and 416(i)(1)(B)), or has owned within the four Fiscal Years prior to the
Fiscal Year under consideration, a portion of the outstanding stock or voting
power of the Employer. The ownership percentage of a "5%" Owner means greater
than a 5% interest, that of a "1%" Owner means greater than a 1% interest and
that of a " 1/2%" Owner means greater than a 1/2% interest.
2.35 "Participant" means any Employee or former Employee who has entered
-----------
the Plan in accordance with Article 3, and whose Account, if any, hereunder has
not subsequently been liquidated.
2.36 "Plan" means the Plan created by this Agreement.
----
2.37 "Plan Administrator" means the Trustees.
------------------
2.38 "Plan Compensation" shall equal an Employee's basic hourly rate of pay
-----------------
on the last day of the year, times the lesser of:
(i) the number of regular work hours for such year after his
Entry Date, or
(ii) the number of Hours of Service for which he was paid during
such year while he was a Participant and an Eligible Employee.
For an Employee who transfers to another Member Employer and is still
an Employee on the last day of the Fiscal Year, Plan Compensation with the first
Member Employer shall be calculated through his transfer date based on the rate
of pay on his transfer date.
Periods of Disability during which the Participant is eligible to
receive Disability benefits under a plan maintained by the Employer or
Affiliated Employer, or would have been eligible if covered by such plan, and
periods of unpaid leave of absence shall be excluded in determining the
multiplier in (i) and (ii) above.
Notwithstanding the above, Plan Compensation shall not exceed
$200,000, multiplied by the Adjustment Factor. For Fiscal Years beginning on or
after January 1, 1994, Plan Compensation shall not exceed the OBRA '93 annual
compensation limit of $150,000, multiplied by the Adjustment Factor.
2-6
<PAGE>
The total of the Plan Compensation received by (1) a Highly
Compensated Employee (as defined in Section 414(q) of the Code) who is one of
the 10 most Highly Compensated Employees, and/or a 5% Owner, (2) his spouse, and
(3) his lineal descendants who have not attained the age of 19 by the end of the
Fiscal Year, shall not exceed $200,000 ($150,000 for Fiscal Years beginning on
or after January 1, 1994) multiplied by the Adjustment Factor. For Fiscal Years
beginning on or after January 1, 1997, the limitations of this paragraph shall
be applied without regard to sections (2) and (3) of this paragraph.
Notwithstanding the above, for Fiscal Years beginning on or after
January 1, 1997, Plan Compensation for any owner-employee as defined in Section
401(c)(3) shall include only earned income of such owner-employee that is
derived from the trade or business with respect to which this Plan is
established.
2.39 "Quarter" means a calendar year quarter ending on March 31, June 30,
-------
September 30 or December 31.
2.40 "Qualified Domestic Relations Order" ("QDRO") has the meaning set
--------------------------------------------
forth in Code Section 414(p).
2.41 "REA" means the Retirement Equity Act of 1984.
2.42 "Savings Plan" means the CH2M Hill Retirement and Tax-Deferred Savings
------------
Plan.
2.43 "SBJPA" means Small Business Job Protection Act of 1996.
-----
2.44 "Service" has the meaning set forth in Article 9.1.
-------
2.45 "Spousal Consent" means the revocable written consent of the
---------------
Participant's spouse to an action taken by the Participant hereunder which
requires such consent under the terms of the Plan; provided that:
(i) Such consent shall acknowledge the Beneficiary designated
by the Participant and the effect of such consent;
(ii) Any change in the designated Beneficiary, other than to
make the spouse the Beneficiary of 100% of the Participant's vested Account,
shall require a new spousal consent;
(iii) Such consent shall be effective only with respect to that
spouse;
(iv) Such consent shall be witnessed by a notary public; and
(v) Such written consent shall not be required if it is
established to the satisfaction of a Plan representative that such consent
cannot be obtained because
2-7
<PAGE>
(1) there is no spouse or, (2) the spouse cannot be located, or (3) such other
circumstances exist as may be prescribed by applicable regulations.
2.46 [Reserved]
2.47 "TEFRA" means the Tax Equity and Fiscal Responsibility Act of 1982.
-----
2.48 "Testing Compensation" for purposes of determining (1) whether an
--------------------
Employee is a Key Employee, and (2) whether an Employee is a Highly Compensated
Employee means Allowable Compensation, except that amounts contributed by the
Employer pursuant to a salary reduction agreement which are not includible in
the Employee's income under Code Section 125, 402(e)(3), 402(h) or 403(b) shall
be included.
Testing Compensation shall not exceed $200,000, multiplied by the
Adjustment Factor. For Fiscal Years beginning on or after January 1, 1994,
Testing Compensation shall not exceed the OBRA '93 limit of $150,000, multiplied
by the Adjustment Factor.
The total of the Testing Compensation received by (1) a Highly
Compensated Employee in a group consisting of the 10 most Highly Compensated
Employees and/or a 5% Owner and (2) his spouse, and (3) his lineal descendants
who have not attained the age of 19 by the end of the Fiscal Year, shall not
exceed $200,000 ($150,000 for Fiscal Years beginning on or after January 1,
1994), multiplied by the Adjustment Factor. For Fiscal Years beginning on or
after January 1, 1997, the limitations of this paragraph shall be applied
without regard to sections (2) and (3) of this paragraph.
2.49 "Top-Heavy Plan" means the Plan during each Fiscal Year in which the
--------------
aggregate value of the Accounts of Key Employees exceeds 60% of the aggregate
value of all Accounts under the Plan as of the Determination Date for such
Fiscal Year. For purposes of determining the value of Employees' Accounts in
the Plan, the following shall be excluded: (1) rollover contributions from a
non-related employer; (2) the Accounts of Participants who have not performed
any services for the Employer within the five year period ending on the
Determination Date; and (3) the Account of any individual who was a Key Employee
with respect to the Plan for any prior Fiscal Year but is not a Key Employee
with respect to the Plan for the applicable Fiscal Year. For purposes of
determining the aggregate value of Accounts and/or accrued benefits under this
Article, distributions made within a 5 year period ending on the Determination
Date shall be included to the extent required by applicable law and regulation.
(a) Required Aggregation to Determine Top-Heaviness. If a Key
------------------------------------------------
Employee is a Participant in this Plan for any Fiscal Year and the Employer
maintains or has maintained any other plans (including terminated plans), (1) in
which a Key Employee is or was a participant within the 5 year period ending on
the Determination Date, or (2) which must be combined with this Plan in order to
meet the requirements of
2-8
<PAGE>
Code Sections 401(a)(4) or 410(b) for any Fiscal Year, then this Plan's top-
heaviness shall be determined for such Fiscal Year by aggregating the Accounts
and/or present value of accrued benefits of participants in this Plan and all
other such plans.
(b) Permissive Aggregation to Determine Top-Heaviness. If the
--------------------------------------------------
Employer maintains or has maintained any plans (including terminated plans)
other than one described in (a) above, the Trustees may aggregate the accounts
and/or present value of accrued benefits of participants in any such plan with
those of this Plan to determine whether this Plan is a Top-Heavy Plan for any
Fiscal Year, provided that the requirements of Code Sections 401(a)(4) and
410(b) would continue to be met by treating this Plan, any plan that must be
aggregated with the Plan under (a) above and any other plan referred to in this
sentence as one unit.
In determining top-heaviness and the aggregate value of Accounts
and/or accrued benefits under this Article, the Trustees shall be guided by the
provisions of the Code, including but not limited to Code Section 416(g)(3)(B).
2.50 "TRA '86" means the Tax Reform Act of 1986.
2.51 "Trust" means the legal entity created by this Trust Agreement as
part of the Plan.
2.52 "Trust Agreement" means this Agreement.
2.53 "Trust Fund" means all property and income held by the Trustees under
the Trust Agreement.
2.54 "Trustees" means FRED K. BERRY, SAMUEL H. IAPALUCCI, SHARON
SCHLECHTER, CLIFF THOMPSON, and STAN VINSON, and any duly appointed successor,
as provided in Article 13.8.
2.55 "USERRA" means Uniformed Services Employment and Reemployment Rights
Act of 1994.
2.56 "Valuation Date" means the last day of the fiscal Year and such other
dates(s) as may be designated by the Trustees as provided in Article 7.
2.57 List of Terms Defined Elsewhere: Article
-------------------------------- -------
(a) "Annual Addition" 5.1
(b) "Annual Amount" 5.1
(c) "Annual Benefit" 5.1
(d) "Defined Benefit Fraction" 5.1
(e) "Defined Contribution Fraction" 5.1
(f) "Dollar Limitation" 5.1
(g) "Eligibility Computation Fraction" 5.1
(h) "Eligible Employee" 3.1
2-9
<PAGE>
(i) "Limitation Account" 5.1
(j) "Limitation Year" 5.1
(k) "Percentage Limitation" 5.1
(l) "Projected Annual Benefits" 5.1
(m) "Social Security Normal Retirement Age" 5.1
(n) "Super Top-Heavy" 5.1
(o) "Transition Amount" 5.1
* * * * End of Article 2 * * * *
2-10
<PAGE>
Article 3.
Eligibility, Participation and Beneficiary Designation
3.1 Definitions.
------------
(a) "Eligible Employee" means any Employee, except an Employee who
-----------------
is a Leased Employee, who is classified as a temporary employee, or an Employee
whose compensation and conditions of employment are established by the terms of
a collective bargaining agreement to which the Employer is a party and which
does not specifically provide for coverage of such Employee under the Plan.
(i) "Eligibility Computation Period" means the 12 consecutive
------------------------------
month period beginning with the Employee's Date of Hire, and each Fiscal Year
starting after the Employee's Date of Hire.
3.2 Participation.
--------------
(a) Continuing Plan Participation. Each individual who was an
------------------------------
Eligible Employee and a Participant in the Plan immediately preceding the
effective date of this amendment and restatement shall continue to be a
Participant on such effective date.
(i) Plan Entry. Each other Eligible Employee shall become a
-----------
Participant in the Plan on the Entry Date coinciding with or next following the
last day of the Eligibility Computation Period in which he completes 1,000 Hours
of Service.
3.3 Beneficiary Designation.
------------------------
(a) Designation Procedure. Each Eligible Employee, upon becoming
----------------------
a Participant, shall designate a Beneficiary or Beneficiaries to receive
benefits under the Plan after his death. A Participant may change his
Beneficiary designation at any time. Each Beneficiary designation shall be in a
form prescribed by the Trustees and will be effective only when filed with the
Trustees during the Participant's lifetime. Each Beneficiary designation filed
with the Trustees will cancel all previously filed Beneficiary designations.
(b) Spousal Consent. In the event that a married Participant
----------------
wishes to designate a Beneficiary other than his spouse for any portion of his
vested Account, such designation shall include Spousal Consent.
(c) Lack of Designation. In the absence of a valid designation
--------------------
by an unmarried Participant or if no designated Beneficiary survives an
unmarried Participant, his interest shall be distributed to his estate. In the
absence of a valid designation by a married Participant or if no designated
Beneficiary survives a married Participant, his interest shall be distributed to
his surviving spouse, or if there is no surviving spouse, then to his estate.
3-1
<PAGE>
3.4 Change from Ineligible to Eligible Employee. An Employee who is
--------------------------------------------
excluded under Article 3.1 for any period shall be eligible to participate on
the first date he is no longer excluded, provided that the requirements of
Article 3.2 have been satisfied, but not earlier than the Entry Date on which he
would have entered the Plan had he not been excluded under Article 3.1.
3.5 Former Employee Rehired. A former Employee who had completed the
------------------------
eligibility requirements of Article 3.2 with the Employer and who is reemployed
by the Employer shall become a Participant as of the date of reemployment as an
Eligible Employee, but not earlier than the Entry Date on which he would have
entered the Plan had his employment not terminated.
3.6 Trustees Determine Eligibility. Compliance with the eligibility
-------------------------------
requirements shall be determined by the Trustees in their capacity as Plan
Administrator.
* * * * End of Article 3 * * * *
3-2
<PAGE>
Article 4.
Contributions
4.1 Employer Contribution. As of the last day of each Fiscal Year, a
----------------------
Member Employer may make a contribution to the Trust for its own Employees in
such amount, if any, as is determined by the Member Employer. These
contributions will be allocated to such Member Employer's Participants' Accounts
as provided in Article 5.2.
4.2 Top-Heavy Minimum Contribution. For any Fiscal Year during which
-------------------------------
the Plan is a Top-Heavy Plan, the top-heavy minimum contribution shall be made
in the Savings Plan.
4.3 Timing of, Limitations on, and Return of Employer Contributions.
----------------------------------------------------------------
(a) Amount and Timing of Contributions. Member Employer
-----------------------------------
contributions shall not exceed an amount which is estimated to constitute the
maximum allowable deduction under Code Section 404(a). Member Employer
contributions shall be paid to the Trustee on or prior to the last day for
filing the Member Employer's federal income tax return for such year, including
any extensions of time granted for such filing. Contributions shall be made in
cash or in Employer Stock.
(b) Return of Employer Contributions. If an amount is
---------------------------------
contributed by a Member Employer due to a mistake of fact, the Member Employer
shall be entitled to recover such amount within one year of the date such
contribution is made. Unless otherwise provided in a resolution of the Board,
any amounts contributed by a Member Employer which are disallowed as a deduction
under Code Section 404 shall be returned to the Member Employer within one year
of the date such deduction is disallowed. Trust income attributable to the
amount to be recovered shall not be paid to the Member Employer, but Trust loss
attributable thereto shall reduce such amount.
* * * * End of Article 4 * * * *
4-1
<PAGE>
Article 5.
Allocation of Contributions and Forfeitures
5.1 Definitions.
------------
(a) "Annual Addition" means the sum for the Limitation Year to which
---------------
the allocation pertains (whether or not allocated in such year) of all Member
Employer and Employee contributions and Forfeitures allocated for such year to
the Participant's Account in this Plan and any other defined contribution plan
maintained by the Employer and an Affiliated Employer.
Annual Addition also includes amounts allocated, for Fiscal Years
---------------
beginning after March 31, 1984, to a Participant's:
(i) Individual medical account (as defined in Code Section
415(l)) which is part of a defined benefit plan maintained by a Member Employer,
for purposes of the maximum dollar limit under Code Section 415(c)(1)(A); and
(ii) Separate account maintained for a Key Employee, to the
extent required by the Code, which is attributable to post-retirement medical or
life insurance benefits under a welfare benefit fund (as defined in Code Section
419A(d)) maintained by a Member Employer.
(b) "Annual Amount" means the lesser of 35% (1.4 x 25%) of the
-------------
Participant's Allowable Compensation (as defined in Article 2) for such
Limitation Year or $37,500 (125% of $30,000) (or such other amount as may be
established for such Limitation Year under Code Section 415(d) for any
Limitation Year).
(c) "Annual Benefit" means the sum of all annual benefits payable in
--------------
the form of a single life annuity from all defined benefit plans (whether or not
terminated) maintained by a Member Employer. Benefits payable in any other
form, except a qualified joint and survivor annuity as defined in Code Section
417(b), shall be adjusted to the actuarial equivalent of a single life annuity
beginning at the same age. The Annual Benefit shall not be adjusted for any
pre-retirement death or disability benefits provided.
(d) "Defined Benefit Fraction" means the fraction in which the:
------------------------
(i) Numerator equals the Participant's Projected Annual Benefit
in the defined benefit plan determined as of the close of the Limitation Year,
and
(ii) Denominator equals the lesser of 140% of the Percentage
Limitation or 125% of the Dollar Limitation.
(e) "Defined Contribution Fraction" means the fraction in which the:
-----------------------------
5-1
<PAGE>
(i) Numerator equals the sum of a Participant's Annual Additions
for each Limitation Year to date from all defined contribution plans (whether or
not terminated) maintained by a Member Employer, less any Transition Amounts,
and
(ii) Denominator equals the sum of the Annual Amounts for each
Limitation Year included in the Participant's Service, plus any Transition
Amounts.
(f) "Dollar Limitation" means the adjusted value of $90,000 (or such
-----------------
other amount as may be in effect on the last day of the Limitation Year pursuant
to Code Section 415(d)) based on the age of the Participant when the benefit
begins as follows:
<TABLE>
<CAPTION>
Age Limitation Adjustment Under the Defined Benefit Plan
- --- ----------------------------------------------------
<S> <C>
Over the Social Security Normal Retirement Age limitation is actuarially increased based on the
mortality table used for actuarial equivalence in the
Plan and 5% interest, but not more than the actuarial
increase (if any) specified in the Defined Benefit Plan
Social Security Normal Retirement Age no adjustment
Age 62 and over but below Social Security Normal limitation is reduced by 5/9% for each of the first 36
Retirement Age months and by 5/12% for each of the next 24 months that
the age precedes Social Security Normal Retirement Age
Under 62 the lesser of:
(i) actuarial equivalent of limitation for age 62,
based on the mortality table used for actuarial
equivalence in the Plan and 5% interest, and
(ii) the limitation at age 62 multiplied by the ratio
of the Plan's early retirement factor at age of
commencement to the Plan's early retirement
factor at age 62
</TABLE>
If a Participant has completed less than ten years of Service in the Defined
Benefit Plan, the Dollar Limitation shall be adjusted by multiplying such
limitation by a fraction, the numerator of which is the Participant's number of
years (or part thereof) of Service not to exceed ten, and the denominator of
which is ten.
(g) "Limitation Account" means an account expressly set up and
------------------
maintained to hold Excess Annual Addition amounts contributed in error pursuant
to Article 5.3(b).
(h) "Limitation Year" means the Fiscal Year.
---------------
(i) "Percentage Limitation" means 100% of the average of Allowable
---------------------
Compensation (as defined in Article 2) paid or accrued over the three (or the
Participant's actual number of years of Service, if fewer) consecutive
Limitation Years
5-2
<PAGE>
included in the Participant's Service which produce the highest average. If a
Participant has completed less than ten years of Service with a Member Employer,
this limitation shall be adjusted by multiplying such amounts by a fraction, the
numerator of which is the Participant's number of years of Service (or part
thereof), and the denominator of which is ten. In no event shall the reduction
for less than 10 years of Service reduce this limitation to an amount less than
one-tenth of the applicable limitation (as determined without regard to this
paragraph).
(j) "Projected Annual Benefit" means the Annual Benefit that a
------------------------
Participant in a defined benefit plan would be entitled to under the terms of
that plan based on the following assumptions:
(i) The Participant will continue employment until normal
retirement age (or his current age, if later) under the terms of that plan;
(ii) The Participant's compensation for the applicable limitation
year will remain the same until his normal retirement age under (i) above; and
(iii) All other relevant factors used to determine benefits under
that plan for the applicable limitation year will remain constant for all future
limitation years.
(k) "Social Security Normal Retirement Age" means the age when
-------------------------------------
unreduced old-age benefits are available from Social Security, rounded to the
next higher year, according to the following table:
<TABLE>
<CAPTION>
Year of Birth Social Security
------------- Normal Retirement Age
---------------------
<S> <C>
1937 and Before 65
1938-1954 66
1955 and After 67
</TABLE>
(l) "Super Top-Heavy" means a Plan which is Top-Heavy after
---------------
substituting 90% for 60% in the definition for Top-Heavy in Article 2.
(m) "Transition Amount" means an amount which is permanently
-----------------
subtracted from the numerator or added to the denominator of the Defined
Contribution Fraction pursuant to transition rules related to the amendments of
Code Section 415.
5.2 Allocation Methods.
----------------------
(a) Top-Heavy Minimum and Restoration Contributions. Top-Heavy
------------------------------------------------
Minimum and Restoration Contributions are allocated as provided in Article 4 and
Article 6.
(b) Contribution Allocation. Member Employer contributions and
------------------------
Forfeitures, and amounts in Limitation Accounts attributable to Member Employer
Accounts for any Fiscal Year shall be allocated as of the last day of such
Fiscal Year to
5-3
<PAGE>
the Accounts of all Eligible Participants of the Member Employer in the ratio
that each such Eligible Participant's Plan Compensation from such Member
Employer during the Fiscal Year bears to the aggregate Plan Compensation of all
Eligible Participants of the Member Employer for the Fiscal Year.
5.3 Limitations on Annual Allocations.
----------------------------------
(a) Limitation Amount.
----------------------------------
(i) Notwithstanding any other provision of this Plan to the
contrary, for Fiscal Years beginning before January 1, 1995, the Annual Addition
to a Participant's Account for any Limitation Year shall not exceed the lesser
of 25% of the Employee's Allowable Compensation or $30,000 (or, if greater, 1/4
of the dollar limitation in effect under Code Section 415(b)(1)(A)), or such
other amount for the Limitation Year as may be established by regulations under
Code Section 415(d).
(ii) Notwithstanding any other provision of this Plan to the
contrary, for Fiscal Years beginning on or after January 1, 1995, the Annual
Addition to a Participant's Account for any Limitation Year shall not exceed the
lesser of 25% of the Employee's Allowable Compensation or $30,000, or such other
amount for the Limitation Year as may be established by regulations under Code
Section 415(d).
(b) Treatment of Excess Annual Addition Made in Error. In the
--------------------------------------------------
event that (as a result of the allocation of Forfeitures, a reasonable error in
estimating a Participant's compensation, a reasonable error in determining the
amount of elective deferrals or other limited facts and circumstances which the
Internal Revenue Service finds to be applicable) an amount would otherwise be
allocated which would result in the Annual Addition limitation being exceeded
with respect to any Participant, the excess amount shall be eliminated:
(i) First, by applying the corrective measures in Article 5.3 of
the Savings Plan;
(ii) Second, by holding any remaining excess amounts in a
Limitation Account. Any amounts in the Limitation Accounts shall be reallocated
among the appropriate Accounts of Eligible Participants pursuant to Article 5.2
as of the last day of each succeeding Fiscal Year until the excess is exhausted,
provided that the Annual Addition limitation with respect to any Participant may
not be exceeded in any Limitation Year. No allocation of contributions may be
credited to the Accounts of Eligible Participants in succeeding years until such
excess has been exhausted.
5.4 Overall Limitation for Different Types of Plans.
------------------------------------------------
(a) General Limitation. If a Participant in this Plan is also a
-------------------
Participant in a qualified defined benefit pension plan maintained by the
Employer or an Affiliated Employer (or was at any time a Participant in such a
defined benefit pension plan maintained by the Employer or an Affiliated
Employer which has since been
5-4
<PAGE>
terminated), the sum of the Defined Contribution Fraction and the Defined
Benefit Fraction for any Limitation Year shall not exceed 1.0. If a restriction
on contributions or benefits is required for any Employee, such restriction will
first be applied to the Retirement and Tax-Deferred Savings Plan.
(b) Super Top-Heavy Limitation. For each Fiscal Year in which
---------------------------
the Plan is Super Top-Heavy or if the Plan is Top-Heavy and the minimum
contribution under Article 5.2(d) is less than 7.5%, 100% shall be substituted
for 125% wherever it appears in Articles 5.1(b) and (d), unless no additional
allocations or benefits accrue to any affected Participant.
5.5 Restoration Procedures.
-----------------------
(a) Computing Amounts. In the event that a Participant's Account
------------------
was improperly excluded in any year from an allocation of Member Employer
contributions and Forfeitures pursuant to Article 5.2, such Participant's
Account shall be restored to its correct status by the addition of amounts that
are determined as follows:
(i) First, an amount will be computed on the same basis as
Member Employer contributions and Forfeitures that were allocated to the
Accounts of other Eligible Participants under Article 5.2 in each year for which
restoration is necessary, and
(ii) Second, Trust Fund income, gain or loss attributable to
amounts that should have been allocated under (i) above will be computed on the
same basis that Trust Fund income, gain or loss was allocated to other
Participants' Accounts in the valuation process described in Article 7.2 in each
year for which restoration is necessary.
(b) Income, Gain or Loss. In the event that a Participant's
---------------------
Account was improperly excluded in any year from an allocation of Trust Fund
income, gain or loss pursuant to the valuation process described in Article 7.2,
such Participant's Account shall be restored to its correct status by the
addition or subtraction of amounts that should have been allocated under Article
7.2 in each year for which restoration is necessary.
