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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
FOR THE TRANSITION PERIOD FROM _________________ TO _________________
COMMISSION FILE NUMBER 1-9654
OHM CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
OHIO 34-1503050
(STATE OF INCORPORATION) (I.R.S. EMPLOYER IDENTIFICATION NUMBER)
16406 U.S. ROUTE 224 EAST, FINDLAY, OH 45840
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (419) 423-3526
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
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Common Stock, $0.10 par value New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
8% Convertible Subordinated Debentures due October 1, 2006
(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
- -
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
The aggregate market value of the voting stock held by non-affiliates
of the registrant on February 16, 1998, was $333,991,409.
The number of shares of common stock outstanding on February 24, 1998,
was 28,284,405 shares.
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OHM CORPORATION
1997 ANNUAL REPORT IN FORM 10-K
TABLE OF CONTENTS
PART I
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Item 1. Business....................................................... 1
Item 2. Properties..................................................... 9
Item 3. Legal Proceedings.............................................. 9
EXECUTIVE OFFICERS OF THE REGISTRANT
PART II
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Item 5. Market for the Registrant's Common Stock and Related
Shareholder Matters............................................ 10
Item 6. Selected Financial Data........................................ 11
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations............................ 12
Item 8. Financial Statements and Supplementary Data.................... 19
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosures........................... 38
PART III
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Item 10. Directors and Executive Officers of the Registrant............. 38
Item 11. Executive Compensation......................................... 40
Item 12. Security Ownership of Certain Beneficial Owners and
Management..................................................... 46
Item 13. Certain Relationships and Related Transactions................. 47
PART IV
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Item 14. Exhibits, Financial Statement Schedule and Reports on
Form 8-K....................................................... 50
SIGNATURES ............................................................. 57
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PART I
ITEM 1. BUSINESS
OVERVIEW
OHM Corporation, an Ohio corporation, and its predecessors (the
"Company"), is a provider of technology-based, on-site hazardous waste
remediation services in the United States. The Company has been in the
environmental services business since 1969. The Company has successfully
completed approximately 32,000 projects involving contaminated groundwater, soil
and facilities.
The Company provides a wide range of environmental services, primarily
to government agencies and to large chemical, petroleum, transportation and
industrial companies. The Company has worked for the United States Environmental
Protection Agency ("EPA"), the Department of Defense ("DOD") (including the U.S.
Army Corps of Engineers ("USACE") and the U.S. Departments of the Air Force,
Army and Navy), the Department of Energy ("DOE"), a number of state and local
governments and a majority of the Fortune 100 industrial and service companies.
In addition to its technology-based, on-site remediation services, the Company
also offers a broad range of other services, including site assessment,
engineering, remedial design and incidental analytical testing. Service is
provided through 25 regional offices, nine mobile laboratories, and
approximately 2,700 pieces of mobile treatment and related field equipment.
Since the disposition by the Company in early 1993 of its interest in
OHM Resource Recovery Corp., the operator of a hazardous waste treatment and
disposal facility, the Company does not own or operate any hazardous waste
disposal sites or other off-site waste treatment or disposal facilities. The
Company generally coordinates through licensed subcontractors the transportation
and disposal of any hazardous waste which is not remediated on-site.
On May 30, 1995, pursuant to an Agreement and Plan of Reorganization,
the Company through its wholly-owned subsidiary, OHM Remediation Services Corp.
("OHMR"), acquired (the "Acquisition") in exchange for 9,668,000 shares of
Common Stock of the Company, par value $.10 per share ("Common Stock"),
substantially all of the assets and certain liabilities of the environmental
remediation services business of Rust International Inc. ("Rust"), a
majority-owned subsidiary of WMX Technologies, Inc. (n/k/a/ Waste Management,
Inc. and referred to herein as "WMX"). In connection with the Acquisition, the
Company and WMX entered into a Guaranty Agreement whereby, in exchange for a
warrant (the "Warrants") exercisable for five years to purchase 700,000 shares
of Common Stock at a price per share of $15.00, WMX agreed, until May 30, 2000,
to guarantee indebtedness of the Company in an amount not to exceed $62,000,000
which will increase proportionately up to $75,000,000 upon issuance of shares
under the warrant. The Guaranty Agreement and related guarantees will terminate
upon consummation of the Merger described below. In addition, the Company
entered into a Standstill and Non-competition Agreement (the "Standstill
Agreement") with WMX and its affiliates. As contemplated by the Standstill
Agreement, three designees of WMX were elected to the Board of Directors of the
Company. Key provisions of the Standstill Agreement will terminate upon the
occurrence of the Merger described below.
On June 17, 1997, the Company acquired all of the issued and
outstanding capital stock of Beneco Enterprises, Inc., a Utah corporation
("Beneco"), from Bennie Smith, Jr., Robert Newberry and Scott Doxey, for an
aggregate purchase price of $14,700,000. The purchase price was payable at
closing as follows: (i) $9,700,000 in cash and (ii) unsecured promissory notes
in the aggregate principal amount of $5,000,000. The Company has agreed to make
an additional payment in the year 2000 contingent upon the achievement of
certain operating results and other contractual conditions.
The Company has entered into an Agreement and Plan of Merger (the
"Merger Agreement"), dated January 15, 1998, by and among the Company,
International Technology Corporation ("Parent") and IT-Ohio, Inc. ("Purchaser").
Pursuant to the Merger Agreement, on February 25, 1998 Purchaser, a wholly owned
subsidiary of Parent, completed a tender offer (the "Offer") for 13,933,000
shares of Common Stock (each, a "Share" and collectively, the "Shares") at a
price of $11.50 per Share, net to the tendering shareholder in cash. The Offer
was described in the Tender Offer Statement on Schedule 14D-1 filed by Purchaser
on January 16, 1998 with the Securities and Exchange Commission (the
"Commission").
The Merger Agreement provides that, subject to the satisfaction or
waiver of certain conditions precedent (including the approval of the Merger
Agreement by holders of a majority of the outstanding Shares), Purchaser will
merge with and into the Company (the "Merger"), and the Company will be the
surviving corporation in the Merger, with the result that the Company will
become a wholly owned subsidiary of Parent. Based upon the preliminary results
of the Offer and on the number
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of shares of Common Stock outstanding on February 24, 1998, at the effective
time of the Merger, each remaining Share outstanding will be converted into the
right to receive approximately 1.077 shares of the common stock of Parent and
approximately $2.61 in cash.
James L. Kirk, Joseph R. Kirk, H. Wayne Huizenga and The Huizenga
Family Foundation, all shareholders of the Company, have entered into voting
agreements whereby they agree to vote their shares of Common Stock in favor of
the Merger.
Pursuant to the Merger Agreement and the Share Repurchase Agreement,
dated as of January 15, 1998 and as amended and restated as of February 11, 1998
and as amended and restated as of February 17, 1998 (the "Repurchase
Agreement"), by and among the Company, Parent, WMX, Rust and Rust Remedial
Services Holding Company Inc., an affiliate of WMX, the Company repurchased from
WMX and its affiliates 2,535,381 Shares for $11.50 per Share, concurrently with
the payment for Shares pursuant to the Offer (the "Repurchase"), and WMX and its
affiliates tendered 7,111,543 Shares in the Offer. Pursuant to the Repurchase
Agreement, WMX and its affiliates also agreed to vote all Shares held by them in
favor of the Merger. WMX also agreed to cancel, without payment of any separate
consideration, the Warrants and any rights it may have to purchase additional
shares of Common Stock.
The Company also has an approximately 40% interest in NSC Corporation
("NSC"), a provider of asbestos abatement and specialty contracting services.
Pursuant to the Merger Agreement, the Company will pay a pro rata distribution
(the "NSC Distribution") to holders of record of the Shares as of the close of
business on February 24, 1998 of all of the shares of Common Stock, par value
$0.01 per share, of NSC held by the Company (the "NSC Shares"). The payment date
for the NSC Distribution is March 6, 1998, which is the earliest date on which
the NSC Distribution may be paid under the Company's Regulations. It is
anticipated that the NSC Distribution will be treated as a pro rata taxable
redemption that qualifies as a sale or exchange for tax purposes.
OHM'S ENVIRONMENTAL REMEDIATION SERVICES
The Company assists its clients by providing comprehensive on-site
treatment of toxic materials and hazardous wastes. By applying a broad range of
biological, chemical, physical, soil vapor extraction and thermal treatment
technologies, the Company performs on-site treatment and remediation services
for the control, detoxification, decontamination, and volume reduction of
hazardous and toxic material. Accordingly, the Company has designed a wide range
of modular mobile treatment equipment, which can be used on-site, either
independently or in a system, for removing, detoxifying, reducing the volume of,
or stabilizing contaminants. This equipment includes thermal destruction units,
dewatering presses, filters, separators, ion exchangers, stripping systems and
mobile process equipment which apply various physical, chemical and biological
technologies to remediate contaminants. Since 1970, the Company has completed
approximately 32,000 projects throughout the United States, cleaning up
hazardous wastes, removing toxic chemicals from groundwater and cleaning
facilities of contaminants.
The Company endeavors to offer clients an increasingly broad array of
on-site treatment services, either on a planned or emergency basis, from its 25
regional offices located throughout the country. The Company places its emphasis
upon planned work because of its more predictable resource requirements, and
because of its larger potential market. In 1997, planned projects accounted for
approximately 99% of the Company's revenue.
The Company believes that professional project management is a critical
element in limiting the significant risks and potential liabilities involved in
environmental remediation projects due to the presence of hazardous and toxic
substances. The Company has adopted a number of risk management policies and
practices including special employee training and health monitoring programs.
The Company's health and safety staff establish a safety plan for each project
prior to the initiation of work, monitor compliance with the plan and administer
the Company's medical monitoring program to staff involved. The Company believes
that it has an excellent overall health and safety record.
The Company believes that designing, developing and implementing
solutions to environmental hazards requires an interdisciplinary approach
combining practical field experience with remediation processes and technical
skills in fields such as chemistry, microbiology, hydrogeology, fluid mechanics,
thermodynamics, and geotechnical, biochemical and process engineering. The
Company employs scientific and engineering professionals in the environmental
services field who enhance the Company's ability to effectively participate in
larger, more technically complex remediation projects.
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The Company has significant experience in the commercialization and
practical field application of new and existing technologies for the treatment
of hazardous wastes, with emphasis on the further development and application of
existing technologies.
GOVERNMENT OUTSOURCING MARKET
Through the Company's acquisition of Beneco, the Company has entered
the government outsourcing market for operations, maintenance and construction
at federal facilities. Beneco is a leading provider of project, program and
construction management services to the DOD, and state and local government
agencies. The Beneco acquisition is the first step to leveraging the Company's
core competencies into new, high growth service areas, specifically the
outsourcing and privatization trend occurring across federal, state and local
levels of government. Through Beneco, the Company may offer a service related
business of a recurring nature that is not dependent on regulatory enforcement.
FOCUS ON LARGER PROJECTS AND GOVERNMENT CONTRACTS
The Company pursues larger projects and term contracts as a method to
achieve more predictable revenue, more consistent utilization of equipment and
personnel, and greater leverage of sales and marketing costs. Historically, the
Company relied most heavily on private sector remediation projects in the
Northeast and Midwest that typically involved planned cleanups of sites that
were contaminated in the normal course of manufacturing activity and emergency
cleanups of oil or chemical spills. Contract values typically were less than $1
million in size and less than one year in duration. The Company now targets more
complex, multi-million dollar, multi-year private sector and government
site-specific and term contracts. As a result of its shift in project focus,
since the beginning of 1991 the Company has been awarded a large number of
multi-million dollar government term contracts which, in some cases, may require
several years to complete. Although the Company still performs private sector
remediation projects, the Company currently derives a majority of its revenue
from government term contracts and these larger projects. Larger site-specific
projects impose heightened risks of loss in the event that actual costs are
higher than those estimated at the time of bid due to unanticipated problems,
inefficient project management, or disputes over the terms and specifications of
the contracted performance.
Since the beginning of 1991, the Company has been awarded a significant
number of government term contracts, and several large projects, with potential
values ranging from $10 million to $250 million and terms ranging from one to
ten years. Such government term contracts typically are performed by completing
remediation work under delivery orders, issued by the contracting government
entity, for a large number of small-to-medium-sized projects throughout the
geographic area covered by the contract. Such government term contracts do not
represent commitments with respect to the amount, if any, that will actually be
expended pursuant to such contracts, may generally be canceled, delayed or
modified at the sole option of the government, and are subject to annual funding
limitations and public sector budget constraints. Accordingly, such government
contracts represent the potential dollar value that may be expended under such
contracts; therefore, no assurance can be provided that such amounts, if any,
will be actually spent on any projects, or of the timing thereof.
For the fiscal year ended December 31, 1997, 79% of the Company's
revenue was derived from federal, state and local government contracts. The
Company expects that the percentage of its revenue attributable to such
government clients will continue to represent a significant portion of its
revenue. In addition to its dependence on government contracts, the Company also
faces the risks associated with such contracting, which could include
substantial civil and criminal fines and penalties. As a result of its
government contracting business, the Company is, has been and may in the future
be subject to audits and investigations by government agencies. In addition to
potential damage to the Company's business reputation, the failure by the
Company to comply with the terms of its government contracts could also result
in the Company's suspension or debarment from future government contracts for a
significant period of time. The fines and penalties which could result from
noncompliance with appropriate standards and regulations, or the Company's
suspension or debarment, could have a material adverse effect on the Company's
business, particularly in light of the increasing importance to the Company of
work for various government agencies.
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ENVIRONMENTAL CONTRACTOR RISKS
Although the Company believes that it generally benefits from increased
environmental regulations, and from enforcement of those regulations, increased
regulation and enforcement also create significant risks for the Company. The
assessment, remediation, analysis, handling and management of hazardous or
radioactive substances necessarily involve significant risks, including the
possibility of damages or injuries caused by the escape of hazardous materials
into the environment, and the possibility of fines, penalties or other
regulatory action. These risks include potentially large civil and criminal
liabilities for violation of environmental laws and regulations, and liabilities
to customers and to third parties, including governmental agencies, for damages
arising from performing services for clients, which could have a material
adverse effect on the Company.
Potential Liabilities Arising Out of Environmental Laws and
Regulations. All facets of the Company's business are conducted in the context
of a developing and changing statutory and regulatory framework. The Company's
operations and services are affected by and subject to regulation by a number of
federal agencies, including the EPA, the Occupational Safety and Health
Administration ("OSHA"), and in limited occasions, the Nuclear Regulatory
Commission, as well as applicable state and local regulatory agencies. For a
description of certain applicable laws and regulations, see "Regulation."
Potential Liabilities Involving Clients and Third Parties. In
performing services for its clients, the Company could potentially be liable for
breach of contract, personal injury, property damage and negligence, including
claims for lack of timely performance and/or for failure to deliver the service
promised (including improper or negligent performance or design, failure to meet
specifications and breaches of express or implied warranties). The damages
available to a client, should it prevail in its claims, are potentially large
and could include consequential damages.
Environmental contractors, in connection with work performed for
clients, also potentially face liabilities to third parties from various claims,
including claims for property damage or personal injury stemming from a release
of hazardous substances or otherwise. Claims for damage to third parties could
arise in a number of ways, including through a sudden and accidental release or
discharge of contaminants or pollutants during the performance of services,
through the inability--despite reasonable care--of a remedial plan to contain or
correct an ongoing seepage or release of pollutants, through the inadvertent
exacerbation of an existing contamination problem, or through reliance on
reports prepared by the Company. Personal injury claims could arise
contemporaneously with performance of the work or long after completion of the
project as a result of alleged exposure to toxic substances. In addition,
increasing numbers of claimants assert that companies performing environmental
remediation should be held strictly liable (i.e., liable for damages regardless
of whether its services were performed using reasonable care) on the grounds
that such services involved "abnormally dangerous activities."
Clients frequently attempt to shift various liabilities arising out of
remediation of their own environmental problems to contractors through
contractual indemnities. Such provisions seek to require the Company to assume
liabilities for damage or injury to third parties and property and for
environmental fines and penalties. The Company has adopted risk management
policies designed to address these problems, but cannot assure their adequacy.
In addition, the Company generally coordinates through subcontractors the
transportation of any hazardous waste which is not remediated on-site to a
licensed hazardous waste disposal or incineration facility.
Moreover, during the past several years, the EPA and other governmental
agencies have constricted significantly the circumstances under which they will
indemnify contractors against liabilities incurred in connection with
remediation projects undertaken by contractors under contract with such
governmental agencies.
DEPENDENCE ON ENVIRONMENTAL REGULATION
Much of the Company's business is generated either directly or
indirectly as a result of federal and state laws, regulations and programs
related to environmental issues. Accordingly, a reduction in the number or scope
of these laws, regulations and programs, or changes in government policies
regarding the funding, implementation or enforcement of such laws, regulations
and programs, could have a material adverse effect on the Company's business.
See "Regulation."
MARKETS AND CUSTOMERS
The Company provides its services to a broad base of clients in both
the private and government sectors. Its private sector clients include large
chemical, petroleum, manufacturing, transportation, real estate, electronics,
automotive, aerospace and other industrial companies, as well as engineering and
consulting firms. The Company has worked for a majority of the
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Fortune 100 industrial companies. Historically, the majority of the Company's
private sector revenue was derived from projects with values typically less than
$1 million in size and less than one year in duration. Revenue from industrial
clients for 1997 was $112 million and constituted 21% of the Company's revenue.
In the government sector, the market for the Company's services
primarily consists of federal government agencies. The Company has been a prime
contractor to the EPA since 1984 under Emergency Response Cleanup Services
("ERCS") contracts administered under the Superfund Removal Program. In
addition, through site specific and term contracts, the Company provides its
services to the DOD, including USACE, the U.S. Departments of the Navy, Air
Force and Army, at DOE facilities and to state and local governments. Revenue
from government agencies in 1997 aggregated $415.1 million and accounted for 79%
of revenue, of which the Department of the Navy and the USACE accounted for
approximately $158.9 million or 30% and $120.5 million or 23% of revenue,
respectively.
SEASONALITY AND FLUCTUATION IN QUARTERLY RESULTS
The timing of the Company's revenue is dependent on its backlog,
contract awards and the performance requirements of each contract. The Company's
revenue is also affected by the timing of its clients' planned remediation
activities which generally increase during the third and fourth quarters.
Because of this change in demand, the Company's quarterly revenue can fluctuate,
and revenue for the first and second quarters of each year has historically been
lower than for the third and fourth quarters. Although the Company believes that
the historical trend in quarterly revenue for the third and fourth quarters of
each year are generally higher than the first and second quarters, there can be
no assurance that this will occur in future periods. Accordingly, quarterly or
interim results should not be considered indicative of results to be expected
for any quarter or for the full year.
COMPETITION
The environmental services industry is highly competitive with numerous
companies of various size, geographic presence and capabilities participating.
The Company believes that it has approximately a dozen principal competitors in
the environmental remediation sector of the environmental services industry and
numerous smaller competitors. The Company believes that the principal
competitive factors in its business are operational experience, technical
proficiency, breadth of services offered, local presence and price. In certain
aspects of the Company's environmental remediation business, substantial capital
investment is required for equipment. Certain of the Company's competitors have
greater financial resources, which could allow for greater investment in
equipment and provide better access to bonding and insurance markets to provide
the financial assurance instruments which are often required by clients.
Additionally, the relatively recent entry of several aerospace and defense
contractors, as well as large construction and engineering firms, into the
environmental services industry has increased the level of competition. The
Company believes that the demand for environmental services is still developing
and expanding and, as a result, many small and large firms will continue to be
attracted to the industry.
INSURANCE
The Company maintains a comprehensive liability insurance program that
is structured to provide coverage for major and catastrophic losses while
essentially self-insuring losses that may occur in the ordinary course of
business. The Company contracts with primary and excess insurance carriers and
generally retains $250,000 to $500,000 of liability per occurrence through
deductible programs, self-insured retentions or through reinsurance provided by
a wholly-owned insurance captive which reinsures some of the Company's workers'
compensation risks.
Although the Company believes its insurance program to be appropriate
for the management of its risks, its insurance policies may not fully cover
risks arising from the Company's operations. Policy coverage exclusions,
retaining risks through deductible and self-insured retention programs, or
losses in excess of the coverage may cause all or a portion of one or more
losses not to be covered by such insurance.
EMPLOYEES
The Company had approximately 2,800 employees at December 31, 1997.
Five employees of the Company were covered by collective bargaining agreements.
The Company considers relations with its employees to be satisfactory.
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PATENTS
The Company currently owns two patents covering certain design features
of equipment employed in its on-site remediation business. The first relates to
a filtration system developed and used by the Company to remove pollutants from
flowing creeks and streams and the second, known as a Portable Method for
Decontaminating Earth, relates to a decontamination system used by the Company
to remove contaminants from the soil through a process, commonly known as soil
vapor extraction. The Company utilizes X*TRAX(R) and LT*X(R) to perform thermal
desorption services. The X*TRAX(R) and LT*X(R) systems are waste treatment
processes that thermally separate organic contaminants from soils or solids with
subsequent treatment of the organic vapor stream. Although the Company considers
its patents to be important, they are not a material factor in its business.