(c) Source of Amounts. Such amounts shall be restored first from
------------------
Forfeitures, if any; and then, if necessary, the Member Employer shall
contribute an amount which is necessary to fully restore each improperly
excluded Account.
* * * * End of Article 5 * * * *
5-5
<PAGE>
Article 6.
Vesting of Accounts
6.1 Automatic Vesting on Retirement, Death or Disability. The value of a
----------------------------------------------------
Participant's Account shall become fully vested (i) when the Participant attains
his Normal Retirement Date or reaches age 55 and completes 5 Years of Service
while an Employee, or (ii) upon his termination of employment by reason of death
or Disability.
6.2 Vesting Based on Service. Except as otherwise provided in Article
-------------------------
6.4(d) and Article 14.3, a Participant's Account shall become vested in
accordance with the following schedule:
<TABLE>
<CAPTION>
Years of Service Vested Percentage
------------------ --------------------
<S> <C>
Less than 2 years 0%
2 years 20%
3 years 40%
4 years 60%
5 years 80%
6 years or more 100%
</TABLE>
6.3 Years of Service for Vesting.
--------------------------------
(a) Year of Service. An Employee shall be credited with one year
----------------
of Service for vesting for each full year in his Period of Service, as defined
in Article 9.3.
(b) Termination Prior to Vesting. If the vested percentag
-----------------------------
applicable to a Participant's Account is 0% at the time his service terminates,
his Service prior to such termination shall be disregarded for vesting purposes
if he is reemployed after he has incurred 5 consecutive Breaks in Service.
6.4 Forfeitures and Restorations.
--------------------------------
(a) Date Forfeitures Occur. Any remainder of a terminating
-----------------------
Participant's Account which is not vested shall be forfeited on the earliest to
occur of the following dates:
(i) The date of termination of the Participant, provided that
this date applies only if the Participant did not then have a vested interest in
his Account;
(ii) The date on which the terminated Participant receives
payment of his entire vested interest;
(iii) The date on which the Participant completes five
consecutive one-year Breaks in Service.
(b) Forfeitures Reallocated. Forfeitures of a Member Employer's
------------------------
own Employees' non-vested Account balances during a Fiscal Year which are not
used to
6-1
<PAGE>
restore any of its Participant's Accounts as of the last day of such Fiscal Year
shall be allocated as of the last day of the Fiscal Year to the Accounts of its
Eligible Participants as provided in Article 5.2(b).
(c) Reemployment After Forfeiture. If a Participant is reemployed
------------------------------
before incurring 5 consecutive Breaks in Service, any amounts forfeited shall be
treated as follows:
(i) Restoration If No Distribution. In the event a Participant
------------------------------
did not receive a distribution of his vested interest, any amounts previously
forfeited shall be fully restored as provided in (iv) below and shall be
recredited to the Participant's Account as of his reemployment date.
(ii) Treatment If Prior Distribution. If the Participant
-------------------------------
received a distribution of part or all of his vested interest in his Account,
the forfeited amount shall be recredited to the Account of the Participant. The
vested interest in the Participant's Account shall thereafter be determined by
applying the formula:
X = V (A+D) - D
For purposes of applying this formula, X is the dollar amount of the
vested interest of his Account which is being determined; V is his vested
interest percentage pursuant to Article 6.2, at the relevant time; A is the
value of his Account as of the relevant time; and D is the amount of the
distribution previously made to the Participant.
(iii) Source of Restored Amounts. Forfeited amounts to be
--------------------------
restored for any Fiscal Year may be restored from Forfeitures as of the last day
of a Fiscal Year, from additional Employer contributions for such Fiscal Year,
from Trust income, or from a combination of these methods, as determined by the
Trustees.
(d) No Restoration After 5 Consecutive Breaks in Service. If a
-----------------------------------------------------
Participant is reemployed after 5 consecutive Breaks in Service, no portion of
his non-vested Account shall be restored and any undistributed vested interest
shall be maintained as a separate fully vested Account.
6.5 No Divestment. Except as provided under Articles 4.2(b), 4.3(b) and
--------------
6.7, a Participant's vested rights shall not be subject to divestment for any
reason.
6.6 Amendment to Vesting. Notwithstanding any other provisions of this
---------------------
Article 6, the vested percentage of an individual who was a Participant
immediately preceding the effective date of any amendment to the Plan is
determined by the provisions of the Plan existing immediately prior to such
amendment if such provisions provide a greater vested percentage at any relevant
time.
6-2
<PAGE>
6.7 Lost Participants.
------------------
(a) Participant's Account. If all or a portion of a
----------------------
Participant's Account becomes payable under Article 8 and the Trustees, after a
reasonable search, cannot locate the Participant or his Beneficiary (if such
Beneficiary is entitled to payment), the vested Account shall:
(i) Be used to establish an Individual Retirement Account in
the Participant's name; or
(ii) Remain in the Plan for a sufficient period of time so
that under state law the Account would escheat, at which point the Account shall
be forfeited and reallocated, in accordance with Articles 4 and 5, as of such
date as the Trustees may decide.
(b) Search for Participants. The Trustees shall make a
------------------------
reasonable attempt to find such a Participant, including securing any assistance
available from the Internal Revenue Service.
(c) Restoration. If an Account is forfeited under this Article
------------
6.7, and the Participant or his Beneficiary subsequently presents a valid claim
for benefits to the Trustees, the Trustees shall cause the vested Account, equal
to the amount that was forfeited under this Article 6, to be restored in
accordance with the provisions of Article 5.5.
* * * * End of Article 6 * * * *
6-3
<PAGE>
Article 7.
Participants' Account Valuation
7.1 Separate Accounts. The Trustees shall open and maintain a separate
------------------
Account for each Participant. Each Participant's Account shall reflect the
amounts allocated thereto and distributed therefrom and such other information
as affects the value of such Account pursuant to this Agreement. Employer Stock
allocated to a Participant shall be carried in a stock account. All other
assets shall be carried in another asset account.
7.2 Determination of Value of Participant Accounts. As of each
-----------------------------------------------
Valuation Date, the Trustees shall determine the net income or loss of the Trust
Fund based on the receipts and disbursements of the General Trust Fund since the
immediately preceding Valuation Date and of the fair market value of the Fund as
of the Valuation Date. The Trustees shall use the same value as that calculated
annually in accordance with the Employer's bylaws to establish the "fair market
value" of the Fund. Prior to any allocation of contributions and Forfeitures to
be made as of such date, the net income or loss of the General Trust Fund since
the immediately preceding Valuation Date, including net appreciation or
depreciation and excluding any expenses paid by the Trust, shall be allocated to
each Participant Account in the ratio that the value, as of the immediately
preceding Valuation Date, of each such Account invested in the General Trust
Fund bears to the value, as of the immediately preceding Valuation Date, of all
Accounts invested in the General Trust Fund. Dividends on Employer Stock shall
be allocated in proportion to shares held in the stock account. Stock dividends
shall be credited to the stock account and cash dividends shall be credited to
the other asset account.
7.3 Valuation Dates. The General Trust Fund shall be valued as of the
----------------
last day of each Fiscal Year and as of any other date the Trustees decided to
value the Trust Fund, as provided in Article 7.4.
7.4 Special Valuation Dates. The Trustees may determine the fair market
------------------------
value of the Trust Fund and may make a determination of Trust income or loss as
of any date other than the last day of a Fiscal Year. If the allocation of such
Trust income or loss will produce a significant change in the value of
Participants' Accounts, and if such valuation shall affect a distribution, then
such date shall thereupon be deemed a Valuation Date, and Trust income or loss
shall be allocated to Participant's Accounts in accordance with the provisions
of Article 7.2.
7.5 Accounts to be Valued. All sub-accounts of all Participants shall
----------------------
be valued at each Valuation Date.
7.6 Statement of Accounts. As soon as practicable after the end of each
----------------------
Fiscal Year, the Trustee shall furnish to each Participant a statement of his
Account, determined as of the end of such Fiscal Year. Upon the discovery of
any error or
7-1
<PAGE>
miscalculation in an Account, the Trustees shall correct it, to the extent
correction is practically feasible. Statements to Participants are for reporting
purposes only, and no allocation, valuation or statement shall vest any right or
title in any part of the Trust Fund, nor require any segregation of Trust
assets, except as is specifically provided in this Agreement.
7.7 Valuation of Account When Payment Due. The amount of the payment
--------------------------------------
shall be based on the value of the Participant's Account as of the Valuation
Date immediately preceding the date of distribution.
* * * * End of Article 7 * * * *
7-2
<PAGE>
Article 8.
Distributions and Withdrawals
8.1 General. Benefits under the Plan shall be distributed solely from
--------
the Trust. The Member Employers have no liability or responsibility for Plan
benefits or for the Trust. No distribution shall be made or commenced prior to
the Participant's termination of employment, except as required under Article
8.3(d) and permitted under Article 15.2(b). Distributions can also be made upon
termination of the Plan. All distributions from the Plan will be made in
accordance with Code Section 401(a)(9) and the regulations thereunder including
the transition rules in proposed regulation 1.401(a)(9)-l and the incidental
death benefit requirements of proposed regulation 1.401(a)(9)-2. The provisions
of Code Section 401(a)(9) shall override any distribution option under the Plan
which might be inconsistent with such provisions.
A distribution to a Participant shall be made solely from his Account.
When a distribution is to be made, his Account shall be valued in accordance
with Article 7.2. The amount to be paid to him shall be based on his vested
interest as determined in Article 6.
8.2 Administrative Rules.
---------------------
(a) Authority. Distributions shall be made only in accordance with
----------
the directions of the Trustees. The Trustees have the authority to direct the
distributions in accordance with the terms and conditions of the Plan, but the
Trustees shall have no power of discretion or consent with regard to a
Participant's or Beneficiary's choice of the form or timing of a distribution,
except as specifically stated herein or to the extent that the Trustees are
constrained by the options available under the Plan or by the requirements of
law or regulation.
(b) Claims. A Participant, Beneficiary or Alternate Payee has the
-------
right to file a claim for benefits as set forth in Article 11.6.
8.3 Timing of Distributions.
------------------------
(a) Cashout of Amounts Under $5,000. If the Participant's vested
--------------------------------
Account does not exceed $5,000, and at the time of any prior distribution, if
any, has not exceeded $5,000, distribution shall be made in a lump sum as soon
as practicable after the Participant's termination of employment.
(b) Amounts Over $5,000. If the Participant's vested Account
--------------------
exceeds the cashout requirements of Article 8.3(a), the Participant may elect
to:
(i) Receive a distribution as soon as practicable after the
amount can be determined, or
8-1
<PAGE>
(ii) Defer receipt of his distribution in accordance with (d)
below. Unless otherwise elected by the Participant under (d) below, the payment
of benefits under the Plan to the Participant will not begin later than the 60th
day after the end of the Fiscal Year in which the latest of the following
occurs:
(1) The date on which the Participant attains the earlier
of Age 65 or his Normal Retirement Date,
(2) The date which is the 10th anniversary of his
commencement of participation in the Plan, or
(3) The date of termination of his service with the
Employer;
However, if the amount of the payment cannot be ascertained and/or the
Participant cannot be located by the date required above, payment shall be made
within 60 days after all of these facts are known.
Notwithstanding the foregoing, no payments may be made to a
Participant prior to his Normal Retirement Date or his 62nd birthday, whichever
is later, if his vested Account exceeds the cashout requirements of Article
8.3(a), unless the written consent of the Participant is obtained by the
Trustees within the 90-day period prior to commencement of the distribution.
(c) Information and Rights. The following applies to the
-----------------------
Participant's written consent:
(i) The Participant must be informed of his right to defer
receipt of the distribution. If a Participant fails to consent, it shall be
deemed an election to defer commencement of the distribution.
(ii) Notice of the rights specified herein shall be provided no
less than 30 days and no more than 90 days before the first day on which all
events have occurred which entitle the Participant to such distribution.
(iii) Written consent of the Participant to the distribution
must not be made before the Participant receives the notices and must not be
made more than 90 days before the first day on which all events have occurred
which entitle the Participant to such distribution.
(iv) No consent shall be valid if a significant detriment is
imposed under the Plan on any Participant who does not consent to the
distribution.
(v) If a distribution is one to which Section 401(a)(11) and 417
of the Internal Revenue Code do not apply, such distribution may commence less
than 30 days after the notice required under Section 1.411(a)11(c) of the Income
Tax Regulations is given, provided that:
8-2
<PAGE>
(1) the Plan Administrator clearly informs the Participant
that the Participant has a right to a period of at least 30 days after receiving
the notice to consider the decision of whether or not to elect a distribution
(and, if applicable, a particular distribution option), and
(2) the Participant, after receiving the notice,
affirmatively elects a distribution.
(vi) Notwithstanding anything in this Article 8.3(c) to the
contrary, effective for Fiscal Years beginning on or after January 1, 1997, the
written explanation described in Section 417(a)(3)(A) of the Code may be
provided after the annuity starting date. In such event, the 90-day applicable
election period to waive the qualified joint and survivor annuity described in
Section 417(a)(3)(A) of the Code shall not end before the 30/th/ day after the
date on which such explanation is provided. Effective for Plan Years beginning
on or after January 1, 1997, a Participant may elect (with any applicable
spousal consent) to waive any requirement that the written explanation be
provided at least 30 days before the annuity starting date (or to waive the 30-
day requirement in the preceding sentence) if the distribution commences more
than 7 days after such explanation is provided.
(d) Required Minimum Distributions. A Participant who meets the
-------------------------------
requirements of Article 8.3(b) may defer a distribution by providing the
Trustees with a written, signed notice specifying the date on which the
distribution is to commence, provided that the distribution shall be made no
later than the April 1 following the last day of the calendar year in which the
Participant attains age 70 1/2 even though such Participant may still be an
Employee.
8.4 Treatment of Deferred Amounts. Where the distribution of a
------------------------------
Participant's Account is to be deferred, the vested portion shall continue to be
held and invested as an Account of the Trust subject to revaluation as provided
in Article 7.
8.5 Methods of Distribution.
------------------------
(a) Method. Distribution to any Participant or Beneficiary shall
-------
be made in a lump sum, in cash.
(b) Timing. If the amount of a distribution cannot be determined
-------
by the date specified under Article 8.3, payment of benefits shall be made no
later than 60 days after the earliest date on which the amount of the
distribution can be determined.
(c) Distributions Delayed Until Trade Date. To the extent that a
---------------------------------------
Participant is entitled to a distribution of all or a portion of his Account
that is invested in Employer Stock, the Participant shall receive such
distribution as soon as reasonably practicable after the Trustees are able to
liquidate sufficient shares of Employer Stock to permit the distribution.
8-3
<PAGE>
8.6 Distribution Upon Death of Participant.
---------------------------------------
(a) Distribution Made to Participant's Beneficiary. The vested
-----------------------------------------------
portion of a Participant's Account which remains at his death shall be
distributed to the Participant's Beneficiary in accordance with the provisions
of this Article 8.6.
(b) General Rules. If a Participant dies before his distribution
--------------
has been made, his vested Account shall be distributed within 5 years after the
death of the Participant.
8.7 Distributions to Minors or Legally Incompetents. In case of any
------------------------------------------------
distribution to a minor or to a legally incompetent person, the Trustees may
make the distribution to his legal representative, to a designated relative, or
directly to such person for his benefit. The Trustees shall not be required to
oversee the application, by any third party, of any distributions made pursuant
to this Article 8.7. Distributions made under this Article 8.7 shall be in
accordance with the provisions of this Article 8.
8.8 Tax Information To Be Provided. The Trustees shall provide to each
-------------------------------
Participant, Beneficiary or Alternate Payee who receives an eligible rollover
distribution (as defined in Code Section 402(f)), at the time such distribution
is made, a written explanation of the (1) provisions under which the
distribution will not be subject to tax if timely transferred to an eligible
retirement plan and, if applicable; (2) provisions regarding the availability of
10-year averaging or 5-year averaging tax treatment of the distribution.
8.9 Direct Rollovers.
-----------------
(a) In General. This Article applies to distributions made on or
-----------
after January 1, 1993. Notwithstanding any provision of the Plan to the
contrary that would otherwise limit a distributee's election under this Article,
a distributes may elect, at the time and in the manner prescribed by the
Trustees, to have an eligible rollover distribution paid directly to an eligible
retirement plan specified by the distributes in a direct rollover.
(b) Definitions Pertaining to Direct Rollovers.
-------------------------------------------
(i) Eligible rollover distribution: An eligible rollover
-------------------------------
distribution is any distribution of the balance to the credit of the
distributee, except that an eligible rollover distribution does not include: any
distribution that is one of a series of substantially equal periodic payments
(not less frequently than annually) made for the life (or life expectancy) of
the distributee or the joint lives (or joint life expectancies) of the
distributee and the distributee's designated beneficiary, or for a specified
period of ten years or more; any distribution to the extent such distribution is
required under Section 401(a)(9) of the Code; and the portion of any
distribution that is not includible in gross income (determined without regard
to the exclusion for net unrealized appreciation with respect to employer
securities).
8-4
<PAGE>
(ii) Eligible retirement plan: An eligible retirement plan is an
-------------------------
individual retirement account described in Section 408(a) of the Code, an
annuity plan described in Section 403(a) of the Code, an individual retirement
annuity described in Section 408(b) of the Code, or a qualified trust described
in Section 401(a) of the Code, that accepts the distributee's eligible rollover
distribution. However, in the case of an eligible rollover distribution to the
surviving spouse, an eligible retirement plan is an individual retirement
account or individual retirement annuity.
(iii) Distributee: A distributee includes an Employee or former
------------
Employee. In addition, the Employee's or former Employee's surviving spouse and
the Employee's or former Employee's spouse or former spouse who is the Alternate
Payee under a qualified domestic relations order, as defined in Section 414(p)
of the Code, are distributees with regard to the interest of the spouse or
former spouse.
(iv) Direct rollover: A direct rollover is a payment by the Plan to
----------------
the eligible retirement plan specified by distributee.
* * * * End of Article 8 * * * *
8-5
<PAGE>
Article 9.
Service
9.1 General Definitions.
--------------------
(a) "Service" means an Employee's total period of employment with the
-------
Employer, including service with a predecessor entity or an Affiliated Employer.
Throughout this Article 9, Employer shall include Affiliated Employer and any
predecessor entity.
(b) "Hour of Service" means:
---------------
(i) Each hour for which an Employee is paid, or entitled to
payment, for the performance of duties for the Employer.
(ii) Each hour for which an Employee is paid, or entitled to
payment, by the Employer on account of a period of time during which no duties
are performed (regardless of whether the employment relationship has terminated)
due to vacation, holiday, illness, incapacity (including disability), layoff,
jury duty, military duty or leave of absence; provided that no Hours of Service
shall be credited to an Employee:
(1) For a period during which no duties are performed if
payment is made or due under a plan maintained solely for purpose of complying
with applicable worker's compensation, unemployment compensation, or disability
insurance laws;
(2) On account of any payment made or due an Employee solely
as reimbursement for medical or medically related expenses incurred by the
Employee,
(3) On account of any payment made to an Employee as
severance pay, unless the severance pay is in lieu of advance notice of
termination.
(iii) Each hour not otherwise credited under the Plan for which
back pay, irrespective of mitigation of damages, has either been awarded or
agreed to by the Employer. Such hours are to be credited to the period or
periods to which the award or agreement pertains. If this provision results in
an Employee becoming an Eligible Participant for a Fiscal Year in which he was
not otherwise an Eligible Participant under Article 5 or if this provision
results in an increase in the vested percentage applicable to a Participant's
Account which has been forfeited under Article 6, the Trustees shall establish
equitable procedures for determining and allocating any resulting amounts to
such Employee's Account.
9-1
<PAGE>
(iv) No more than 501 Hours of Service shall be credited under
Articles 9.1(b)(ii) or (iii) to an Employee on account of any single continuous
period of time during which the Employee performs no duties for the Employer.
9.2 Crediting of Hours Subject to DOL Regulation. The calculation of
---------------------------------------------
the number of Hours of Service to be credited under Articles 9.1(b)(ii) and
(iii) for periods during which no duties are performed, and the crediting of
such Hours of Service to periods of time for purposes of computations under the
Plan, shall be determined by the Trustees in accordance with the rules set forth
in the Department of Labor Regulation Section 2530.200b-2 paragraphs (b) and
(c), which rules shall be consistently applied with respect to all employees
within the same job classifications.
9.3 Elapsed Time Service Definitions.
---------------------------------
(a) "Break in Service" means a one year Period of Severance. Solely
----------------
for purposes of determining whether a Break in Service has occurred, a one year
period of absence shall be disregarded, provided such absence is:
(1) By reason of pregnancy or the birth of a child of the
Employee;
(2) By reason of the placement of a child with the Employee
in connection with his adoption of such child; or
(3) For purposes of caring for any such child for a period
beginning immediately following such birth or placement, and further provided
that the Employee provides the Committee with such timely information as the
Committee may reasonably require to establish that the absence is for a reason
described above.
(b) "Employment Commencement Date" means each of the following:
----------------------------
(i) The date on which an Employee first performs an Hour of
Service for an Employer with respect to which such Employee is compensated or
entitled to compensation by the Employer.
(ii) In the case of an Employee who incurs a Period of Severance
and who is subsequently reemployed by the Employer, the term Employment
Commencement Date means the first day following such Period of Severance on
which such Employee performs an Hour of Service for the Employer with respect to
which he is compensated or entitled to compensation.
(c) "Period of Service" shall mean the period of time beginning on an
-----------------
Employee's Employment Commencement Date and ending on his Severance Date.
Periods of Service shall be measured under the elapsed time method as authorized
under regulations promulgated by the Secretary of Labor.
Periods of Service shall also be subject to the following:
9-2
<PAGE>
(i) If an Employee severs from service by quit, discharge or
retirement and returns to service within 12 months, that Period of Severance
shall be considered as part of that Employee's Period of Service.
(ii) Notwithstanding the rule in subparagraph (i) above, if an
Employee severs from service by reason of quit, discharge or retirement after a
period of absence from service of 12 months or less, which period of absence
occurred for reasons other than a quit, discharge or retirement, such period of
absence shall be considered as part of the Employee's Period of Service only if
such Employee performs an Hour of Service within 12 months of the date on which
the Employee was first absent from service.
An Employee is considered to have returned to service on his new
Employment Commencement Date.
(d) "Period of Severance" means the period of time beginning on an
-------------------
Employee's Severance Date and ending on the Employee's new Employment
Commencement Date, if any, following thereafter.
(e) "Severance Date" means the date on which an Employee quits,
--------------
retires, is discharged or dies, or, if earlier, the first anniversary of the
beginning of a period of absence from service (for reasons other than a quit,
retirement, discharge or death, such as vacation, holiday, sickness, disability,
leave of absence or lay off).
* * * * End of Article 9 * * * *
9-3
<PAGE>
Article 10.
Fiduciary Responsibility
10.1 Names Fiduciaries. The authority to control and manage the
------------------
operation and administration of the Plan shall be allocated as provided in this
Agreement between the Employer and the Trustees, all of whom are named
fiduciaries under ERISA.
In addition, procedures for the appointment of another fiduciary, an
investment manager, are set forth in Article 12.3.
10.2 Fiduciary Standards. Each fiduciary shall discharge its duties
--------------------
with respect to the Plan solely in the interest of the Participants and
Beneficiaries as follows:
(1) For the exclusive purpose of providing benefits to
Participants and their Beneficiaries;
(2) With the care, skill, prudence and diligence under the
circumstances then prevailing that a prudent man acting in a like capacity and
familiar with such matters would use in the conduct of an enterprise of a like
character and with like aims;
(3) By diversifying the investments of the Trust Fund so as
to minimize the risk of large losses, unless under the circumstances it is
clearly prudent not to do so; and
(4) In accordance with this Trust Agreement.
10.3 Fiduciaries Liable for Breach of Duty. A fiduciary shall be
--------------------------------------
liable, as provided in ERISA, for any breach of his fiduciary responsibilities.
In addition, a fiduciary under this Plan shall be liable for a breach of
fiduciary responsibility of another fiduciary under this Plan as provided under
ERISA Section 405.
10.4 Fiduciary May Employ Agents. Any person or group of persons may
----------------------------
serve in more than one fiduciary capacity with regard to the Plan. A fiduciary
may, with the consent of the Employer, employ one or more persons to render
advice and assistance with regard to any function such fiduciary has under the
Plan. The expenses of such persons shall be paid by the Trust if not paid by
the Employer.
10.5 Authority Outlined.
-------------------
(a) Employer Authority. The Employer has the authority to amend
-------------------
and terminate the Plan, to appoint and to appoint and remove Trustees.
(b) Trustees' Administrative Authority. The Trustees, in their
-----------------------------------
role as Plan Administrator, have the authority to:
10-1
<PAGE>
(i) Allocate the Employer contributions;
(ii) Determine the method for allocation of the Trust
income or loss;
(iii) Maintain separate Accounts for Participants;
(iv) Furnish, and correct errors in, statements of
Accounts;
(v) Direct the method, timing and media of distributions
pursuant to Article 8;
(vi) Direct the segregation of assets;
(vii) Direct distribution of the interests of incompetent
persons and minors;
(viii) Construe the Plan and Trust Agreement and determine
questions thereunder;
(ix) Establish a funding policy;
(x) Appoint and delegate duties to an investment manager;
and
(xi) Employ advisors and assistants.
Article 11 further describes the administrative authority and duties
of the Trustees.
(c) Trustees' Authority With Respect to Plan Assets. The
------------------------------------------------
Trustees have the authority to establish the fair market value of the Trust
Fund, to value segregated Accounts, to employ advisors, agents and counsel, to
hold the Trust assets and to render accounts of their administration of the
Trust. Article 13 further describes the authority and duties of the Trustees
with respect to Plan assets.
10.6 Fiduciaries Not to Engage in Prohibited Transactions. A fiduciary
-----------------------------------------------------
shall not cause the Plan to engage in a transaction if he knows or should know
that such transaction constitutes a prohibited transaction under ERISA Section
406 or Code Section 4975, unless such transaction is exempted under ERISA
Section 408 or Code Section 4975.
10.7 Duties of Plan Administrator. The Trustees are the Plan
-----------------------------
Administrator under ERISA and shall have the duty and authority to comply, with
those reporting and disclosure requirements of ERISA and the Code which are
specifically required of the Plan Administrator. The Plan Administrator is the
agent for the service of legal process. The Plan Administrator shall keep on
file a copy of this Plan and Trust Agreement, including any subsequent
amendments, all annual and interim reports of the Trustee and
10-2
<PAGE>
the latest annual report required under Title I of ERISA for examination by
Participants during business hours.
* * * * End of Article 10 * * * *
10-3
<PAGE>
Article 11.
Administration of the Plan
11.1 Selection of Trustees. There shall be five Trustees to manage and
----------------------
administer this Plan. The Trustees shall be appointed by the chief executive
officer of the Company, who shall also select a successor Trustee upon
resignation, death or removal of a Trustee.
11.2 Trustees' Operating Rules. The Trustees shall act by agreement of
--------------------------
a majority of their members, either by vote at a meeting or in writing without a
meeting. By such action, the Trustees may authorize one or more members to
execute documents on their behalf, or may delegate such authority to another
person. A Trustee, who is also a Participant hereunder, shall not vote or act
upon any matter relating solely to himself. In the event of a deadlock or other
situation which prevents agreement of a majority of the Trustees, the matter
shall be decided by the Employer.
11.3 Trustees' Administrative Authority. The Trustees have the
-----------------------------------
authority and duty to do all things necessary or convenient to effect the intent
and purpose of this Plan, whether or not such authority and duties are
specifically set forth herein. Not in limitation but in amplification of the
foregoing, the Trustees shall have the discretionary power to construe the Plan
and Trust Agreement and to determine all questions that shall arise hereunder.
Decisions of the Trustees made in good faith upon any matters within the scope
of its authority shall be final and binding on the Employer, the Participants,
their Beneficiaries and all others. The Trustees shall at all times act in a
uniform and nondiscriminatory manner in making and carrying out their decisions
and directions, and may from time to time prescribe and modify uniform rules of
interpretation and administration. The Trustees are the Plan Administrator and
have the duties outlined in Article 3.
11.4 Trustees to Establish Funding Policy. The Trustees shall establish
-------------------------------------
a funding policy for the Trust Fund bearing in mind both the short-run and long-
run needs and goals of the Plan. The Trustees shall review such policy prior to
the end of each Fiscal Year for its appropriateness under the circumstances then
prevailing. The funding policy shall be communicated to the investment manager
of the Trust Fund, if one has been appointed, so that the investment policy of
the Trust Fund can be coordinated with Plan needs.
11.5 Trustees May Retain Advisors. With the approval of the Employer,
-----------------------------
the Trustees may from time to time or on a continuing basis, retain such agents
or advisors including, specifically, attorneys, accountants, actuaries,
investment counsel, consultants and administrative assistants, as it considers
necessary to assist it in the proper performance of its duties. The expenses of
such agents or advisors shall be paid by the Employer, or, if not paid by the
Employer, the Trustees may direct that such expenses be paid from the Trust
Fund; provided that only reasonable expenses of administering the Trust may be
paid from the Trust.
11-1
<PAGE>
11.6 Claims Procedure.
-----------------
(a) Claim Must Be Submitted Within 60 Days. The Trustees shall
---------------------------------------
determine Participants', Alternate Payees' and Beneficiaries' rights to benefits
under the Plan. In the event of a dispute over benefits, a Participant,
Beneficiary or Alternate Payee may file a written claim for benefits with the
Trustees, provided that such claim is filed within 60 days of the date the
Participant, Beneficiary or Alternate Payee receives notification of the
Trustees' determination.
(b) Requirements for Notice of Denial. If a claim is wholly or
----------------------------------
partially denied, the Trustees shall provide the claimant with a Notice of
Denial, written in a manner calculated to be understood by the claimant, setting
forth:
(i) The specific reason for such denial;
(ii) Specific references to the pertinent Plan provisions on
which the denial is based;
(iii) A description of any additional material or information
necessary for the claimant to perfect the claim with an explanation of why such
material or information is necessary; and
(iv) Appropriate information as to the steps to be taken if
the claimant wishes to submit his or her claim for review.
The Notice of Denial shall be given within a reasonable time period
but no later than 90 days after the claim is filed, unless special circumstances
require an extension of time for processing the claim. If such extension is
required, written notice shall be furnished to the claimant within 90 days of
the date the claim was filed stating the special circumstances requiring an
extension of time and the date by which a decision on the claim can be expected,
which shall be no more than 180 days from the date the claim was filed. If no
Notice of Denial is provided as herein described, the claimant may appeal the
claim as though the claim had been denied.
(c) Claimant's Rights If Claim Denied. The claimant and/or his
----------------------------------
representative may appeal the denied claim and may:
(i) Request a review upon written application to the
Trustees;
(ii) Review pertinent documents; and
(iii) Submit issues and comments in writing;
provided that such appeal is made within 60 days of the date the claimant
receives notification of the denied claim.
11-2
<PAGE>
(d) Time Limit on Review of Denied Claim. Upon receipt of a
-------------------------------------
request for review, the Trustees shall provide written notification of its
decision to the claimant stating the specific reasons and referencing specific
Plan provisions on which its decision is based, within a reasonable time period
but not later than 60 days after receiving the request, unless special
circumstances require an extension for processing the review. If such an
extension is required, the Trustees shall notify the claimant of such special
circumstances and of the date, no later than 120 days after the original date
the review was requested, on which the Trustees will notify the claimant of its
decision.
(e) No Legal Recourse Until Claims Procedure Exhausted. In the
---------------------------------------------------
event of any dispute over benefits under this Plan, all remedies available to
the disputing individual under this Article 11.6 must be exhausted before legal
recourse of any type is sought.
* * * * End of Article 11 * * * *
11-3
<PAGE>
Article 12.
Investments
12.1 Investment Authority. The Trustees are hereby granted full power
---------------------
and authority to invest and reinvest the Trust Fund or any part thereof in
accordance with the standards set forth in Article 10. Without limiting the
generality of the foregoing, the Trustees may invest in bonds, notes, mortgages,
commercial or federal paper, preferred stock, common stock, or other securities,
rights, obligations or property, real or personal, including shares and
certificates of participation issued by investment companies or investment
trusts. However, the Trustees are expected to accept and retain Employer Stock
contributed to the Trust and to invest all or substantially all cash
contributions in Employer Stock if it is available.
12.2 Trustees May Hold Necessary Cash. The Trustees may hold in a cash
---------------------------------
or cash equivalent account such portion of the Trust Fund as may be deemed
necessary for the ordinary administration of the Trust and disbursement of
funds. Such funds may be deposited in any bank or savings and loan institution
subject to the rules and regulations governing such deposits.
12.3 Appointment of Investment Manager. The power of the Trustees to
----------------------------------
direct, control or manage the investment of the Trust Fund may be delegated to
one or more investment managers appointed by the Trustees. Any such investment
manager, if appointed, must acknowledge in writing that he is a fiduciary with
respect to the Trust Fund and shall then have the power to manage, acquire, or
dispose of any asset of the Trust Fund. An investment manager must be a person
who is (1) registered as an investment advisor under the Investment Advisors Act
of 1940; (2) a bank, as defined in that Act; or (3) an insurance company
qualified to perform such services under the laws of more than one state. If an
investment manager has been appointed, the Trustee shall neither be liable for
acts or omissions of such investment manager nor be under any obligation to
invest or otherwise manage any asset of the Trust Fund. The Trustees shall not
be liable for any act or omission of the investment manager in carrying out such
responsibility except to the extent that the Trustees violated Article 10.2 of
this Trust Agreement with respect to:
(1) Such designation,
(2) The establishment or implementation of the procedures
for the designation of an investment manager, or
(3) Continuing the designation, in which case the Trustees
would be liable in accordance with Article 10.3.
* * * * End of Article 12 * * * *
12-1
<PAGE>
Article 13.
Trustee
13.1 Trustees' Duties With Respect to Trust Assets. The duties of the
----------------------------------------------
Trustees with respect to Trust assets shall be to direct the receipt and payment
of funds of the Trust, the safeguarding and valuing of Trust assets, and the
investing and reinvesting of the Trust Funds. The directions of the Trustees
shall be in writing and bear the signature of one or more persons designated as
its authorized signatory or signatories, as provided in Article 11.2. The
directions of an investment manager shall be in writing or in such other form as
is acceptable to the Trustee. The Employer may, however, authorize the Trustees
to act with respect to any specific matter or class of matters by delivering to
the Trustees a certified copy of a resolution authorizing the Trustees so to
act.
13.2 Indicia of Ownership Must Be in the United States. The Trustees
--------------------------------------------------
shall not maintain the indicia of ownership of any Trust assets outside the
jurisdiction of the district courts of the United States, except as authorized
by regulations issued by the Department of Labor.
13.3 Permissible Trustees' Actions. Except as provided in Article 13.4,
------------------------------
in the discharge of its duties, the Trustees have all the powers, authority,
rights and privileges of an absolute owner of the Trust Fund and, not in
limitation of but in amplification of the foregoing, may (i) receive, hold,
manage, invest and reinvest, sell, exchange, dispose of, encumber, hypothecate,
pledge, mortgage, lease, grant options respecting, repair, alter, insure, or
distribute any and all property in the Trust Fund; (ii) borrow money,
participate in reorganizations, pay calls and assessments, vote or execute
proxies, exercise subscription or conversion privileges and register in the name
of a nominee any securities in the Trust Fund; (iii) renew, extend the due date,
compromise, arbitrate, adjust, settle, enforce or foreclose by judicial
proceedings or otherwise or defend against the same, any obligations or claims
in favor of or against the Trust Fund; (iv) exercise options, employ agents;
and, (v) whether herein specifically referred to or not, do all such acts, take
all such actions and proceedings and exercise all such rights and privileges as
if the Trustees were the absolute owner of any and all property in the Trust
Fund. The Trustees have no authority or duty to determine the amount of the
Employer contribution or to enforce the payment of any Employer contribution to
it.
13.4 Voting of Employer Stock. Every Participant shall have the right
-------------------------
to direct the Trustees with respect to the voting of the Employer Stock
allocated to his Account. At the time of the mailing to shareholders of the
notice of any shareholders' meeting of the Employer, the Employer shall cause to
be prepared and delivered to each Participant a notice of the shareholders'
meeting with a descriptive statement of the items upon which the Participant has
the right to exercise his right to vote. The Trustees shall vote any Employer
Stock which a Participant fails to vote as authorized by this Article in the
same proportion as the allocated shares for which voting instructions have been
received and are voted.
13-1
<PAGE>
13.5 Trustees' Fees for Services and Advisors Retained. Individual
--------------------------------------------------
Trustees shall serve without compensation for their service as such. However,
with the approval of the Employer, the Trustees may from time to time or on a
continuing basis, retain such agents or advisors, including specifically
accountants, attorneys, investment counsel and administrators, as they consider
necessary to assist them in the proper performance of their duties. The
expenses of such agents or advisors and all other expenses of the Trustees shall
be paid by the Employer. If such expenses remain unpaid by the Employer for a
period of 60 days after an appropriate billing is mailed to the Employer, the
Trustees shall be entitled to charge such fees and expenses to the Trust Fund.
13.6 Annual Accounting and Asset Valuation. Within 60 days or within a
--------------------------------------
reasonable period following the close of each Fiscal Year, the Trustees shall
render to the Employer an accounting of the administration of the Trust during
the preceding year. The Trustees shall also determine the value of the Trust
Fund, at the close of the Fiscal Year in Article 7. Notwithstanding any other
provisions of this Agreement, if the Trustees find that the Trust Fund consists,
in whole or in part, of property not traded freely on a recognized market or
that information necessary to ascertain the fair market value thereof is not
readily available to the Trustees, the Trustees shall take such action as is
required to ascertain the fair market value of such property including the
retention of such counsel and independent appraisers as it considers necessary;
and in such event the fair market value so determined shall be conclusive and
binding.
13.7 Trustee Removal or Resignation. A Trustee may resign at any time
-------------------------------
upon 30 days written notice to the Employer and the Trustees or such shorter
period as may be agreeable to the Employer. Upon receipt of instructions or
directions from the Employer with which the Trustees are unable or unwilling to
comply, a Trustee may resign upon written notice to the Employer, given within a
reasonable time under the circumstances then prevailing. After resignation, a
Trustee shall have no liability to the Employer, or any person interested herein
for failure to comply with any instructions or directions. The Employer may
remove a Trustee without cause at any time upon 30 days written notice. In case
of resignation or removal of all the Trustees, the Trustees shall have the right
of a settlement of their accounts, which may be made at the option of the
Trustees, either by judicial settlement in an action in a court of competent
jurisdiction or by agreement of settlement between the Trustees and the
Employer. The Trustees shall not be required to transfer assets of the Trust
Fund to a successor Trustee under Article 13.8 or otherwise until its accounts
have been settled.
13.8 Approval of Trustees' Accounting. The written approval of any
---------------------------------
Trustees' accounting by the Employer shall be final as to all matters and
transactions stated or shown therein and binding upon the Employer, and all
persons who then shall be or thereafter shall become interested in this Trust.
Failure of the Employer to notify the Trustees of its disapproval of an
accounting within 90 days after it has been received shall be the equivalent of
written approval.
13-2
<PAGE>
13.9 Trust Not Terminated Upon Trustees' Removal or Resignation.
-----------------------------------------------------------
Resignation or removal of all of the Trustees shall not terminate the Trust. If
all or any of the Trustees have died, resigned, or been removed, a successor
Trustee shall be appointed pursuant to Article 11.1. Any successor Trustee
shall have all the powers and duties herein conferred upon the former Trustee.
The title to all Trust property shall automatically vest in a successor Trustee
without the execution or filing of any instrument or the doing of any act, but
the former Trustee shall, nevertheless, execute all instruments and do all acts
which would otherwise, be necessary to vest such title in any successor. The
appointment of a successor Trustee may be effected by amendment to this Trust
Agreement or by a board resolution of the Employer, with the agreement of the
successor Trustee to act as such being evidenced by its execution of such
amendment or acceptance of such board resolution.
13.10 Trustees May Consult With Legal Counsel. The Trustees may consult
----------------------------------------
ith legal counsel (who may or may not be counsel to the Employer) concerning
any question which may arise with reference to its duties under this Agreement.
13.11 Trustees Not Required to Verify Identification or Addresses. The
------------------------------------------------------------
Trustees shall not be required to make any investigation to determine the
identity or mailing address of any person entitled to benefits under this
Agreement and shall be entitled to withhold making payments until the identity
and mailing address of any person entitled to benefits are certified by the
Employer. In the event that any dispute shall arise as to the identity or
rights of persons entitled to benefits hereunder, the Trustees may withhold
payment of benefits until such dispute has been determined by a court of
competent jurisdiction or shall have been settled by written stipulation of the
parties concerned.
13.12 Individual Trustee Rules. The action of individual Trustees shall
-------------------------
be determined by the vote or other affirmative expression of the majority
thereof, and they shall designate one of their members, or some other person, to
keep a record of their decision on matters to be determined hereunder and of all
dates, documents and other matters pertaining to their administration of this
Trust. However, no Trustee who is a Participant shall vote on any action
relating specifically to himself, and in the event the remaining Trustees by
majority vote thereof are unable to come to a determination of any such
question, the matter shall be decided by the Employer.
13.13 Indemnification of Trustees and Insurance. To the fullest extent
------------------------------------------
permitted by law, the Employer agrees to indemnify, to defend, and to hold
harmless the Trustees, individually and collectively, against any liability
whatsoever for any action taken or omitted by such Trustees in good faith in
connection with this Plan and Trust or duties hereunder and for any expenses or
losses for which the Trustees may become liable as a result of any such actions
or non-actions unless resultant from willful misconduct. The Employer may
purchase insurance for the Trustees to cover any of their potential liabilities
with regard to the Plan and Trust.
13-3
<PAGE>
13.14 Income Tax Withholding. In directing payments from the Trust, the
-----------------------
Trustees shall be liable for federal income tax withholding, and shall withhold
the appropriate amount of tax, if any, as provided by applicable law and
regulation, from any payment made to a Participant, Beneficiary or Alternate
Payee.
* * * * End of Article 13 * * * *
13-4
<PAGE>
Article 14.
Amendment, Termination and Merger
14.1 Trust Is Irrevocable. The Trust shall be irrevocable but shall be
---------------------
subject to amendment and termination as provided in this Article 14.
14.2 Employer May Amend Trust Agreement. The Employer reserves the
-----------------------------------
right to amend this Trust Agreement to any extent and in any manner that it may
deem advisable by action of its Board of Directors. The Employer, the Trustees,
all Participants, their Beneficiaries and all other persons having any interest
hereunder shall be bound by any such amendment; provided, however, that no
amendment shall:
(1) Cause or permit any part of the principal or income of
the Trust to revert to the Employer or to be used for, or be diverted to, any
purpose other than the exclusive benefit of Participants or their Beneficiaries
except as permitted by ERISA;
(2) Change the duties or liabilities of the Trustees without
their written assent to such amendment;
(3) Adversely affect the then accrued benefits of any
Participants; or
(4) Eliminate an optional form of distribution for Account
balances accrued before such amendment, except as allowed under the Code.
14.3 Employer May Terminate Plan. The Employer has established the Plan
----------------------------
with the bona fide intention and expectation that the Plan will continue
indefinitely, and that it will be able to make its contributions indefinitely,
but the Employer shall be under no obligation to continue its contributions or
to maintain the Plan for any given length of time and may, in its sole
discretion, terminate the Plan at any time without any liability whatsoever. In
the event of the termination of this Plan, the full value of the Accounts of all
Participants shall become fully vested and nonforfeitable. In the event of
partial termination of the Plan, the full value of the applicable Accounts of
the Participants involved in the partial termination shall become fully vested
and nonforfeitable.
14.4 Timing of Plan Termination. The Plan shall terminate:
---------------------------
(a) By Written Notice. Upon the date specified in a written
------------------
notice of such termination, executed by the Employer and delivered to the
Trustee; or
(b) Purpose of Trust Accomplished. Upon the earlier of (i) the
------------------------------
complete accomplishment of all purposes for which the Plan has created, or (ii)
the death of the last person entitled to receive any benefits hereunder who is
living at the date of execution of the Trust Agreement. However, if, upon the
death of such last
14-1
<PAGE>
survivor, the Trust may continue for a longer period without violation of any
law of the jurisdiction to which the Trust is subject, the Trust shall continue
until the complete accomplishment of all the purposes for which the Plan and
Trust are created, unless sooner terminated under the other provisions hereof.
14.5 Action Required Upon Plan Termination. Upon the termination of
--------------------------------------
this Plan and after payment of all expenses of the Trust, including any amounts
then due the Trustees and agents of the Trustees, the Trust assets and all
Participants' Accounts shall be revalued according to the procedures provided in
Article 7. Limitation Accounts held pursuant to Article 5 shall be allocated as
of the date the Plan is terminated in accordance with Articles 4 and 5. The
Trustee shall hold and distribute such Accounts as directed by the Trustees in
accordance with the provisions of Article 8. Upon such termination, if the
Employer has ceased to exist, all rights, powers, and duties to be exercised or
performed by the Employer shall thereafter be exercised or performed by the
Trustees, including the filling of vacancies on the Trustees and the amending of
the Plan.
14.6 Non-Reversion of Assets. Except as provided in Article 4.2(b),
------------------------
4.3(b), in no event shall any part of the principal or income of the Trust
revert to the Employer or be used for or diverted to any purpose other than the
exclusive benefit of Participants or their Beneficiaries.
14.7 Merger or Consolidation Cannot Reduce Benefits. In no event shall
-----------------------------------------------
this Plan or either portion thereof be merged or consolidated with any other
plan, nor shall there be any transfer of assets or liabilities from this Plan,
or either portion thereof to any other plan unless immediately after such
merger, consolidation or transfer, each Participant's benefits, if such other
plan were then to terminate, are at least equal to or greater than the benefits
which the Participant would have been entitled to had this Plan or such
applicable portion thereof been terminated immediately before such merger,
consolidation or transfer.
* * * * End of Article 14 * * * *
14-2
<PAGE>
Article 15.
Assignments
15.1 No Assignment. Except as provided below, the interest herein,
--------------
whether vested or not, of any Participant, former Participant or Beneficiary,
shall not be subject to alienation, assignment, pledging, encumbrance,
attachment, garnishment, execution, sequestration, or other legal or equitable
process, or transferability by operation of law in the event of bankruptcy,
insolvency or otherwise.
15.2 Qualified Domestic Relations Order Permitted. The provisions of
---------------------------------------------
Article 15.1 above shall not prevent the creation, assignment or recognition of
any individual's right to a benefit payable with respect to a Participant
pursuant to a Qualified Domestic Relations Order (QDRO).
(a) Not All Domestic Relations Orders Qualify as QDROs. The
---------------------------------------------------
Trustees shall establish reasonable procedures to determine whether a domestic
relations order is a QDRO and to administer distributions under a QDRO. If any
domestic relations order is received by the Plan, the Trustees shall promptly
notify the Participant and each Alternate Payee that the order has been
received, and shall determine within a reasonable period after receipt of the
order whether it is a QDRO and notify the Participant and each Alternate Payee
of the Trustees' determination.
(b) Payments May Occur Before Termination of Service. The Plan
-------------------------------------------------
may make benefit payments to an Alternate Payee under a QDRO before the
Participant's termination of Service if such payments are made on or after the
earlier of (i) the date specified in the QDRO; (ii) the earliest date on which
the Participant is entitled to a distribution under the Plan; or (iii) the later
of (A) the Participant's 50th birthday, or (B) the earliest date on which the
Participant could receiving benefits under the Plan if the Participant separated
from Service; in accordance with applicable law or regulations.