REGULATION
The environmental services business, including the remediation services
segment of the industry, has benefited from extensive federal and state
regulation of environmental matters. On the other hand, the Company's
environmental services are also subject to extensive federal and state
legislation as well as regulation by the EPA, the OSHA and applicable state and
local regulatory agencies. All facets of the Company's business are conducted in
the context of a rapidly developing and changing statutory and regulatory
framework and an aggressive enforcement and regulatory posture. The full impact
of these laws and regulations, and the enforcement thereof, on the Company's
business is difficult to predict, principally due to the complexity of the
relatively new legislation, new and changing regulations, and the impact of
governmental and economic pressures. The assessment, remediation, analysis,
handling and management of hazardous substances necessarily involve significant
risks, including the possibility of damages or injuries caused by the escape of
hazardous materials into the environment, and the possibility of fines,
penalties or other regulatory action.
The Comprehensive Environmental Response, Compensation and Liability
Act of 1980 ("CERCLA") addresses cleanup of sites at which there has been a
release or threatened release of hazardous substances or contaminants, including
certain radioactive substances, into the environment. CERCLA assigns liability
for costs of cleanup of such sites and for damage to natural resources to any
person who, currently or at the time of disposal of a hazardous substance, owned
or operated any facility at which hazardous substances were disposed of; and to
any person who by agreement or otherwise arranged for disposal or treatment, or
arranged with a transporter for transport for disposal or treatment of hazardous
substances owned or possessed by such person for disposal or treatment by
others; and to any person who accepted hazardous substances for transport to
disposal or treatment facilities or sites selected by such persons from which
there is a release or threatened release of hazardous substances. CERCLA
authorizes the federal government both to clean up these sites itself and to
order persons responsible for the situation to do so. In addition, under the
authority of Superfund and its implementing regulations, detailed requirements
apply to the manner and degree of remediation of facilities and sites where
hazardous substances have been or are threatened to be released into the
environment. CERCLA created the Superfund to be used by the federal government
to pay for the cleanup efforts. Where the federal government expends money for
remedial activities, it may seek reimbursement from the "potentially responsible
parties." CERCLA imposes strict, joint and several retroactive liability upon
such parties. 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. Several recent court decisions have accepted these claims. Should
the Company be held responsible under CERCLA for damages caused while performing
services or otherwise, it may be forced to bear such liability by itself,
notwithstanding the potential availability of contribution or indemnity from
other parties.
The statutory funding mechanism of CERCLA is comprised of contributions
from the general revenue and tax on petrochemical feedstocks. The CERCLA tax
expired December 31, 1995. However, an additional $1.5 billion was appropriated
for fiscal year 1998 and the authority to use the funds has been extended
through September 30, 1998. Additionally, EPA has a large amount of
appropriated, unobligated funds which are projected by the Congressional Budget
Office to be sufficient for EPA to continue operating at current levels for
approximately two years. In addition, under the Administration's current budget
proposal, an additional $650 million will become available whether or not
Superfund reauthorization legislation has been passed in Congress.
Bills to reauthorize Superfund have been introduced in both the
Senate and the House. Support for environmental programs remains strong in
the Executive
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Branch. President Clinton's fiscal year 1999 budget included increases in
funding for all EPA, Department of Defense and Department of Energy
environmental programs.
Despite the priority given by the Administration to Reauthorization of
Superfund, and the history of Congress never to allow an actual lapse in the
tax, the perceived potential for this occurrence adversely impacts the
environmental industry due to resultant funding uncertainties. Additional
uncertainties arise from significant changes being considered for Superfund,
including shifting the current preference for permanent treatment to a wider
acceptance of containment and other engineering/institutional controls. This
change could lead to smaller volumes of waste being treated on-site, and the
potential to qualify for less stringent remedies could cause clients to delay
the initiation of remediation projects. However, many of the proposed changes to
Superfund are beneficial to the environmental remediation industry, including
doubling the dollar amount and time period in which emergency removal actions
take place, increasing contractor indemnification protections, streamlining the
study phase of the process to accelerate actual remediation, and creating
incentives for brownfield cleanups.
The Resource Conservation and Recovery Act of 1976, as amended in 1984
("RCRA"), is the principal federal statute governing hazardous waste generation,
treatment, storage and disposal. RCRA, or EPA-approved state programs often more
stringent, govern waste handling activities involving wastes classified as
"hazardous." Under RCRA, liability and stringent operating requirements are
imposed on a person who is either a "generator" or "transporter" of hazardous
wastes, or an "owner" or "operator" of a hazardous waste treatment, storage or
disposal facility. The EPA has issued regulations under RCRA for hazardous waste
generators, transporters and owners and operators of hazardous waste treatment,
storage or disposal facilities. These regulations impose detailed operating,
inspection, training, emergency preparedness and response standards, and
requirements for closure, continuing financial responsibility, manifesting,
recordkeeping and reporting. The Company's clients remain responsible by law for
the generation or transportation of hazardous wastes or ownership or operation
of hazardous waste treatment, storage or disposal facilities. Although the
Company does not believe its conduct in performing environmental remediation
services would cause it to be considered liable as an owner or operator of a
hazardous waste treatment, storage or disposal facility, or a generator or
transporter of hazardous wastes under RCRA, RCRA and similar state statutes
regulate the Company's practices for the treatment, transportation and other
handling of hazardous materials, and substantial fines and penalties may be
imposed for any violation of such statutes and the regulations thereunder.
The Company's services are also utilized by its clients in complying
with, and the Company's operations are subject to regulation under, among
others, the following federal laws: the Toxic Substances Control Act, the Clean
Water Act, the Safe Drinking Water Act, the Occupational Safety and Health Act
and the Hazardous Materials Transportation Act. In addition, many states have
passed Superfund-type legislation and other statutes, regulations and policies
to cover more detailed aspects of hazardous materials management.
The Company, through its on-site treatment capabilities and the use of
subcontractors, attempts to minimize its transportation of hazardous substances
and wastes. However, there are occasions, especially in connection with its
emergency response activities, when the Company does transport hazardous
substances and wastes. Such transportation activities are closely regulated by
the United States Department of Transportation, the Interstate Commerce
Commission, and transportation regulatory bodies in each state. The applicable
regulations include licensing requirements, truck safety requirements, weight
limitations and, in some areas, rate limitations and operating conditions.
BACKLOG AND POTENTIAL VALUE OF TERM CONTRACTS
The following table lists at the dates indicated (i) the Company's
backlog, defined as the unearned portion of the Company's existing contracts and
unfilled orders, and (ii) the Company's term contracts, defined as the potential
value of government term contracts (in thousands):
<TABLE>
<CAPTION>
December 31,
------------
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Backlog $ 332,000 $ 375,000 $ 445,000
Term contracts 1,509,000 1,401,000 1,531,000
------------ ----------- -----------
Total contract backlog $ 1,841,000 $1,776,000 $1,976,000
============ ========== ==========
</TABLE>
Backlog. In accordance with industry practice, substantially all of the
Company's contracts in backlog may be terminated at the convenience of the
client. In addition, the amount of the Company's backlog is subject to changes
in the scope of services to be provided under any given contract. The Company
estimates that approximately 80% of the backlog at December 31, 1997 will be
realized within the next year.
7
<PAGE> 10
Term Contracts. Term contracts typically are performed by completing
remediation work under delivery orders, issued by the contracting government
entity, for a large number of small-to-medium-sized projects throughout the
geographic area covered by the contract. The Company's government term contracts
generally may be canceled, delayed or modified at the sole option of the
government, and typically are subject to annual funding limitations and public
sector budget constraints. Accordingly, such government contracts represent the
potential dollar value that may be expended under such contracts, but there is
no assurance that such amounts, if any, will be actually spent on any projects,
or of the timing thereof.
NSC INVESTMENT
NSC is a provider of asbestos-abatement and other specialty contracting
services to a broad range of commercial, industrial and institutional clients
located throughout the United States. NSC provides asbestos-abatement services
through two of its wholly-owned subsidiaries, National Surface Cleaning, Inc.
and National Service Cleaning Corp.; demolition and dismantling services through
its wholly-owned subsidiary, Olshan Demolishing Management, Inc. ("ODMI"); and
specialty coatings application and lead paint-abatement through its wholly-owned
subsidiary, NSC Specialty Coatings, Inc. In May 1993, the Company's investment
in NSC was reduced from 70% to 40% as a result of NSC's purchase of the asbestos
abatement division of The Brand Companies, Inc., an affiliate of WMX, in
exchange for its industrial cleaning and maintenance business and the issuance
of 4,010,000 shares of NSC common stock. In April 1995, NSC entered into an
agreement with Rust under which NSC, through ODMI, assumed the management of
Olshan Demolishing Company, a Rust subsidiary specializing in demolition and
dismantling, primarily in the industrial market. Rust owns another 40% of NSC
and the remaining 20% is publicly held.
An asbestos-abatement or demolition and dismantling program is focused
on meeting the needs of the facility owner or operator to manage properly the
financial, regulatory and safety-related risks associated with a demolition or
asbestos project. NSC's removal and demolition services require the coordination
of several processes: marketing, bidding and contracting, project management,
health and safety programs, and the actual asbestos removal or dismantling and
demolition. NSC management maintains administrative and operational control over
all phases of a project, from estimating and bidding through project completion.
Although some of NSC's contracts are directly entered into with its
clients without a formal bidding process, NSC receives a significant portion of
its contracts through a bidding process. The majority of NSC's projects are
contracted on a fixed-price basis, while the remainder are contracted either on
a time and materials or a unit-price basis. All work is done in accordance with
applicable EPA and OSHA regulations and applicable state and local regulations.
NSC is also subject to the regulations of the Mine Safety and Health Act when it
conducts demolition and dismantling projects at mine locations.
The market for asbestos abatement services is highly competitive. NSC
competes with large asbestos abatement firms, several of which provide services
on a regional basis. NSC also competes, to a lesser extent, with smaller local
and regional firms. While the demand for asbestos-abatement services has
stabilized, demand is still dependent on the fluctuation of national and
regional economies and the finite amount of asbestos remaining to be removed,
there can be no assurance that such demand will remain steady. Through the
diversification into the demolition, specialty coatings and lead paint-abatement
markets, NSC is seeking to provide a full range of specialty contracting
services to the performance-sensitive customer.
The Company has historically accounted for its investment in NSC on the
equity method. The Company now intends to divest its 40% share of NSC and
recorded a writedown of the investment in the second quarter of 1997. The
investment in NSC is now accounted for as an asset held for sale.
NSC's Board of Directors declared and NSC paid a cash dividend of
$602,000 to the Company for each of the years ended December 31, 1997, 1996 and
1995. While NSC's Board of Directors has not established a policy concerning
payment of regular dividends, it has stated its intention to review annually the
feasibility of declaring additional dividends depending upon the results of
NSC's operations and the financial condition and cash needs of NSC.
Pursuant to the Merger Agreement, the Company will pay the NSC
Distribution of NSC Shares to holders of record of the Shares as of the close of
business on February 24, 1998. The payment date for the NSC Distribution is
March 6, 1998, which is the earliest date on which the NSC Distribution may be
paid under the Company's Regulations. It is anticipated that the NSC
Distribution will be treated as a pro rata taxable redemption that qualifies as
a sale or exchange for tax purposes.
8
<PAGE> 11
ITEM 2. PROPERTIES
The Company currently owns property in four states and leases property
in 19 states and the District of Columbia. The property owned by the Company
includes approximately 26 acres in Findlay, Ohio, upon which are located the
Company's 37,500 square foot corporate headquarters, a 39,600 square foot
laboratory and technical facility, a 20,000 square foot support services
facility, as well as its fabrication, maintenance and remediation service center
and training facilities. The Company also owns remediation service centers in
Covington, Georgia (approximately ten acres of land and an 8,200 square foot
building), Clermont, Florida (approximately five acres of land and a 6,500
square foot building) and Salt Lake City, Utah (approximately one third acre of
land and a 6,097 square foot building).
The Company operates other offices and remediation service centers in
the following states: Alaska, Arizona, California, Colorado, the District of
Columbia, Florida, Georgia, Hawaii, Illinois, Iowa, Louisiana, Massachusetts,
Minnesota, Missouri, New Jersey, New York, Ohio, Pennsylvania, Tennessee, Texas,
Utah, Virginia and Washington. All of these offices and service center
facilities are leased. Under these leases, the Company is required to pay base
rentals, real estate taxes, utilities and other operating expenses. Annual
rental payments for the remediation service centers and office properties are
approximately $5,000,000.
ITEM 3. LEGAL PROCEEDINGS
The Company is currently in litigation in the U.S. District Court for
the Western District of New York with Occidental Chemical Corporation
("Occidental") relating to the Durez Inlet Project performed in 1993 and 1994
for Occidental in North Tonawanda, New York. The Company's work was
substantially delayed and its costs of performance were substantially increased
as a result of conditions at the site which the Company believes were materially
different than as represented by Occidental. Occidental's amended complaint
seeks $8,806,000 in damages primarily for alleged costs incurred as a result of
project delays and added volumes of incinerated waste. The Company's
counterclaim seeks an amount in excess of $9,200,000 for damages arising from
Occidental's breach of contract, misrepresentation and failure to pay
outstanding contract amounts.
Management believes that it has established adequate reserves should
the resolution of the above matter be lower than the amounts recorded and for
other matters in litigation or other claims and disputes. There is, however,
always risk and uncertainty in pursuing and defending litigation and arbitration
proceedings in the course of the Company's remediation business and,
notwithstanding the reserves currently established, adverse future results in
litigation or other proceedings could have a material adverse impact upon the
Company's consolidated future results of operations or financial condition. In
addition to the above, the Company is subject to a number of claims and lawsuits
in the ordinary course of its business. In the opinion of management, the
outcome of these actions, which are not clearly determinable at the present
time, are either adequately covered by insurance, or if not insured, will not,
in the aggregate, have a material adverse impact upon the Company's consolidated
financial position or the results of future operations.
9
<PAGE> 12
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SHAREHOLDER MATTERS
The Company's common stock is traded on The New York Stock Exchange
under the symbol "OHM." The table sets forth by quarter, for the last two fiscal
years, the high and low sales prices of the Company's common stock on The New
York Stock Exchange Composite Tape as reported by The Wall Street Journal
(Midwest Edition):
<TABLE>
<CAPTION>
Market Price
------------
High Low
---- ---
<S> <C> <C>
1997
First 9 7 3/4
Second 8 5/8 7 3/8
Third 8 7/16 6 13/16
Fourth 9 5/16 7 7/16
1996
First 8 1/8 7
Second 9 1/4 7 1/4
Third 7 7/8 6 1/2
Fourth 9 7
</TABLE>
NOTE:
(1) As of December 31, 1997, the Company has approximately 739
shareholders of record.
(2) The Company has not declared any cash dividends on its Common
Stock and has bank covenants that restrict the amount of cash
dividends that can be paid in the future. See "Note 7 to the
Consolidated Financial Statements."
10
<PAGE> 13
ITEM 6. SELECTED FINANCIAL DATA
(a) The Five Year Summary of Results of Operations for each of the five
years ended December 31 is set forth below:
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
(In Thousands, Except Per Share Data)
<S> <C> <C> <C> <C> <C>
Revenue $526,691 $550,984 $457,925 $323,381 $242,401
Cost of services 454,556 478,924 393,149 296,159 202,341
-------- -------- -------- -------- --------
Gross Profit 72,135 72,060 64,776 27,222 40,060
Claims settlement cost and other 37,877 ---- ---- ---- ----
Selling, general and administrative expenses 46,060 49,250 45,223 32,281 27,110
-------- --------
Operating (Loss) Income (11,802) 22,810 19,553 (5,059) 12,950
-------- -------- -------- -------- --------
Other (Income) Expenses:
Investment income (389) (124) (849) (28) (28)
Interest expense 5,186 7,087 10,413 9,177 7,748
Equity in net earnings of affiliates' continuing operations (185) (748) (287) (1,032) (1,600)
Write-down of investment in NSC Corporation 14,949 ---- ---- ---- ----
Miscellaneous (income) expense 276 (296) (72) 898 341
-------- -------- -------- -------- --------
19,837 5,919 9,205 9,015 6,461
(Loss) Income From Continuing Operations Before Income Taxes (Benefit) (31,639) 16,891 10,348 (14,074) 6,489
Income taxes (benefit) (10,442) 5,376 3,541 (6,458) 2,082
-------- -------- -------- -------- --------
Net (Loss) Income $(21,197) $ 11,515 $ 6,807 $ (7,616) $ 4,407
======== ======== ======== ======== ========
Net (Loss) Income Per Common Share $ (0.78) $ 0.43 $ 0.31 $ (0.49) $ 0.36
======== ======== ======== ======== ========
Weighted Average Common Shares 27,210 26,820 22,211 15,582 12,250
======== ======== ======== ======== ========
Net (Loss) Income Per Common Share--Assuming Dilution $ (0.78) $ 0.43 $ 0.30 $ (0.49) $ 0.35
======== ======== ======== ======== ========
Adjusted Weighted Average Common Shares--Assuming Dilution 27,210 26,840 22,413 15,582 12,454
======== ======== ======== ======== ========
</TABLE>
NOTES:
(1) Special charges include: (i) for the year ended December 31,
1997, the Company recorded a $22,726,000 charge (net of income
tax benefit of $15,151,000) for the settlement and write-down of
certain claims and litigation, establishment of reserves for the
consolidation of certain laboratory and operational functions.
In addition, the Company recorded a $12,089,000 (net of
$2,860,000 income tax benefit) charge to reduce the carrying
value of its NSC investment to reflect the likely value to be
realized given the Company's intention to divest this
investment; (ii) for the year ended December 31, 1995, the
Company recorded a $2,312,000 charge (net of income tax benefit
of $1,542,000) for integration costs related to the acquisition
of the hazardous and nuclear waste remediation service business
(the "Division") of Rust International Inc. ("Rust"); and (iii)
for the year ended December 31, 1994, the Company recorded a
special charge of $15,000,000 (net of income tax benefit of
$10,000,000) to establish a reserve for accounts receivable,
primarily where such accounts are in litigation.
(2) Effective June 1, 1997, the Company acquired all of the
outstanding stock of Beneco Enterprises, Inc., a Utah
corporation ("Beneco"), for an aggregate purchase price of
$14,700,000. The acquisition of Beneco has been accounted for
using the purchase method and, accordingly, the acquired assets
and assumed liabilities, including goodwill, have been recorded
at their estimated fair values as of June 1, 1997. The Company's
consolidated financial statements for the year ended December
31, 1997 include the results of Beneco since June 1, 1997.
See "Note 2 to the Consolidated Financial Statements."
(3) On May 30, 1995, the Company completed the acquisition of
substantially all of the assets and certain liabilities of the
Division of Rust in exchange for 9,668,000 shares of Common
Stock of the Company, or approximately 37% of the outstanding
shares of the Company's Common Stock. The acquisition of the
Division has been accounted for using the purchase method and,
accordingly, the acquired assets and assumed liabilities,
including
11
<PAGE> 14
goodwill, have been recorded at their estimated fair values as
of May 30, 1995. The Company's consolidated financial statements
for the year ended December 31, 1995, include the results of
operations for the Division since May 30, 1995. See "Note 2 to
the Consolidated Financial Statements."
(b) The Five Year Summary of Financial Position as of December 31 is set
forth below (In thousands):
<TABLE>
<CAPTION>
December 31,
------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Working capital $ 77,058 $ 94,342 $ 129,156 $ 116,464 $ 69,985
Total assets 319,779 336,537 376,506 272,546 215,357
Long-term debt 50,041 52,972 104,111 127,279 71,113
Shareholders' equity 156,896 174,572 160,492 76,920 82,743
</TABLE>
NOTE:
(1) The Company has not declared any cash dividends on its Common
Stock and is restricted by bank covenants from the payment of
cash dividends in the future. See "Note 7 to the Consolidated
Financial Statements."
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
(a) RESULTS OF OPERATIONS
GENERAL
The Company is a diversified services firm which provides a broad range
of outsourced services including environmental remediation and project, program
and construction management services to government and private sector clients
located primarily in the United States. The timing of the Company's revenue is
dependent on its backlog, contract awards and the performance requirements of
each contract. The Company's revenue is also affected by the timing of its
clients' planned remediation activities which generally increase during the
third and fourth quarters. Because of this change in demand, the Company's
quarterly revenue can fluctuate, and revenue for the first and second quarters
of each year have historically been lower than for the third and fourth
quarters, although there can be no assurance that this will occur in future
years. Accordingly, quarterly or other interim results should not be considered
indicative of results to be expected for any quarter or full fiscal year.
See Part I, Item 1 for a description of the Merger, the Offer and the
NSC Distribution.
In connection with the Company's entry into the Merger Agreement and by
resolution of the Company's Board of Directors, the Company's 1986 Stock Option
Plan and the Company's Nonqualified Stock Option Plan for Directors were amended
to immediately vest each non-vested stock option issued under such plans and to
give each of the option holders the right to cancel their options in exchange
for a cash payment equal to the difference between $11.50 per share and the
respective exercise price of each option. In addition, the Company's Board of
Directors took action to allow holders of the restricted stock issued under the
Company's Incentive Stock Plan to tender such stock in the Offer. As a result of
the above actions, the Company will incur up to $9,400,000 of compensation
expense during the first quarter of 1998 if all of the stock option holders
elect to receive the cash payment for their outstanding options.