(c) Separate Accounting of Alternate Payee's Account. During any
-------------------------------------------------
period in which the issue of whether a domestic relations order is a QDRO is
being determined by the Trustees, a court of competent jurisdiction or
otherwise, the Trustees shall separately account for (herein referred to as "the
separate amounts") the amounts which would have been payable to the Alternate
Payee during such period if the order had been determined to be a QDRO. If the
order, or a modification of the order, is determined within the 18 month period
described herein to be a QDRO, the Trustees shall pay the separate amounts (as
adjusted by attributable investment income or loss), in accordance with the
Plan's provisions, to the entitled individuals). If, within the 18 month period
described herein, the order is determined not to be a QDRO or its status as a
QDRO is not resolved, the Trustees shall return the separate amounts (as
adjusted by attributable investment income or loss) to his Account; or if
applicable, the Trustees shall pay such separate amounts to the individuals who
would have been entitled to receive such amounts absent such order. Any
determination that an order is a QDRO made after the close of the 18-month
period described herein shall be applied
15-1
<PAGE>
prospectively only. For purposes of this Article 15.2(c), the 18-month period
shall be the 18-month period beginning with the date on which the first payment
would be required to be made under the QDRO.
(d) Consent Requirements. Except as otherwise provided in a
---------------------
QDRO, payments made to an Alternate Payee shall not be subject to (1) Spousal
Consent, or (2) consent of the Alternate Payee.
* * * * End of Article 15 * * * *
15-2
<PAGE>
Article 16.
Adoption of the Plan by Affiliated Employers
16.1 Purpose. The purpose of this Article 16 is to describe the terms
--------
and conditions under which an Affiliated Employer may adopt the Plan for the
benefit of its Eligible Employees.
16.2 Conditions of Subscription Agreement. Any Affiliated Employer may,
-------------------------------------
with the written consent of the Board, execute a Subscription Agreement under
which it shall agree:
(a) To be bound by all the provisions of the adopted Plan and Trust in
the manner set forth herein:
(b) To pay its share of the expenses of the Plan and Trust as they may
be determined from time to time in the manner specified in this Article 16; and
(c) To provide the Board and the Trustees with full, complete and
timely information on all matters necessary to them in the operation of the Plan
and Trust.
16.3 Participation of Affiliated Employers. In the event of the
--------------------------------------
adoption of the Plan and Trust by an Affiliated Employer, the following shall
apply with respect to the participation of such Affiliated Employer hereunder:
(a) All the terms and conditions of the Plan and Trust shall apply to
the participation of such Member Employer and its Employees in the same manner
as set forth for the Employer and its Employees, except as follows:
(i) The right to designate an Affiliated Employer is
specifically reserved to the Board.
(ii) An Affiliated Employer which adopts the Plan shall have the
right to designate for purposes of Articles 2.41 and 5.2(b), an alternative
definition of Plan Compensation, and for purposes of Article 3, alternative
requirements which shall be met by its Eligible Employees in order to qualify as
Participants. In the event that no such designation is made, the current
requirements set forth in Article 2.41 and Article 3 shall apply to Employees of
such Member Employer.
(iii) The right to appoint the Trustees as Plan Administrator is
specifically reserved to the Board, provided that a Member Employer may appoint
an Advisory Committee of such composition and size as it may determine to advise
the Trustees on any matters affecting such Member Employer or its Employees who
are Participants under the Plan. The Trustees shall be entitled to rely on any
information furnished it by any such Advisory Committee in the same manner as if
furnished by the Member Employer appointing such Advisory Committee, but in no
event shall the
16-1
<PAGE>
existence of any such Advisory Committee modify or otherwise limit any of the
powers or duties of the Trustees under the Plan.
(iv) The right to direct, appoint, remove, approve the account of
or otherwise deal with the Trustees are specifically reserved to the Board
and/or the chief executive officer of the Company as otherwise set forth in this
Plan and Trust.
(v) The right to amend the Plan and Trust is specifically
reserved to the Board, and any such amendment, unless otherwise specified
therein, shall be fully binding with respect to the participation of any Member
Employer, provided that this reservation shall in no event be construed to
prevent any Member Employer from terminating at any time its participation in
the Plan and Trust.
(b) In the operation of the Plan with respect to a Member Employer,
the term "effective date" shall mean the effective date in this Restatement or
such later date as specified in such Member Employer's Subscription Agreement.
(c) The Trustees shall at all times maintain separate Accounts
reflecting the participation of the Eligible Employees of the Member Employer
and in no event shall there be a commingling of the Accounts of the Eligible
Employees of the Employer or any Member Employer, provided that this requirement
shall in no event be construed to be a limitation on the commingling of any
contributions of the Trust Fund for investment purposes nor shall it require the
Trustees to maintain separate accounts with respect to the Trust Fund except as
otherwise provided herein.
(d) Notwithstanding any other provisions of this Agreement to the
contrary, it is specifically understood that the participation of any Affiliated
Employer hereunder, the obligation of such Affiliated Employer to make
contributions hereunder, and the vesting and entitlements of any Participant
based on such contributions are conditional to the extent that if a notification
is received from the United States Treasury that its Subscription Agreement as
part of the Plan, or the same as it may have been amended, is not part of a
qualified plan under Section 401 of the Code, as amended by ERISA, with respect
to its participation, such Affiliated Employer shall not be a Member Employer
hereunder and the then value of any contributions made by such Affiliated
Employer or its Employees shall be returned from the Trust Fund, and no
Participant hereunder or his Beneficiary shall have any vested interest in, or
be entitled to, any benefit payments based on such contributions. Further, it
is understood and provided that upon receipt of an initial notification from the
United States Treasury Department that such Subscription Agreement and the Plan
and Trust, as they may have been amended in order to receive such notification,
are qualified and exempt from taxation under the applicable sections of the
Code, the participation of such Affiliated Employer as a Member Employer and the
vestings and entitlement of all Participants employed by such Member Employer
and their Beneficiaries shall be retroactive to the date of their occurrence in
accordance with the other provisions of the Plan, and this Article 16.3 shall be
of no further force or effect with respect to such Member Employer and its
Employees.
16-2
<PAGE>
16.4 Termination of Member Employer's Participation. Any Member
-----------------------------------------------
Employer may at any time elect to terminate its participation in the Plan and
Trust, or any Member Employer may elect at any time by appropriate amendment or
action affecting only its own status hereunder to disassociate itself from the
Plan and Trust but to continue the Plan and the portion of the Trust as it
pertains to itself and its Employees as an entity separate and distinct from the
Plan and Trust if otherwise permitted by law. Termination of the participation
of any Member Employer shall not affect the participation of any other Member
Employer nor terminate the Plan or Trust with respect to them and their
Employees; provided that, if Employer shall terminate its participation, or
disassociate itself, then each remaining Member Employer shall make such
arrangement and take such action as may be necessary to assume the duties of
providing for the operation and continued administration of the Plan and Trust
as the same pertains to the Member Employer.
* * * * End of Article 16 * * * *
16-3
<PAGE>
Article 17.
Miscellaneous
17.1 Special Rule Relating to Veterans Reemployment Rights Under USERRA.
------------------------------------------------------------------
Notwithstanding any provision of this Plan to the contrary, effective as of
December 12, 1994, contributions, benefits and service credit with respect to
qualified military service will be provided in accordance with Section 414(u) of
the Code.
* * * * End of Article 17 * * * *
17-1
<PAGE>
IN WITNESS WHEREOF, the Employer and the Trustees have caused this
Agreement to be executed by their respective duly authorized parties on this
_____ day of ___________________, 1999.
CH2M HILL COMPANIES, LTD.
(Employer)
By
-------------------------------------
Its
------------------------------------
FRED K. BERRY
SAMUEL H. IAPALUCCI
SHARON SCHLECHTER
CLIFF THOMPSON
STAN VINSON
(Trustees)
By
-------------------------------------
By
-------------------------------------
By
-------------------------------------
By
-------------------------------------
By
-------------------------------------
<PAGE>
EXHIBIT 10.3
CH2M HILL COMPANIES, LTD.
1999 STOCK OPTION PLAN
SECTION 1: PURPOSE
-------------------
The purpose of the CH2M Hill Companies, Ltd. 1999 Stock Option Plan (the
"Plan") is to further the growth and development of CH2M Hill Companies, Ltd.
(the "Company") by affording an opportunity for stock ownership to selected
employees of the Company and of certain other entities in which the Company has
an ownership interest, who are responsible for the conduct and management of the
Company's business or who are involved in endeavors significant to the Company's
success.
SECTION 2: DEFINITIONS
-----------------------
Unless otherwise indicated, the following words when used herein shall have
the following meanings:
(a) "Board of Directors" shall mean the Board of Directors of the
Company.
(b) "Cause" shall mean a termination of employment on account of: (1)
repeated refusal to obey written directions of the Board of Directors or a
superior officer of the Company (so long as such directions do not involve
illegal or immoral acts); (2) repeated acts of substance abuse which are
materially injurious to the Company; (3) fraud or dishonesty that is
materially injurious to the Company; (4) commission of a criminal offense
involving money or other property of the Company (excluding any traffic
violations or similar violations); or (5) commission of a criminal offense
that constitutes a felony in the jurisdiction in which the offense is
committed.
(c) "Change in Control" shall be deemed to have occurred: (1) at such
time as a third person, including a "group" as defined in Section 13(d)(3)
of the Securities Exchange Act of 1934, becomes the beneficial owner of
shares of the Company having 50% or more of the total number of votes that
may be cast for the election of Directors of the Company; or (2) on the
date on which the shareholders of the Company approve (i) any agreement for
a merger or consolidation in which the Company will not survive as an
independent corporation or (ii) any sale, exchange or other disposition of
all or substantially all of the Company's assets; or (3) on the effective
date of any sale, exchange or other disposition of greater than 50% in fair
market value of the Company's assets. In determining whether clause (1) of
the preceding sentence has been satisfied, the third person owning shares
must be a person or entity other than an employee benefit plan of the
Company. The Committee's reasonable
<PAGE>
determination as to whether a Change in Control has occurred shall be final and
conclusive.
(d) "Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time.
(e) "Committee" shall mean the Committee appointed by the Board of
Directors in accordance with Section 4.1 to administer the Plan.
(f) "Common Stock" shall mean the Company's common stock (par value $0.10
per share) and any share or shares of the Company's capital stock hereafter
issued or issuable in substitution for such shares.
(g) "Incentive Stock Option" shall mean any option granted to an
eligible employee under the Plan, which the Company intends at the time the
option is granted to be an Incentive Stock Option within the meaning of Section
422 of the Code.
(h) "Nonqualified Stock Option" shall mean any option granted to an
eligible employee under the Plan which is not an Incentive Stock Option.
(i) "Option" shall mean and refer collectively to Incentive Stock
Options and Nonqualified Stock Options.
(j) "Option Agreement" shall mean the agreement specified in Section
7.2.
(k) "Optionee" shall mean any employee who is granted an Option under
the Plan. "Optionee" shall also mean the personal representative of the estate
of a deceased Optionee or any designated beneficiary or other person who
acquires the right to exercise an Option by bequest or inheritance.
(l) "Parent" shall mean a parent corporation of the Company as defined in
Section 424(e) of the Code.
(m) "Subsidiary" shall mean a subsidiary corporation of the Company as
defined in Section 424(f) of the Code.
SECTION 3: EFFECTIVE DATE
--------------------------
The effective date of the Plan is January 1, 1999; provided, however,
that the adoption of the Plan by the Board of Directors is subject to approval
and ratification by the shareholders of the Company within twelve months before
or after the effective date. Options granted under the Plan prior to approval of
the Plan by the shareholders of the Company shall be subject to approval of the
Plan by the shareholders of the Company
2
<PAGE>
and may not be exercised prior to the approval of the Plan by the shareholders
of the Company.
SECTION 4: ADMINISTRATION
--------------------------
4.1 Administrative Committee. The Plan shall be administered by a
------------------------
Committee appointed by and serving at the pleasure of the Board of Directors.
The Committee shall at all times include at least two Directors and shall
include such other members (Directors or non-Directors) as the Board of
Directors may determine. The Board of Directors may from time to time remove
members from or add members to the Committee, and vacancies on the Committee
shall be filled by the Board of Directors.
4.2 Committee Meetings and Actions. The Committee shall hold meetings at
------------------------------
such times and places as it may determine. A majority of the members of the
Committee shall constitute a quorum, and the acts of a majority of the members
present at a meeting or a consent in writing signed by all members of the
Committee shall be the acts of the Committee and shall be final, binding and
conclusive upon all persons, including the Company, its shareholders, and all
persons having any interest in Options which may be or have been granted
pursuant to the Plan.
4.3 Powers of Committee. The Committee shall have the full and exclusive
-------------------
right to grant and to determine terms and conditions of all Options granted
under the Plan and to prescribe, amend and rescind rules and regulations for
administration of the Plan. In granting Options, the Committee shall take into
consideration the contribution the Optionee has made or may make to the success
of the Company and such other factors as the Committee shall determine.
4.4 Interpretation of Plan. The determination of the Committee as to any
----------------------
disputed question arising under the Plan, including questions of construction
and interpretation, shall be final, binding and conclusive upon all persons,
including the Company, its shareholders, and all persons having any interest in
Options which may be or have been granted pursuant to the Plan.
4.5 Indemnification. Each person who is or shall have been a member of the
---------------
Committee or of the Board of Directors shall be indemnified and held harmless by
the Company against and from any loss, cost, liability or expense that may be
imposed upon or reasonably incurred in connection with or resulting from any
claim, action, suit or proceeding to which such person may be a party or in
which such person may be involved by reason of any action taken or failure to
act under the Plan and against and from any and all amounts paid in settlement
thereof, with the Company's approval, or paid in satisfaction of a judgment in
any such action, suit or proceeding against him, provided such person shall give
the Company an opportunity, at its own expense, to handle and defend the same
before undertaking to handle and defend it on such person's own behalf. The
foregoing right of indemnification shall not be exclusive of, and is in
3
<PAGE>
addition to, any other rights of indemnification to which any person may be
entitled under the Company's Articles of Incorporation or Bylaws, as a matter of
law, or otherwise, or any power that the Company may have to indemnify them or
hold them harmless.
SECTION 5: STOCK SUBJECT TO THE PLAN
-------------------------------------
5.1 Number. The aggregate number of shares of Common Stock which may be
------
issued under Options granted pursuant to the Plan shall not exceed 800,000
shares. Shares which may be issued under Options may consist, in whole or in
part, of authorized but unissued stock or treasury stock of the Company not
reserved for any other purpose.
5.2 Unused Stock. If any outstanding Option under the Plan is cancelled,
------------
expires, or for any other reason ceases to be exercisable, in whole or in part,
other than upon exercise of the Option, the shares which were subject to such
Option and as to which the Option had not been exercised shall continue to be
available under the Plan.
5.3 Adjustment for Change in Outstanding Shares. If there is any change,
--------------------------------------------
increase or decrease, in the outstanding shares of Common Stock which is
effected without receipt of additional consideration by the Company, by reason
of a stock dividend, recapitalization, merger, consolidation, stock split,
combination or exchange of stock, or other similar circumstances, then in each
such event, the Committee shall make an appropriate adjustment in the aggregate
number of shares of stock available under the Plan, the maximum number of shares
of stock for which Options may be granted to an employee under the Plan, the
number of shares of stock subject to each outstanding Option, and the Option
prices, in order to prevent the dilution or enlargement of any Optionee's
rights. In making such adjustments, fractional shares shall be rounded to the
nearest whole share. The Committee's determinations in making adjustments shall
be final and conclusive.
5.4 Reorganization or Sale of Assets. If the Company is merged or
--------------------------------
consolidated with another corporation and the Company is not the surviving
corporation, or if all or substantially all of the assets of the Company are
acquired by another entity, or if the Company is liquidated or reorganized (each
of such events being referred to as a "Reorganization Event"), the Committee
shall, as to outstanding Options, either: (1) make appropriate provision for the
protection of any such outstanding Options by the substitution on an equitable
basis of appropriate stock of the Company, or of the merged, consolidated or
otherwise reorganized corporation, which will be issuable in respect of the
Common Stock, provided that no additional benefits shall be conferred upon
Optionees as a result of such substitution, and provided further that the excess
of the aggregate fair market value of the shares subject to the Options
immediately after such substitution over the purchase price thereof is not more
than the excess of the aggregate fair market value of the shares subject to such
Options immediately before
4
<PAGE>
such substitution over the purchase price thereof; or (2) upon written notice to
all Optionees, which notice shall be given not less than 20 days prior to the
effective date of the Reorganization Event, provide that all unexercised Options
must be exercised within a specified number of days (which shall not be less
than ten) of the date of such notice or such Options will terminate. In response
to a notice provided pursuant to clause (2) of the preceding sentence, an
Optionee may make an irrevocable election to exercise the Optionee's Option
contingent upon and effective as of the effective date of the Reorganization
Event. The Committee may, in its sole discretion, accelerate the exercise dates
of outstanding Options in connection with any Reorganization Event which does
not also result in a Change in Control.
SECTION 6: ELIGIBILITY
-----------------------
All employees of the Company and its Subsidiaries who are responsible for
the conduct and management of the Company's business or who are involved in
endeavors significant to the success of the Company shall be eligible to receive
both Incentive Stock Options and Nonqualified Stock Options under the Plan.
Employees of entities in which the Company has a direct or indirect ownership
interest of at least 50%, who are not employees of the Company or its
Subsidiaries but who are involved in endeavors significant to the success of the
Company, shall be eligible to receive Nonqualified Stock Options, but not
Incentive Stock Options, under the Plan. The Board of Directors may reduce the
50% ownership requirement in the preceding sentence, except that such percentage
shall not be reduced below 10%. Notwithstanding the preceding sentences of this
Section, the Committee may from time to time, in its sole discretion, determine
that employees of specific entities are not eligible to receive Options under
the Plan.
SECTION 7: GRANT OF OPTIONS
----------------------------
7.1 Grant of Options. The Committee may from time to time in its sole
----------------
discretion determine which of the eligible employees should receive Options, the
type of Options to be granted (whether Incentive Stock Options or Nonqualified
Stock Options), the number of shares subject to such Options, the dates on which
such Options are to be granted and, except as otherwise provided by the Plan,
all other terms and conditions relating to Options. The terms and conditions of
an Option granted under the Plan need not be identical to the terms and
conditions of any other Option granted under the Plan. No employee may be
granted Incentive Stock Options to the extent that the aggregate fair market
value (determined as of the time each Incentive Stock Option is granted) of the
Common Stock with respect to which any such Incentive Stock Options are
exercisable for the first time during a calendar year (under all incentive stock
option plans of the Company and its Parent and Subsidiaries) would exceed
$100,000. No employee shall be granted Options under the Plan to purchase more
than 35,000 shares of Common Stock.
5
<PAGE>
7.2 Option Agreement. Each Option granted under the Plan shall be
----------------
evidenced by a written Option Agreement setting forth the terms upon which the
Option is granted. Each Option Agreement shall designate the type of Options
being granted (whether Incentive Stock Options or Nonqualified Stock Options)
and shall state the number of shares of Common Stock, as designated by the
Committee, to which that Option pertains. More than one Option may be granted to
an eligible person.
7.3 Option Price. The option price per share of Common Stock under each
------------
Option shall be determined by the Committee and stated in the Option Agreement.
The option price for Incentive Stock Options granted under the Plan shall not be
less than 100% of the fair market value (determined as of the day the Option is
granted) of the shares subject to the Option. The option price for Nonqualified
Stock Options granted under the Plan shall not be less than 90% of the fair
market value (determined as of the day the Option is granted) of the shares
subject to the Option.
7.4 Determination of Fair Market Value. For all purposes of the Plan and
----------------------------------
all Option Agreements under the Plan, the fair market value of each share of
Common Stock on any date shall be deemed to be the formula price per share in
effect on that date, as determined in accordance with the Company's Articles of
Incorporation and Bylaws as amended from time to time.
7.5 Duration of Options. Each Option shall be of a duration as specified
-------------------
in the Option Agreement; provided, however, that the term of each Option shall
be no more than ten years from the date on which the Option is granted and shall
be subject to early termination as provided herein. Each Option may be
cancelled, with or without cause, at any time by the Committee by written notice
of cancellation to the Optionee. Upon cancellation of an Option by the
Committee, the Optionee shall not have any rights to purchase Common Stock under
the Option, and neither the Company nor the Committee shall have any liability
to the Optionee with respect to such Option or the cancellation of such Option.
7.6 Additional Limitations on Grant. No Incentive Stock Option shall be
--------------------------------
granted to an employee who, at the time the Incentive Stock Option is granted,
owns stock (as determined in accordance with Section 424(d) of the Code)
representing more than 10% of the total combined voting power of all classes of
stock of the Company or of any Parent or Subsidiary, unless the option price of
such Incentive Stock Option is at least 110% of the fair market value
(determined as of the day the Incentive Stock Option is granted) of the Common
Stock subject to the Incentive Stock Option and the Incentive Stock Option by
its terms is not exercisable more than five years from the date it is granted.
7.7 Other Terms and Conditions. The Option Agreement may contain such
--------------------------
other provisions, which shall not be inconsistent with the Plan, as the
Committee shall deem appropriate, including, without limitation, provisions that
relate the Optionee's ability to exercise an Option to the passage of time or
the achievement of specific goals
6
<PAGE>
established by the Committee or the occurrence of certain events specified by
the Committee. The Option Agreement may also provide, in the discretion of the
Committee, that any shares of Common Stock acquired upon exercise of an Option
shall become, upon such acquisition, subject to the terms of a Stock Restriction
Agreement which shall be set forth as an attachment to the Option Agreement.
SECTION 8: EXERCISE OF OPTIONS
-------------------------------
8.1 Manner of Exercise. Subject to the limitations and conditions of the
------------------
Plan or the Option Agreement, an Option shall be exercisable, in whole or in
part, from time to time, by giving written notice of exercise to the Treasurer
of the Company, which notice shall specify the number of shares of Common Stock
to be purchased and shall be accompanied by all of the following: (1) payment in
full to the Company of the purchase price of the shares to be purchased; (2)
payment in full of such amount as the Company shall determine to be sufficient
to satisfy any liability that the Company or the Optionee's employer may have
for any withholding of federal, state or local income or other taxes incurred by
reason of the exercise of the Option; (3) a representation meeting the
requirements of Section 12.2, if demanded by the Company; and (4) a Stock
Restriction Agreement meeting the requirements of Section 12.3, if requested by
the Committee. An Option shall be considered to be exercised on the earlier of
the date on which the Treasurer of the Company receives all of the items
specified in the preceding sentence or the date on which all of the items
specified in the preceding sentence are mailed to the Treasurer of the Company,
as evidenced by a United States Postal Service postmark.
8.2 Payment of Purchase Price. Payment for shares shall be in the form of
-------------------------
either: (1) cash; or (2) a personal check to the order of the Company; or (3) a
combination of cash and a personal check. In addition, unless the Committee, in
its discretion, provides otherwise, all or part of the payment for shares may be
made by tendering to the Company whole shares of Common Stock owned by the
Optionee, in an amount the fair market value of which (as determined in
accordance with Section 7.4) on the date of exercise equals or exceeds the
aggregate option price of the shares with respect to which the Option is being
exercised. If shares of Common Stock owned by the Optionee are used to pay all
or part of the purchase price, such shares shall be evidenced by negotiable
certificates endorsed to the Company or, if authorized by the Committee, by a
written attestation of ownership of shares signed by the Optionee.
8.3 Designation of Beneficiary. Each Optionee may designate one or more
--------------------------
beneficiaries (who may be designated contingently or successively) to whom the
right to exercise Options following the Optionee's death shall pass, if the
Option Agreement permits the exercise of unexercised Options after the
Optionee's death. Each designation will automatically revoke any prior
designations by the same Optionee, shall be in writing in such form as may be
prescribed by the Committee, and shall be
7
<PAGE>
effective as of the date on which the written designation is received by the
Committee during the lifetime of the Optionee. If no valid designation of
beneficiary is on file with the Committee as of the date on which the Optionee
dies, any right to exercise any unexercised Options after the Optionee's death
will pass to the Optionee's estate or to the person or persons to whom the
Optionee's rights under the Option pass by will or by applicable law.
8.4 Prohibition on Exercise of Options if Limits on Ownership of Common
-------------------------------------------------------------------
Stock Would be Exceeded. Notwithstanding any other provision of this Plan or of
- -----------------------
any Option Agreement, an Option granted under this Plan may not be exercised if,
immediately after the exercise of such Option, the recipient of shares of Common
Stock pursuant to such exercise would own more shares of Common Stock of the
Company than such person is permitted to own under the Articles of Incorporation
or Bylaws of the Company.
SECTION 9: CHANGE IN CONTROL
-----------------------------
Notwithstanding any vesting requirements contained in any Option
Agreement, all outstanding Options shall become immediately exercisable in full
upon the occurrence of a Change in Control.
SECTION 10: EFFECT OF TERMINATION OF EMPLOYMENT
------------------------------------------------
10.1 Termination of Employment Other Than Upon Death or Disability. The
-------------------------------------------------------------
Committee may provide in any Option Agreement that, upon termination of the
Optionee's employment with the Company other than upon death or disability
(within the meaning of Section 22(e)(3) of the Code) and other than for Cause,
the Optionee may, at any time within three months (or such lesser period as the
Committee may determine) after the date of termination of employment, but not
later than the date of expiration of the Option, exercise the Option to the
extent the Optionee was entitled to do so on the date of termination of
employment. Any Options not exercisable as of the date of termination of
employment and any Options or portions of Options of terminated Optionees not
exercised as provided herein shall terminate.
10.2 Termination By Death of Optionee. The Committee may provide in any
--------------------------------
Option Agreement that, if an Optionee dies while in the employ of the Company or
within a period of three months (or such lesser period as the Committee may
determine) after termination of employment with the Company under circumstances
to which Section 10.1 applies, the personal representative of the Optionee's
estate or the designated beneficiary or other person or persons who shall have
acquired the Option from the Optionee by bequest or inheritance may exercise the
Option at any time within one year (or such lesser period as the Committee may
determine) after the date of death
8
<PAGE>
but not later than the expiration date of the Option, to the extent the Optionee
was entitled to do so on the date of death. Any Options not exercisable as of
the date of death and any Options or portions of Options of deceased Optionees
not exercised as provided herein shall terminate.
10.3 Termination By Disability of Optionee. The Committee may provide in
-------------------------------------
any Option Agreement that, upon termination of an Optionee's employment with the
Company by reason of the Optionee's disability (within the meaning of Section
22(e)(3) of the Code), the Optionee may exercise the Option at any time within
one year (or such lesser period as the Committee may determine) after the date
of termination of employment but not later than the expiration date of the
Option, to the extent the Optionee was entitled to do so on the date of
termination of employment. Any Options not exercisable as of the date of
termination of employment and any Options or portions of Options of disabled
Optionees not exercised as provided herein shall terminate.
10.4 Other Terminations. Upon termination of an Optionee's employment with
------------------
the Company under circumstances other than those set forth in Sections 10.1,
10.2 or 10.3, including without limitation a termination for Cause, Options
granted to the Optionee shall terminate immediately.
10.5 Definition of Termination of Employment. For purposes of any
---------------------------------------
Nonqualified Stock Option granted under this Plan, an Optionee's employment with
the Company shall be deemed to be terminated as of the first day on which the
Optionee is no longer employed by the Company or by another entity that is
eligible to participate in the Plan. For purposes of any Incentive Stock Option
granted under this Plan, an Optionee's employment with the Company shall be
deemed to be terminated as of the first day on which the Optionee is no longer
employed by the Company or any Subsidiary of the Company.
10.6 Employees of Eligible Entity that Becomes Ineligible. If an entity
----------------------------------------------------
whose employees are eligible to participate in the Plan becomes ineligible to
participate in the Plan because of a change in the Company's ownership of the
entity or because of a determination by the Committee under Section 6, all
Options held by employees of such entity shall become immediately exercisable in
full. The change in the status of the entity to one whose employees are not
eligible to participate in the Plan shall be deemed to be a termination of
employment with the Company with respect to the employees of that entity.
10.7 Exercise of Nonqualified Stock Option After Termination of Employment
---------------------------------------------------------------------
and Conversion of Nonqualified Stock Option. Notwithstanding any other provision
- -------------------------------------------
of the Plan, the Committee may, in its sole discretion, provide in an Option
Agreement or otherwise that: (1) upon termination of an Optionee's employment
with the Company, one or more Nonqualified Stock Options held by the Optionee
may be exercised at such time and subject to such conditions as the Committee,
in its sole discretion, may designate; or (2) one or more Nonqualified Stock
Options held by an Optionee may be
9
<PAGE>
converted by the Committee, in its sole discretion, into options to purchase
interests in a trust or other entity that holds Common Stock for the benefit of
specified individuals, on such terms and conditions as the Committee, in its
sole discretion, may designate.
SECTION 11: NON-TRANSFERABILITY OF OPTIONS
-------------------------------------------
Options granted pursuant to the Plan are not transferable by the Optionee
other than by will or the laws of descent and distribution and shall be
exercisable during the Optionee's lifetime only by the Optionee. Upon any
attempt to transfer, assign, pledge, hypothecate or otherwise dispose of an
Option contrary to the provisions hereof, or upon the levy of any attachment or
similar process upon an Option, the Option shall immediately become null and
void.
SECTION 12: ISSUANCE OF SHARES
-------------------------------
12.1 Transfer of Shares to Optionee. As soon as practicable after the
------------------------------
Treasurer of the Company has received an Optionee's written notice of exercise
of an Option and the other items specified in Section 8.1, the Company shall
issue or transfer to the Optionee the number of shares of Common Stock as to
which the Option has been exercised and shall deliver to the Optionee a
certificate or certificates therefor, registered in the Optionee's name. In the
alternative, the Company may provide for the recording of ownership of shares
without the issuance of certificates. In no event shall the Company be required
to transfer fractional shares to the Optionee, and in lieu thereof, the Company
may pay an amount in cash equal to the fair market value (as determined in
accordance with Section 7.4) of such fractional shares on the date of exercise.
If the issuance or transfer of shares by the Company would for any reason, in
the opinion of counsel for the Company, violate any applicable federal or state
laws or regulations, the Company may delay issuance or transfer of such shares
to the Optionee until compliance with such laws can reasonably be obtained. In
no event shall the Company be obligated to effect or obtain any listing,
registration, qualification, consent or approval under any applicable federal or
state laws or regulations or any contract or agreement to which the Company is a
party with respect to the issuance of any such shares.
12.2 Investment Representation. Upon demand by the Company, the Optionee
-------------------------
shall deliver to the Company a representation in writing that the purchase of
all shares with respect to which notice of exercise of the Option has been given
by the Optionee is being made for investment only and not for resale or with a
view to distribution, and containing such other representations and provisions
with respect thereto as the Company may require. Upon such demand, delivery of
such representation promptly and prior to the transfer or delivery of any such
shares and prior to the expiration of the option period shall be a condition
precedent to the right to purchase such shares.
10
<PAGE>
12.3 Restrictions on Common Stock Acquired Through Exercise of Options.
-----------------------------------------------------------------
All shares of Common Stock acquired through the exercise of Options granted
under this Plan shall be subject to all restrictions on shares of Common Stock
of the Company set forth in the Articles of Incorporation and Bylaws of the
Company, including: (1) restrictions that grant the Company the right to
repurchase shares upon termination of the shareholder's affiliation with the
Company; (2) restrictions that grant the Company a right of first refusal if the
shareholder wishes to sell shares other than in the limited market maintained by
the Company; (3) restrictions that require the approval of the Company for any
other sale of shares; and (4) restrictions that define the Formula Price to be
applied in purchases and sales of shares. In addition, if requested by the
Committee in its sole discretion, the Optionee shall execute and deliver to the
Company a Stock Restriction Agreement in such form as the Committee may provide
at the time of exercise of the Option. Such Stock Restriction Agreement may
include, without limitation, restrictions in addition to those restrictions set
forth in the Articles of Incorporation and Bylaws of the Company. Upon such
request, execution of the Stock Restriction Agreement by the Optionee prior to
the transfer or delivery of any shares and prior to the expiration of the option
period shall be a condition precedent to the right to purchase such shares,
unless such condition is expressly waived in writing by the Committee.
SECTION 13: AMENDMENTS
-----------------------
The Board of Directors may at any time and from time to time alter,
amend, suspend or terminate the Plan or any part thereof as it may deem proper,
except that no such action shall diminish or impair the rights under an Option
previously granted without the consent of the Optionee. Unless the shareholders
of the Company shall have given their approval, the total number of shares for
which Options may be issued under the Plan shall not be increased, except as
provided in Section 5.3, and no amendment shall be made which reduces the option
price at which the Common Stock may be offered through Incentive Stock Options
under the Plan below the minimum required by Section 7.3, except as provided in
Section 5.3, or which materially modifies the requirements as to eligibility for
receipt of Incentive Stock Options under the Plan. Subject to the terms and
conditions of the Plan, the Committee may modify, extend or renew outstanding
Options granted under the Plan, or accept the surrender of outstanding Options
to the extent not theretofore exercised and authorize the granting of new
Options in substitution therefor, except that no such action shall diminish or
impair the rights under an Option previously granted without the consent of the
Optionee.
SECTION 14: TERM OF PLAN
-------------------------
This Plan shall terminate on December 31, 2008; provided, however, that
the Board of Directors may at any time prior thereto suspend or terminate the
Plan.
11
<PAGE>
SECTION 15: RIGHTS AS STOCKHOLDER
----------------------------------
An Optionee shall have no rights as a stockholder of the Company with
respect to any shares of Common Stock covered by an Option until the date of the
issuance of the stock certificate for such shares.
SECTION 16: NO EMPLOYMENT RIGHTS
---------------------------------
Nothing contained in this Plan or in any Option granted under the Plan
shall confer upon any Optionee any right with respect to the continuation of
such Optionee's employment by the Optionee's employer or interfere in any way
with the right of the Optionee's employer, subject to the terms of any separate
employment agreement to the contrary, at any time to terminate such employment
or to increase or decrease the compensation of the Optionee from the rate in
existence at the time of the grant of the Option.
SECTION 17: EMPLOYEES BASED OUTSIDE OF THE UNITED STATES
---------------------------------------------------------
With respect to Options granted to employees of the Company and its
Subsidiaries who are based outside of the United States, the Committee shall
have complete discretion to determine which such employees are eligible to
receive Options, to define all terms and conditions of Options granted to such
employees (including the duration of such Options and the option price under
such Options), to modify and amend such Options as may be necessary or
appropriate to comply with the laws and regulations of foreign jurisdictions,
and to establish subplans and modified procedures with respect to the grant and
exercise of such Options. Notwithstanding the provisions of Sections 7.3 and
7.5, the Committee may in its discretion grant Options to employees of the
Company and its Subsidiaries who are based outside of the United States that
have an option price that is less than 90% of the fair market value (determined
as of the day the Option is granted) of the shares subject to the Options or
that have a term of more than ten years from the date on which the Options are
granted, or both.
SECTION 18: GOVERNING LAW
--------------------------
This Plan, and all Options granted under this Plan, shall be construed
and shall take effect in accordance with the laws of the State of Colorado,
without regard to the conflicts of laws rules of such State.
Adopted this 18th day of December, 1998.
12
<PAGE>
CH2M Hill Companies, Ltd.
By: /s/ Ralph R. Peterson
-----------------------------------------
Title: President and Chief Executive Officer
--------------------------------------
13
<PAGE>
Exhibit 10.4
FORM OF
CH2M HILL COMPANIES, LTD.
1999 PAYROLL DEDUCTION STOCK PURCHASE PLAN
1. Purpose
CH2M HILL Companies, Ltd. (the "Company") hereby establishes the CH2M HILL
Companies, Ltd. 1999 Payroll Deduction Stock Purchase Plan (the "Plan"). The
purpose of the Plan is to secure for the Company and its shareholders the
benefits inherent in the ownership of capital stock of the Company by employees
of the Company and its Affiliates. The Plan is intended to provide to eligible
employees of the Company and designated Affiliates an opportunity to purchase
shares of Common Stock through payroll deductions. The Plan encompasses two
components. One component ("423 Component") constitutes a plan designed to
comply with Section 423(b) of the Code, such that the shares purchased under
that component will qualify for the favorable tax treatment provided by Sections
423(a) and 421(a) of the Code. The second component ("non-423 Component")
constitutes a plan which provides for the purchase of shares which do not
qualify for the favorable tax treatment provided by Sections 423(a) and 421(a)
of the Code.
2. Definitions
(a) "Affiliate" means each entity in which the Company has a direct or
indirect ownership interest, whether such entity is a corporation, a
partnership, a joint venture, a limited liability company, or any other form of
entity.
(b) "Agent" means the Agent for the Plan and shall be either the Company
or its designee.
(c) "Board" means the Board of Directors of the Company.
(d) "Code" means the Internal Revenue Code of 1986, as amended.
(e) "Committee" means the Payroll Deduction Stock Purchase Plan Committee,
which is responsible for administering the Plan.
(f) "Company Percent" means the percent of the purchase price contributed
by the Company pursuant to the provisions of Section 11. The Company Percent
shall be from zero percent (0%) to fifteen percent (15%) and shall initially be
ten percent (10%) until changed by the Board.
(g) "Fair Market Value" as of any date means the Formula Price per share
of Common Stock in effect on that date, as determined by the Board in accordance
with the Company's Articles of Incorporation and Bylaws, as amended from time to
time.
(h) "Internal Market" means the limited secondary market maintained by the
Company for the purchase and sale of Common Stock of the Company.
<PAGE>
(i) "Participant Percent" means the difference between one hundred percent
(100%) and the Company Percent.
(j) "Subsidiary Corporation" means any corporation (other than the
Company) in an unbroken chain of corporations that begins with the Company and
in which each of the corporations other than the last corporation in the chain
owns at least fifty percent (50%) of the total voting power of all classes of
stock in one of the other corporations in the chain.
3. Stock Subject to the Plan
The capital stock which may be purchased under the Plan is the Common
Stock, par value one cent ($0.01) per share (the "Common Stock"), of the
Company. The Common Stock purchased by the Agent for stock purchase accounts
under the Plan shall be subject to the terms, conditions, and restrictions set
forth in the Articles of Incorporation and Bylaws of the Company, as amended
from time to time, including: (a) restrictions that grant the Company the right
to repurchase shares upon termination of the shareholder's affiliation with the
Company; (b) restrictions that grant the Company a right of first refusal if the
shareholder wishes to sell shares other than in the Internal Market; (c)
restrictions that require the approval of the Company for any other sale of
shares; and (d) RESTRICTIONS THAT DEFINE THE FORMULA PRICE TO BE APPLIED IN
PURCHASES AND SALES OF SHARES. THE NUMBER OF SHARES OF COMMON STOCK RESERVED
FOR ISSUANCE UNDER THE PLAN IS ONE MILLION (1,000,000) SHARES OF COMMON STOCK,
DETERMINED AFTER THE TEN-TO-ONE (10:1) STOCK SPLIT APPROVED BY THE BOARD ON A
CONDITIONAL BASIS ON NOVEMBER 6, 1998.
4. Administration
(a) The Plan shall be administered by the Committee. The Committee shall
have the number of members determined by the President of the Company, with a
minimum of two (2) members. The members of the Committee shall be appointed by
and shall serve at the discretion of the President of the Company. Vacancies
occurring in the membership of the Committee shall be filled by appointment by
the President of the Company.
(b) Subject to the provisions of the Plan, the Committee shall have the
authority, in its discretion and on behalf of the Company:
(i) to prescribe, amend, and rescind rules and regulations relating
to the Plan;
(ii) to prescribe forms for carrying out the provisions and purposes
of the Plan;
(iii) to interpret the Plan; and
(iv) to make all other determinations deemed necessary or advisable
for the administration of the Plan, including factual
determinations.
(c) In exercising its authority, the Committee shall have the broadest
possible discretion and the Committee's determinations under the Plan made in
good faith shall be binding and conclusive on participating employees and other
persons claiming entitlements under the Plan. In no event shall a Committee
determination with respect to a particular employee or provision of the Plan be
binding with respect to any other employee (even if similarly situated)
2
<PAGE>
nor with respect to any future determinations regarding the same or other
provisions of the Plan. No member of the Committee shall be liable for any
action taken or determination made in administering the Plan, if such action is
taken or such determination is made in good faith.
(d) A majority of the Committee shall constitute a quorum. The acts of a
majority of the members present at any meeting at which a quorum is
present, or acts approved in writing by all of the members, shall be the
acts of the Committee.
5. Eligibility
(a) The Committee shall from time to time designate the corporations whose
employees may participate in the 423 Component of the Plan, provided that only
the Company and its Subsidiary Corporations (including corporations that become
Subsidiary Corporations after the adoption and approval of the Plan) shall be
eligible to be designated by the Committee to participate in the 423 Component
of the Plan. Subject to the terms, provisions, and conditions of the Plan, each
employee of each designated corporation shall be eligible to participate in the
423 Component of the Plan, except for: (i) an employee who owns capital stock
having five percent (5%) or more of the total combined voting power or value of
all classes of capital stock of the Company or of any of its Subsidiary
Corporations; (ii) an employee whose customary employment is less than twenty
(20) hours per week; and (iii) an employee whose customary employment is for
less than five (5) months in any calendar year. The Committee may impose
additional eligibility requirements consistent with Section 423(b) of the Code.
The Committee's determination of the status of an individual as an employee
eligible to participate in the 423 Component of the Plan for a particular
purchase date or period shall be final, binding, and conclusive, regardless of
any subsequent reclassification or change in status.
(b) The Affiliates whose employees may participate in the non-423
Component of the Plan shall be designated from time to time by the Committee.
The Committee, in its sole discretion, shall have the power and authority to
modify the eligibility for, and terms and conditions of, participation in the
Plan by employees of such Affiliates and to establish subplans, modified Plan
procedures, and other terms and procedures to the extent such actions are deemed
necessary or desirable by the Committee. Participation in the non-423 Component
of the Plan by employees of designated Affiliates and the offer and purchase of
Common Stock by such employees shall not be considered part of, or pursuant to,
a plan qualified under Section 423 of the Code.
(c) An employee shall cease to be eligible to participate in the 423
Component of the Plan upon termination of employment with all corporations
participating in the 423 Component of the Plan, whether by death, total
disability, retirement, transfer to an entity that is not participating in the
423 Component of the Plan, or otherwise. A former employee of a participating
corporation shall again become eligible to participate in the 423 Component of
the Plan as of the date of such person's re-employment by a corporation
participating in the 423 Component of the Plan.
(d) An employee shall cease to be eligible to participate in the non-423
Component of the Plan upon termination of employment with all Affiliates
participating in the non-423 Component of the Plan, whether by death, total
disability, retirement, transfer to an entity that is
3
<PAGE>
not participating in the non-423 Component of the Plan, or otherwise. A former
employee of a participating Affiliate shall again become eligible to participate
in the non-423 Component of the Plan as of the date of such person's re-
employment by an Affiliate participating in the non-423 Component of the Plan.
(e) No employee shall be entitled to purchase shares of Common Stock with
a Fair Market Value (measured as of the purchase date) of more than twenty-five
thousand dollars ($25,000) in any calendar year under the Plan and any other
"employee stock purchase plan" of the Company or any of its Affiliates, or at
any other rate of purchase that exceeds the rate allowed for plans qualifying
under Section 423(b) of the Code.
6. Participation in the Plan
(a) An eligible employee may enter the Plan as of the first day of any
calendar quarter prior to termination of the Plan. An eligible employee enters
the Plan by completing a payroll deduction authorization form and delivering
such form in the manner prescribed by the Committee. Alternatively, the
Committee may prescribe or permit electronic enrollment procedures. The
employee's payroll deduction authorization shall authorize regular payroll
deductions from the employee's compensation.
(b) The participating employee's payroll deduction authorization form
shall also designate the Company or the Company's designee to be the Agent for
the employee with respect to all stock certificates for shares purchased under
the Plan. All stock certificates representing shares purchased for participating
employees shall be delivered to and held by the Agent. Prior to any record date
established by the Company for any vote of its shareholders, the Agent shall
distribute to each participant a stock certificate representing all shares
purchased under the Plan and not yet distributed to the participant.
Alternatively, the Committee may prescribe or authorize bookkeeping entry or
electronic recording of share ownership.
7. Payroll Deductions
(a) Payroll deductions for a participating employee shall be in an amount
specified by the employee in the participating employee's payroll deduction
authorization form, but not less than one percent (1%) nor more than ten percent
(10%) of the participating employee's compensation, expressed as a whole
percentage of such compensation. Compensation for purposes of the Plan shall be
defined by the Committee; provided, however, compensation shall include the
regular wages, salary or commissions paid to the employee. Payroll deductions
shall be credited to the stock purchase account maintained for the participating
employee.
(b) A participating employee may increase or decrease the amount of the
participating employee's payroll deduction (within the minimum and maximum
limits provided for in Section 7(a) above) as of the first day of any calendar
quarter. A participating employee increases or decreases the amount of the
participating employee's payroll deduction by delivering or providing a new
payroll deduction authorization form in the manner prescribed by the Committee.
4
<PAGE>
8. Stock Purchase Accounts
(a) Amounts credited to a participating employee's stock purchase account
may not be assigned, transferred, pledged, hypothecated, or otherwise disposed
of in any way by a participating employee other than by will or the laws of
descent and distribution, and any attempt to do so shall be null and void and
without effect.
(b) No interest will be paid on the amounts credited to a participating
employee's stock purchase account, unless required by applicable law.
9. Purchase Price of Shares
Unless otherwise determined by the Board, the purchase price of each share
of Common Stock purchased under the Plan shall be the Fair Market Value in
effect as of the date of purchase.
10. Purchase of Shares
(a) Shares will be purchased by the Agent in the Internal Market or shares
will be issued by the Company from the remaining balance of those shares
reserved for issuance under Section 3 of the Plan.
(b) Stock purchases shall be made on predetermined purchase dates
established by the Committee, which may coincide with the dates that trades are
conducted for the Internal Market. The first purchase date shall not be prior to
January 1, 2000, even if the Committee permits eligible employees to elect to
have amounts deducted from their compensation and contributed to their stock
purchase accounts in the Plan during the last calendar quarter of 1999. If on
any purchase date a participating employee has sufficient funds credited to the
participating employee's stock purchase account to pay the Participant Percent
of the purchase price of one or more whole shares of Common Stock, the Agent
shall then purchase such number of shares at the applicable price per share. The
employee's stock purchase account shall be charged with the Participant Percent
of the purchase price of such shares. Only whole shares may be purchased. Any
balance remaining in the participating employee's stock purchase account will
remain in such stock purchase account and will be treated as part of the
accumulations for the next purchase date.
(c) With respect to both newly issued shares of Common Stock which are
purchased for the account of participating employees under the Plan and shares
purchased on the Internal Market, a stock certificate will be issued in the name
of the Agent and held by the Agent in accordance with Section 6 of the Plan.
Notwithstanding that such stock certificates are held by the Agent for
participating employees, each participant shall have all the rights and
privileges of a shareholder with respect to the shares purchased for the
participating employee's account, subject to the provisions of Sections 6 and
10(d). Alternatively, the Committee may prescribe or authorize bookkeeping entry
or electronic recording of share ownership.
(d) Except as provided in this Section 10(d), shares purchased pursuant to
the Plan may not be sold, transferred, pledged as collateral, or in any way
encumbered for so long as the stock certificates are held by the Agent. A
participant may apply to the Committee for
5
<PAGE>
permission to sell shares that have been purchased by the participant pursuant
to the Plan but which have not yet been distributed to the participant. The
Committee, in its sole discretion, may grant or deny the application or may
grant the application in part and deny the remainder of the application. The
Committee's action on any such application shall be final and binding for all
purposes and shall not be subject to review. If the Committee grants an
application in whole or in part, the Agent will place an order to sell the
participant's shares with respect to which the application was granted at the
next date on which trades are conducted for the Internal Market. If the order to
sell shares is accepted in whole or in part, the Agent will sell the shares for
which the order was accepted and will distribute the net proceeds from such sale
to the participant. Any shares with respect to which the participant's
application is denied or with respect to which the Agent's order to sell shares
is not accepted will continue to be held by the Agent until such shares are
distributed to the participant in accordance with Section 6(b).