The consummation of the transactions contemplated by the Merger
Agreement is subject to the satisfaction of various conditions, including,
without limitation: (i) the approval by the stockholders of Parent for the
issuance of shares of Parent Common Stock pursuant to the Merger Agreement, and
(ii) the approval of the Merger Agreement and the Merger by the shareholders of
the Company. The Company received early termination of the waiting period
required under the Hart-Scott-Rodino Antitrust Improvements Act during January
1998. See "Business -- Overview."
The accompanying financial statements were prepared assuming the
Company would continue operations independently and do not anticipate
adjustments which may be required as a result of the Merger. The Merger will be
accounted for using the purchase method and as a result may impact the carrying
value of certain of the Company's assets and liabilities.
Effective June 1, 1997, the Company acquired all of the outstanding
stock of Beneco Enterprises, Inc. ("Beneco"), a Utah corporation, for an
aggregate purchase price of $14,700,000. The purchase price consisted of a
$9,700,000 cash payment and $5,000,000 of unsecured promissory notes. The
Company has agreed to make an additional payment in the year 2000 contingent
upon the achievement of certain operating results and other contractual
conditions. Beneco is a provider of project, program and construction management
services to the Department of Defense ("DOD") and other government agencies
throughout the United States. The acquisition of Beneco has been accounted for
using the purchase method and, accordingly,
12
<PAGE> 15
the acquired assets and assumed liabilities, including goodwill, have been
recorded at their estimated fair values as of June 1, 1997. The Company's
consolidated statements of operations include the results of operations for
Beneco since June 1, 1997. See "Note 2 to the Consolidated Financial
Statements."
On May 30, 1995, the Company completed the acquisition of substantially
all of the assets and certain liabilities of the hazardous and nuclear waste
remediation service business (the "Division") of Rust in exchange for 9,668,000
shares of Common Stock of the Company, or approximately 37% of the outstanding
shares of the Company's Common Stock. In exchange for the Warrants WMX provided
the Company with a credit enhancement in the form of guarantees, issued from
time to time upon request of the Company, of up to $62,000,000 of the Company's
indebtedness, which will increase proportionately up to $75,000,000 upon
issuance of shares under the warrant. The acquisition of the Division has been
accounted for using the purchase method and, accordingly, the acquired assets
and assumed liabilities, including goodwill, have been recorded at their
estimated fair values as of May 30, 1995. See "Note 2 to the Consolidated
Financial Statements." The Company's consolidated financial statements include
the results of operations for the Division since May 30, 1995. See Item 1 and
Item 13 for a discussion of the Standstill Agreement.
TWELVE MONTHS ENDED DECEMBER 31, 1997 VS. TWELVE MONTHS ENDED DECEMBER 31, 1996
Revenue. The following table sets forth the Company's revenue by client
type for the twelve months ended December 31, 1997 and 1996 (in thousands,
except percentages):
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C> <C> <C>
Federal, State, and Local Government $414,735 79% $426,256 77%
Industrial 111,956 21 124,728 23
-------- ---- --------- ----
Total Revenue $526,691 100% $550,984 100%
======== === ======== ===
</TABLE>
Total revenue for the year ended December 31, 1997, decreased 4% to
$526,691,000 from $550,984,000 in 1996. Such decrease in revenue is primarily
due to decreased environmental remediation revenues from government and
industrial sector clients, partially offset by revenue from Beneco which was
acquired effective June 1, 1997 and has been included in the results of
operations since such time. The Company derives a substantial portion of its
revenue from the government sector and believes that such revenue will continue
to be its primary source of revenue for the foreseeable future. See "Business --
Backlog and Potential Value of Term Contracts" and "Environmental Matters and
Government Contracting" in Management's Discussion and Analysis of Financial
Condition and Results of Operations.
Revenue from government agencies for the twelve months ended December 31,
1997 decreased $11,521,000 or 3% from $426,256,000 in 1996. Revenues from
government agencies was negatively impacted by a decline in revenue from the
Company's environmental remediation services business, which was offset by the
acquisition of Beneco. The environmental remediation business experienced a
decrease in revenue from the Company's term contracts with the United States Air
Force ("Air Force") and the United States Navy ("Navy"). In addition, the
Company has experienced a significant decrease in revenue from its site specific
thermal incineration project in Holbrook, Massachusetts with the United States
Army Corps of Engineers ("USACE") as the project nears its completion. Such
decreases were partially offset by an increase in revenue from the Company's
term contracts with the USACE and various state and local governments. The
Company expects to continue to receive funding under its federal contracts in
the foreseeable future and is experiencing a significant amount of proposal
activity for new contracts with the various DOD agencies, as well as the
Department of Energy ("DOE"). However, no assurance can be given that the
Company will be awarded any new contracts with the DOD or DOE. In addition,
reductions by Congress in future environmental remediation budgets of government
agencies may have a material adverse impact upon future revenue from such
agencies and the funding of the Company's government term contracts included in
contract backlog.
The Company experienced a $12,772,000 or 10% decrease in revenue from
industrial clients for the year ended December 31, 1997 as compared to 1996. The
Company believes that demand for its services from the industrial sector has
been negatively impacted due to anticipated changes in the Superfund law pending
its reauthorization as well as current economic conditions in certain industry
and geographic sectors. Although the Company cannot predict the impact upon the
environmental industry of the failure of Congress to reauthorize the Superfund
law, further delays in Superfund reauthorization will continue to have a
material adverse impact upon the demand for the Company's services in the form
of project delays as clients and potential clients wait for and anticipate
changes in these regulations. The result of decreased demand from the industrial
sector has increased the competitive pressures on the contracts available for
bid from the industrial market. The Company has been very selective in bidding
industrial contracts and has established specific minimum criteria on
profitability and risk in determining whether or not to compete for any given
contract. The Company expects the current market conditions to continue in the
industrial sector into the foreseeable future.
13
<PAGE> 16
Cost of Services and Gross Profit. Cost of services for the year ended
December 31, 1997 decreased 5% to $454,556,000 from $478,924,000 in 1996. Cost
of services as a percentage of revenue decreased to 86% for the year ended
December 31, 1997 from 87% for 1996. Gross profit increased $75,000 to
$72,135,000 in 1997 from $72,060,000 in 1996. Gross profit as a percentage of
revenue increased to 14% for the year ended December 31, 1997 from 13% in 1996.
The Company's cost of services and gross profit during 1997 was favorably
impacted by the following: (i) actions taken by the Company to lessen the use of
subcontractors on its government cost reimbursable projects as the amount of
mark-up the Company receives on subcontractors is minimal, (ii) cost reduction
actions taken during the second quarter of 1997 to reduce the indirect cost of
services through the consolidation of certain of the Company's operational and
laboratory functions, and (iii) the acquisition of Beneco. Such improvements
were partially offset by decreased gross profit from competitive market
conditions on projects performed for the industrial sector.
Claims Settlement Costs and Other. During the second quarter of 1997,
the Company settled litigation that was pending involving Citgo Petroleum
Corporation ("Citgo"), Oxy USA Inc., and Occidental Oil & Gas (collectively
"Oxy") relating to a remediation project which was performed by the Company for
Citgo at its Lake Charles, Louisiana refinery during 1993 and 1994. Under the
terms of the settlement with Citgo and Oxy, the Company received a cash payment
of $14,346,000. As a result of an unfavorable binding arbitration decision on
the dispute between the Company and Separation and Recovery Systems, Inc.
("SRS") arising out of the Company's termination of SRS' subcontract for
services at a project in Cincinnati, Ohio, SRS was awarded $2,400,000 in
damages. The settlement and write-down of the aforementioned claims and
litigation, together with other receivables and the establishment of reserves
for the consolidation of certain laboratory and operational functions, resulted
in the Company recording a charge of $37,877,000 pre-tax, $22,726,000 after-tax.
Selling, General and Administrative Expenses. Selling, general and
administrative ("SGA") expenses for the year ended December 31, 1997 decreased
7% to $46,060,000 from $49,250,000 in 1996. SGA expense as a percentage of
revenue was 9% for both the years ended December 31, 1997 and 1996. SGA expense
was favorably impacted during 1997 by the consolidation of certain operational
functions during the second quarter of 1997. During 1997 and 1996, the Company
made substantial investments in personnel and systems in support of its
government contracts and related compliance issues. Such investments will
continue in light of the Company's dependence on federal government contracts.
Interest expense. Interest expense, net of investment income, decreased
31% to $4,797,000 for the year ended December 31, 1997 from $6,963,000 for 1996.
The decrease in interest expense is a result of a decrease in the average
borrowings outstanding under the Company's revolving credit agreement during
1997 when compared to 1996. Such decease is primarily the result of the Company
utilizing lease lines of credit for purchases and financing of certain of its
operational equipment as well as improvements made in the Company's cash
management procedures and systems which decreased its working capital
investment.
Write-down of Investment in NSC. During the second quarter of 1997, the
Company wrote down its investment in NSC to the expected net realizable value
and plans to divest its 40% share of NSC. As a result, the Company recorded a
$14,949,000 pre-tax, $12,089,000 after tax, charge during the second quarter of
1997, to reduce the carrying value of its NSC investment and to account for it
as an asset held for sale. Subsequently, the Company has decided to distribute
to its common stock shareholders its shares of NSC common stock pursuant to the
Merger Agreement.
Net (loss) Income. Net loss for the year ended December 31, 1997 was
$21,197,000 or $0.78 per share compared to net income of $11,515,000 or $0.43
per share in 1996. The decrease in net income is primarily due to the settlement
of claims and the write-down of the Company's investment in NSC, partially
offset by other factors discussed above.
TWELVE MONTHS ENDED DECEMBER 31, 1996 VS. TWELVE MONTHS ENDED DECEMBER 31, 1995
Revenue. The following table sets forth the Company's revenue by client
type for the twelve months ended December 31, 1996 and 1995 (in thousands,
except percentages):
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C> <C> <C>
Federal, State, and Local Government $426,256 77% $349,052 76%
Industrial 124,728 23 108,873 24
-------- --- -------- ---
Total Revenue $550,984 100% $457,925 100%
======== === ======== ===
</TABLE>
Total revenue for the year ended December 31, 1996, increased 20% to
$550,984,000 from $457,925,000 in 1995. Such improvement resulted primarily from
increased revenue from federal government agencies. In addition, revenue from
industrial sector clients was favorably impacted by the acquisition of the
Division, which was included for a full year in 1996 compared to only seven
months of 1995.
14
<PAGE> 17
Revenue from government agencies for the twelve months ended December
31, 1996 increased $77,204,000 or 22% from $349,052,000 in 1995. This
improvement resulted primarily from an increase in revenue from the Company's
term contracts with the Air Force, the USACE, the DOE and the Navy. Such
increases were partially offset by a decrease in revenue from state and local
governments and the Environmental Protection Agency ("EPA") during 1996. The
federal government shutdown during the first quarter of 1996 negatively impacted
the Company's revenue from the EPA and delayed delivery orders issued under the
Company's existing federal term contracts.
The Company experienced a $15,855,000 or 15% increase in revenue from
industrial clients for the year ended December 31, 1996 as compared to 1995.
Such increase is primarily a result of the acquisition of the Division during
May 1995. The Company believes that revenue growth from the industrial sector
has been negatively impacted due to anticipated changes in the Superfund law
pending its reauthorization as well as current economic conditions in certain
industry and geographic sectors.
Cost of Services and Gross Profit. Cost of services for the year ended
December 31, 1996 increased 22% to $478,924,000 from $393,149,000 in 1995
primarily due to increased revenue. Cost of services as a percentage of revenue
increased to 87% for the year ended December 31, 1996 from 86% for 1995.
Gross profit increased 11% to $72,060,000 in 1996 from $64,776,000 in
1995. The increase in gross profit is primarily due to increased revenues. Gross
profit as a percentage of revenue decreased to 13% for the year ended December
31, 1996 from 14% in 1995. The Company's gross profit on its fixed-price
contracts has been negatively impacted by competitive market conditions and,
during the first quarter of 1996, by the severe winter weather in the Midwest
and Northeast regions of the country. In addition, the Company has experienced a
decrease in the overall gross margin it has received on its government projects
as a result of the nature of the projects that have been awarded to the Company
under its term contracts which has required an increase in the use of
subcontracted services and materials over levels historically experienced. Under
the terms of such contracts, the Company receives minimal markups on such
subcontracted services and materials.
Selling, General and Administrative Expenses. SGA expense increased 9%
to $49,250,000 from $45,223,000 in 1995. SGA expenses for the year ended
December 31, 1995 included a $3,854,000 pre-tax, $2,312,000 after-tax, charge
for integration costs related to the acquisition of the Division. The charge was
primarily for severance and relocation costs for certain of the Company's
personnel and the closing of certain of the Company's offices as a result of
combining the operations of the Division and the Company. Without such charge,
SGA expenses increased 19% primarily as a result of the acquisition of the
Division and the growth in revenue. In addition, the Company has made a
substantial investment in personnel and systems in support of its government
contracts and related compliance issues. SGA expense as a percent of revenue was
9% for the twelve months ended December 31, 1996 and 1995, exclusive of the
integration charge recorded in 1995.
Interest expense. Interest expense, net of investment income, decreased
27% to $6,963,000 for the year ended December 31, 1996 from $9,564,000 for 1995.
The decrease in interest expense was a result of a decrease in the average
borrowings outstanding, as well as interest rates charged, under the Company's
revolving credit agreement during 1996 compared to 1995. The decrease in
interest rates charged under the revolving credit agreement primarily is a
result of the WMX guarantee of the Company's debt in exchange for the warrant
described above. Upon successful completion of the aforementioned merger with
IT, such debt guarantee will be terminated. Investment income for the twelve
months ended December 31, 1995 included income earned on certain outstanding
receivables guaranteed by Rust pursuant to the agreement for the acquisition of
the Division. Such receivables were paid to the Company on September 30, 1995.
Equity in Net Earnings of Affiliate. The Company's equity interest in
NSC's net earnings increased $461,000 to $748,000 in 1996 from $287,000 in 1995.
The twelve months ended December 31, 1995 was negatively impacted by the
settlement of claims with certain clients of NSC as well as increases in
insurance reserves. NSC has experienced a decrease in revenues from asbestos
abatement contracts for the twelve months ended December 31, 1996 compared to
1995. Such decrease in revenue was more than offset by increases in revenue from
its specialty contractor services subsidiary, Olshan Demolishing Management,
Inc. The asbestos abatement industry in general continues to experience
competitive pressures in the marketplace which have negatively impacted the
gross margin on NSC's projects.
Net Income. Net income for the year ended December 31, 1996 was
$11,515,000 or $0.43 per share compared to $6,807,000 or $0.30 per share in
1995. The improvement in net income is primarily due to increased revenue, the
integration charge recorded during 1995, decreased interest expense as well as
the other factors discussed above.
(b) LIQUIDITY AND CAPITAL RESOURCES
15
<PAGE> 18
On May 31, 1995, the Company entered into a $150,000,000 revolving
credit agreement with a group of banks (the "Bank Group") to provide letters of
credit and cash borrowings. The agreement has a five year term and is scheduled
to expire on May 30, 2000. WMX has issued a guarantee of up to $62,000,000
outstanding under the credit agreement in favor of the Bank Group. Upon
successful completion of the Merger, such debt guarantee will be terminated. See
"Note 2 to the Consolidated Financial Statements." Under the terms of the
agreement the entire credit facility can be used for either cash borrowings or
letters of credit. Cash borrowings bear interest at either the prime rate plus a
percentage up to 0.625% or, at the Company's option, the Eurodollar market rate
plus a percentage ranging from 0.325% to 1.625%. The percentage over the prime
rate or the Eurodollar market rate is based on the aggregate amount borrowed
under the facility, the presence of the guarantee, and the Company's financial
performance as measured by an interest coverage ratio and a total funded debt
ratio. The agreement provides the participating banks with a security interest
in the Company's equipment, inventories, accounts receivables, general
intangibles and in the Company's investment in the common stock of NSC as well
as the Company's other subsidiaries. The agreement also imposes, among other
covenants, a minimum tangible net worth covenant, a restriction on all of the
Company's retained earnings including the declaration and payment of cash
dividends and a restriction on the ratio of total funded debt to earnings before
income taxes, depreciation and amortization. The Company had no cash borrowing
under the revolving credit facility at December 31, 1997 and 1996. Aggregate
letters of credit outstanding at December 31, 1997 and 1996 were $13,300,000 and
$12,223,000, respectively.
Capital expenditures for the years ended December 31, 1997, 1996, and
1995 were $18,036,000, $23,279,000, and $14,276,000, respectively. The Company's
capital expenditures are primarily related to the purchase of heavy construction
equipment the fabrication of custom equipment by the Company for the execution
of remediation projects and the installation of computer systems and related
equipment. Capital expenditures for fiscal year 1998 are expected to range
between $10,000,000 and $15,000,000. The Company's long-term capital expenditure
requirements are dependent upon the type and size of future remediation projects
awarded to the Company.
The Company believes that the government sector will continue to be its
primary source of revenue for the foreseeable future in light of its contract
backlog with federal government agencies. Revenue from government agencies
historically has required greater working capital, the major component of which
is accounts receivable, than revenue from industrial sector clients. In
addition, the Company is bidding on a number of large, long-term contract
opportunities which, if awarded to the Company, would also increase working
capital needs and capital expenditures. The Company believes it will be able to
finance its working capital needs and capital expenditures in the short term
through a combination of cash flows from operations, borrowing under its
revolving credit facility, proceeds from permitted asset sales and other
external sources.
The Company's identified long-term capital needs consist of payments
due upon the maturity of the Company's Revolving Credit Facility in 2000 and
sinking fund payments which commenced in 1996 of 7.5% of the principal amount as
well as payments due upon maturity of its Convertible Debentures in 2006. The
Company has purchased and retired $10,736,000 of the outstanding Convertible
Debentures during 1995 and 1996, sufficient to meet its annual sinking fund
obligations through October 1, 1997, as well as a portion of the sinking fund
obligation due October 1, 1998. The Company believes that it will be able to
refinance the remaining indebtedness as necessary. See "Note 7 to the
Consolidated Financial Statements."
(c) INFLATION
Historically, inflation has not been a significant factor to the
Company or to the cost of its operations.
(d) RECENT ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board ("FASB") issued
Statements No. 130, "Reporting Comprehensive Income," and Statement No. 131,
"Disclosures about Segments of an Enterprise and Related Information." Statement
No. 130 requires separate reporting of certain items, already disclosed by the
Company, affecting shareholders' equity outside of those included in arriving at
net earnings. Statement No. 131, effective for fiscal 1999, establishes
requirements for reporting information about operating segments in annual and
interim statements. This statement may require a change in the Company's
financial reporting, however, the extent of this change, if any, has not been
determined.
(e) DEFERRED TAX ASSETS
The Company has recorded a valuation allowance for its deferred tax
assets to the extent that the Company believes such deferred tax assets may not
be realized. With respect to deferred tax assets for which a valuation allowance
has not been established, the Company believes it will realize the benefit of
these assets through the reversal of taxable temporary differences and future
income. The Company believes that the future taxable income of approximately
$67,000,000 necessary to realize
16
<PAGE> 19
the deferred tax assets is more likely than not to occur because of its
substantial backlog and term contracts from which the Company has historically
realized sufficient margin to produce consolidated net income. The principal
uncertainty of realization of the deferred tax assets is the Company's ability
to convert its backlog to revenue and margin. See "Business -- Backlog and
Potential Value of Term Contracts" and "Environmental Matters and Government
Contracting" in Management's Discussion and Analysis of Financial Condition and
Results of Operations. The Company evaluates the realizability of its deferred
tax assets quarterly and assesses the need for any change in the valuation
allowance. See "Note 9 to the Consolidated Financial Statements."
(f) IMPACT OF YEAR 2000
Some of the Company's older computer programs were written using two
digits rather than four to define the applicable year. As a result, those
computer programs have time-sensitive software that recognizes a date using "00"
as year 1900 rather than the year 2000. This could cause a system failure or
miscalculations, causing disruptions of operations, including, among other
things, a temporary inability to process transactions, send invoices, or engage
in similar normal business activities.
The Company has completed an assessment and will have to modify or
replace portions of its software. The Company believes the cost to modify or
replace such software will be minimal and will not have a material adverse
impact upon the Company's future results of operations or financial condition.
(g) ENVIRONMENTAL MATTERS AND GOVERNMENT CONTRACTING
Although the Company believes that it generally benefits from increased
environmental regulations and from enforcement of those regulations, increased
regulation and enforcement also create significant risks for the Company. The
assessment, remediation, analysis, handling and management of hazardous
substances necessarily involve significant risks, including the possibility of
damages or injuries caused by the escape of hazardous materials into the
environment, and the possibility of fines, penalties or other regulatory action.
These risks include potentially large civil and criminal liabilities for
violations of environmental laws and regulations, and liabilities to customers
and to third parties for damages arising from performing services for clients,
which could have a material adverse effect on the Company.
The Company does not believe there are currently any material
environmental liabilities which should be recorded or disclosed in its financial
statements. The Company anticipates that its compliance with various laws and
regulations relating to the protection of the environment will not have a
material effect on its capital expenditures, future earnings or competitive
position.