(e) Notwithstanding any other provision of the Plan, no shares of Common
Stock shall be purchased under this Plan for any person if, immediately after
such purchase, that person would own more shares of Common Stock of the Company
than such person is permitted to own under the Articles of Incorporation and
Bylaws of the Company, as amended from time to time. If, as of a purchase date,
a purchase of shares of Common Stock for a participating employee is prohibited
by this Section 10(e), then the amount in the participating employee's stock
purchase account that would have been used to purchase such shares will be
refunded to the participating employee as soon as practicable after the purchase
date, and the participating employee's stock purchase account will be charged
with the amount refunded to the participating employee.
11. Company Contributions
The Company shall contribute the Company Percent of the purchase price of
each share of Common Stock purchased under the Plan. On each purchase date, the
Company will, through the Agent and under the direction of the Committee, pay
the Company Percent of the purchase price of each share purchased by the Agent,
whether purchased in the Internal Market or as a newly issued share. No
contribution shall be made by the Company into an employee's stock purchase
account.
12. Termination of Participation and Re-Entry
(a) An employee may terminate participation in the Plan at any time by
completing a payroll deduction authorization form and delivering such form in
the manner prescribed by the Committee. Alternatively, the Committee may
prescribe or permit electronic procedures for such changes. Such employee's
participation in the Plan shall terminate as soon as practicable upon receipt of
the payroll deduction authorization form by the Company. An employee who
terminates participation in the Plan pursuant to this Section 12(a) shall not be
eligible to re-enter the Plan until the first business day of the following
calendar quarter.
(b) If a participating employee ceases to be eligible to participate in
the Plan as described in Section 5(c) or (d) or terminates participation in the
Plan, or if the Plan terminates or is terminated, any cash credited to the
employee's stock purchase account will be distributed to the participating
employee or, in the event of the death of the participating employee, to the
participating employee's estate. Any shares held by the Agent for an employee
whose affiliation
6
<PAGE>
with the Company has terminated will be released by the Agent to the employee.
Such shares will be subject to the Company's right to repurchase the shares, as
set forth in the Company's Articles of Incorporation and Bylaws, as amended from
time to time.
13. Government and Stock Exchange Regulations
The Company shall not be required to sell or deliver any shares of Common
Stock under the Plan unless and until the Company has fully complied with any
then applicable requirements of the Securities and Exchange Commission, state
securities commissions, or other regulatory agencies having jurisdiction, and of
any exchanges upon which Common Stock of the Company may be listed. The Company
shall not be obligated to obtain any required licenses or to register any Common
Stock to permit purchases of Common Stock under the Plan.
14. Application of Funds
All funds received by the Company as a result of the sale of newly issued
shares of Common Stock under the Plan may be used for any corporate purpose.
15. Recapitalization
In the event any change, such as a stock split, reverse stock split or
stock dividend, is made in the Company's capitalization which results in an
adjustment in the number of shares of capital stock outstanding without receipt
of consideration by the Company, appropriate adjustment, as determined by the
Committee in its discretion, may be made in the number of shares reserved for
issuance as provided in Section 3 of the Plan.
16. Withholding
The Company shall be entitled to make appropriate arrangements to comply
with any withholding requirements imposed by federal, state, or local law with
respect to the purchase or disposition of shares of Common Stock under the Plan,
including, without limitation, payroll withholding or withholding from proceeds
of a disposition of shares of Common Stock acquired under the Plan.
17. No Employment Obligation
An employee's employment with the Company or an Affiliate is not for any
specified term and may be terminated by such employee or by the Company or the
Affiliate at any time, for any reason, with or without cause, except as
otherwise provided by law or contract. Nothing in this Plan shall confer upon
any employee any right to continue in the employ of, or affiliation with, the
Company or an Affiliate, nor constitute any promise or commitment by the Company
or an Affiliate regarding future positions, future work assignments, future
compensation, or any other term or condition of employment or affiliation.
18. Amendment of the Plan
The Board may at any time suspend or terminate the Plan and may at any time
or from time to time amend the Plan in such respects as the Board may deem
advisable; provided,
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however, no such amendment of the Plan shall, without the approval of a majority
of the voting power of the capital stock of the Company present or represented
and entitled to vote at a duly constituted meeting of shareholders, increase the
number of shares reserved for purchase under the Plan, except as provided in
Section 15.
19. No Implied Rights or Obligations
The Company, in establishing and maintaining this Plan as a voluntary and
unilateral undertaking, expressly disavows the creation of any rights in
participating employees or others claiming entitlements under the Plan or any
obligations on the part of the Company, any Affiliate, the Agent, or the
Committee, except as expressly provided in this Plan.
20. Effective Date and Termination of the Plan
(a) The Plan is effective as of the date on which the Plan is adopted by
the Board. The Committee shall determine when eligible employees may begin
payroll deductions under the Plan.
(b) Unless the Plan is terminated earlier by the Board, the Plan shall
terminate on December 31, 2007. Termination shall be deemed to be effective as
of the close of business on the day of termination.
21. Governing Law
The Plan shall be construed in accordance with and governed by the laws of
the State of Colorado.
Adopted this _______ day of __________________, 199__.
CH2M HILL Companies, Ltd.
By:___________________________
Title:________________________
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Exhibit 10.5
FORM OF
CH2M HILL COMPANIES, LTD.
PRE-TAX DEFERRED COMPENSATION PLAN
1. Purposes
The purposes of the CH2M HILL Companies, Ltd. Pre-Tax Deferred Compensation
Plan are: (a) to provide a mechanism by which certain bonuses awarded to
employees of certain affiliates of CH2M HILL Companies, Ltd. may be deferred to
a specified date or until the earlier occurrence of one of several specified
events; and (b) to provide certain employees of certain affiliates of CH2M HILL
Companies, Ltd. with the opportunity to defer compensation on a voluntary basis
to a specified date or until the earlier occurrence of one of several specified
events.
2. Definitions
(a) "Affiliate" means each entity in which the Company has a direct or
indirect ownership interest, whether such entity is a corporation, a
partnership, a joint venture, a limited liability company, or any other form of
entity.
(b) "Beneficiary" means one or more individuals or entities designated by
a Participant to receive the Participant's benefits under the Plan in the event
of the Participant's death. A Participant's designation of a Beneficiary must be
in writing and must comply with rules and procedures established by the
Committee. If a Participant dies without a properly designated Beneficiary, the
Participant's estate will be deemed to be the Participant's Beneficiary.
(c) "Board" means the Board of Directors of the Company.
(d) "Committee" means the Deferred Compensation Plan Committee appointed
by the President of the Company in accordance with Section 3.
(e) "Common Stock" means the common stock, par value one cent ($0.01) per
share, of the Company.
(f) "Company" means CH2M HILL Companies, Ltd.
(g) "Formula Price" as of any date means the value per share of Common
Stock in effect on that date, as determined by the Board.
(h) "Internal Market" means the limited secondary market maintained by the
Company for the purchase and sale of Common Stock.
<PAGE>
(i) "Participant" means each employee of a participating Affiliate who has
been awarded a deferred bonus under Section 5 and each eligible employee of a
participating Affiliate who has elected to defer compensation under Section 6.
An individual will become a Participant when the individual is awarded a
deferred bonus under Section 5 or when the individual makes an election to defer
compensation under Section 6. An individual will cease to be a Participant when
the individual dies or, if earlier, when the individual receives a full
distribution of all benefits to which the individual is entitled under the Plan.
(j) "Plan" means the CH2M HILL Companies, Ltd. Pre-Tax Deferred
Compensation Plan.
(k) "Trade Date" means a date on which trading in Common Stock takes place
on the Internal Market.
(l) "Trust" means the Trust Under CH2M HILL Companies, Ltd. Pre-Tax
Deferred Compensation Plan established by the Company.
(m) "Trustee" means the Trustee of the Trust.
3. Administration
(a) The Plan will be administered by the Committee. The Committee will
have the number of members determined by the President of the Company, with a
minimum of two (2) members. The members of the Committee will be appointed by
and will serve at the discretion of the President of the Company. Vacancies
occurring in the membership of the Committee will be filled by appointment by
the President of the Company.
(b) Subject to the provisions of the Plan, the Committee will have the
authority, in its discretion and on behalf of the Company:
(i) to establish, amend, and rescind rules and procedures relating
to the Plan;
(ii) to prescribe forms for carrying out the provisions and purposes
of the Plan;
(iii) to interpret the Plan; and
(iv) to make all other determinations deemed necessary or advisable
for the administration of the Plan, including factual
determinations.
(c) In exercising its authority, the Committee will have the broadest
possible discretion. The Committee's determinations under the Plan made in good
faith will be binding and conclusive on the Company, its Affiliates, employees
of the Company and its Affiliates, Participants and
Beneficiaries, and
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any persons claiming benefits under the Plan. In no event will a Committee
determination with respect to a particular person or provision of the Plan be
binding with respect to any other person (even if similarly situated) nor with
respect to any future determinations regarding the same or other provisions of
the Plan. No member of the Committee will be liable for any action taken or
determination made in administering the Plan, if such action is taken or such
determination is made in good faith.
(d) A majority of the Committee will constitute a quorum. The acts of a
majority of the members of the Committee present at any meeting at which a
quorum is present, or acts approved in writing by all of the members of the
Committee, will be the acts of the Committee.
4. Affiliates Eligible to Participate in the Plan
The Committee will designate from time to time those Affiliates whose
employees are eligible to participate in the Plan. The Committee may provide
that a particular Affiliate will participate in the Plan only with respect to
bonuses awarded to employees of the Affiliate, or only with respect to voluntary
deferrals by eligible employees of the Affiliate, or with respect to both
bonuses awarded to employees of the Affiliate and voluntary deferrals by
eligible employees of the Affiliate. The Committee may change the eligibility
of an Affiliate to participate in the Plan from time to time. All
determinations of the Committee with respect to the eligibility of an Affiliate
to participate in the Plan will be final and binding for all purposes.
5. Participation with Respect to Bonuses
If the Committee designates an Affiliate as eligible to participate in the
Plan with respect to bonuses awarded to employees of the Affiliate, then the
Board may provide that all or a portion of any bonus awarded to one or more
employees of the Affiliate will be deferred in accordance with the terms of this
Plan. Any such deferred bonus may be awarded in the form of a specific dollar
amount or in the form of a specific number of shares of Common Stock, or in a
combination of a specific dollar amount and a specific number of shares of
Common Stock, as determined by the Board in its sole discretion. Any such
determination by the Board will be binding for all purposes.
6. Participation with Respect to Voluntary Deferrals
(a) If the Committee designates an Affiliate as eligible to participate in
the Plan with respect to voluntary deferrals by eligible employees of the
Affiliate, then the Committee will also designate (by name, by job
classification, or by other criteria selected by the Committee) those employees
of the Affiliate who may elect to defer compensation in accordance with the
terms of the Plan. The Committee's designations under this Section 6(a) of
Affiliates as eligible to
3
<PAGE>
participate in the Plan and of employees as eligible to elect to defer
compensation under the Plan will be final, binding, and conclusive for all
purposes and will not be subject to review.
(b) An eligible employee designated by the Committee may elect to defer
compensation to be earned during calendar year 2000 in accordance with the terms
of the Plan by: (i) executing a deferred compensation election in a form
specified by the Committee; and (ii) delivering the executed deferred
compensation election to the Committee prior to January 1, 2000. The deferred
compensation election will designate the amount or percentage of the
Participant's regular compensation to be earned during calendar year 2000 that
will be deferred in accordance with the terms of the Plan. The deferred
compensation election will specify a date (no later than January 2, 2008) on
which amounts deferred under the Plan will be distributed to the Participant if
no distribution event occurs prior to that date. A Participant's designation of
an amount or percentage of compensation as deferred compensation will be
irrevocable as of January 1, 2000.
(c) The Company will withhold from compensation earned by a Participant
during calendar year 2000 the amount designated by the Participant as deferred
compensation in accordance with Section 6(b).
7. Establishment of Bookkeeping Account
(a) The Company will establish a bookkeeping account in the name of each
Participant in the Plan.
(b) The bookkeeping account of a Participant will be credited with the
number of shares of Common Stock awarded to the Participant as a deferred bonus
in accordance with Section 5 and with the dollar amount awarded to the
Participant as a deferred bonus in accordance with Section 5. Any dollar amount
credited to the Participant's bookkeeping account will be converted to a whole
number of shares of Common Stock as of the next Trade Date, based on the Formula
Price of the Common Stock on that Trade Date.
(c) The bookkeeping account of a Participant will be credited with a
dollar amount equal to the amount of compensation withheld by the Company
pursuant to the Participant's election to defer compensation under Section 6.
The dollar amount credited to the Participant's bookkeeping account will be
converted to a whole number of shares of Common Stock as of the next Trade Date,
based on the Formula Price of the Common Stock on that Trade Date. The Board, in
its sole discretion, may provide that the conversion of the dollar amount
credited to Participants' bookkeeping accounts under this Section 7(c) as of a
particular Trade Date will be based on a discounted Formula Price of the Common
Stock on that Trade Date. The discount may be as much as fifteen percent (15%)
of the Formula Price, as determined by the Board in its sole discretion. This
discount
4
<PAGE>
provision will not apply to dollar amounts credited to Participants' bookkeeping
accounts under Section 7(b) (relating to deferred bonuses).
(d) Each Participant's bookkeeping account in the Plan will be debited for
all shares of Common Stock transferred to the Participant or to the
Participant's Beneficiary pursuant to Sections 9 and 10.
(e) Each Participant's bookkeeping account in the Plan will be adjusted by
the Committee, in its discretion, to reflect any change, such as a stock split,
reverse stock split, or stock dividend, made in the Company's capitalization
that results in an adjustment in the number of shares of capital stock
outstanding without receipt of consideration by the Company.
8. Establishment of Trust
The Company is establishing the Trust. The agreement establishing the
Trust is made a part of the Plan and is incorporated into the Plan by reference.
As soon as reasonably practicable after the Board awards a deferred bonus to a
Participant in accordance with Section 5, the Company will transfer to the Trust
an amount of cash or a number of shares of Common Stock or a combination of cash
and Common Stock, equal to the deferred bonus awarded to the Participant. As
soon as reasonably practicable after the Company withholds an amount from a
Participant's compensation pursuant to the Participant's election to defer
compensation under Section 6, the Company will transfer to the Trust an amount
of cash or a number of shares of Common Stock or a combination of cash and
Common Stock, equal to the amount withheld. The cash and the shares of Common
Stock transferred by the Company to the Trust will be allocated to the
recordkeeping account in the Trust maintained in the name of the Participant.
9. Distribution
(a) As soon as reasonably practicable after the occurrence of the
distribution event with respect to a Participant, the Company will transfer to
the Participant or, if applicable, to the Participant's Beneficiary the number
of shares of Common Stock credited to the Participant's bookkeeping account in
the Plan. The Company may satisfy its obligation to transfer shares of Common
Stock to the Participant or, if applicable, to the Participant's Beneficiary by
instructing the Trustee of the Trust to transfer to the Participant or, if
applicable, to the Participant's Beneficiary the number of shares of Common
Stock held in the recordkeeping account in the Trust in the name of the
Participant. The transfer to the Participant or, if applicable, to the
Participant's Beneficiary of the number of shares of Common Stock credited to
the Participant's bookkeeping account in the Plan (whether by the Company or by
the Trustee) will complete the Company's obligations to the Participant and the
Participant's Beneficiary under the Plan.
(b) The distribution event with respect to a Participant is the first of
the following to occur:
5
<PAGE>
(i) the date specified by the Participant in the Participant's
deferred compensation election (at which time distribution will
be made to the Participant);
(ii) January 2, 2008 (at which time distribution will be made to the
Participant);
(iii) the termination of the Participant's affiliation with the
Company, as determined by the Committee in its discretion (in
which case distribution will be made to the Participant);
(iv) the transfer of the Participant to a position of employment with
the Company or with an Affiliate that the Committee, in its
discretion, determines to be a position that warrants a
distribution under the Plan (in which case distribution will be
made to the Participant);
(v) the death of the Participant (in which case distribution will be
made to the Participant's Beneficiary); or
(vi) the termination of the Plan (in which case distribution will be
made to the Participant).
10. Application to Exercise Deferred Compensation
(a) A Participant may apply to the Committee to exercise the Participant's
deferred compensation with respect to part or all of the shares of Common Stock
credited to the Participant's bookkeeping account in the Plan. Such application
will be submitted in accordance with rules and procedures established by the
Committee. The Committee may approve the application, disapprove the
application, or approve a part of the application and disapprove the rest of the
application, in its sole discretion.
(b) If the Committee disapproves a Participant's application to exercise
the Participant's deferred compensation with respect to shares of Common Stock
credited to the Participant's bookkeeping account in the Plan, the Participant
will not be eligible to apply to the Committee to exercise the Participant's
deferred compensation until the first day of the next succeeding calendar
quarter.
(c) If the Committee approves a Participant's application to exercise the
Participant's deferred compensation, the Committee will, on behalf of the
Participant, place an order to sell the shares of Common Stock with respect to
which the application was approved in the Internal Market at the next Trade
Date.
(i) If the order to sell shares is accepted, in whole or in part,
then prior to the Trade Date the Company will transfer to the
Participant the number of shares of Common Stock for which
6
<PAGE>
the order was accepted, and those shares of Common Stock will be
sold in the Limited Market at the Trade Date in accordance with
the accepted order. The Company may satisfy its obligation to
transfer shares of Common Stock to the Participant by
instructing the Trustee of the Trust to transfer to the
Participant the appropriate number of shares of Common Stock
from the shares of Common Stock held in the recordkeeping
account in the Trust in the name of the Participant.
(ii) If the order to sell shares is not accepted in full, then the
Participant's application to exercise the Participant's deferred
compensation will be treated as though the Committee disapproved
the application with respect to the number of shares for which
the order to sell shares is not accepted. The Participant will
not be eligible to apply to the Committee to exercise the
Participant's deferred compensation until the first day of the
next succeeding calendar quarter.
11. Restrictions on Transfers of Common Stock
(a) All shares of Common Stock transferred to a Participant or, if
applicable, to a Participant's Beneficiary in accordance with the Plan will be
subject to the terms, conditions, and restrictions on Common Stock set forth in
the Company's Articles of Incorporation and Bylaws, as amended from time to
time, including: (i) restrictions that grant the Company the right to repurchase
shares upon termination of the shareholder's affiliation with the Company; (ii)
restrictions that grant the Company a right of first refusal if the shareholder
wishes to sell shares other than in the Internal Market; (iii) restrictions that
require the approval of the Company for any other sale of shares; and (iv)
restrictions that define the Formula Price to be applied in purchases and sales
of shares. In addition, the Committee, in its sole discretion, may condition any
distribution or transfer of Common Stock under the Plan on an agreement by the
recipient of such distribution or transfer to sell the shares in the Internal
Market at the next Trade Date.
(b) Notwithstanding any other provision of the Plan, the Company will not
be required to transfer Common Stock to any person if, immediately after the
transfer, the recipient would own more shares of Common Stock than that person
is permitted to own under the Articles of Incorporation and Bylaws of the
Company, as amended from time to time. The Company will not be required to
transfer Common Stock to any person unless and until the Company has fully
complied with any then applicable requirements of the Securities and Exchange
Commission, state securities commissions, or other regulatory agencies having
jurisdiction, and of any exchanges upon which the Common Stock may be listed.
7
<PAGE>
The Company will not be obligated to obtain any required licenses or to register
any Common Stock to permit transfers of Common Stock under the Plan.
12. Amendment and Termination
(a) The Plan may be amended at any time by the Company, in its sole
discretion. Any amendment to the Plan will be made by the adoption of a
resolution by the Board, approving a written amendment. An amendment to the Plan
will not apply to amounts credited to a Participant's bookkeeping account in the
Plan on the date the amendment is made unless the Participant accepts the
amendment in writing.
(b) The Company may terminate the Plan at any time, in its sole
discretion. Any termination of the Plan will be made by the adoption of a
resolution by the Board, approving a written termination of the Plan and
specifying the effective date of the termination. As soon as reasonably
practicable after termination of the Plan, the Company will transfer to each
Participant the number of shares of Common Stock credited to the Participant's
bookkeeping account in the Plan. The Company may satisfy its obligation to
transfer shares of Common Stock to a Participant by instructing the Trustee of
the Trust to transfer to the Participant the number of shares of Common Stock
held in the recordkeeping account in the Trust in the name of the Participant.
13. Withholding
The Company will be entitled to make appropriate arrangements to comply
with any withholding requirements imposed by federal, state, or local law with
respect to amounts deferred under the Plan and with respect to transfers of
shares of Common Stock under the Plan, including, without limitation, payroll
withholding or withholding from proceeds of a disposition of shares of Common
Stock acquired under the Plan.
14. No Employment Obligation
An employee's employment with the Company or an Affiliate is not for any
specified term and may be terminated by such employee or by the Company or the
Affiliate at any time, for any reason, with or without cause, except as
otherwise provided by law or contract. Nothing in the Plan confers upon any
employee any right to continue in the employ of, or affiliation with, the
Company or an Affiliate, nor constitute any promise or commitment by the Company
or an Affiliate regarding future positions, future work assignments, future
compensation, or any other term or condition of employment or affiliation.
15. No Implied Rights or Obligations
8
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The Company, in establishing and maintaining the Plan as a voluntary and
unilateral undertaking, expressly disavows the creation of any rights in
participating employees or others claiming entitlements under the Plan or any
obligations on the part of the Company, any Affiliate, or the Committee, except
as expressly provided in the Plan.
16. Effective Date
The Plan is effective on the date that it is approved by the Board.
17. Miscellaneous
(a) Except as expressly provided in Section 8 of the Plan (requiring the
Company to transfer certain amounts to the Trust), the Company is not required
to fund or secure payment of the Company's obligation under this Plan. The
Company's obligation under this Plan is specifically limited to an unfunded,
unsecured promise to transfer shares of Common Stock in the future. The rights
acquired by a Participant under this Plan are those of a general unsecured
creditor of the Company and its Affiliates.
(b) No Participant or Beneficiary will have any right to sell, transfer,
alienate, assign, pledge, or encumber any benefits under the Plan. Benefits
under the Plan are not subject to attachment, garnishment, or any other charge,
whether voluntary or involuntary.
(c) The Plan will be construed in accordance with the laws of the State of
Colorado, without regard to the choice of law provisions of that state.
CH2M HILL COMPANIES, LTD
By:________________________________
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Exhibit 10.6
FORM OF
TRUST UNDER CH2M HILL COMPANIES, LTD.
PRE-TAX DEFERRED COMPENSATION PLAN
(a) This Agreement made this _____ day of __________, 1999, by and between
CH2M HILL Companies, Ltd. ("Company") and ________________________ ("Trustee");
(b) WHEREAS, Company has adopted the CH2M HILL Companies, Ltd. Pre-Tax
Deferred Compensation Plan (the "Plan");
(c) WHEREAS, Company has incurred or expects to incur liability under the
terms of such Plan with respect to the individuals participating in such Plan;
(d) WHEREAS, Company wishes to establish a trust (hereinafter called
"Trust") and to contribute to the Trust assets that shall be held therein,
subject to the claims of Company's creditors in the event of Company's
Insolvency, as herein defined, until paid to Plan participants and their
beneficiaries in such manner and at such times as specified in the Plan;
(e) WHEREAS, it is the intention of the parties that this Trust shall
constitute an unfunded arrangement and shall not affect the status of the
Plan as an unfunded plan; and
(f) WHEREAS, it is the intention of Company to make contributions to the
Trust to provide itself with a source of funds to assist it in the meeting of
its liabilities under the Plan;
NOW, THEREFORE, the parties do hereby establish the Trust and agree that
the Trust shall be comprised, held and disposed of as follows:
SECTION 1
ESTABLISHMENT OF TRUST
----------------------
(a) Company hereby deposits with Trustee in trust $1 in cash, which shall
become the principal of the Trust to be held, administered and disposed of
by Trustee as provided in this Agreement.
(b) The Trust hereby established shall be revocable by Company.
(c) The Trust is intended to be a grantor trust, of which Company is the
grantor, within the meaning of subpart E, part I, subchapter J, chapter 1,
subtitle A of the Internal Revenue Code of 1986, as amended, and shall be
construed accordingly.
(d) The principal of the Trust, and earnings (if any) thereon, shall be
held separate and apart from other funds of Company and shall be used
exclusively for the
<PAGE>
uses and purposes of Plan participants and general creditors as herein set
forth. Plan participants and their beneficiaries shall have no preferred claim
on, or any beneficial ownership interest in, any assets of the Trust. Any rights
created under the Plan and this Agreement shall be mere unsecured contractual
rights of Plan participants and their beneficiaries against Company. Any assets
held by the Trust will be subject to the claims of Company's general creditors
under federal and state law in the event of Insolvency, as defined in Section
3(a) herein.
(e) Company may at any time, or from time to time, make additional
deposits of cash or shares of common stock of Company ("Common Stock") in trust
with Trustee to augment the principal to be held, administered and disposed of
by Trustee as provided in this Agreement. Trustee shall not have any right to
compel such additional deposits.
(f) When Company deposits cash or Common Stock with Trustee, Company shall
inform Trustee in writing of the Plan participant with respect to whom such
deposit is made. Trustee shall establish and maintain a separate
recordkeeping account in the name of each Plan participant and shall credit
that recordkeeping account with a number of units (referred to as "Share
Value Equivalent Units," or "SVEUs") equal to the number of shares of
Common Stock deposited by Company with Trustee with respect to that Plan
participant. Trustee shall also credit the recordkeeping account
maintained in the name of each Plan participant with the amount of cash
deposited by Company with Trustee with respect to that Plan participant.
Trustee shall also credit the recordkeeping account maintained in the name
of each Plan participant with an amount equal to earnings (if any) of the
Trust on any assets credited to the recordkeeping account maintained in the
name of that Plan participant, other than cash dividends paid with respect
to the Common Stock (which shall be paid over to Company in accordance with
Section 5). When Trustee uses cash credited to a recordkeeping account
maintained in the name of a Plan participant to purchase shares of Common
Stock, the recordkeeping account maintained in the name of that Plan
participant shall be reduced to reflect the amount of cash used to purchase
the shares of Common Stock and the recordkeeping account maintained in the
name of that Plan participant shall be credited with a number of SVEUs
equal to the number of shares of Common Stock so purchased.
SECTION 2
PAYMENTS TO PLAN PARTICIPANTS AND THEIR BENEFICIARIES
-----------------------------------------------------
(a) Company shall deliver to Trustee a schedule (the "Payment Schedule")
that indicates the amount payable in respect of each Plan participant (and his
or her beneficiaries), that provides a formula or other instructions acceptable
to Trustee for determining the amounts so payable, the form in which such amount
is to be paid (as provided for or available under the Plan), and the time of
commencement for payment of such amounts. The Payment Schedule may be modified
from time to time by Company. Except as otherwise provided herein, Trustee shall
make payments to the Plan participants and their beneficiaries in accordance
with such Payment Schedule. Trustee shall make provision for the reporting and
withholding of any federal, state or local taxes that may be required to be
withheld with respect to the payment of benefits pursuant to the terms of the
Plan and shall pay amounts withheld to the appropriate
2
<PAGE>
taxing authorities or determine that such amounts have been reported, withheld
and paid by Company.
(b) The entitlement of a Plan participant or his or her beneficiaries to
benefits under the Plan shall be determined by Company or such party as it
shall designate under the Plan, and any claim for such benefits shall be
considered and reviewed under the procedures set out in the Plan.
(c) Company may make payment of benefits directly to Plan participants or
their beneficiaries as they become due under the terms of the Plan. Company
shall notify Trustee of its decision to make payment of benefits directly prior
to the time amounts are payable to participants or their beneficiaries. In
addition, if the principal of the Trust, and earnings (if any) thereon, are not
sufficient to make payment of benefits in accordance with the terms of the Plan,
Company shall make the balance of each such payment as it falls due. Trustee
shall notify Company when assets of the Trust are not sufficient.
SECTION 3
TRUSTEE RESPONSIBILITY REGARDING PAYMENTS TO TRUST BENEFICIARIES
-----------------------------------------------------------------
WHEN COMPANY IS INSOLVENT
-------------------------
(a) Trustee shall cease payment of benefits to Plan participants and their
beneficiaries if the Company is Insolvent. Company shall be considered
"Insolvent" for purposes of this Agreement if (1) Company is unable to pay
its debts as they become due, or (2) Company is subject to a pending
proceeding as a debtor under the United States Bankruptcy Code.
(b) At all times during the continuance of this Trust, as provided in
Section 1(d) hereof, the principal and income of the Trust shall be subject to
claims of general creditors of Company under federal and state law as set forth
below.
(1) The Board of Directors and the Chief Executive Officer of Company
shall have the duty to inform Trustee in writing of Company's Insolvency.
If a person claiming to be a creditor of Company alleges in writing to
Trustee that Company has become Insolvent, Trustee shall determine whether
Company is Insolvent and, pending such determination, Trustee shall
discontinue payment of benefits to Plan participants or their
beneficiaries.
(2) Unless Trustee has actual knowledge of Company's Insolvency, or
has received notice from Company or a person claiming to be a creditor
alleging that Company is Insolvent, Trustee shall have no duty to inquire
whether Company is Insolvent. Trustee may in all events rely on such
evidence concerning Company's solvency as may be furnished to Trustee and
that provides Trustee with a reasonable basis for making a determination
concerning Company's solvency.
(3) If at any time Trustee has determined that Company is Insolvent,
Trustee shall discontinue payments to Plan participants or their
beneficiaries and
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<PAGE>
shall hold the assets of the Trust for the benefit of Company's general
creditors. Nothing in this Agreement shall in any way diminish any rights
of Plan participants or their beneficiaries to pursue their rights as
general creditors of Company with respect to benefits due under the Plan or
otherwise.
(4) Trustee shall resume the payment of benefits to Plan participants
or their beneficiaries in accordance with Section 2 of this Agreement only
after Trustee has determined that Company is not Insolvent (or is no longer
Insolvent).
(c) Provided that there are sufficient assets, if Trustee discontinues the
payment of benefits from the Trust pursuant to Section 3(b) hereof and
subsequently resumes such payments, the first payment following such
discontinuance shall include the aggregate amount of all payments due to
Plan participants or their beneficiaries under the terms of the Plan for
the period of such discontinuance, less the aggregate amount of any
payments made to Plan participants or their beneficiaries by Company in
lieu of the payments provided for hereunder during any such period of
discontinuance.
SECTION 4
INVESTMENT AUTHORITY
--------------------
(a) Trustee shall, to the maximum extent practicable, invest all assets of
the Trust in Common Stock. Trustee shall retain Common Stock deposited by
Company with Trustee. Trustee shall use cash deposited by Company with Trustee
or earned by the Trust to purchase Common Stock as soon as reasonably
practicable after such cash is received by Trustee. Common Stock shall be
purchased in the internal market maintained by Company or directly from Company.
(b) All rights associated with assets of the Trust shall be exercised by
Trustee or the person designated by Trustee, and shall in no event be
exercisable by or rest with Plan participants, except that voting rights
and dividend rights with respect to Trust assets will be exercised by
Company.
SECTION 5
DISPOSITION OF INCOME
---------------------
During the term of this Trust, all income (if any) received by the Trust,
net of expenses and taxes, shall be accumulated and reinvested to the maximum
extent practicable in Common Stock, except that cash dividends (if any) paid to
the Trust with respect to Common Stock shall be paid to Company immediately upon
receipt by Trustee.
SECTION 6
ACCOUNTING BY TRUSTEE
---------------------
Trustee shall keep accurate and detailed records of all investments,
receipts, disbursements, and all other transactions required to be made,
including such specific records as shall be agreed upon in writing between
Company and Trustee. Within forty-five (45) days following the close of each
calendar year and within forty-five (45) days
4
<PAGE>
after the removal or resignation of Trustee, Trustee shall deliver to Company a
written account of its administration of the Trust during such year or during
the period from the close of the last preceding year to the date of such removal
or resignation, setting forth all investments, receipts, disbursements and other
transactions effected by it, including a description of all securities and
investments purchased and sold with the cost or net proceeds of such purchases
or sales (accrued interest paid or receivable being shown separately), and
showing all cash, securities and other property held in the Trust at the end of
such year or as of the date of such removal or resignation, as the case may be.
SECTION 7
RESPONSIBILITY OF TRUSTEE
-------------------------
(a) Trustee may consult with legal counsel (who may also be counsel for
Company generally) with respect to any of its duties or obligations hereunder.
(b) Trustee shall have, without exclusion, all powers conferred on
Trustees by applicable law, unless expressly provided otherwise herein.
(c) Notwithstanding any powers granted to Trustee pursuant to this
Agreement or to applicable law, Trustee shall not have any power that could give
this Trust the objective of carrying on a business and dividing the gains
therefrom, within the meaning of Section 301.7701-2 of the Procedure and
Administrative Regulations promulgated pursuant to the Internal Revenue Code.
SECTION 8
COMPENSATION AND EXPENSES OF TRUSTEE
------------------------------------
Company shall pay all administrative and Trustee's fees and expenses. If
not so paid, the fees and expenses shall be paid from the Trust.
SECTION 9
RESIGNATION AND REMOVAL OF TRUSTEE
----------------------------------
(a) Trustee may resign at any time by written notice to Company, which
shall be effective thirty (30) days after receipt of such notice unless Company
and Trustee agree otherwise.
(b) Trustee may be removed by Company on thirty (30) days notice or upon
shorter notice accepted by Trustee.
(c) Upon resignation or removal of Trustee and appointment of a successor
Trustee, all assets shall subsequently be transferred to the successor Trustee.
The transfer shall be completed within thirty (30) days after receipt of notice
of resignation, removal or transfer, unless Company extends the time limit.
(d) If Trustee resigns or is removed, a successor shall be appointed, in
accordance with Section 10 hereof, by the effective date of resignation or
removal under paragraphs (a) or (b) of this section. If no such
appointment has been made, Trustee may apply to a court of competent
jurisdiction for appointment of a successor or for
5
<PAGE>
instructions. All expenses of Trustee in connection with the proceeding shall be
allowed as administrative expenses of the Trust.
SECTION 10
APPOINTMENT OF SUCCESSOR
------------------------
(a) If Trustee resigns or is removed in accordance with Section 9(a) or
(b) hereof, Company may appoint any third party, such as a bank trust department
or other party that may be granted corporate trustee powers under state law, as
a successor to replace Trustee upon resignation or removal. The appointment
shall be effective when accepted in writing by the new Trustee, who shall have
all of the rights and powers of the former Trustee, including ownership rights
in the Trust assets. The former Trustee shall execute any instrument necessary
or reasonably requested by Company or the successor Trustee to evidence the
transfer.
(b) The successor Trustee need not examine the records and acts of any
prior Trustee and may retain or dispose of existing Trust assets, subject to
Section 4 hereof. The successor Trustee shall not be responsible for and Company
shall indemnify and defend the successor Trustee from any claim or liability
resulting from any action or inaction of any prior Trustee or from any other
past event, or any condition existing at the time it becomes successor Trustee.
SECTION 11
AMENDMENT OR TERMINATION
------------------------
(a) This Agreement may be amended by a written instrument executed by
Trustee and Company.
(b) The Trust shall not terminate until the date on which Plan
participants and their beneficiaries are no longer entitled to benefits pursuant
to the terms of the Plan, unless sooner revoked in accordance with Section 1(b)
hereof. Upon termination of the Trust any assets remaining in the Trust shall be
returned to Company.
SECTION 12
MISCELLANEOUS
-------------
(a) Any provisions of this Agreement prohibited by law shall be
ineffective to the extent of any such prohibition, without invalidating the
remaining provisions hereof.
(b) Benefits payable to Plan participants and their beneficiaries under
this Agreement may not be anticipated, assigned (either at law or in equity),
alienated, pledged, encumbered or subjected to attachment, garnishment, levy,
execution or other legal or equitable process.
(c) This Trust Agreement shall be governed by and construed in accordance
with the laws of the State of Colorado.
SECTION 13
EFFECTIVE DATE
--------------
6
<PAGE>
The effective date of this Trust Agreement shall be January 1, 2000.
CH2M HILL COMPANIES, LTD.
By:__________________________________
TRUSTEE
By:__________________________________
DTC:0054613.04
7
<PAGE>
Exhibit 10.7
FORM OF
CH2M HILL COMPANIES, LTD.
AFTER-TAX DEFERRED COMPENSATION PLAN
1. Purpose
The purpose of the CH2M HILL Companies, Ltd. After-Tax Deferred
Compensation Plan is to provide a mechanism by which certain employees of
certain affiliates of CH2M HILL Companies, Ltd. may transfer cash or shares of
Common Stock to CH2M HILL Companies, Ltd. in exchange for benefits under the
Plan.
2. Definitions
(a) "Affiliate" means each entity in which the Company has a direct or
indirect ownership interest, whether such entity is a corporation, a
partnership, a joint venture, a limited liability company, or any other form of
entity.
(b) "Beneficiary" means one or more individuals or entities designated by a
Participant to receive the Participant's benefits under the Plan in the event of
the Participant's death. A Participant's designation of a Beneficiary must be in
writing and must comply with rules and procedures established by the Committee.
If a Participant dies without a properly designated Beneficiary, the
Participant's estate will be deemed to be the Participant's Beneficiary.
(c) "Board" means the Board of Directors of the Company.
(d) "Committee" means the Deferred Compensation Plan Committee appointed by
the President of the Company in accordance with Section 3.
(e) "Common Stock" means the common stock, par value one cent ($0.01) per
share, of the Company.
(f) "Company" means CH2M HILL Companies, Ltd.
(g) "Formula Price" as of any date means the value per share of Common
Stock in effect on that date, as determined by the Board.
(h) "Internal Market" means the limited secondary market maintained by the
Company for the purchase and sale of Common Stock.
(i) "Participant" means each employee of an Affiliate who has been
designated by the Committee as eligible to participate in the Plan and who has
elected to participate in the Plan by transferring cash or shares of Common
Stock
<PAGE>
to the Company. An individual will become a Participant when the individual
makes an election to participate in the Plan under Section 5. An individual will
cease to be a Participant when the individual dies or, if earlier, when the
individual receives a full distribution of all benefits to which the individual
is entitled under the Plan.
(j) "Plan" means the CH2M HILL Companies, Ltd. After-Tax Deferred
Compensation Plan.
(k) "Trade Date" means a date on which trading in Common Stock takes place
on the Internal Market.
(l) "Trust" means the Trust Under CH2M HILL Companies, Ltd. After-Tax
Deferred Compensation Plan established by the Company.
(m) "Trustee" means the Trustee of the Trust.
3. Administration
(a) The Plan will be administered by the Committee. The Committee will have
the number of members determined by the President of the Company, with a minimum
of two (2) members. The members of the Committee will be appointed by and will
serve at the discretion of the President of the Company. Vacancies occurring in
the membership of the Committee will be filled by appointment by the President
of the Company.
(b) Subject to the provisions of the Plan, the Committee will have the
authority, in its discretion and on behalf of the Company:
(i) to establish, amend, and rescind rules and procedures relating to
the Plan;
(ii) to prescribe forms for carrying out the provisions and purposes of
the Plan;
(iii)to interpret the Plan; and
(iv) to make all other determinations deemed necessary or advisable for
the administration of the Plan, including factual determinations.
(c) In exercising its authority, the Committee will have the broadest
possible discretion. The Committee's determinations under the Plan made in good
faith will be binding and conclusive on the Company, its Affiliates, employees
of Affiliates, Participants, Beneficiaries, and any persons claiming benefits
under the Plan. In no event will a Committee determination with respect to a
particular person or provision of the Plan be binding with respect to any other
person (even if similarly situated) nor with respect to any future
2
<PAGE>
determinations regarding the same or other provisions of the Plan. No member of
the Committee will be liable for any action taken or determination made in
administering the Plan, if such action is taken or such determination is made in
good faith.
(d) A majority of the Committee will constitute a quorum. The acts of a
majority of the members of the Committee present at any meeting at which a
quorum is present, or acts approved in writing by all of the members of the
Committee, will be the acts of the Committee.
4. Employees Eligible to Participate in the Plan
The Committee will designate from time to time those employees of
Affiliates who are eligible to participate in the Plan. All determinations of
the Committee with respect to the eligibility of employees of Affiliates to
participate in the Plan will be final and binding for all purposes.
5. Participation by an Eligible Employee
An eligible employee designated by the Committee may elect to participate
in the Plan at any time during calendar year 2000 by: (i) executing an election
to participate in the Plan in a form specified by the Committee; (ii) delivering
the executed participation election to the Committee; and (iii) transferring to
the Company, in the manner specified by the Committee, the number of shares of
Common Stock or the amount of cash with respect to which the eligible employee
is participating in the Plan. The participation election will designate the
number of shares of Common Stock or the amount of cash with respect to which the
eligible employee is participating in the Plan. The participation election will
specify a date (no later than January 2, 2008) on which benefits accrued under
the Plan will be distributed to the Participant if no distribution event occurs
prior to that date. A Participant's election to participate in the Plan is
irrevocable.
6. Establishment of Bookkeeping Account
(a) The Company will establish a bookkeeping account in the name of each
Participant in the Plan.
(b) The bookkeeping account of a Participant will be credited with the
number of shares of Common Stock or the dollar amount of cash designated in the
Participant's election to participate in the Plan. Any dollar amount credited to
the Participant's bookkeeping account will be converted to a whole number of
shares of Common Stock as of the next Trade Date, based on the Formula Price of
the Common Stock on that Trade Date.
3
<PAGE>
(c) Each Participant's bookkeeping account in the Plan will be debited for
all shares of Common Stock transferred to the Participant or to the
Participant's Beneficiary pursuant to Sections 8 and 9.
(d) Each Participant's bookkeeping account in the Plan will be adjusted by
the Committee, in its discretion, to reflect any change, such as a stock split,
reverse stock split, or stock dividend, made in the Company's capitalization
that results in an adjustment in the number of shares of capital stock
outstanding without receipt of consideration by the Company.
7. Establishment of Trust
The Company is establishing the Trust. The agreement establishing the
Trust is made a part of the Plan and is incorporated into the Plan by reference.
As soon as reasonably practicable after a Participant makes an election to
participate in the Plan with respect to a number of shares of Common Stock, the
Company will transfer to the Trust a number of shares of Common Stock equal to
the number of shares of Common Stock with respect to which the Participant
elected to participate in the Plan. As soon as reasonably practicable after a
Participant makes an election to participate in the Plan with respect to a
dollar amount of cash, the Company will transfer to the Trust an amount of cash
or a number of shares of Common Stock or a combination of cash and Common Stock,
equal to the dollar amount with respect to which the Participant elected to
participate in the Plan. The cash and the shares of Common Stock transferred by
the Company to the Trust will be allocated to the recordkeeping account in the
Trust maintained in the name of the Participant.
8. Distribution
(a) As soon as reasonably practicable after the occurrence of the
distribution event with respect to a Participant, the Company will transfer to
the Participant or, if applicable, to the Participant's Beneficiary the number
of shares of Common Stock credited to the Participant's bookkeeping account in
the Plan. The Company may satisfy its obligation to transfer shares of Common
Stock to the Participant or, if applicable, to the Participant's Beneficiary by
instructing the Trustee of the Trust to transfer to the Participant or, if
applicable, to the Participant's Beneficiary the number of shares of Common
Stock held in the recordkeeping account in the Trust in the name of the
Participant. The transfer to the Participant or, if applicable, to the
Participant's Beneficiary of the number of shares of Common Stock credited to
the Participant's bookkeeping account in the Plan (whether by the Company or by
the Trustee) will complete the Company's obligations to the Participant and the
Participant's Beneficiary under the Plan.
(b) The distribution event with respect to a Participant is the first of
the following to occur:
4
<PAGE>
(i) the date specified by the Participant in the Participant's
participation election (at which time distribution will be made to
the Participant);
(ii) January 2, 2008 (at which time distribution will be made to the
Participant);
(iii)the termination of the Participant's affiliation with the Company,
as determined by the Committee in its discretion (in which case
distribution will be made to the Participant);
(iv) the transfer of the Participant to a position of employment with
the Company or with an Affiliate that the Committee, in its
discretion, determines to be a position that warrants a
distribution under the Plan (in which case distribution will be
made to the Participant);
(v) the death of the Participant (in which case distribution will be
made to the Participant's Beneficiary); or
(vi) the termination of the Plan (in which case distribution will be
made to the Participant).
9. Application to Exercise Deferred Compensation
(a) A Participant may apply to the Committee to exercise the Participant's
deferred compensation with respect to part or all of the shares of Common Stock
credited to the Participant's bookkeeping account in the Plan. Such application
will be submitted in accordance with rules and procedures established by the
Committee. The Committee may approve the application, disapprove the
application, or approve a part of the application and disapprove the rest of the
application, in its sole discretion.
(b) If the Committee disapproves a Participant's application to exercise
the Participant's deferred compensation with respect to shares of Common Stock
credited to the Participant's bookkeeping account in the Plan, the Participant
will not be eligible to apply to the Committee to exercise the Participant's
deferred compensation until the first day of the next succeeding calendar
quarter.
(c) If the Committee approves a Participant's application to exercise the
Participant's deferred compensation, the Committee will, on behalf of the
Participant, place an order to sell the shares of Common Stock with respect to
which the application was approved in the Internal Market at the next Trade
Date.
(i) If the order to sell shares is accepted, in whole or in part, then
prior to the Trade Date the Company will transfer to the
Participant the number of shares of Common Stock for which
5
<PAGE>
the order was accepted, and those shares of Common Stock will be
sold in the Limited Market at the Trade Date in accordance with
the accepted order. The Company may satisfy its obligation to
transfer shares of Common Stock to the Participant by instructing
the Trustee of the Trust to transfer to the Participant the
appropriate number of shares of Common Stock from the shares of
Common Stock held in the recordkeeping account in the Trust in the
name of the Participant.
(ii) If the order to sell shares is not accepted in full, then the
Participant's application to exercise the Participant's deferred
compensation will be treated as though the Committee disapproved
the application with respect to the number of shares for which the
order to sell shares is not accepted. The Participant will not be
eligible to apply to the Committee to exercise the Participant's
deferred compensation until the first day of the next succeeding
calendar quarter.
10. Restrictions on Transfers of Common Stock
(a) All shares of Common Stock transferred to a Participant or, if
applicable, to a Participant's Beneficiary in accordance with the Plan will be
subject to the terms, conditions, and restrictions on Common Stock set forth in
the Company's Articles of Incorporation and Bylaws, as amended from time to
time, including: (i) restrictions that grant the Company the right to repurchase
shares upon termination of the shareholder's affiliation with the Company; (ii)
restrictions that grant the Company a right of first refusal if the shareholder
wishes to sell shares other than in the Internal Market; (iii) restrictions that
require the approval of the Company for any other sale of shares; and (iv)
restrictions that define the Formula Price to be applied in purchases and sales
of shares. In addition, the Committee, in its sole discretion, may condition any
distribution or transfer of Common Stock under the Plan on an agreement by the
recipient of such distribution or transfer to sell the shares in the Internal
Market at the next Trade Date.
(b) Notwithstanding any other provision of the Plan, the Company will not
be required to transfer Common Stock to any person if, immediately after the
transfer, the recipient would own more shares of Common Stock than that person
is permitted to own under the Articles of Incorporation and Bylaws of the
Company, as amended from time to time. The Company will not be required to
transfer Common Stock to any person unless and until the Company has fully
complied with any then applicable requirements of the Securities and Exchange
Commission, state securities commissions, or other regulatory agencies having
jurisdiction, and of any exchanges upon which the Common Stock may be listed.
6
<PAGE>
The Company will not be obligated to obtain any required licenses or to register
any Common Stock to permit transfers of Common Stock under the Plan.