Because of its dependence on government contracts, the Company also
faces the risks associated with such contracting, which could include civil and
criminal fines and penalties. As a result of its government contracting
business, the Company has been, is, and may in the future be subject to audits
and investigations by government agencies. The fines and penalties which could
result from noncompliance with the Company's government contracts or appropriate
standards and regulations, or the Company's suspension or debarment from future
government contracting, could have a material adverse effect on the Company's
business.
(h) FORWARD LOOKING STATEMENTS
All statements, other than statements of historical facts, included in
this Form 10-K that address activities, events or developments that the Company
expects, believes or anticipates will or may occur in the future, including such
matters as future capital expenditures, including the amount and nature thereof,
potential acquisitions by the Company, trends affecting the Company's financial
condition or results of operations, and the Company's business and growth
strategies are forward-looking statements. Such statements are subject to a
number of risks and uncertainties, including risks and uncertainties identified
in "Business -- Environmental Contractor Risks," "Business -- Regulation," "--
Results of Operation," "--Environmental Matters and Government Contracting,"
"Note 1 to Consolidated Financial Statements" and other general economic and
business conditions, the business opportunities (or lack thereof) that may be
presented to and pursued by the Company, changes in laws or regulations
affecting the Company's operations and other factors, many of which are beyond
the control of the Company. In addition, these risks and uncertainties include,
without limitation, (i) the potential for fluctuations in funding of backlog,
(ii) weather conditions affecting or delaying the Company's ability to perform
or complete the services required by its contracts, (iii) the Company's ability
to be awarded new contracts in its target markets or its ability to expand
existing contracts, (iv) other industry-wide market factors, including the
timing of client's planned remediation activities, and (v) interpretation or
enforcement by federal, state or local regulators of existing environmental
regulations. Also, there is always risk and uncertainty in pursuing and
defending litigation, arbitration proceedings and claims in the course of the
Company's business. All of these risks and uncertainties could cause actual
results to differ materially from those assumed in the forward-looking
statements.
17
<PAGE> 20
These forward-looking statements reflect management's analysis, judgment, belief
or expectation only as of the date of this Form 10-K. The Company undertakes no
obligation to revise publicly these forward-looking statements to reflect events
or circumstances that arise after the date hereof. In addition to the disclosure
contained herein, readers should carefully review risks and uncertainties
contained in other documents the Company files or has filed from time to time
with the Commission pursuant to the Exchange Act that are incorporated by
reference herein.
18
<PAGE> 21
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Consolidated Financial Statements and supplementary quarterly
financial data of the Company and its subsidiaries for the years ended December
31, 1997, 1996 and 1995, are set forth on pages 19 through 37.
OHM CORPORATION
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
December 31,
------------
1997 1996
---- ----
ASSETS
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 31,784 $ 14,002
Accounts receivable 70,627 85,461
Costs and estimated earnings on contracts in process in excess of billings 47,774 56,303
Materials and supply inventory, at cost 13,285 13,899
Prepaid expenses and other assets 10,950 17,274
Deferred income taxes 11,166 10,513
Refundable income taxes 259 493
--------- ---------
185,845 197,945
--------- ---------
Property and Equipment, net 56,610 70,521
--------- ---------
Other Noncurrent Assets:
Investment in affiliated company 8,421 23,185
Intangible assets relating to acquired businesses, net 46,364 33,534
Deferred debt issuance and financing costs 1,114 1,412
Deferred income taxes 15,677 3,563
Other assets 5,748 6,377
--------- ---------
77,324 68,071
--------- ---------
Total Assets $ 319,779 $ 336,537
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 72,692 $ 69,230
Billings on contracts in process in excess of costs and estimated earnings 1,530 897
Accrued compensation and related taxes 8,646 6,528
Federal, state and local taxes 86 150
Other accrued liabilities 17,769 21,477
Current notes payable 5,000 ----
Current portion of noncurrent liabilities 3,064 5,321
--------- ---------
108,787 103,603
--------- ---------
Noncurrent Liabilities:
Long-term debt 50,041 52,972
Deferred gain from sale leaseback of equipment 2,890 4,484
Capital leases 65 32
Pension agreement 1,100 874
--------- ---------
54,096 58,362
--------- ---------
Commitments and Contingencies -- --
Shareholders' Equity:
Preferred stock, $10.00 par value, 2,000,000 shares authorized;
none issued and outstanding -- --
Common stock, $.10 par value, 50,000,000 shares authorized;
shares issued: 1997 - 27,425,046; 1996 - 26,992,140 2,742 2,699
Additional paid-in capital 142,453 138,989
Retained earnings 11,701 32,884
--------- ---------
156,896 174,572
--------- ---------
Total Liabilities and Shareholders' Equity $ 319,779 $ 336,537
========= ==========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
19
<PAGE> 22
OHM CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Revenue $ 526,691 $ 550,984 $ 457,925
Cost of services 454,556 478,924 393,149
--------- --------- ---------
Gross Profit 72,135 72,060 64,776
Claims settlement costs and other 37,877 -- --
Selling, general and administrative expenses 46,060 49,250 45,223
--------- --------- ---------
Operating (Loss) Income (11,802) 22,810 19,553
--------- --------- ---------
Other (Income) Expenses:
Investment income (389) (124) (849)
Interest expense 5,186 7,087 10,413
Equity in net earnings of affiliate (185) (748) (287)
Write-down of investment in NSC Corporation 14,949 -- --
Miscellaneous (income) expenses 276 (296) (72)
--------- --------- ---------
19,837 5,919 9,205
--------- --------- ---------
(Loss) Income Before Income Taxes (Benefit) (31,639) 16,891 10,348
Income taxes (Benefit) (10,442) 5,376 3,541
--------- --------- ---------
Net (Loss) Income $ (21,197) $ 11,515 $ 6,807
========= ========= =========
Net (Loss) Income Per Common Share $ 0.43 $ 0.31 $ (0.78)
========= ========= =========
Weighted-Average Common Shares 27,210 26,820 22,211
========= ========= =========
Net (Loss) Income Per Common Share--Assuming Dilution $ (0.78) $ 0.43 $ 0.30
========== ========= =========
Adjusted Weighted-Average Common Shares--Assuming Dilution 27,210 26,840 22,413
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
20
<PAGE> 23
OHM CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
Common Stock
------------ Additional Cumulative
Number of Paid-In Retained Translation Treasury
Shares Amount Capital Earnings Adjustments Stock
------ ------ ------- -------- ----------- -----
<S> <C> <C> <C> <C> <C> <C>
BALANCE AT JANUARY 1, 1995 15,848,089 $1,584 $ 63,294 $14,656 $ (58) $(2,556)
Proceeds from sale of 1,000,000 shares
common stock, less issuance
expenses of $25,000 1,000,000 100 9,875
Shares issued for the acquisition
of the Division 9,668,000 967 61,149
Issuance of common stock warrants 1,372
Stock options exercised, 211,624
shares reissued from treasury (861) 2,556
Shares issued for stock options 37,921 4 776
Shares issued for 401(k) plan funding 93,067 9 823
Deferred translation adjustments (5)
Net income 6,807
---------- ------ -------- ------- ----- ------
BALANCE AT DECEMBER 31, 1995 26,647,077 2,664 136,428 21,463 (63) --
Shares issued for 401(k) plan funding 345,063 35 2,561
Deferred translation adjustments (31)
Net income 11,515
---------- ------ -------- ------- ----- ------
BALANCE AT DECEMBER 31, 1996 26,992,140 2,699 138,989 32,978 (94) --
Shares issued for 401(k) plan funding 326,711 32 2,658
Shares issued for stock options 106,195 11 806
Deferred translation adjustments 14
Net income (21,197)
---------- ------ -------- ------- ----- ------
BALANCE AT DECEMBER 31, 1997 27,425,046 $2,742 $142,453 $11,781 $ (80) $ --
========== ====== ======== ======= ===== ======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
21
<PAGE> 24
OHM CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net (loss) income $ (21,197) $ 11,515 $ 6,807
Adjustments to reconcile net (loss) income to net cash provided
by operating activities:
Depreciation and amortization 13,131 19,963 10,652
Amortization of other noncurrent assets 3,139 3,332 2,916
Deferred income taxes (10,442) 5,335 3,483
(Gain) loss on sale of property and equipment (1,705) (206) 423
Equity in net earnings of affiliate, net of dividends received (185) (147) 314
Writedown of investment in affiliated company 14,949 -- --
Deferred translation adjustments and other (568) (1,305) (1,881)
Changes in current assets and liabilities:
Accounts receivable 19,034 13,622 10,049
Costs and estimated earnings on contracts
in process in excess of billings 8,529 11,972 (10,278)
Materials and supply inventory 614 (2,068) (1,732)
Prepaid expenses and other assets 6,324 (8,125) (206)
Refundable income taxes and other 234 (92) (196)
Accounts payable (1,864) 2,949 3,907
Billings on contracts in process in excess
of costs and estimated earnings 633 (490) (1,019)
Accrued compensation and related taxes 1,638 (512) 476
Federal, state and local income taxes (64) (50) 98
Other accrued liabilities (7,504) (11,286) (4,416)
--------- --------- ---------
Net cash flows provided by operating activities 24,696 44,407 19,397
--------- --------- ---------
Cash flows from investing activities:
Purchases of property and equipment (18,036) (23,279) (14,276)
Proceeds from sale of property and equipment 1,908 4,612 3,813
Proceeds from sale and leaseback of equipment 21,800 12,850 --
Cash (used) acquired from purchase
of business, net of acquisition costs (7,092) -- 13,527
Decrease (increase) in receivable from affiliated company -- 15,000 (6,695)
Increase in other noncurrent assets (1,090) (1,140) (589)
--------- --------- ---------
Net cash (used in) provided by investing activities (2,510) 8,043 (4,220)
--------- --------- ---------
Cash flows from financing activities:
Increase in long-term debt 8 204 2,209
Payments on long-term debt and capital leases (7,802) (10,230) (8,691)
Proceeds from borrowing under revolving credit agreement 187,554 202,300 159,900
-------------
Payments on revolving credit agreement (187,554) (244,400) (175,500)
Proceeds from private placement of common stock -- -- 9,975
Common Stock issued for 401(k) funding and stock options 3,507 2,597 1,612
Payments on pension agreement (117) (124) (102)
Reissuance of treasury stock -- -- 1,695
--------- --------- ---------
Net cash (used in) financing activities (4,404) (49,653) (8,902)
--------- --------- ---------
Net increase in cash and cash equivalents 17,782 2,797 6,275
Cash and cash equivalents at beginning of year 14,002 11,205 4,930
--------- --------- ---------
Cash and cash equivalents at end of year $ 31,784 $ 14,002 $ 11,205
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
22
<PAGE> 25
OHM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION AND PRINCIPLES OF CONSOLIDATION. The accompanying
consolidated financial statements include the accounts of OHM Corporation (the
"Company") and its subsidiaries. The Company's investment in 40% of the
outstanding common stock of NSC Corporation ("NSC") has historically been
accounted for on the equity method until the second quarter of 1997 and is now
accounted for as an asset held for sale. See "Note 17 - Special Charges" and
"Note 19 - Subsequent Events" regarding disposition of the NSC investment. All
material intercompany transactions and balances among the consolidated group
have been eliminated in consolidation.
RECENT ACCOUNTING PRONOUNCEMENTS. In June 1997, the Financial
Accounting Standards Board ("FASB") issued Statements No. 130, "Reporting
Comprehensive Income," and Statement No. 131, "Disclosures about Segments of an
Enterprise and Related Information." Statement No. 130 requires separate
reporting of certain items, already disclosed by the Company, affecting
shareholders' equity outside of those included in arriving at net earnings.
Statement No. 131, effective for fiscal 1999, establishes requirements for
reporting information about operating segments in annual and interim statements.
This statement may require a change in the Company's financial reporting,
however, the extent of this change, if any, has not been determined.
USE OF ESTIMATES. The preparation of the accompanying consolidated
financial statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect the amounts
reported in the consolidated financial statements and the accompanying notes.
Actual results could differ from those estimates.
RISKS AND UNCERTAINTIES. The Company provides a broad range of
environmental and hazardous waste remediation services to its clients located
primarily in the United States. The assessment, remediation, analysis, handling
and management of hazardous substances necessarily involve significant risks,
including the possibility of damages or injuries caused by the escape of
hazardous materials into the environment, and the possibility of fines,
penalties or other regulatory action. These risks include potentially large
civil and criminal liabilities for violations of environmental laws and
regulations, and liability to customers and to third parties for damages arising
from performing services for clients, which could have a material adverse effect
on the Company. Although the Company believes that it generally benefits from
increased environmental regulations, and from enforcement of those regulations,
increased regulation and enforcement also create significant risks for the
Company.
The Company does not believe there are currently any material
environmental liabilities which should be recorded or disclosed in its financial
statements. The Company anticipates that its compliance with various laws and
regulations relating to the protection of the environment will not have a
material effect on its capital expenditures, future earnings or competitive
position.
The Company's revenue from government agencies accounted for 79%, 77%
and 76% of revenue for the years ended December 31, 1997, 1996 and 1995,
respectively. Because of its dependence on government contracts, the Company
also faces the risks associated with such contracting, which could include civil
and criminal fines and penalties. As a result of its government contracting
business, the Company has been, is and may in the future be subject to audits
and investigations by government agencies. The fines and penalties which could
result from noncompliance with the Company's government contracts or appropriate
standards and regulations, or the Company's suspension or debarment from future
government contracting, could have a material adverse effect on the Company's
business. The dependence on government contracts will also continue to subject
the Company to significant financial risk and an uncertain business environment
caused by any federal budget reductions.
In addition to the above, there are other risks and uncertainties that
involve the use of estimates in the preparation of the Company's consolidated
financial statements. See "Note 2 - Acquisitions" and "Note 15 - Litigation and
Contingencies."
STOCK-BASED COMPENSATION. The Company grants stock options for a fixed
number of shares to employees and members of the Board of Directors with an
exercise price equal to the fair value of the shares at the date of grant. The
Company accounts for stock compensation arrangements in accordance with APB
Opinion No. 25, "Accounting for Stock Issued to Employees," ("APB No. 25") and
accordingly, recognizes no compensation expense for the stock compensation
arrangements. The Company has no intention of changing this accounting practice.
The pro forma information regarding net income and earnings per share as
required by Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation" ("SFAS No. 123") is disclosed in "Note 13 - Stock
Option Plan."
23
<PAGE> 26
REVENUE AND COST RECOGNITION. The Company primarily derives its revenue
from providing environmental services under cost plus fee, time and materials,
fixed price and unit price contracts. The Company records revenue and related
income from its contracts in process using the percentage-of-completion method
of accounting. Provisions for estimated losses on uncompleted contracts are made
in the period in which such losses are determined. Changes in project
performance, project conditions and estimated profitability may result in
revisions to costs and income and are recognized in the period in which the
revisions are determined. An amount equal to contract costs attributable to
claims is included in revenue when realization is probable and the amount can be
reliably estimated. Back charges to subcontractors are recorded as receivables
to the extent considered collectible. Contract costs include all direct labor,
material, per diem, subcontract and other direct and indirect project costs
related to contract performance. Revenue derived from non-contract activities is
recorded when the services are performed.
PROPERTY AND EQUIPMENT. Property and equipment are carried at cost and
include expenditures which substantially increase the useful lives of the
assets. Maintenance, repairs and minor renewals are expensed as incurred.
Depreciation and amortization, including amortization of assets under capital
leases, are provided on a specific item basis net of salvage value over the
estimated useful lives of the respective assets, using the straight-line method.
CAPITALIZED INTEREST. Interest expense incurred on capital expenditures
for assets constructed by the Company is capitalized and is included in the cost
of such assets. Total interest expense incurred by the Company was $6,104,000,
$8,085,000 and $11,205,000 for the years ended December 31, 1997, 1996 and 1995,
respectively. Total interest capitalized was $918,000, $998,000 and $792,000 for
the years ended December 31, 1997, 1996 and 1995, respectively.
INTANGIBLE ASSETS. Intangible assets consist principally of goodwill
and other intangible assets resulting primarily from acquisitions accounted for
using the purchase method of accounting. Goodwill is amortized using the
straight-line method over forty years. The carrying value of goodwill is
reviewed if the facts and circumstances suggest that it may be impaired. If this
review indicates that goodwill will not be recoverable, as determined based on
the undiscounted cash flows of the entity acquired over the remaining
amortization period, the Company's carrying value of the goodwill will be
reduced by the estimated shortfall of cash flows. Other intangible assets
relating to acquired businesses consist principally of proprietary processes,
and other deferred costs, and are amortized on a straight-line basis over five
to ten years. The accumulated amortization of intangible assets, including
goodwill, relating to acquired businesses, was $3,061,000 and $1,938,000 at
December 31, 1997 and 1996, respectively.
INCOME TAXES. The Company accounts for income taxes under the liability
method pursuant to Statement of Financial Accounting Standards No. 109,
Accounting for Income Taxes (SFAS No. 109). Under the liability method, deferred
tax assets and liabilities are determined based on differences between the
financial reporting and tax bases of assets and liabilities using the enacted
tax rates and laws that will be in effect when the differences are expected to
reverse.
STATEMENT OF CASH FLOWS. The Company considers all short-term deposits
and highly liquid investments purchased with an original maturity of three
months or less to be cash equivalents. Cash paid for income taxes for the years
ended December 31, 1997, 1996 and 1995 was $603,000, $482,000 and $986,000,
respectively. Cash paid for interest was $6,159,000, $8,137,000 and $10,937,000
for each of the years ended December 31, 1997, 1996 and 1995, respectively.
With respect to non-cash investing and financing activities, the
Company acquired $2,564,000, $1,870,000 and $29,000 of fixed assets under
financial obligations for the years ended December 31, 1997, 1996 and 1995,
respectively. In addition, the Company issued $5,000,000 of unsecured promissory
notes in connection with an acquisition in fiscal 1997 and 9,668,000 shares of
its common stock in fiscal 1995 for an acquisition. See Note 2 - Acquisitions.
NET INCOME (LOSS) PER SHARE. In February 1997, the Financial Accounting
Standards Board issued Statement No. 128, Earnings per Share, which was required
to be adopted on December 31, 1997. The Company has changed the method used to
compute earnings per share and restated all prior periods. Under the new
requirements for calculating basic earnings per share, the dilutive effect of
stock options is excluded. Shares of common stock issuable upon conversion of
the 8% Convertible Subordinated Debentures due 2006 were antidilutive in each of
the years presented; therefore, they were excluded from the calculation of net
income per share. See Note 11 - Earnings Per Share.
RECLASSIFICATION. Certain amounts presented for the years ended
December 31, 1996 and 1995 have been reclassified to conform to the 1997
presentation.
NOTE 2 - ACQUISITIONS
24
<PAGE> 27
Effective June 1, 1997, the Company acquired all of the outstanding
stock of Beneco Enterprises, Inc., a Utah corporation (Beneco), for an aggregate
purchase price of $14,700,000. The purchase price was paid as follows: (i)
$9,700,000 in cash and (ii) unsecured promissory notes in the aggregate of
$5,000,000, bearing interest at 7.25%, due and payable June 17, 1998. The
Company has agreed to make an additional payment in the year 2000 contingent
upon the achievement of certain operating results and other contractual
conditions. Beneco is a provider of project, program and construction management
services to the Department of Defense and other government agencies throughout
the United States.
The estimated fair value of the assets acquired and liabilities assumed
at the date of the acquisition of Beneco are as follows (in thousands):
<TABLE>
<S> <C>
Current assets $ 8,208
Property and equipment 615
Goodwill 13,179
Current liabilities 8,024
</TABLE>
On May 30, 1995, the Company completed the acquisition of substantially
all of the assets and certain liabilities of the hazardous and nuclear waste
remediation service business (the Division) of Rust International Inc. (Rust) in
exchange for 9,668,000 shares of common stock of the Company, or approximately
37% of the outstanding shares of the Company's common stock. Such shares issued
to Rust are subject to a number of restrictions set forth in a Standstill and
Non-competition Agreement that was entered into pursuant to the Agreement and
Plan of Reorganization dated December 5, 1994, as amended (the Reorganization
Agreement), among the Company, Rust and certain of their subsidiaries. In
addition to the net assets of the Division, the Company received $16,636,000 in
cash pursuant to provisions of the Reorganization Agreement that provided for an
adjustment based on the average per share price of the Company's common stock
for a 20 trading day period prior to closing. Also, under terms of the
Reorganization Agreement, as amended on March 22, 1996, the Company received an
additional $15,000,000 on March 25, 1996. For purposes of calculating the
consideration given by the Company for the Division, such 20 trading day average
per share price of $11.25 was used, adjusted to reflect a 40% discount for the
restricted nature of the common stock issued. Consideration for the Division
aggregated $65,259,000, which includes $3,143,000 of direct costs related to the
acquisition.
In exchange for a warrant to purchase up to 700,000 shares of the
Company's common stock at an exercise price of $15.00 per share during the five
years following the closing date, Rust's parent company, WMX Technologies, Inc.
("WMX"), will provide the Company with a credit enhancement in the form of
guarantees, issued from time to time upon request of the Company, of up to
$62,000,000 of the Company's indebtedness, which will increase proportionately
up to $75,000,000 upon issuance of shares under the warrant. See "Note 19 -
Subsequent Events".