11. Amendment and Termination
(a) The Plan may be amended at any time by the Company, in its sole
discretion. Any amendment to the Plan will be made by the adoption of a
resolution by the Board, approving a written amendment. An amendment to the Plan
will not apply to amounts credited to a Participant's bookkeeping account in the
Plan on the date the amendment is made unless the Participant accepts the
amendment in writing.
(b) The Company may terminate the Plan at any time, in its sole
discretion. Any termination of the Plan will be made by the adoption of a
resolution by the Board, approving a written termination of the Plan and
specifying the effective date of the termination. As soon as reasonably
practicable after termination of the Plan, the Company will transfer to each
Participant the number of shares of Common Stock credited to the Participant's
bookkeeping account in the Plan. The Company may satisfy its obligation to
transfer shares of Common Stock to a Participant by instructing the Trustee of
the Trust to transfer to the Participant the number of shares of Common Stock
held in the recordkeeping account in the Trust in the name of the Participant.
12. Withholding
The Company will be entitled to make appropriate arrangements to comply
with any withholding requirements imposed by federal, state, or local law with
respect to transfers of shares of Common Stock under the Plan, including,
without limitation, payroll withholding or withholding from proceeds of a
disposition of shares of Common Stock acquired under the Plan.
13. No Employment Obligation
An employee's employment with an Affiliate is not for any specified term
and may be terminated by such employee or by the Affiliate at any time, for any
reason, with or without cause, except as otherwise provided by law or contract.
Nothing in the Plan confers upon any employee any right to continue in the
employ of, or affiliation with, the Affiliate, nor constitute any promise or
commitment by the Affiliate regarding future positions, future work assignments,
future compensation, or any other term or condition of employment or
affiliation.
14. No Implied Rights or Obligations
The Company, in establishing and maintaining the Plan as a voluntary and
unilateral undertaking, expressly disavows the creation of any rights in
participating employees or others claiming entitlements under the Plan or any
7
<PAGE>
obligations on the part of the Company, any Affiliate, or the Committee, except
as expressly provided in the Plan.
15. Effective Date
The Plan is effective on the date that it is approved by the Board.
16. Miscellaneous
(a) Except as expressly provided in Section 7 of the Plan (requiring the
Company to transfer certain amounts to the Trust), the Company is not required
to fund or secure payment of the Company's obligation under this Plan. The
Company's obligation under this Plan is specifically limited to an unfunded,
unsecured promise to transfer shares of Common Stock in the future. The rights
acquired by a Participant under this Plan are those of a general unsecured
creditor of the Company and its Affiliates.
(b) No Participant or Beneficiary will have any right to sell, transfer,
alienate, assign, pledge, or encumber any benefits under the Plan. Benefits
under the Plan are not subject to attachment, garnishment, or any other charge,
whether voluntary or involuntary.
(c) The Plan will be construed in accordance with the laws of the State of
Colorado, without regard to the choice of law provisions of that state.
CH2M HILL COMPANIES, LTD
By:____________________________________
8
<PAGE>
Exhibit 10.8
FORM OF
TRUST UNDER CH2M HILL COMPANIES, LTD.
AFTER-TAX DEFERRED COMPENSATION PLAN
(a) This Agreement made this _____ day of __________, 1999, by and between
CH2M HILL Companies, Ltd. ("Company") and ________________________ ("Trustee");
(b) WHEREAS, Company has adopted the CH2M HILL Companies, Ltd. After-Tax
Deferred Compensation Plan (the "Plan");
(c) WHEREAS, Company has incurred or expects to incur liability under the
terms of such Plan with respect to the individuals participating in such Plan;
(d) WHEREAS, Company wishes to establish a trust (hereinafter called
"Trust") and to contribute to the Trust assets that shall be held therein,
subject to the claims of Company's creditors in the event of Company's
Insolvency, as herein defined, until paid to Plan participants and their
beneficiaries in such manner and at such times as specified in the Plan; and
(e) WHEREAS, it is the intention of the parties that this Trust shall
constitute an unfunded arrangement and shall not affect the status of the Plan
as an unfunded plan;
NOW, THEREFORE, the parties do hereby establish the Trust and agree that
the Trust shall be comprised, held and disposed of as follows:
SECTION 1
ESTABLISHMENT OF TRUST
----------------------
(a) Company hereby deposits with Trustee in trust $1 in cash, which shall
become the principal of the Trust to be held, administered and disposed of by
Trustee as provided in this Agreement.
(b) The Trust hereby established shall be revocable by Company.
(c) The Trust is intended to be a grantor trust, of which Company is the
grantor, within the meaning of subpart E, part I, subchapter J, chapter 1,
subtitle A of the Internal Revenue Code of 1986, as amended, and shall be
construed accordingly.
(d) The principal of the Trust, and earnings (if any) thereon, shall be
held separate and apart from other funds of Company and shall be used
exclusively for the uses and purposes of Plan participants and general creditors
as herein set forth. Plan participants and their beneficiaries shall have no
preferred claim on, or any beneficial ownership interest in, any assets of the
Trust. Any rights created under the Plan and this Agreement shall be mere
unsecured contractual rights of Plan participants and their beneficiaries
against Company. Any assets held by the Trust will be subject to the
<PAGE>
claims of Company's general creditors under federal and state law in the event
of Insolvency, as defined in Section 3(a) herein.
(e) Company may at any time, or from time to time, make additional
deposits of cash or shares of common stock of Company ("Common Stock") in trust
with Trustee to augment the principal to be held, administered and disposed of
by Trustee as provided in this Agreement. Trustee shall not have any right to
compel such additional deposits.
(f) When Company deposits cash or Common Stock with Trustee, Company shall
inform Trustee in writing of the Plan participant with respect to whom such
deposit is made. Trustee shall establish and maintain a separate recordkeeping
account in the name of each Plan participant and shall credit that recordkeeping
account with a number of units (referred to as "Share Value Equivalent Units,"
or "SVEUs") equal to the number of shares of Common Stock deposited by Company
with Trustee with respect to that Plan participant. Trustee shall also credit
the recordkeeping account maintained in the name of each Plan participant with
the amount of cash deposited by Company with Trustee with respect to that Plan
participant. Trustee shall also credit the recordkeeping account maintained in
the name of each Plan participant with an amount equal to earnings (if any) of
the Trust on any assets credited to the recordkeeping account maintained in the
name of that Plan participant, other than cash dividends paid with respect to
the Common Stock (which shall be paid over to Company in accordance with Section
5). When Trustee uses cash credited to a recordkeeping account maintained in the
name of a Plan participant to purchase shares of Common Stock, the recordkeeping
account maintained in the name of that Plan participant shall be reduced to
reflect the amount of cash used to purchase the shares of Common Stock and the
recordkeeping account maintained in the name of that Plan participant shall be
credited with a number of SVEUs equal to the number of shares of Common Stock so
purchased.
SECTION 2
PAYMENTS TO PLAN PARTICIPANTS AND THEIR BENEFICIARIES
-----------------------------------------------------
(a) Company shall deliver to Trustee a schedule (the "Payment Schedule")
that indicates the amount payable in respect of each Plan participant (and his
or her beneficiaries), that provides a formula or other instructions acceptable
to Trustee for determining the amounts so payable, the form in which such amount
is to be paid (as provided for or available under the Plan), and the time of
commencement for payment of such amounts. The Payment Schedule may be modified
from time to time by Company. Except as otherwise provided herein, Trustee shall
make payments to the Plan participants and their beneficiaries in accordance
with such Payment Schedule. Trustee shall make provision for the reporting and
withholding of any federal, state or local taxes that may be required to be
withheld with respect to the payment of benefits pursuant to the terms of the
Plan and shall pay amounts withheld to the appropriate taxing authorities or
determine that such amounts have been reported, withheld and paid by Company.
(b) The entitlement of a Plan participant or his or her beneficiaries to
benefits under the Plan shall be determined by Company or such party as it shall
designate under
2
<PAGE>
the Plan, and any claim for such benefits shall be considered and reviewed under
the procedures set out in the Plan.
(c) Company may make payment of benefits directly to Plan participants or
their beneficiaries as they become due under the terms of the Plan. Company
shall notify Trustee of its decision to make payment of benefits directly prior
to the time amounts are payable to participants or their beneficiaries. In
addition, if the principal of the Trust, and earnings (if any) thereon, are not
sufficient to make payment of benefits in accordance with the terms of the Plan,
Company shall make the balance of each such payment as it falls due. Trustee
shall notify Company when assets of the Trust are not sufficient.
SECTION 3
TRUSTEE RESPONSIBILITY REGARDING PAYMENTS TO TRUST BENEFICIARIES
-----------------------------------------------------------------
WHEN COMPANY IS INSOLVENT
-------------------------
(a) Trustee shall cease payment of benefits to Plan participants and their
beneficiaries if the Company is Insolvent. Company shall be considered
"Insolvent" for purposes of this Agreement if (1) Company is unable to pay its
debts as they become due, or (2) Company is subject to a pending proceeding as a
debtor under the United States Bankruptcy Code.
(b) At all times during the continuance of this Trust, as provided in
Section 1(d) hereof, the principal and income of the Trust shall be subject to
claims of general creditors of Company under federal and state law as set forth
below.
(1) The Board of Directors and the Chief Executive Officer of Company
shall have the duty to inform Trustee in writing of Company's Insolvency.
If a person claiming to be a creditor of Company alleges in writing to
Trustee that Company has become Insolvent, Trustee shall determine whether
Company is Insolvent and, pending such determination, Trustee shall
discontinue payment of benefits to Plan participants or their
beneficiaries.
(2) Unless Trustee has actual knowledge of Company's Insolvency, or
has received notice from Company or a person claiming to be a creditor
alleging that Company is Insolvent, Trustee shall have no duty to inquire
whether Company is Insolvent. Trustee may in all events rely on such
evidence concerning Company's solvency as may be furnished to Trustee and
that provides Trustee with a reasonable basis for making a determination
concerning Company's solvency.
(3) If at any time Trustee has determined that Company is Insolvent,
Trustee shall discontinue payments to Plan participants or their
beneficiaries and shall hold the assets of the Trust for the benefit of
Company's general creditors. Nothing in this Agreement shall in any way
diminish any rights of Plan participants or their beneficiaries to pursue
their rights as general creditors of Company with respect to benefits due
under the Plan or otherwise.
3
<PAGE>
(4) Trustee shall resume the payment of benefits to Plan participants
or their beneficiaries in accordance with Section 2 of this Agreement only
after Trustee has determined that Company is not Insolvent (or is no longer
Insolvent).
(c) Provided that there are sufficient assets, if Trustee discontinues the
payment of benefits from the Trust pursuant to Section 3(b) hereof and
subsequently resumes such payments, the first payment following such
discontinuance shall include the aggregate amount of all payments due to Plan
participants or their beneficiaries under the terms of the Plan for the period
of such discontinuance, less the aggregate amount of any payments made to Plan
participants or their beneficiaries by Company in lieu of the payments provided
for hereunder during any such period of discontinuance.
SECTION 4
INVESTMENT AUTHORITY
--------------------
(a) Trustee shall, to the maximum extent practicable, invest all assets of
the Trust in Common Stock. Trustee shall retain Common Stock deposited by
Company with Trustee. Trustee shall use cash deposited by Company with Trustee
or earned by the Trust to purchase Common Stock as soon as reasonably
practicable after such cash is received by Trustee. Common Stock shall be
purchased in the internal market maintained by Company or directly from Company.
(b) All rights associated with assets of the Trust shall be exercised by
Trustee or the person designated by Trustee, and shall in no event be
exercisable by or rest with Plan participants, except that voting rights and
dividend rights with respect to Trust assets will be exercised by Company.
SECTION 5
DISPOSITION OF INCOME
---------------------
During the term of this Trust, all income (if any) received by the Trust,
net of expenses and taxes, shall be accumulated and reinvested to the maximum
extent practicable in Common Stock, except that cash dividends (if any) paid to
the Trust with respect to Common Stock shall be paid to Company immediately upon
receipt by Trustee.
SECTION 6
ACCOUNTING BY TRUSTEE
---------------------
Trustee shall keep accurate and detailed records of all investments,
receipts, disbursements, and all other transactions required to be made,
including such specific records as shall be agreed upon in writing between
Company and Trustee. Within forty-five (45) days following the close of each
calendar year and within forty-five (45) days after the removal or resignation
of Trustee, Trustee shall deliver to Company a written account of its
administration of the Trust during such year or during the period from the close
of the last preceding year to the date of such removal or resignation, setting
forth all investments, receipts, disbursements and other transactions effected
by it, including a description of all securities and investments purchased and
sold with the cost or net
4
<PAGE>
proceeds of such purchases or sales (accrued interest paid or receivable being
shown separately), and showing all cash, securities and other property held in
the Trust at the end of such year or as of the date of such removal or
resignation, as the case may be.
SECTION 7
RESPONSIBILITY OF TRUSTEE
-------------------------
(a) Trustee may consult with legal counsel (who may also be counsel for
Company generally) with respect to any of its duties or obligations hereunder.
(b) Trustee shall have, without exclusion, all powers conferred on
Trustees by applicable law, unless expressly provided otherwise herein.
(c) Notwithstanding any powers granted to Trustee pursuant to this
Agreement or to applicable law, Trustee shall not have any power that could give
this Trust the objective of carrying on a business and dividing the gains
therefrom, within the meaning of Section 301.7701-2 of the Procedure and
Administrative Regulations promulgated pursuant to the Internal Revenue Code.
SECTION 8
COMPENSATION AND EXPENSES OF TRUSTEE
------------------------------------
Company shall pay all administrative and Trustee's fees and expenses. If
not so paid, the fees and expenses shall be paid from the Trust.
SECTION 9
RESIGNATION AND REMOVAL OF TRUSTEE
----------------------------------
(a) Trustee may resign at any time by written notice to Company, which
shall be effective thirty (30) days after receipt of such notice unless Company
and Trustee agree otherwise.
(b) Trustee may be removed by Company on thirty (30) days notice or upon
shorter notice accepted by Trustee.
(c) Upon resignation or removal of Trustee and appointment of a successor
Trustee, all assets shall subsequently be transferred to the successor Trustee.
The transfer shall be completed within thirty (30) days after receipt of notice
of resignation, removal or transfer, unless Company extends the time limit.
(d) If Trustee resigns or is removed, a successor shall be appointed, in
accordance with Section 10 hereof, by the effective date of resignation or
removal under paragraphs (a) or (b) of this section. If no such appointment has
been made, Trustee may apply to a court of competent jurisdiction for
appointment of a successor or for instructions. All expenses of Trustee in
connection with the proceeding shall be allowed as administrative expenses of
the Trust.
5
<PAGE>
SECTION 10
APPOINTMENT OF SUCCESSOR
------------------------
(a) If Trustee resigns or is removed in accordance with Section 9(a) or
(b) hereof, Company may appoint any third party, such as a bank trust department
or other party that may be granted corporate trustee powers under state law, as
a successor to replace Trustee upon resignation or removal. The appointment
shall be effective when accepted in writing by the new Trustee, who shall have
all of the rights and powers of the former Trustee, including ownership rights
in the Trust assets. The former Trustee shall execute any instrument necessary
or reasonably requested by Company or the successor Trustee to evidence the
transfer.
(b) The successor Trustee need not examine the records and acts of any
prior Trustee and may retain or dispose of existing Trust assets, subject to
Section 4 hereof. The successor Trustee shall not be responsible for and Company
shall indemnify and defend the successor Trustee from any claim or liability
resulting from any action or inaction of any prior Trustee or from any other
past event, or any condition existing at the time it becomes successor Trustee.
SECTION 11
AMENDMENT OR TERMINATION
------------------------
(a) This Agreement may be amended by a written instrument executed by
Trustee and Company.
(b) The Trust shall not terminate until the date on which Plan
participants and their beneficiaries are no longer entitled to benefits pursuant
to the terms of the Plan, unless sooner revoked in accordance with Section 1(b)
hereof. Upon termination of the Trust any assets remaining in the Trust shall be
returned to Company.
SECTION 12
MISCELLANEOUS
-------------
(a) Any provisions of this Agreement prohibited by law shall be
ineffective to the extent of any such prohibition, without invalidating the
remaining provisions hereof.
(b) Benefits payable to Plan participants and their beneficiaries under
this Agreement may not be anticipated, assigned (either at law or in equity),
alienated, pledged, encumbered or subjected to attachment, garnishment, levy,
execution or other legal or equitable process.
(c) This Trust Agreement shall be governed by and construed in accordance
with the laws of the State of Colorado.
SECTION 13
EFFECTIVE DATE
--------------
The effective date of this Trust Agreement shall be January 1, 2000.
6
<PAGE>
CH2M HILL COMPANIES, LTD.
By:_________________________
TRUSTEE
By:_________________________
7
<PAGE>
EXHIBIT 21
SUBSIDIARIES OF CH2M HILL COMPANIES, LTD.
1. CH2M Hill Industrial Design Corporation, an Oregon corporation
2. Operations Management International, Inc., a California corporation
3. CH2M Hill, Inc., a Florida corporation
4. Kaiser-Hill Company, LLC, a Colorado limited liability company
5. CH2M Hill Corp., an Oregon corporation
6. CH2M HILL Holding, Inc., a Delaware corporation
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
reports (and to all references to our firm) included in or made as part of this
registration statement.
ARTHUR ANDERSEN LLP
Denver, Colorado,
March 15, 1999.
<PAGE>
EXHIBIT 23.2
INDEPENDENT AUDITOR'S REPORT
The Board of Directors
CH2M HILL INDUSTRIAL DESIGN
CORPORATION:
We have audited the accompanying consolidated balance sheets of CH2M HILL
INDUSTRIAL DESIGN CORPORATION AND SUBSIDIARIES as of December 31, 1998 and
1997, and the related consolidated statements of income and retained earnings,
comprehensive income, and cash flows for each of the years in the three-year
period ended December 31, 1998. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of CH2M HILL
INDUSTRIAL DESIGN CORPORATION AND SUBSIDIARIES as of December 31, 1998 and
1997, and the results of their operations and their cash flows for each of the
years in the three-year period ended December 31, 1998 in conformity with
generally accepted accounting principles.
KPMG Peat Marwick LLP
Portland, Oregon
January 22, 1999
<PAGE>
EXHIBIT 23.3
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the inclusion of our report dated January 22, 1999 on the
consolidated balance sheets of CH2M HILL INDUSTRIAL DESIGN CORPORATION AND
SUBSIDIARIES as of December 31, 1998 and 1997, and related consolidated
statements of income and retained earnings, comprehensive income, and cash
flows for each of the years in the three year period ended December 31, 1998.
KPMG Peat Marwick LLP
Portland, Oregon
March 15, 1999
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 16,595,000
<SECURITIES> 0
<RECEIVABLES> 229,084,000
<ALLOWANCES> 8,201,000
<INVENTORY> 0
<CURRENT-ASSETS> 253,738,000
<PP&E> 42,062,000
<DEPRECIATION> 28,072,000
<TOTAL-ASSETS> 298,325,000
<CURRENT-LIABILITIES> 180,440,000
<BONDS> 0
0
221,000
<COMMON> 170,000
<OTHER-SE> 74,741,000
<TOTAL-LIABILITY-AND-EQUITY> 298,325,000
<SALES> 935,030,000
<TOTAL-REVENUES> 935,030,000
<CGS> 629,468,000
<TOTAL-COSTS> 920,228,000
<OTHER-EXPENSES> (1,735,000)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,154,000
<INCOME-PRETAX> 14,383,000
<INCOME-TAX> 8,571,000
<INCOME-CONTINUING> 5,812,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,812,000
<EPS-PRIMARY> .21
<EPS-DILUTED> .21
</TABLE>
<PAGE>
Exhibit 99
March 12, 1999
Form of
-------
CH2M HILL Internal Market Rules
-------------------------------
The following rules are to be applied to the operation of the CH2M HILL
Internal Market (the "Market"). It should be noted that from time to time at
CH2M HILL discretion, Market rules and procedures might be changed.
It is anticipated that the Market will permit existing and new CH2M HILL
shareholders to sell shares of CH2M HILL common stock (the "Shares") up to four
times each year on predetermined days (the "Trade Dates"). Such sales will be
made at the formula price (the "Formula Price") determined by the Board of
Directors to eligible employees, directors and consultants of CH2M HILL and to
trustees and administrators of CH2M HILL's qualified and non-qualified employee
benefit plans. Any employee, director or consultant who resides in a state
wherein direct individual purchase through the market is permitted, whether by
reason of registration under or exemption from state securities laws, is
eligible for purposes of the Market. In addition, CH2M HILL will be authorized,
but not obligated, to sell or purchase Shares in the Market, provided that the
Company will not be both a seller and a purchaser on the same Trade Date.
All record owners of Shares will be eligible to sell some or all of the
Shares owned by them on any Trade Date; in the case of Shares owned
beneficially, sales must be directed by the record holder and in accordance with
any relevant instrument relating to the rights and obligations of the respective
parties. In the event that the aggregate number of Shares offered for sale by
the sellers is greater than the aggregate number of Shares sought to be
purchased by authorized buyers and CH2M HILL on a specific Trade Date, offers to
sell will be treated in the following manner:
(a) If enough orders to buy are received to purchase all the shares
offered by each seller selling fewer than 500 shares and at least 500
shares from each other seller, then all sell orders will be accepted
up to the first 500 shares and the portion of any sell orders
exceeding 500 shares will be accepted on a pro-rata basis.
(b) If not enough orders to buy are received to purchase all the shares
offered by each seller selling fewer than 500 shares and at least 500
shares from each other seller, then the purchase orders will be
allocated equally to each seller.
(c) Subject to applicable legal or contractual restrictions and the
availability of funds, CH2M HILL may, in its discretion, purchase
sufficient Shares on each Trade Date so that each shareholder wishing
to sell Shares will be able to sell additional Shares in accordance
with the above preferences.
If the aggregate purchase orders exceed the number of Shares available for
sale, the following prospective purchasers will have priority, in the order
listed:
1. Administrator of the Payroll Deduction Stock Purchase Plan
2. Trustees of the 401(k) Plan
3. Trustees of the Employee Stock Plan
4. Individual employees, directors and consultants on a pro-rata basis
(including
<PAGE>
purchases through the pre-tax and after-tax deferred compensation
plans)
To the extent that the aggregate number of Shares sought to be purchased
exceeds the aggregate number of Shares for sale, CH2M HILL may, but is not
obligated to, sell authorized, but unissued Shares in the Market.
CH2M HILL intends to publish the current formula price and upcoming trade
date prior to each trade date to all participants in the internal market through
internal communications, including bulletins, electronic mail communications or
mailed reports.
Buck Investment Services, a NASD-registered broker-dealer ("Buck"), will
initially maintain the Market for CH2M HILL. Buck will receive all sell orders
from record holders and buy orders from authorized buyers and CH2M HILL five
business days prior to Trade Date. On each Trade Date, Buck will clear trades on
an agency only, unsolicited basis between sellers and buyers of Shares
(including, to the extent applicable, CH2M HILL) according to the priority rules
described above. Buck will then forward payments to sellers, minus the
commission, and will issue, in book-entry form unless certificated form is
required by law, the Shares to the buyers.
Individual sellers will pay a sales commission to Buck of 2% of the sales
price. CH2M HILL and CH2M HILL's qualified and non-qualified employee benefit
plans will not pay such a commission. Buyers will not pay any commission.
For purchases by entities such as CH2M HILL's qualified and non-qualified
employee benefit plans, CH2M HILL will coordinate payments to Buck Investment
Services' Special Reserve Account, established for the protection of customer
funds, with transmittal instructions to be issued no later than noon on the
first business day following the day Buck advises CH2M HILL of the amount
required. For purchases by individuals, deposits in good funds must be received
by Buck Investment Services' Special Reserve Account prior to the Trade Date.
Buck Investment Services will not buy or sell shares for its own account.
Shares held as a result of purchases in the Market will be subject to
restrictions as listed in CH2M HILL's Restated Articles of Incorporation and
Restated Bylaws, each as effected from time to time.