The acquisitions of Beneco and the Division have been accounted for
using the purchase method and, accordingly, the acquired assets and assumed
liabilities, including goodwill, have been recorded at their estimated fair
values as of June 1, 1997 for Beneco and May 30, 1995 for the Division. The
Company's consolidated financial statements for the twelve months ended December
31, 1997 include the results of Beneco since June 1, 1997. The following table
sets forth the unaudited combined pro forma results of operations of the Company
for the twelve months ended December 31, 1997 and 1996, giving effect to the
acquisition of Beneco as if such acquisition had occurred on January 1, 1996.
The Company's consolidated financial statements also include the results of
operations for the Division since May 30, 1995. The following table sets forth
the unaudited combined pro forma results of operations for the year ended
December 31, 1995 giving effect to the acquisition of the Division as if such
acquisition had occurred on January 1, 1995.
<TABLE>
<CAPTION>
Pro Forma
Year Ended December 31,
-----------------------
1997 1996 1995
---- ---- ----
(In Thousands, Except Per Share Data)
<S> <C> <C> <C>
Revenue $555,271 $622,814 $520,465
Net income (loss) (21,099) 13,007 8,142
Net income (loss) per share $ (0.78) $ 0.48 $ 0.31
</TABLE>
The combined pro forma results of operations for the years ended
December 31, 1997, 1996 and 1995 are based upon certain assumptions and
estimates which the Company believes are reasonable. The combined pro forma
results of operations may not be indicative of the operating results that
actually would have been reported had the transactions been consummated on
January 1, 1996 for Beneco and January 1, 1995 for the Division, nor are they
necessarily indicative of results which will be reported in the future.
25
<PAGE> 28
NOTE 3 - ACCOUNTS RECEIVABLE AND COSTS AND ESTIMATED EARNINGS ON CONTRACTS IN
PROCESS
Accounts receivable are summarized as follows:
<TABLE>
<CAPTION>
December 31,
------------
1997 1996
---- ----
(In Thousands)
<S> <C> <C>
Accounts billed and due currently $ 43,982 $ 45,573
Unbilled receivables 37,827 59,649
Retainage 4,265 5,167
--------- ---------
86,074 110,389
Allowance for uncollectible accounts (15,447) (24,928)
--------- ---------
$ 70,627 $ 85,461
========= =========
</TABLE>
The consolidated balance sheets include the following amounts:
<TABLE>
<CAPTION>
December 31,
------------
1997 1996
---- ----
(In Thousands)
<S> <C> <C>
Costs incurred on contracts in process $ 306,314 $ 442,923
Estimated earnings 63,128 90,442
--------- ---------
369,442 533,365
Less billings to date (323,198) (477,959)
-------- ---------
$ 46,244 $ 55,406
========= =========
Costs and estimated earnings on contracts in process in excess of billings $ 47,774 $ 56,303
Billings on contracts in process in excess of costs and estimated earnings (1,530) (897)
--------- ---------
$ 46,244 $ 55,406
========= =========
</TABLE>
Unbilled receivables and costs and estimated earnings on contracts in
process typically represent: (i) amounts earned under the Company's contracts
but not yet billable to clients according to contract terms, which usually
consider passage of time, achievement of certain project milestones or
completion of the project; and (ii) amounts equal to contract costs attributable
to claims included in revenue. In addition, unbilled receivables and costs and
estimated earnings on contracts in process include amounts relating to contracts
with federal government agencies which require services performed by the
Company's subcontractors to be paid prior to billing.
The Company provides a broad range of environmental and hazardous waste
remediation services to industrial, federal government agencies, and state and
local government agencies located primarily in the United States and Canada. The
Company's industrial, federal government, and state and local government clients
constituted 38%, 58%, and 4%, respectively, of total accounts receivable and
costs and estimated earnings on contracts in process at December 31, 1997.
NOTE 4 - PROPERTY AND EQUIPMENT
<TABLE>
<CAPTION>
December 31,
------------ Useful
1997 1996 Lives
---- ---- -----
(In Thousands)
<S> <C> <C> <C>
Land $ 284 $ 257 --
Buildings and improvements 21,798 21,698 1-40 Years
Machinery and equipment 72,326 89,831 3-15 Years
Construction in progress 1,823 8,385 --
--------- ---------
96,231 120,171
Less accumulated depreciation and amortization (39,621) (49,650)
$ 56,610 $ 70,521
========= =========
</TABLE>
26
<PAGE> 29
NOTE 5 - INVESTMENT IN AFFILIATED COMPANY
The combined summarized financial information of the Company's 40%
owned asbestos abatement and specialty contracting subsidiary, NSC, is set forth
below:
<TABLE>
<CAPTION>
December 31,
------------
1997 1996
---- ----
(In Thousands)
<S> <C> <C> <C>
Current assets $ 34,906 $ 41,123
Noncurrent assets 39,583 44,102
Total assets 74,489 85,225
Current liabilities 18,080 19,969
Noncurrent liabilities 5,253 7,610
Years Ended December 31,
------------------------
1997 1996 1995
---- ---- ----
(In Thousands)
Revenue $ 115,955 $ 129,043 $124,529
Gross profit 11,027 22,589 19,447
Operating (loss) income (7,785) 4,361 1,859
Net (loss) income (4,994) 1,861 715
Company's interest in net income 185 748 287
</TABLE>
During the second quarter of 1997, the Company wrote down its
investment in NSC to the expected net realizable value based on its plans to
divest its 40% share of NSC. As a result, the Company recorded a $12,089,000
(net of $2,860,000 income tax benefit) charge to earnings. The Company has
historically accounted for NSC in accordance with the equity method, however as
a result of the Company's current intentions, it now accounts for NSC under
statement of Financing Accounting Standard No. 115, "Accounting for Certain
Investments in Debt and Equity Securities" as securities available-for-sale. See
"Note 19 - Subsequent Events". The Company received cash dividends from NSC
aggregating $602,000 for each of the years ended December 31, 1997 and 1996.
NOTE 6 - OTHER ACCRUED LIABILITIES
Other accrued liabilities are summarized as follows:
<TABLE>
<CAPTION>
December 31,
------------
1997 1996
---- ----
(In Thousands)
<S> <C> <C>
Reserve for loss projects $ 4,328 $ 5,839
Reserve for legal settlements 2,694 5,490
Reserve for self-insurance 4,360 4,212
Accrued insurance 2,411 2,601
Other 3,976 3,335
-------- --------
$ 17,769 $ 21,477
======== ========
</TABLE>
NOTE 7 - LONG-TERM DEBT
The long-term debt of the Company is summarized below:
<TABLE>
<CAPTION>
December 31,
------------
1997 1996
---- ----
(In Thousands)
<S> <C> <C>
8% Convertible Subordinated Debentures due October 1, 2006 $ 46,764 $ 46,764
Notes payable to financial institutions 2,806 8,434
Notes payable 3,494 3,066
-------- --------
53,064 58,264
Less current portion (3,023) (5,292)
-------- --------
$ 50,041 $ 52,972
======== ========
</TABLE>
27
<PAGE> 30
The convertible subordinated debentures are convertible into 41.67
shares of common stock per $1,000 unit with interest payable semiannually on
April 1 and October 1, and are redeemable at the option of the Company. The
convertible subordinated debentures require annual mandatory sinking fund
payments of 7.5% of the principal amount which commenced in 1996, and continue
through October 1, 2005. The Company purchased and retired $5,736,000 and
$5,000,000 of the outstanding debentures during 1996 and 1995, respectively. The
fair value of the convertible subordinated debentures, based on a quoted market
price, approximates $45,325,000 at December 31, 1997. The amortization of debt
issuance costs related to the convertible subordinated debentures was $88,000,
$97,000 and $108,000 for the years ended December 31, 1997, 1996 and 1995,
respectively.
On May 31, 1995, the Company entered into a $150,000,000 revolving
credit agreement with a group of banks (the "Bank Group") to provide letters of
credit and cash borrowings. There were no cash borrowings outstanding at
December 31, 1997 or 1996. The agreement has a five year term and is scheduled
to expire on May 30, 2000. WMX has issued a guarantee of up to $62,000,000
outstanding under the credit agreement in favor of the Bank Group. See "Note 2 -
Acquisition." Under the terms of the agreement the entire credit facility can be
used for either cash borrowings or letters of credit subject to certain
covenants. Cash borrowings bear interest at either the prime rate plus a
percentage up to 0.625% or, at the Company's option, the Eurodollar market rate
plus a percentage ranging from 0.325% to 1.625%. The percentage over the prime
rate or the Eurodollar market is based on the aggregate amount borrowed under
the facility, the presence of the WMX guarantee, and the Company's financial
performance as measured by an interest coverage ratio and a total funded debt
ratio. The arrangement provides the participating banks and WMX with a security
interest in the Company's equipment, inventories, accounts receivables, general
intangibles and in the Company's investment in the common stock of NSC as well
as the Company's other subsidiaries. The agreement also imposes, among other
covenants, a minimum tangible net worth covenant, a restriction on all of the
Company's retained earnings including the declaration and payment of cash
dividends and a restriction on the ratio of total funded debt to earnings before
income taxes, depreciation and amortization. The Company had $13,300,000 and
$12,223,000 of letters of credit outstanding under its revolving credit facility
at December 31, 1997 and 1996, respectively.
Notes payable to financial institutions consist of a $2,806,000 note
payable bearing interest at 8.58% payable in quarterly installments of $356,000
with the final payment of $957,000 due in August 1999. The above agreement
provides the respective financial institution with a security interest in the
equipment financed with the proceeds from such note.
Notes payable include: (i) a $143,000 interest bearing note at a rate
of 9.50% payable in equal monthly installments of $48,000, due in April 1998,
(ii) a $66,000 interest bearing note at a rate of 9.22% payable in equal monthly
installments of $13,000, due in June 1998, (iii), a $79,000 interest bearing
note at a rate of 7.50% payable in equal monthly installments of $8,000, due in
December 1998, (iv) a $717,000 interest bearing note at a rate of 8.67% payable
in equal monthly installments of $48,000, due in July 1999, (v) a $72,000
interest bearing note at a rate of 8.70% payable in equal installments of
$5,000, due in June 1999, (vi) a $187,000 interest bearing note at a rate of
7.51% payable in equal monthly installments of $8,000, due in July 1999, (vii) a
$1,637,000 interest bearing note at a rate of 8.50% payable in equal monthly
installments of $61,000, due in May 2000 and (viii) a $593,000 interest bearing
note at a rate of 7.96% payable in equal monthly installments of $20,000, due in
October 2000.
Current Notes payable include $5,000,000 of unsecured promissory notes
bearing interest of 7.25% due June 17, 1998 to the former shareholders of
Beneco.
The aggregate maturity of long-term debt for the five years ending
December 31 is: 1998, $5,226,000; 1999, $7,099,000; 2000, $4,804,000; 2001,
$4,313,000; 2002, $4,313,000; 2003 and thereafter, $27,309,000.
NOTE 8 - LEASES
Future minimum lease payments under noncancelable operating leases
total $15,744,000, $13,264,000, $10,659,000, $7,532,000 and $3,308,000 for the
years ended December 31, 1998, 1999, 2000, 2001 and 2002, respectively. Lease
payments under noncancelable operating leases subsequent to the year ended
December 31, 2002 aggregate $6,510,000.
In addition to the above, the Company has entered into agreements for
the sale and leaseback of certain of the Company's thermal destruction units
located at various project sites. The leases are for one or two years with
annual renewals at the option of the Company with a maximum term of four or five
years each. The leases call for rental payments which total $8,002,000,
$8,106,000, $8,106,000, $5,696,000 and $1,223,000 for the years ended December
31, 1998, 1999, 2000, 2001 and 2002, respectively, with required early
termination payments of up to $19,986,000, $19,561,000, $12,710,000 or
$4,269,000 in the event that some or all of the leases are canceled on or before
expiration of the full lease terms in 1998, 1999, 2000 or 2001, respectively.
The leases are classified as operating leases in accordance with Statement of
Financial Accounting Standards No. 13, "Accounting for Leases". For the year
ended December 31, 1997, the total cost and accumulated depreciation
28
<PAGE> 31
of $29,701,000 and $13,080,000, respectively, were removed from the accounts and
total gains realized on the sales of $2,979,000 were deferred. For the year
ended December 31, 1996, the total cost and accumulated depreciation of
$11,579,000 and $4,181,000, respectively, were removed from the accounts and
total gain realized on the sale of $5,452,000 was deferred. The deferred gains
are being amortized to income as adjustments to lease expense over the terms of
the leases.
Rental expense under operating leases totaled $23,177,000, $14,029,000
and $8,858,000 for the years ended December 31, 1997, 1996 and 1995,
respectively.
NOTE 9 - INCOME TAXES
Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes.
Significant components of the Company's deferred tax liabilities and
assets as of December 31, 1997 and 1996 are as follows:
<TABLE>
<CAPTION>
December 31,
------------
1997 1996
---- ----
(In Thousands)
<S> <C> <C>
Long-term deferred tax liabilities:
Property and equipment $ 9,410 $ 10,470
Intangible assets 1,726 1,131
Investments 8 2,784
-------- --------
Total long-term deferred tax liabilities 11,144 14,385
Long-term deferred tax assets:
Net operating loss ("NOL") carryforwards 22,457 7,571
Intangible assets 1,446 1,840
Research and development tax credits 7,307 5,832
Other tax credit carryforwards 2,421 2,431
Other, net 1,837 3,474
-------- --------
Total long-term deferred tax assets 35,468 21,148
Valuation allowance for long-term deferred tax assets (8,808) (3,358)
-------- --------
Total long-term deferred tax assets - net of valuation allowance 26,660 17,790
-------- --------
Net long-term deferred tax assets - domestic operations 15,516 3,405
Foreign tax NOL carryforwards 167 167
Valuation allowance for foreign deferred tax assets (6) (9)
-------- --------
Net long-term deferred tax assets $ 15,677 $ 3,563
======== ========
Current deferred tax liabilities:
Revenue recognition $ 2,779 $ --
Prepaid expenses 1,047 1,095
Tax reserves 55 366
-------- --------
Total current deferred tax liabilities 3,881 1,461
Current deferred tax assets:
Bad debt reserves 5,941 9,722
Project accruals 4,282 8,709
NOL carryforwards 5,787 1,950
Other, net 3,193 1,196
-------- --------
Total current deferred tax assets 19,203 21,577
Valuation allowance for current deferred tax assets (4,156) (9,603)
-------- --------
Total current deferred tax assets - net of valuation allowance 15,047 11,974
-------- --------
Net current deferred tax assets $11,166 $ 10,513
======= ========
</TABLE>
The net foreign long-term deferred tax assets of $161,000 and $158,000
at December 31, 1997 and 1996, respectively, are attributable to the foreign
operations of the Company and cannot be offset with the net long-term deferred
tax liabilities resulting from the Company's domestic operations.
29
<PAGE> 32
The provisions for income taxes (benefit) consist of the following:
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------
1997 1996 1995
---- ---- ----
(In Thousands)
<S> <C> <C> <C>
Current:
Federal $ -- $ -- $ --
State -- 41 58
--------- ------ ------
-- 41 58
Deferred:
Federal (9,429) 4,569 3,036
State (1,013) 766 447
--------- ------ ------
(10,442) 5,335 3,483
--------- ------ ------
$ (10,442) $5,376 $3,541
========= ====== ======
</TABLE>
The reasons for differences between the provisions for income taxes and
the amount computed by applying the statutory federal income tax rate to income
(loss) from operations before income taxes are as follows:
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Federal statutory rate 34.0% 34.0% 34.0%
Add (deduct):
State income taxes, net of federal benefit 3.2 4.8 3.2
Research and development tax credits 4.3 (8.6) (4.5)
Goodwill (1.3) 2.4 1.2
Write-down of investment in NSC Corporation (7.0) -- --
Equity in net earnings of affiliates 0.2 (1.2) (0.8)
Other, net (0.4) 0.4 1.1
---- ----- -----
33.0% 31.8% 34.2%
==== ==== ====
</TABLE>
Net operating loss, capital loss and tax credit carryforward amounts
and their respective expiration dates for income tax purposes are as follows (in
thousands):
<TABLE>
<CAPTION>
Amount Expiration Date
------ ---------------
<S> <C> <C>
Net operating losses $73,208 2006 through 2012
State net operating losses in excess of federal 14,420 1998 through 2010
Research and development tax credits 7,307 2002 through 2012
Alternative minimum tax credits 1,218 Indefinite
Miscellaneous credits 482 1998 through 2005
Foreign tax net operating losses 427 1998
</TABLE>
NOTE 10 - RELATED PARTY TRANSACTIONS
The Company has a policy whereby transactions with directors, executive
officers and related parties require the approval of a disinterested majority of
the Board of Directors.
The Company has been reimbursed by NSC for certain third party charges
paid on NSC's behalf, such as letter of credit fees, insurance and bonding costs
and legal fees. The costs charged to NSC for general liability and other
insurance coverages were $188,000, $1,774,000 and $981,000 for the years ended
December 31, 1997, 1996 and 1995, respectively. In the normal course of
business, NSC has provided the Company with subcontract services on certain of
its projects for asbestos abatement and industrial maintenance services. The
costs for such services were $233,000, $40,000 and $212,000 for the years ended
December 31, 1997, 1996 and 1995, respectively. The Company has provided
remediation services to NSC in the amount of $121,000 for the year ended
December 31, 1996.
In the normal course of business, the Company has provided to WMX and
its affiliates certain subcontractor services on remediation and construction
projects, the cost of these services, in the aggregate, were $23,664,000,
$12,959,000 and $10,242,000 for the years ended December 31, 1997, 1996 and
1995, respectively. The Company has purchased from WMX and its affiliates,
hazardous waste disposal services, the cost of these services, in the aggregate,
were $6,868,000, $7,536,000
30
<PAGE> 33
and $6,636,000 for the years ended December 31, 1997, 1996 and 1995,
respectively. At December 31, 1997, 1996 and 1995, the Company has $2,831,000,
$6,873,000 and $3,871,000 of accounts receivable and $1,385,000, $968,000 and
$806,000 of accounts payable, respectively, recorded related to such activities.
In addition to the above, WMX paid $15,000,000 to the Company in 1996, which was
related to final payments due under terms of the Reorganization Agreement, as
amended March 22, 1996.
The Company rents certain buildings and contracts certain services from
The KDC Company and Findlay Machine and Tool, Inc. Such expenses totaled
$318,000, $348,000 and $94,000 for the years ended December 31, 1997, 1996 and
1995, respectively. The principal shareholders of the companies are officers and
directors of the Company.
The Company has purchased general contractor services and equipment
from Alvada Construction, Inc. which totaled $7,000, $957,000 and $226,000 for
the years ended December 31, 1997, 1996 and 1995, respectively. The principal
shareholder of the company is directly related to certain officers and directors
of the Company.
In the normal course of business, the Company has purchased
subcontractor services on certain of its projects from Kirk Brothers Co., Inc.
which totaled $1,161,000, $2,265,000 and $615,000 for the years ended December
31, 1997, 1996 and 1995, respectively. The principal shareholders of the company
are directly related to certain officers and directors of the Company.
During 1985, the Company executed a pension agreement with a former
officer, directly related to certain directors of the Company, for an annual
pension commencing on June 1, 1990, of $96,000, subject to cost of living
adjustments, for the remainder of his life and that of his spouse if she
survives him. The Company made pension payments totaling $118,000, $124,000 and
$102,000 pursuant to this agreement during the years ended December 31, 1997,
1996 and 1995, respectively.
NOTE 11 - EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted earnings per
share:
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
(IN THOUSANDS, EXCEPT PER SHARE DATA)
NUMERATOR
<S> <C> <C> <C> <C> <C>
Net income (loss) $ (21,197) $ 11,515 $ 6,807 $ (7,616) $ 4,407
=========== ========== ========= ========== =========
DENOMINATOR
Denominator for basic earnings per share
-weighted-average shares 27,210 26,820 22,211 15,582 12,250
Effect of dilutive
employee stock options -- 20 202 -- 204
--------- --------- --------- --------- ---------
Denominator for diluted earnings per share
-adjusted weighted-average shares and
assumed conversions 27,210 26,840 22,413 15,582 12,454
========== ========== ========== ========== ==========
Net (loss) income per common share $ (0.78) $ 0.43 $ 0.31 $ (0.49) $ 0.36
========= ========= ========= ========= =========
Net (loss) income per common share - assuming
dilution $ (0.78) $ 0.43 $ 0.30 $ (0.49) $ 0.35
========= ========= ========= ========= =========
</TABLE>
See "Note 19 - Subsequent Events" for additional disclosure regarding
employee stock options, warrants and repurchase of outstanding shares.
31
<PAGE> 34
NOTE 12 - CAPITAL STOCK
The Company has authorized 2,000,000 shares of preferred stock at a
$10.00 par value. No shares of preferred stock had been issued at December 31,
1997. The rights and preferences of the preferred stock will be fixed by the
Board of Directors at the time such shares are issued. The preferred stock, when
issued, will have dividend and liquidation preferences over those of the common
shareholders.
On March 28, 1995, the Company sold to H. Wayne Huizenga and an
affiliated family foundation 1,000,000 shares of its common stock and options
for an aggregate purchase price of $10,000,000, less issuance expenses of
$25,000. The options are exercisable over five years for the purchase of 620,000
shares of common stock upon payment of $10.00 per share and 380,000 shares of
common stock upon payment of $12.00 per share. See "Note 19-Subsequent
Events."
NOTE 13 - STOCK OPTION PLANS
The Company has elected to follow APB No. 25 and related
interpretations in accounting for its employee stock options because, as
discussed below, the alternative fair value accounting provided for under SFAS
No. 123 requires use of option valuation models that were not developed for use
in valuing employee stock options. Under APB No. 25, because the exercise price
of the Company's employee stock options equals the market price of the
underlying stock on the date of grant, no compensation expense is recognized.
The Company's 1986 Incentive Stock Option Plan ("1986 Plan") as amended
by vote of the shareholders at the 1994 and 1996 Annual Meetings, has authorized
the grant of options to officers and key employees for up to 3,850,000 shares of
the Company's common stock. All options granted have 10 year terms and vest and
become fully exercisable at the end of up to 6 years of continued employment.
The number of shares available for grants of additional options under the 1986
Plan were 666,441 and 1,161,674 at December 31, 1997 and 1996, respectively.
On August 6, 1992, the Company's Board of Directors approved a stock
option plan for the Board of Directors (the "Directors' Plan"), which was
subsequently approved by the Company's shareholders at the 1993 Annual Meeting.
The Directors' Stock Option Plan provides for the immediate grant to each
non-employee director a stock option for 15,000 shares of the Company's common
stock, less the number of shares held by any such director under the 1986 Stock
Option Plan. Additionally, the Directors' Plan provides for additional grants of
stock options for 5,000 shares of the Company's common stock, at prices not less
than the fair value, to each non-employee director annually. Options granted
under the Directors' Plan may not be exercised for a period of six months
following the date of grant and terminate up to eleven years after the date of
grant or eighteen months after the holder ceases to be a member of the Board of
Directors, whichever occurs earlier. The total number of shares available for
grants of additional options under the Directors' Plan at December 31, 1997 and
1996 was 785,000 and 805,000, respectively.
On August 15, 1996, the Board of Directors of the Company approved the
OHM Corporation Incentive Stock Plan ("ISP") which permits the Board to grant
shares of common stock of the Company to officers of the Company under
restrictions set forth with the grant. Shares issued under the ISP are subject
to substantial risk of forfeiture within the meaning of Section 83 of the
Internal Revenue Code of 1986. There have been 105,000 shares of common stock
issued under the ISP with a vesting date of August 15, 2001 for 100% of the
shares. Total expense recognized for the year ended December 31, 1997 in
connection with shares issued under this plan is $226,844.
See "Note 19 - Subsequent Events" for disclosure of disposition of
shares in the aforementioned plans.
Pro forma information regarding net income and earnings per share is
required by SFAS No. 123, which also requires that the information be determined
as if the Company had accounted for its employee stock options granted
subsequent to December 31, 1994 under the fair value method of that Statement.
The fair value for these options was estimated at the date of grant using a
Black-Scholes option pricing model. The following assumptions were used in the
valuation, and no dividends were assumed:
32
<PAGE> 35
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Average expected life (years) 6 7 7
Expected volatility 0.41 0.46 0.46
Risk free interest rate 6% 6% 6%
Weighted average fair value of options granted during the year $3.83 $4.20 $5.40
</TABLE>
The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting restrictions
and are fully transferable. In addition, option valuation models require the
input of highly subjective assumptions including the expected stock price
volatility. Because the Company's employee stock options have characteristics
significantly different from those of traded options, and because changes in the
subjective input assumptions can materially affect the fair value estimate, in
management's opinion, the existing models do not necessarily provide a reliable
single measure of the fair value of its employee stock options.
For purposes of pro forma disclosures of net income and earnings per
share, the estimated fair value of the options is amortized to expense over the
options' vesting period. The Company's pro forma information follows:
<TABLE>
<CAPTION>
Pro Forma
Years Ended December 31,
------------------------
1997 1996 1995
---- ---- ----
(In Thousands, Except Per Share Data
<S> <C> <C> <C>
Net (loss) income $ (22,284) $ 10,901 $ 6,428
Net (loss) income per share $ (0.82) $ 0.41 $ 0.29
</TABLE>
The following is a summary of the stock option activity:
<TABLE>
<CAPTION>
Number Weighted Average
of Shares Exercise Price
--------- --------------
<S> <C> <C>
1986 PLAN
Outstanding at January 1, 1995 1,765,350 $ 9.41
Granted 632,750 9.89
Exercised (249,545) 7.74
Canceled (134,735) 9.81
-----------
Outstanding at December 31, 1995 2,013,820 9.74
Granted 1,097,569 8.33
Exercised -- --
Canceled (1,004,399) 11.06
----------
Outstanding at December 31, 1996 2,106,990 8.38
Granted 807,000 8.20
Exercised (106,195) 7.69
Canceled (311,767) 8.28
-----------
Outstanding at December 31, 1997 2,496,028 8.36
===========
Exercisable at December 31, 1996 1,037,008 8.44
===========
Exercisable at December 31, 1997 1,221,738 8.54
===========
DIRECTORS' PLAN
Outstanding at January 1, 1995 85,000 $ 10.16
Granted 65,000 11.83
-----------
Outstanding at December 31, 1995 150,000 10.88
Granted 60,000 7.94
Canceled (15,000) 10.50
-----------
Outstanding at December 31, 1996 195,000 10.01
Granted 35,000 7.50
Canceled (15,000) 11.75
-----------
Outstanding at December 31, 1997 215,000 9.48
===========
Exercisable at December 31, 1996 180,000 10.20
===========
Exercisable at December 31, 1997 215,000 9.48
===========
</TABLE>
33
<PAGE> 36
Exercise prices for options outstanding as of December 31, 1997 for the
1986 Plan and the Director's Plan ranged from $6.38 to $11.88 and $7.38 to
$15.63, respectively. The weighted-average remaining contractual life of those
options is 7.2 and 7.5 years, respectively.
NOTE 14 - RETIREMENT AND PROFIT-SHARING PLANS
The Company has a Retirement Savings Plan (the "Plan") which allows
each of its eligible employees to make contributions, up to a certain limit, to
the Plan on a tax-deferred basis under Section 401(k) of the Internal Revenue
Code of 1986, as amended. Eligible employees are those who are employed
full-time, are over twenty-one years of age, and have one year of service with
the Company. The Company may, at its discretion, make matching contributions and
profit sharing contributions to the Plan out of its profits for the plan year.
The Company made matching contributions of $2,718,000, $2,691,000 and $1,643,000
to the Plan for the years ended December 31, 1997, 1996 and 1995, respectively.
Effective January 1, 1996, the Board of Directors of the Company
approved the Retirement and Incentive Compensation Plan ("RICP") which provides
eligible employees an election to defer a specified percentage of their cash
compensation. The obligations of the Company under the RICP will be unsecured
general obligations to pay the deferred compensation under the terms of the
RICP. Participants may elect under the plan to invest deferrals in an OHM Common
Stock Deferral Account for which contributions will be treated as if such
amounts had been used to purchase shares of the Company's stock and not as
actual purchases of the Company's stock. At the discretion of the compensation
committee of the Board of Directors, contributions to the plan will be matched
by the Company and all amounts invested in the plan will earn interest at the
prime rate published by the Wall Street Journal if not invested in the OHM
Common Stock Deferral Account. Total expense was $564,000 and $154,000 for the
years ended December 31, 1997 and 1996, respectively.
NOTE 15 - LITIGATION AND CONTINGENCIES
The Company is currently in litigation in the U.S. District Court for
the Western District of New York with Occidental Chemical Corporation
("Occidental") relating to the Durez Inlet Project performed in 1993 and 1994
for Occidental in North Tonawanda, New York. The Company's work was
substantially delayed and its costs of performance were substantially increased
as a result of conditions at the site which the Company believes were materially
different than as represented by Occidental. Occidental's amended complaint
seeks $8,806,000 in damages primarily for alleged costs incurred as a result of
project delays and added volumes of incinerated waste. The Company's
counterclaim seeks an amount in excess of $9,200,000 for damages arising from
Occidental's breach of contract, misrepresentation and failure to pay
outstanding contract amounts.
Management believes that it has established adequate reserves should
the resolution of the above matter be lower than the amounts recorded and for
other matters in litigation or other claims and disputes. There is, however,
always risk and uncertainty in pursuing and defending litigation and arbitration
proceedings in the course of the Company's remediation business and,
notwithstanding the reserves currently established, adverse future results in
litigation or other proceedings could have a material adverse impact upon the
Company's consolidated future results of operations or financial condition. In
addition to the above, the Company is subject to a number of claims and lawsuits
in the ordinary course of its business. In the opinion of management, the
outcome of these actions, which are not clearly determinable at the present
time, are either adequately covered by insurance, or if not insured, will not,
in the aggregate, have a material adverse impact upon the Company's consolidated
financial position or the results of future operations.
NOTE 16 - MAJOR CUSTOMERS
Revenue from federal government agencies accounted for 72%, 72% and 71%
of total revenue from continuing operations for the years ended December 31,
1997, 1996 and 1995, respectively. Revenue from state and local government
agencies accounted for 7%, 5% and 5% of total revenue from continuing operations
for the years ended December 31, 1997, 1996 and 1995, respectively. There were
no industrial customers which accounted for more than 10% of total revenue for
the years ended December 31, 1997, 1996 and 1995.
NOTE 17 - SPECIAL CHARGES
During June 1997, the Company settled litigation that was pending
involving Citgo Petroleum Corporation ("Citgo") and Occidental relating to a
remediation project which was performed by the Company for Citgo at its Lake
Charles, Louisiana refinery during 1993 and 1994. Under the terms of the
settlement with Citgo and Occidental, the Company received a cash payment of
$14,346,000. In addition, as a result of an unfavorable binding arbitration
decision on the dispute between the Company and Separation and Recovery Systems,
Inc. ("SRS") arising out of the Company's termination of SRS' subcontract for
services at a project in Cincinnati, Ohio, the Company paid SRS $2,400,000 in
damages. The settlement and write-down
34
<PAGE> 37
of the aforementioned claims and litigation, together with other receivables and
the establishment of reserves for the consolidation of certain laboratory and
operational functions resulted in the Company recording a $22,726,000 (net of
$15,151,000 income tax benefit), charge during the second quarter of 1997.
The Company plans to divest its 40% share of NSC Corporation. As a
result, the Company recorded, in addition to the charge described above, a
$12,089,000 (net of $2,860,000 income tax benefit), charge during the second
quarter of 1997, to reduce the carrying value of its NSC investment to reflect
the likely value to be realized given the Company's current intentions. See
"Note 19 - Subsequent Events".
The Company's consolidated statement of operations for the year ended
December 31, 1995 includes a $2,312,000 (net of $1,542,000 income tax benefit),
charge for integration costs related to the acquisition of the Division. The
charge was recorded as a selling, general and administrative expense and was
primarily for severance and relocation costs for certain of the Company's
personnel and the closing of certain of the Company's offices as a result of
combining the operations of the Division and the Company.
NOTE 18 - QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
The following table sets forth the Company's condensed consolidated
statements of operations by quarter for 1997 and 1996.
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter
------- ------- ------- -------
(In Thousands, Except Per Share Data)
1997
- ----
<S> <C> <C> <C> <C>
Revenue $ 108,498 $ 129,313 $ 143,656 $ 145,224
Gross profit 13,851 17,874 20,909 19,501
Selling, general and administrative expenses 10,409 49,368 11,972 12,188
Operating income (loss) 3,442 (31,494) 8,937 7,313
Net income (loss) (1) $ 1,438 $ (31,609) $ 4,914 $ 4,060
========= ========= ========= =========
Basic and diluted net income (loss) per share $ 0.05 $ (1.16) $ 0.18 $ 0.15
========= ========= ========= =========
1996
- ----
Revenue $ 118,963 $ 129,177 $ 158,272 $ 144,572
Gross profit 15,030 17,560 20,638 18,832
Selling, general and administrative expenses 11,176 11,943 13,124 13,007
Operating income 3,854 5,617 7,514 5,825
Net income $ 1,330 $ 2,379 $ 3,996 $ 3,810
========= ========= ========= =========
Basic and diluted net income per share $ 0.05 $ 0.09 $ 0.15 $ 0.14
========= ========= ========= =========
</TABLE>
NOTES:
(1) During the second quarter of 1997, the Company recorded a $34,815,000
charge (net of income tax benefit of $18,011,000) or $1.28 per share,
charge for the settlement and write-down of certain claims and
litigation, establishment of reserves for the consolidation of certain
laboratory and operational functions, and the reduction of the carrying
value of its NSC investment.
NOTE 19 - SUBSEQUENT EVENTS (UNAUDITED)
The Company has entered into an Agreement and Plan of Merger (the
"Merger Agreement"), dated January 15, 1998, by and among the Company,
International Technology Corporation ("Parent") and IT-Ohio, Inc. ("Purchaser").
Pursuant to the Merger Agreement, on February 25, 1998 Purchaser, a wholly owned
subsidiary of Parent, completed a tender offer (the "Offer") for 13,933,000
shares of Common Stock (each, a "Share" and collectively, the "Shares") by
purchasing such Shares at a price of $11.50 per Share, net to the tendering
shareholder in cash. The Offer was described in the Tender Offer Statement on
Schedule 14D-1 filed by Purchaser on January 16, 1998 with the Securities and
Exchange Commission (the "Commission").
The Merger Agreement provides that, subject to the satisfaction or
waiver of certain conditions precedent (including the approval of the Merger
Agreement by holders of a majority of the outstanding Shares), Purchaser will
merge with and into
35
<PAGE> 38
the Company (the "Merger"), and the Company will be the surviving corporation in
the Merger, with the result that the Company will become a wholly owned
subsidiary of Parent. Based upon the preliminary results of the Offer and on the
number of shares of Common Stock outstanding on February 24, 1998, at the
effective time of the Merger, each remaining Share outstanding will be converted
into the right to receive approximately 1.077 shares of the common stock of
Parent and approximately $2.61 in cash.
James L. Kirk, Joseph R. Kirk, H. Wayne Huizenga and The Huizenga
Family Foundation, all shareholders of the Company, have entered into voting
agreements whereby they agree to vote their shares of Common Stock in favor of
the Merger.
Pursuant to the Merger Agreement and the Share Repurchase Agreement,
dated as of January 15, 1998 and as amended and restated as of February 11, 1998
and as amended and restated as of February 17, 1998 (the "Repurchase
Agreement"), by and among the Company, Parent, WMX, Rust and Rust Remedial
Services Holding Company Inc., an affiliate of WMX, the Company repurchased from
WMX and its affiliates 2,535,381 Shares for $11.50 per Share, concurrently with
the payment for Shares pursuant to the Offer (the "Repurchase"), and WMX and its
affiliates tendered 7,111,543 Shares in the Offer. Pursuant to the Repurchase
Agreement, WMX and its affiliates also agreed to vote all Shares held by them in
favor of the Merger. WMX also agreed to cancel, without payment of any separate
consideration, the Warrants and any rights it may have to purchase additional
shares of Common Stock. In addition, the Guaranty Agreement and related
guarantees as well as key provisions of the Standstill Agreement will terminate
upon consummation of the Merger.
The Company also has an approximately 40% interest in NSC Corporation
("NSC"), a provider of asbestos abatement and specialty contracting services.
Pursuant to the Merger Agreement, the Company will pay a pro rata distribution
(the "NSC Distribution") to holders of record of the Shares as of the close of
business on February 24, 1998, of all of the shares of Common Stock, par value
$0.01 per share, of NSC held by the Company (the "NSC Shares"). The payment date
for the NSC Distribution is March 6, 1998, which is the earliest date on which
the NSC Distribution may be paid under the Company's Regulations. It is
anticipated that the NSC Distribution will be treated as a pro rata taxable
redemption that qualifies as a sale or exchange for tax purposes.
In connection with the Company's entry into the Merger Agreement and by
resolution of the Company's Board of Directors, the Company's 1986 Stock Option
Plan and the Company's Nonqualified Stock Option Plan for Directors were amended
to immediately vest each non-vested stock option issued under such plans and to
give each of the option holders the right to cancel their options in exchange
for a cash payment equal to the difference between $11.50 per share and the
respective exercise price of each option. In addition, the Company's Board of
Directors took action to allow holders of the restricted stock issued under the
Company's Incentive Stock Plan to tender such stock in the Offer. As a result of
the above actions, the Company will incur up to $9,400,000 of compensation
expense during the first quarter of 1998 if all of the stock option holders
elect to receive the cash payment for their outstanding options. In addition,
pursuant to that certain letter agreement, dated as of January 15, 1998, by and
between H. Wayne Huizenga and the Company, all of the outstanding options held
by H. Wayne Huizenga were cancelled as of February 25, 1998 in consideration of
$1,500,000.
The consummation of the transactions contemplated by the Merger
Agreement is subject to the satisfaction of various conditions, including,
without limitation: (i) the approval by the stockholders of Parent for the
issuance of shares of Parent Common Stock pursuant to the Merger Agreement, and
(ii) the approval of the Merger Agreement and the Merger by the shareholders of
the Company. The Company received early termination of the waiting period
required under the Hart-Scott-Rodino Antitrust Improvements Act during January
1998.
The accompanying financial statements were prepared assuming the
Company would continue operations independently and do not anticipate
adjustments which may be required as a result of the Merger. The Merger will be
accounted for using the purchase method and as a result may impact the carrying
value of certain of the Company's assets and liabilities.
36
<PAGE> 39
REPORT OF INDEPENDENT AUDITORS
Board of Directors and Shareholders
OHM Corporation
We have audited the accompanying consolidated balance sheets of OHM
Corporation and subsidiaries as of December 31, 1997 and 1996, and the related
consolidated statements of operations, changes in shareholders' equity, and cash
flows for each of the three years in the period ended December 31, 1997. Our
audits also included the financial statement schedule listed in the Index at
Item 14(a). These financial statements and schedule are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
OHM Corporation and subsidiaries at December 31, 1997 and 1996, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1997, in conformity with generally
accepted accounting principles. Also, in our opinion, the related financial
statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.
/s/ ERNST & YOUNG LLP
Columbus, Ohio
February 12, 1998
37
<PAGE> 40
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURES
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
<TABLE>
<CAPTION>
Positions and Other Relationships
Name Age with the Company and Business Experience
---- --- ----------------------------------------
<S> <C> <C>
Herbert A. Getz 42 Director and member of the Compensation and Stock Option Committee. Mr. Getz
has been Senior Vice President of WMX since May 1995 and General Counsel of
WMX since August 1992. Mr. Getz also served as Vice President from May 1990
to May 1995 and as Secretary of WMX since January 1988. Mr. Getz served as
Assistant General Counsel from December 1985 until August 1992. Mr. Getz has
also held the offices of Vice President, General Counsel and Secretary of Waste
Management of North America, Inc., a provider of solid waste management services,
from April 1989 until December 1993, and Vice President and Secretary of Rust, a
provider of engineering, construction, environmental, infrastructure, consulting
services and other on-site industrial and related services, from January 1993 to May
1994. He has also served as Vice President and Secretary of Wheelabrator
Technologies Inc. ("WTI") a provider of environmental products and services, from
July 1995 until January 1997, as well as being the General Counsel of WTI from
November 1990 until May 1993. Mr. Getz is a director of NSC.
Ivan W. Gorr 68 Director and Chairman of the Audit Committee and member of the Compensation
and Stock Option and Executive Committees. Mr. Gorr retired as Chairman of the
Board of Directors and Chief Executive Officer of Cooper Tire & Rubber Company
of Findlay, Ohio, a manufacturer of tires and other rubber products. Mr. Gorr is a
director of Amcast Industrial Corporation, Arvin Industries, Inc., The Fifth Third
Bancorp and Borg-Warner Automotive.
Dr. Charles D. Hollister 60 Director and member of the Audit Committee. Since 1979, Dr. Hollister has been
Senior Scientist and Vice President of Woods Hole Oceanographic Institution,
Woods Hole, Massachusetts, a non-profit oceanographic research institution
William P. Hulligan 54 Director and member of the Executive Committee. Mr. Hulligan served as Vice
President of WMX from February 1997 until his retirement in November 1997 and
now serves as a consultant to WMX. Prior to this position, he was Executive Vice
President of WMX from January, 1996 until February, 1997, President of the
Midwest Group of Waste Management, Inc., from March 1993 until January 1996,
and President of the East Group of Waste Management, Inc. from 1992 until March
1993. Mr. Hulligan is a director of National Seal Company and NSC.
James L. Kirk (1) 48 Chairman of the Board of Directors, President and Chief Executive Officer and
Chairman of the Executive Committee. Mr. Kirk has been President and Chief
Executive Officer of the Company since July 1986 and, in addition, was elected
Chairman of the Board in January 1987. He has served as Chairman of the Board and
President of OHMR, a wholly-owned subsidiary of the Company, since April 1985.
Mr. Kirk is a founder of OHMR and has served in various capacities as an officer and
director of OHMR.
Joseph R. Kirk (1) 46 Director. Mr. Kirk has served as a Director of the Company since July, 1986. Mr.
Kirk also served as Executive Vice President from July 1986 until February, 1998.
Mr. Kirk served as Vice Chairman of OHMR from April 1985 until July 1986 and
continues to serve as Executive Vice President of OHMR. He is a founder of OHMR
and has served in various capacities as an officer and director of OHMR.
</TABLE>
38
<PAGE> 41
<TABLE>
<S> <C> <C>
James E. Koenig 50 Director and member of the Audit Committee. Mr. Koenig served as Executive Vice
President of WMX and President of Waste Management Shared Services from
February 1997 until October 1997 and remains an employee of WMX. Prior to this
position, he was Senior Vice President of WMX from May 1992 until February 1997,
Chief Financial Officer of WMX since 1989 and Vice President and Treasurer of
WMX since December 1986. Mr. Koenig served as Vice President, Chief Financial
Officer and Treasurer of WTI from November 1990 to May 1993 and Vice President,
Chief Financial Officer and Treasurer of Rust from January 1993 to August 1993.
Richard W. Pogue 69 Director and member of the Executive Committee. Mr. Pogue is a consultant with
Dix & Eaton, a public relations firm. Effective June 30, 1994, Mr. Pogue retired as
Senior Partner of the law firm of Jones, Day, Reavis & Pogue, Cleveland, Ohio, of
which he had been a partner since 1961. Mr. Pogue is also a director of Continental
Airlines, Inc., Derlan Industries Limited, M.A. Hanna Company, KeyCorp, LAI
Associates, Inc., Rotek Incorporated and TRW Inc.
Charles W. Schmidt 68 Director and Chairman of the Compensation and Stock Option Committee and
member of the Executive Committee. Mr. Schmidt retired in 1991 as Senior Vice
President, External Affairs of Raytheon Company, a broadly diversified manufacturer
of industrial and consumer products, and was formerly President and
Chief Executive Officer of SCA Services, Inc., a company that provided waste
management-related services. Mr. Schmidt also serves as a director of the
Massachusetts Financial Services Family of Mutual Funds and Mohawk Paper Company.
</TABLE>
(1) James L. Kirk and Joseph R. Kirk are brothers.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under the securities laws of the United States, the Company's
directors, executive officers, and any persons holding more than ten percent of
the Company's Common Stock are required to report their initial ownership of the
Company's Common Stock and any subsequent changes in that ownership to the
Commission. Specific due dates for these reports have been established and the
Company is required to disclose in its Proxy Statement any failure to file by
these dates. All of these filing requirements were satisfied except that James
L. Kirk failed to report a September 26, 1997 sale of 25,900 shares in his
September, 1997 Form 4, but did report that sale in an amended Form 4 filed on
February 10, 1998, and Pamela K. M. Beall, Vice President, Treasurer and
Assistant Secretary and Fred H. Halvorsen, Vice President, Health and Safety,
each filed one late Form 4 reporting an exercise of stock option.
EXECUTIVE OFFICERS OF THE REGISTRANT
The executive officers of the Company are listed below:
<TABLE>
<CAPTION>
NAME AGE POSITIONS
- ---- --- ---------
<S> <C> <C>
James L. Kirk 48 Chairman of the Board, President and
Chief Executive Officer
Joseph R. Kirk 46 Executive Vice President and a Director
Pamela K.M. Beall 41 Vice President, Treasurer and Assistant Secretary
Robert J. Blackwell 41 Vice President, Marketing and Strategic Planning
Fred H. Halvorsen 56 Vice President, Health and Safety
Kris E. Hansel 40 Vice President and Controller
Steven E. Harbour 49 Vice President, Legal and Secretary
Phillip V. Petrocelli 39 Vice President, Western Operations
Philip O. Strawbridge 43 Vice President, Chief Financial and Administrative Officer
Michael A. Szomjassy 47 Vice President, Eastern Operations
</TABLE>
PAMELA K.M. BEALL -Vice President, Treasurer and Assistant Secretary.
Ms. Beall joined the Company in June 1985 as Director of Finance of OHMR, became
Treasurer and Assistant Secretary of OHMR in September 1985, and became
Treasurer and Assistant Secretary of the Company in January 1986. Ms. Beall
assumed her current position in August 1994.
39
<PAGE> 42
Prior to joining the Company, Ms. Beall was General Manager, Treasury Services
for USX Corporation and previous to that with Marathon Oil Company. Ms. Beall
also serves as a director of NSC.
ROBERT J. BLACKWELL -Vice President, Marketing and Strategic Planning.
Mr. Blackwell joined the Company in July 1993 as Vice President, Government
Business Development of OHMR, and has served as Senior Vice President, Marketing
of OHMR since October 1995. Prior to joining the Company, Mr. Blackwell was Vice
President for Federal Marketing and Legislative Affairs, from January 1993 to
July 1993, and Director of Marketing and Federal Relations, from January 1989 to
December 1992, of Ebasco Services Incorporated. Mr. Blackwell also serves as a
director of NSC.
FRED H. HALVORSEN -Vice President, Health and Safety. Dr. Halvorsen
joined the Company in 1984 as Director of Health and Safety of OHMR and assumed
his current position in May 1987.
KRIS E. HANSEL -Vice President and Controller. Mr. Hansel joined the
Company in November 1988 as General Accounting Manager of OHMR, became Assistant
Controller in October 1991 of the Company and became Controller in October 1992.
Mr. Hansel assumed his current position in August 1994. Prior to joining the
Company, Mr. Hansel was General Accounting Manager of WearEver-ProctorSilex,
Inc.
STEVEN E. HARBOUR -Vice President, Legal and Secretary. Mr. Harbour
joined the Company in December 1996. Prior to joining the Company, Mr. Harbour
served in various management and legal capacities with the Coca-Cola Company
from 1983 to 1993, was Vice President, The Coca-Cola Bottling Company of New
York, Inc., from 1993 to 1995, and most recently was affiliated with the law
firm of Sumner & Anderson.
PHILLIP V. PETROCELLI -Vice President, Western Operations. Mr.
Petrocelli joined the Company in August 1993 as Vice President, Western Region
of OHMR, and since October 1995 has served as Senior Vice President, Western
Region of OHMR. Mr. Petrocelli assumed his current position with the Company in
May 1995. Prior to joining the Company, Mr. Petrocelli was Regional Director and
previous to that was Acting Vice President--Analytical Labs, with IT
Corporation.
PHILIP O. STRAWBRIDGE -Vice President, Chief Financial and
Administrative Officer. Mr. Strawbridge joined the Company in February 1996. In
addition, Mr. Strawbridge has served as Senior Vice President and Director of
OHMR since October 1996. Prior to joining the Company, Mr. Strawbridge was
Senior Director of Contracts and Finance with Fluor Daniel, Inc. and an acting
Vice President of Fluor Daniel Fernald.
MICHAEL A. SZOMJASSY -Vice President, Eastern Operations. Mr. Szomjassy
joined the Company in November 1989 as Vice President, Southeast Region of OHMR
and since October 1995 has served as Senior Vice President, Eastern Operations
of OHMR. Prior to joining OHM, Mr. Szomjassy was Regional Manager, Remediation
Services of Ebasco Services, Inc.
ITEM 11. EXECUTIVE COMPENSATION
Summary of Cash and Certain Other Compensation
The following table shows, for the fiscal years ended December 31,
1997, 1996 and 1995, the cash compensation paid by the Company and its
subsidiaries, as well as certain other compensation paid or accrued for those
years, to each of the five most highly compensated executive officers of the
Company in 1997, including the Chief Executive Officer of the Company, in all
capacities in which they served:
40
<PAGE> 43
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION AWARDS
STOCK OPTIONS
ANNUAL COMPENSATION GRANTED (#)
------------------- ---------------------------------------------------------
RESTRICTED SECURITIES
SALARY BONUS OTHER ANNUAL STOCK UNDERLYING ALL OTHER
------ ----- COMPENSATION AWARDS OPTIONS COMPENSATION
NAME OF PRINCIPAL POSITION YEAR ($) ($) ($) (1) ($) (2) (#) (3) ($) (4)
- -------------------------- ---- --- --- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
James L. Kirk 1997 452,830 256,750 0 0 125,000 23,883
Chairman, President 1996 376,747 0 44,841 351,750 68,279 17,568
and Chief Executive Officer 1995 330,013 0 0 0 70,000 5,347
Michael A. Szomjassy 1997 281,363 155,995 0 0 50,000 41,748
Vice President, 1996 288,093 25,000 0 150,750 65,275 14,682
Eastern Operations 1995 256,266 0 0 0 25,000 5,184
Philip V. Petrocelli 1997 274,122 125,500 0 0 50,000 110,677
Vice President, 1996 264,040 65,476 0 143,375 100,489 76,528
Western Operations 1995 232,513 50,000 50,839 25,000 25,000 19,435
Philip O. Strawbridge 1997 262,376 119,000 0 0 75,000 109,817
Vice President and 1996 187,321 0 0 108,875 22,967 47,305
Chief Financial Officer 1995 0 0 0 0 0 0
Robert J. Blackwell 1997 251,708 114,000 0 0 42,000 108,000
Vice President, Marketing 1996 225,349 28,125 25,505 125,625 66,092 36,621
and Strategic Planning 1995 193,768 30,000 0 0 25,000 29,591
</TABLE>
(1) Amounts in 1996 include $37,392 and 0 for financial planning services;
$2,126 and $3,377 for country club dues; and $5,323 and $11,845
representing earnings on the contributions made to the retirement
deferral accounts in accordance with the Company's Retirement and
Incentive Compensation Plan for Messrs. James L. Kirk and Robert J.
Blackwell, respectively. Amount in 1996 for Mr. Blackwell includes
$7,583 for miscellaneous perquisites and $2,700 for imputed interest.
Amount in 1995 for Mr. Petrocelli includes $43,938, $4,466, and $2,435
paid to him for reimbursement of tax costs in connection with the
relocation of his principal residence, imputed interest and
miscellaneous perquisites, respectively.
(2) Represents 42,000, 18,000, 17,000, 13,000 and 15,000 shares of
restricted stock which were granted to Messrs. James L. Kirk,
Szomjassy, Petrocelli, Strawbridge and Blackwell, respectively, the
value of which was $8.375 per share as of December 31, 1996.
(3) Amounts in 1996 include 69,453, 31,135, and 38,092 stock options which
were granted to Messrs. Petrocelli, Szomjassy, and Blackwell,
respectively, on May 9, 1996 in exchange for the surrender of
previously granted options.
(4) Amounts in 1995 for Messrs. Petrocelli and Blackwell include $14,286
and $25,000, respectively, in loans forgiven by the Company. Amount in
1996 for Mr. Strawbridge includes $47,261 for a relocation expenses.
Amount in 1996 for Mr. Petrocelli includes $19,048 for a loan forgiven
by the Company. Amounts in 1996 include matching contributions to each
individual's Retirement and Incentive Compensation Plan account of
$17,568, $14,682, $57,480, and $36,561, on behalf of Messrs. James L.
Kirk, Szomjassy, Petrocelli, and Blackwell, respectively. Amounts in
1997 for Messrs. Petrocelli, Strawbridge, and Blackwell include
$14,285, $10,000 and $20,000, respectively, in loans forgiven by the
Company. See 'Certain Relationships and Related Transactions --
Transactions with Management." Amounts in 1997 include matching
contributions to each individual's Retirement and Incentive
Compensation Plan account of $22,347, $35,320, $89,165, $92,600, and
$79,931; and matching contributions to each individual 401(k) account
of $0, $5,712, $6,352, $6,352 and $6,352, on behalf of Messrs. Kirk,
Szomjassy, Petrocelli, Strawbridge, and Blackwell, respectively. On
December 30, 1997, pursuant to resolutions approved by the Board of
Directors, the vested portion of each individual's Retirement and
Incentive Compensation Plan account was distributed to Messrs. James
L. Kirk, Szomjassy, Petrocelli, Strawbridge, and Blackwell, in the
amounts of $109,896,$95,489,$312,464, $123,894, and $257,233,
respectively.
41
<PAGE> 44
STOCK OPTIONS
The following table sets forth information with respect to grants of
options pursuant to the Company's 1986 Stock Option Plan made to the executive
officers named in the Summary Compensation Table during the 1997 fiscal year.
<TABLE>
<CAPTION>
STOCK OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
---------------------------------------------------------
POTENTIAL REALIZABLE
VALUE AT ASSUMED
NUMBER OF % OF TOTAL ANNUAL RATES OF
SECURITIES OPTIONS EXERCISE STOCK PRICE
UNDERLYING GRANTED TO OR APPRECIATION FOR
OPTIONS EMPLOYEES BASE OPTION TERM
GRANTED IN FISCAL PRICE EXPIRATION 5% 10%
NAME (#) YEAR ($/SH) DATE ($) ($)
- ---- ----- ------ -------- ------ -------- ------
<S> <C> <C> <C> <C> <C> <C>
James L. Kirk 125,000 15.49 8.500 02/12/07 $668,200.54 $1,693,351.36
Philip O. Strawbridge 75,000 9.29 8.500 02/12/07 $400,920.32 $1,018,010.82
Michael A. Szomjassy 50,000 6.20 8.500 02/12/07 $267,280.22 $677,340.55
Robert J. Blackwell 42,000 5.20 8.500 02/12/07 $224,515.38 $568,966.06
Philip V. Petrocelli 50,000 6.20 8.500 02/12/07 $267,280.22 $677,340.55
</TABLE>
OPTION EXERCISES AND HOLDINGS
The following table sets forth information with respect to the
executives named in the Summary Compensation Table concerning the exercise of
options during the last fiscal year and the value of unexercised options held as
of the end of the fiscal year.
42
<PAGE> 45
AGGREGATED OPTION EXERCISES IN
LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
Name Number of Securities
- ---- Underlying Value of Unexercised
Unexercised in-the-Money Options
Shares Value Realized Options at FY-End (#) at FY-End ($)
acquired (Market price at --------------------- -------------
on exercise exercise less
(#) exercise price) Exercisable Unexercisable Exercisable Unexercisable
--- --------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
James L. Kirk --- --- 249,070 214,209 21,000 14,000
Michael A. Szomjassy --- --- 110,558 89,717 7,500 5,000
Philip V. Petrocelli --- --- 89,901 85,558 7,500 5,000
Philip O. Strawbridge --- --- 11,992 110,975 1,563 4,688
Robert J. Blackwell --- --- 49,530 83,562 7,500 5,000
</TABLE>
Pursuant to the Merger Agreement, each holder of an option to purchase
a share of Company Common Stock was required to elect how their options would be
treated as a result of the Merger Agreement. Option-holders could elect that
each option, whether vested or unvested, exercisable or unexercisable, be
converted into the right to receive an amount in cash equal to the excess of
$11.50 over the exercise price per share subject to the option, multiplied by
the number of shares subject to the option.
Alternatively, option-holders could elect to receive an option to
acquire, on the same terms and conditions as were applicable to the
option-holder's existing option, a number of shares of Parent Common Stock
equivalent to the number of shares that could have been purchased under the
option-holder's option multiplied by 1.394 (rounded up to the nearest whole
number of shares of Parent Common Stock).
The exercise price under the new Parent options would be equal to the
exercise price for the shares under the existing Company options divided by
1.394 (rounded up to the nearest whole cent).
In the case of any Company option to which Section 422 of the Internal
Revenue Code of 1986, as amended applied, the option price, the number of shares
purchasable pursuant to such option and the terms and conditions of exercise of
such option was determined in accordance with the foregoing, subject to such
adjustments as were necessary in order to satisfy the requirements of Section
424(a) of the Internal Revenue Code of 1986, as amended (the "Code")
RETIREMENT AND INCENTIVE COMPENSATION PLAN
Effective January 1, 1996, the Board of Directors of the Company
adopted the Executive Retirement Plan and subsequently amended it on June 21,
1996 and renamed the plan as the Retirement and Incentive Compensation Plan
("RICP"). The RICP is administered by the Compensation and Stock Option
Committee. The principal purpose of the RICP is to allow executive officers to
defer current federal income taxation of their compensation and, along with the
Company's matching contribution, accumulate monies towards retirement in the
absence of any Company retirement plan, other than the Company's Retirement
Saving Plan which severely restricts officer participation due to certain
Internal Revenue Service limitations. Pursuant to the terms of the RICP,
executive officers may defer up to 50% of their compensation during any year,
provided that such executive officer may not defer more than 30% of his or her
compensation during any year to such individual's Retirement Deferral Account
(as described below). The Company matches 50% of the amounts deferred by the
participant and deposited into the Retirement Deferral Account and matches 100%
of the amounts deferred by the participant and deposited into the OHM Common
Stock Deferral Account. The participant's contribution, plus the Company match,
remain unfunded by the Company until paid to the participant at retirement or
other termination of employment. Any amounts deferred by the participant and
deposited into the Retirement Deferral Account, and Company matching
contributions, are credited monthly with interest at the prime rate and are
increased yearly by the annual increase in the S&P 500 index if such increase
exceeds the interest credited monthly to the participant during the calendar
year. Any amounts deferred by the participant and deposited into the OHM Common
Stock Deferral
43
<PAGE> 46
Account, and Company matching contributions, are credited monthly in units on
the basis of the average of the market value of the Company's Common Stock
during the preceding calendar month.
OHM CORPORATION RETIREMENT SAVINGS PLAN
The Company's Retirement Savings Plan (the "Retirement Plan") was
established in 1986. Officers of the Company, together with substantially all
full-time salaried employees and certain other employees of the Company and its
subsidiaries, are eligible to participate in the Retirement Plan. Participants
may make basic contributions of up to a combination of 15% of their
compensation, as defined in the Retirement Plan, which qualify for deferred tax
treatment under Section 401(k) of the Code. The Company makes matching
contributions of 100% of the first two percent of the participant's compensation
contributed to the Retirement Plan and 50% of the next four percent of the
participant's compensation contributed to the Retirement Plan. Matching
contributions are allocated to the accounts of participants in the Retirement
Plan who have completed two years of service. The Company also may, in its
discretion, make profit sharing contributions to the Retirement Plan which will
be allocated to all eligible employees. All participant contributions are
invested at the direction of the participant, and all profit sharing
contributions are invested at the direction of the Retirement Plan committee.
Matching contributions are made in Company stock and, upon allocation to a
participant's account, may be reinvested at the direction of the participant.
Amounts attributable to the Company's matching contributions vest upon the
earlier of (i) the completion of two years of service, or (ii) the participant's
death, disability or attaining age 65 while an employee. During 1997, an
aggregate of $46,472 was contributed as matching contributions under the
Retirement Plan to the accounts of all executive officers as a group. Matching
contributions for the five most highly compensated executed officers named are
shown above under the heading "Executive Compensation and Other Information,
Summary of Cash and Certain Other Compensation." The Company made no profit
sharing contributions to the retirement plan during 1997.
DIRECTORS' NON-QUALIFIED STOCK OPTION PLAN
The Company recognizes the importance of attracting and retaining
outstanding individuals as directors and of stimulating the active interest of
these persons in the development and financial success of the Company. In
addition, the Company endorses the position that stock ownership arrangements
are beneficial in aligning Directors' and shareholders' interests in the
enhancement of shareholder value. The Board of Directors believes that the
Directors' Non-Qualified Stock Option Plan (the "Director Option Plan") is a
significant factor in furtherance of these objectives and intends, through the
Director Option Plan, to increase the Company's profits by providing such
persons with opportunities to acquire shares of the Common Stock of the Company
on advantageous terms.
Only Directors who are not employees of the Company and its
subsidiaries are eligible to participate in the Director Option Plan. The
Director Option Plan provides that the total number of shares that may be sold
upon the exercise of stock options shall not exceed 1,000,000 shares of Common
Stock. The Director Option Plan is of indefinite duration and will continue in
effect until all shares reserved for options thereunder have been sold or until
earlier termination of the Director Option Plan.
The Director Option Plan provides for automatic grants of options to
purchase shares of Common Stock of the Company to Directors of the Company who
are not employees of the Company or its subsidiaries. Under the Director Option
Plan, each person who was an incumbent non-employee Director of the Company
received an option to purchase 15,000 shares of Common Stock, as of August 6,
1992, the effective date of the Director Option Plan, provided that the total
number of shares each optionee was eligible to receive was reduced by the number
of shares of Common Stock subject to prior option grants to such Director. Each
person who first becomes a non-employee Director of the Company after the
effective date is entitled to receive an option to purchase 15,000 shares of
Common Stock as of the date such person first became a non-employee Director.
Each person who is a non-employee Director of the Company is entitled to receive
an option to purchase 5,000 shares of Common Stock immediately after each of the
Company's annual meetings of shareholders. An option is exercisable in full upon
six months of continuous service as a non-employee Director. Options granted
under the Director Option Plan are options that do not qualify under particular
provisions of the Code. The Director Option Plan is administered by employee
directors who are not eligible to participate in the Director Option Plan.
DIRECTORS' DEFERRED FEE PLAN
The Board of Directors has adopted the Directors' Deferred Fee Plan
(the "Deferred Fee Plan"), the purpose of which is to help solidify the common
interest of Directors and shareholders in enhancing the value of the Company's
Common Stock. It is also intended that the Deferred Fee Plan will assist in
attracting and retaining qualified individuals to serve as Directors. The
Deferred Fee Plan will give those Directors who are not also employees of the
Company an opportunity to defer current federal income taxation of all or a
portion of their annual retainer and meeting fees payable by the Company for
their services as a Director.
44
<PAGE> 47
Under the terms of the Deferred Fee Plan, a Director may elect to have
his or her Director's fees credited to an account in either cash or units (an
accounting unit equal in value to one share of Common Stock). Deferred fees that
a Director elects to have credited in cash will be credited to the Director's
account as they become payable to the Director. A Director's account to which
fees have been credited in cash will earn interest annually at the rate of
interest payable on one-year U.S. Treasury Bills or such other rate as the
Committee designated by the Deferred Fee Plan may establish. In no event,
however, will the rate of interest be more than five percent higher than the
rate payable on such U.S. Treasury Bills. Deferred fees payable in units will be
credited, together with an amount equal to 10% of such deferred fees, to a
Director's account after the end of the fiscal year on the basis of the average
of the market values of the Common Stock on the last trading day in each
calendar month during the year. Each account to which fees have been credited in
units shall be credited annually after the end of each fiscal year with
additional units equal in value to the amount of cash dividends paid by the
Company during such year on Common Stock equivalent to the average daily balance
of units in such account during the year. The maximum number of units that may
be granted under the Deferred Fee Plan during its term is 100,000 in the
aggregate. The Deferred Fee Plan is administered by a Committee consisting of
the Chairman of the Board (provided he is an employee-director) and two Company
officers or directors who are employee-directors appointed by the Chairman of
the Board.
EMPLOYMENT AND INDEMNIFICATION AGREEMENTS
The Company has entered into agreements with the executive officers
named in the Summary Compensation Table and certain other executive officers
providing that in the event of any "change in control" of the Company, such
officers would continue their employment with the Company in their present
position for terms of approximately three years following such change in
control. During such term of employment, each such officer would be entitled to
receive base compensation and to continue to participate in incentive and
employee benefit plans at levels no less favorable to him than prior to
commencement of the term or to receive a lump sum payment, following the
termination of his employment. Benefits under these agreements are subject to an
overall limitation which assures that payments will not constitute "excess
golden parachute payments" under federal income tax law. While each of such
agreements is presently in effect, none become operative until a change in
control of the Company has occurred, prior to which time the Company and such
officer each reserves the right at any time with or without cause to terminate
their employment relationship. The transactions that are deemed to result in a
change in control for the purposes of these agreements include (a) merger or
consolidation of the Company with, or sale of all or substantially all its
assets to another corporation, as a result of which less than a majority of the
voting shares of the surviving entity are owned by former stockholders of the
Company; (b) any person becoming the beneficial owner of 25% or more of the
voting stock of the Company; (c) reporting by the Company under specified
provisions of the federal securities laws that a change in control has occurred;
and (d) when within any two-year period, a majority of directors at the
beginning of such period (not including persons approved by at least two-thirds
of the Directors still in office who were directors at the beginning of such
period) cease to be directors of the Company. Effective December 12, 1995, the
Company terminated the employment agreements in effect as of such date and,
effective as of January 1, 1996, entered into revised employment agreements with
the executive officers of the Company. The revised employment agreements include
the provisions described above, except that the Board of Directors may, by vote
of three-quarters of the members, determine that a change in control described
in (b) above will not cause the employment agreement to become operative.
The Company has also entered into indemnification agreements (the
"Indemnification Agreements") with each current member of the Board of Directors
as well as with each executive officer of the Company. The form and execution of
the Indemnification Agreements were approved by the Company's shareholders. The
Indemnification Agreements were amended as of January 1, 1996 to provide that
Ohio law determines the rights and responsibilities of the Company and the
indemnitee. The amendment was necessary to reflect the Company's reincorporation
under Ohio law previously approved by the shareholders. Such agreements
essentially provide that, to the extent permitted by Ohio law, the Company will
indemnify the indemnitee against all expenses, costs, liabilities and losses
(including attorney's fees, judgments, fines or settlements) incurred or
suffered by the indemnitee in connection with any suit in which the indemnitee
is a party or otherwise involved as a result of his service as a member of the
Board or as an officer.
The Company also has entered into certain employment agreements with
twelve officers and employees of subsidiaries of the Company for up to one year
in the form of severance and retention agreements to assist in the transition
resulting from the Merger.
COMPENSATION AND STOCK OPTION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Messrs. Gorr, Getz and Schmidt are members of the Compensation and
Stock Option Committee of the Board of Directors of the Company. Mr. Getz is
employed by WMX, which beneficially owns 37.63% of the Company's Common Stock.
WMX and its affiliates and the Company are parties to various agreements,
including the Guaranty Agreement, the Warrant Agreement and the Standstill and
Non-Competition Agreement discussed below. See "Certain Relationships and
Related Transactions."
45
<PAGE> 48
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The Company's Common Stock is the Company's only outstanding class of
voting securities. The following table sets forth certain information as of
January 10, 1998 with respect to the beneficial ownership of the Company's
Common Stock by (i) holders of 5% or more of the outstanding Common Stock, (ii)
each Director of the Company, (iii) the executive officers named in the Summary
Compensation Table under "Executive Compensation and Other Information" and (iv)
all Directors and executive officers of the Company as a group.
<TABLE>
<CAPTION>
AMOUNT AND NATURE
OF BENEFICIAL PERCENTAGE
NAME OWNERSHIP (1) OF CLASS
- ---- ------------- --------
<S> <C> <C>
WMX Technologies, Inc. (2)
3003 Butterfield Road
Oak Brook, Illinois 60521 10,368,000 37.63%
State of Wisconsin Investment Board (3)
P.O. Box 7842
Madison, Wisconsin 53707 1,517,000 5.51%
H. Wayne Huizenga (4)
200 South Andrews Avenue
Fort Lauderdale, Florida 33301 1,500,000 5.25%
James L. Kirk (5)(6)(7) 2,280,960 8.14%
Joseph R. Kirk (5)(6)(7) 2,569,138 9.25%
Herbert A. Getz (6) 25,000 *
Ivan W. Gorr (6)(8) 50,606 *
Dr. Charles D. Hollister (6) 40,000 *
William P. Hulligan(6) 20,000 *
James E. Koenig (6)(7) 25,150 *
Richard W. Pogue (6)(7) 53,000 *
Charles W. Schmidt (6)(7)(8) 78,190 *
Robert J. Blackwell (6) 173,076 *
Philip V. Petrocelli (6)(8) 212,735 *
Philip O. Strawbridge (5)(6)(8) 148,274 *
Michael A. Szomjassy (5)(6)(8) 223,159 *
All Directors and executive officers as a group
(17 persons) (5)(6) 6,122,185 20.87%
</TABLE>
* less than 1%.
(1) Information with respect to beneficial ownership is based on
information furnished to the Company by each shareholder included in
this table. Except as indicated in the notes to the table, each
shareholder included in the table has sole voting and investment power
with respect to the shares shown to be beneficially owned. Beneficial
ownership is calculated in accordance with the rules and regulations
of the Commission.
(2) According to a Schedule 13D dated June 8, 1995 jointly filed by WMX ,
Chemical Waste Management, Inc., Rust Holding Company Inc., and Rust
International Inc. Assumes the exercise of warrants currently
exercisable to purchase 700,000 shares of Common Stock pursuant to
that certain Warrant Agreement between the Company and WMX described
below.
(3) According to an Amendment No. 8 to Schedule 13G filed by the State of
Wisconsin Investment Board.
(4) According to a Schedule 13D, dated April 1, 1995, filed by Mr.
Huizenga. Assumes the exercise of options currently exercisable or
exercisable within 60 days to purchase 1,000,000 shares of Common
Stock, but does not include 500,000 shares of Common Stock owned by
the Huizenga Family Foundation, Inc. as to which Mr. Huizenga
disclaims beneficial ownership.
46
<PAGE> 49
(5) The address of the shareholder is c/o OHM Corporation, 16406 U.S.
Route 224 East, Findlay, Ohio 45840.
(6) Assumes the exercise of options to purchase 463,279, 210,000, 25,000,
40,000, 40,000, 20,000, 25,000, 40,000, 30,000, 133,092, 175,489,
122,967, 200,275, and 1,737,494 by Messrs. James L. Kirk, Joseph R.
Kirk, Getz, Gorr, Hollister, Hulligan, Koenig, Pogue, Schmidt,
Blackwell, Petrocelli, Strawbridge, Szomjassy, respectively, and all
directors and executive officers as a group, respectively.
(7) Includes 20,562 shares of Common Stock held in three trusts by Mr.
James L. Kirk's wife as trustee for the benefit of the Kirk's
children, and 2,600 held in trust by Mr. James L. Kirk's daughter as
trustee for the benefit of Mr. Kirk's grandchild, as to which Mr.
James L. Kirk disclaims beneficial ownership. Includes 30,201 shares
of Common Stock held in three trusts by Mr. Joseph R. Kirk's wife as
trustee for the benefit of the Kirk's children, as to which Mr. Joseph
R. Kirk disclaims beneficial ownership. Includes 150 shares of Common
Stock held in trust for the benefit of Mr. Koenig's brother as to
which he disclaims beneficial ownership. Includes 1,000 shares of
Common Stock held in trust for the benefit of Mr. Pogue's wife as to
which he disclaims beneficial ownership. Includes 10,000 shares of
Common Stock held in trust for the benefit of Mr. Schmidt's wife as to
which he disclaims beneficial ownership.
(8) Includes 8,606, 8,190, 5,479, 7,083, 11,537, and 3,130 phantom stock
units held by Messrs. Gorr, Schmidt, Blackwell, Petrocelli,
Strawbridge, and Szomjassy, respectively.
(9) The information set forth in this table predates the consummation
of the Offer.
James L. Kirk and Joseph R. Kirk are brothers, each of whom disclaims
beneficial interest in the shares owned by the other.
CHANGES IN CONTROL
The Company has entered into the Merger Agreement pursuant to which
the Purchaser, a wholly owned subsidiary of Parent, is making the Offer to
purchase the Shares at a price of $11.50 per Share, net to the tendering
shareholder in cash, subject to the terms and conditions set forth in the Offer
to Purchase, dated January 16, 1998, and the related Letter of Transmittal. The
Offer is described in the Tender Offer Statement on Schedule 14D-1 filed by
Purchaser on January 16, 1998 with the Commission.
The Merger Agreement provides that, regardless of whether Shares are
accepted for payment or paid for in the Offer, but subject to the satisfaction
or waiver of certain conditions precedent (including the approval of the Merger
Agreement by holders of a majority of the outstanding Shares), Purchaser will
merge with and into the Company , and the Company will be the surviving
corporation in the Merger, with the result that the Company will become a wholly
owned subsidiary of Parent.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
TRANSACTIONS WITH MANAGEMENT
The Company provides Robert W. Kirk, a former officer and stockholder
of the Company and father of James L. Kirk and Joseph R. Kirk, with a pension
arrangement pursuant to which the Company is to make payments of $96,000 per
year, subject to further cost of living adjustments, for the remainder of his
life and that of his spouse if she survives him. During 1997, the Company made
payments totaling $117,955 to Robert W. Kirk under this pension arrangement.
The Company has entered into a five-year employment agreement with Mr.
Joseph Kirk during 1996, pursuant to which he will be entitled to a salary of
$250,000 payable in the initial year, and decreasing $25,000 during each of the
four succeeding years. Under the agreement, Mr. Kirk is eligible to receive
other benefits and perquisites payable to senior employees.
In the normal course of business, the Company has purchased
subcontractor services on certain of its projects from Kirk Brothers Co., Inc.
("KBC") which totaled $1,161,000, $2,265,000 and $615,000 for the years ended
December 31, 1997, 1996 and 1995, respectively. The principal shareholders of
KBC are directly related to certain officers and directors of the Company.
During 1997, OHMR paid $471,593 to KBC. This amount represents
payments made to KBC for subcontract services.
OHMR leases a building with approximately 5,400 square feet for a
monthly rental of $2,500 on a month-to-month basis from The KDC Company ("KDC"),
the principal shareholders of which are James L. Kirk and Joseph R. Kirk. OHMR
utilizes the building, located near its headquarters in Findlay, Ohio, for the
storage of equipment and inventory and made rental payments to KDC aggregating
$20,000 during 1997 under this arrangement.
47
<PAGE> 50
OHMR leases office and storage space from Findlay Machine and Tool,
Inc. ("FMT"), of which Joseph R. Kirk is the principal shareholder pursuant to a
lease. The rate and other terms of the lease were approved by the Board of
Directors on November 7, 1995 and amended on March 6, 1996 and August 13, 1996.
During 1997, OHMR made payments to FMT totaling $297,860 under the lease.
In connection with the commencement of his employment, Mr. Philip V.
Petrocelli, Vice President, Western Operations, received a $100,000 interest
free loan to be forgiven in equal installments on the anniversary date of his
employment over seven consecutive years. The balance of the loan becomes due and
payable immediately in the event Mr. Petrocelli voluntarily leaves the
employment of the Company or is terminated for cause before August 30, 2000.
During 1997, $14,286 of the principal balance was forgiven. As of December 31,
1997, the aggregate principal amount outstanding was $38,095.
In November 1997, the Company entered into an agreement to purchase a
new aircraft for use in the Company's business. In connection with such
agreement, the Company deposited the sum of $100,000 with the seller of such
aircraft. The Company has determined not to complete the purchase of the
aircraft. James L. Kirk has proposed that an entity in which he has a personal
interest assume the Company's obligations under the foregoing purchase agreement
and reimburse the Company in the amount of the deposit made.
The Company has been reimbursed by NSC for certain third party charges
paid on NSC's behalf, such as letter of credit fees, insurance and bonding costs
and legal fees. The costs charged to NSC for general liability and other
insurance coverages were $188,000, $1,774,000 and $981,000 for the years ended
December 31, 1997, 1996 and 1995, respectively. In the normal course of
business, NSC has provided the Company with subcontract services on certain of
its projects for asbestos abatement and industrial maintenance services. The
costs for such services were $233,000, $40,000 and $212,000 for the years ended
December 31, 1997, 1996 and 1995, respectively. The Company has provided
remediation services to NSC in the amount of $121,000 for the year ended
December 31, 1996.
TRANSACTIONS WITH SHAREHOLDERS
In connection with the Reorganization Agreement (the "Reorganization
Agreement") entered into in connection with the Company's purchase of Rust
Environmental, Inc., the Company and Rust, the parent of Rust Environmental,
Inc., entered into certain business agreements. First, Rust agreed that the
Company would provide all environmental remediation services under Rust's
governmental Total Environmental Restoration Contracts ("TERCs"), and a portion
of all fees earned under such contracts.
In the normal course of business, the Company has provided to WMX and
its affiliates certain subcontractor services on remediation and construction
projects, the cost of these services, in the aggregate, were $23,664,000,
$12,959,000 and $10,242,000 for the years ended December 31, 1997, 1996 and
1995, respectively. The Company has purchased from WMX and its affiliates,
hazardous waste disposal services, the cost of these services, in the aggregate,
were $6,868,000, $7,536,000 and $6,636,000 for the years ended December 31,
1997, 1996 and 1995, respectively. At December 31, 1997, 1996 and 1995, the
Company has $2,831,000, $6,873,000 and $3,871,000 of accounts receivable and
$1,385,000, $968,000 and $806,000 of accounts payable, respectively, recorded
related to such activities. In addition to the above, WMX paid $15,000,000 to
the Company in 1996, which was related to final payments due under terms of the
Reorganization Agreement, as amended March 22, 1996.
Rust also agreed to maintain, at its cost, certain payment,
performance and surety bonds in connection with certain Rust projects acquired
in connection with the transaction, and to assist the Company in preparing
documents and favorable pricing from Rust and affiliated Company vendors.
48
<PAGE> 51
THE GUARANTY AGREEMENT
In connection with the Reorganization Agreement, WMX, the majority
stockholder of Rust, and the Company entered into a Guaranty Agreement, which
provides that in exchange for a Warrant (described below), WMX guaranteed
indebtedness of the Company in an amount not to exceed $62,000,000. The guaranty
amount may be increased from time to time, up to an amount not to exceed
$75,000,000 in the event the Warrant is, in whole or in part, exercised by WMX
or transferred to a third party. On May 31, 1995, WMX guaranteed certain
indebtedness under the Company's Revolving Credit Agreement and the Company, in
consideration thereof, executed a Reimbursement Agreement in favor of WMX
obligating the Company to reimburse WMX for any payments by WMX under the
Guaranty. The Guaranty Agreement and related guarantees will terminate upon
consummation of the Merger.
THE WARRANT AGREEMENT
In consideration for the Guaranty, the Company issued a Warrant to WMX
which is exercisable, in whole or in part, until May 31, 2000, for an aggregate
of 700,000 shares of Common Stock (the "Warrant Shares") at an exercise price of
$15.00 per Warrant Share (the "Exercise Price"). The Warrant provides further
that the acquisition by WMX of any of the Warrant Shares upon exercise of all or
any portion of the Warrant is subject to the ownership limitation on WMX and its
affiliates (the "WMX Group") set forth in the Standstill and Non-Competition
Agreement (the "Standstill Agreement") described below. The Warrant provides for
certain adjustments to the Exercise Price and/or the number of Warrant Shares
purchasable upon exercise in the event of a stock combination, stock split, a
capital reorganization or reclassification, a merger or consolidation, or a sale
or conveyance of all or substantially all of the Company's assets. In connection
with the Merger, WMX agreed to cancel without any separate consideration, the
Warrant Agreement and any rights it may have to purchase additional Common Stock
thereunder effective as of the repayment of the Company's obligations under the
Guaranty Agreement.
THE STANDSTILL AND NON-COMPETITION AGREEMENT
Pursuant to the Reorganization Agreement, the Company, WMX and Rust
entered into a Standstill Agreement providing that the WMX Group will not
acquire any of the Company's Common Stock or any of the Company's other
securities entitled to vote generally for the election of directors ("Voting
Securities") other than pursuant to exercise of the Warrant, or in acquisitions,
including exercise of the Warrant, that do not result in the aggregate ownership
by the WMX Group of more than 40% of the Company's Voting Securities, or such
lesser percentage as may exist from time to time as the result of voluntary
dispositions by the WMX Group (the "Ownership Limit").
Pursuant to the Standstill Agreement, no member of the WMX Group shall
acquire Voting Securities which would result in the WMX Group owning Voting
Securities beyond the Ownership Limit unless the acquisition is (i) made
pursuant to an offer for all of the Company's outstanding Voting Securities at
the same price, and (ii) is approved by either the Company's independent
directors or the Company's shareholders, other than the WMX Group and certain
other shareholders, pursuant to the Control Share Acquisition provisions of the
Company's Amended and Restated Articles of Incorporation. The Standstill
Agreement also provides that if the WMX Group's ownership level falls below 20%
of the outstanding Voting Securities, the WMX Group shall have an option to
purchase from the Company sufficient Voting Securities at fair market value to
raise its ownership to not more than 21% of the outstanding Voting Securities.
The WMX Group, pursuant to the Standstill Agreement, agrees, among other things,
not to solicit proxies in opposition to any matter recommended by a majority of
the Company's directors not representing WMX (the "Non-WMX Directors"), or to
solicit a tender offer or business combination.
As long as the WMX Group owns at least 20% of the Voting Securities,
the Company will include as nominees to the Board of Directors a number of WMX
Group designees proportionate to the WMX Group's ownership interest (to the
lowest corresponding whole directorship). Furthermore, so long as the WMX Group
owns at least 20% of the outstanding Voting Securities, WMX shall take all
actions in its control to include at least three independent Directors on the
Company's Board of Directors. The Standstill Agreement provides that the WMX
Group shall vote its Common Stock for the Company's nominees to the Board of
Directors selected by a majority of the Non-WMX Directors. The WMX Group shall
vote on all other matters (i) in accordance with the recommendations of the
majority of the Non-WMX Directors, or (ii) if no recommendation is made, in the
same proportion as other shareholders of the Company shall vote.
Pursuant to the Standstill Agreement, WMX, Rust and their respective
wholly-owned subsidiaries (the "WMX Affiliates") have agreed not to engage in
the business of providing field services for the on-site remediation of
hazardous substances in North America for seven years after the closing except
as otherwise provided in the Standstill Agreement. The Standstill Agreement also
provides that for so long as the WMX Group owns at least 20% of the outstanding
Voting Securities, (i) the Company shall be a preferred provider of certain
environmental remediation services to the WMX Affiliates, and (ii) the WMX
Affiliates shall be preferred providers of engineering, consulting and design
environmental and waste management services to the Company. Also, Rust will
provide the Company access to its engineering, consulting, design and project
management services personnel on the same
49
<PAGE> 52
terms and conditions as Rust provides them to WMX Affiliates. Additionally, the
Standstill Agreement provides that the WMX Affiliates will contract with the
Company for $20 million of environmental remediation services prior to December
31, 1996, which was extended to December 31, 1997. Key provisions of the
Standstill Agreement will terminate upon the occurrence of the Merger.
Pursuant to the Merger Agreement and the Repurchase Agreement, the
Company repurchased from WMX and its affiliates 2,535,381 Shares for $11.50 per
share, concurrently with the payment for Shares pursuant to the Offer (the
"Repurchase"), and WMX and its affiliates tendered 7,111,543 Shares in the
Offer. Pursuant to the Repurchase Agreement, WMX and its affiliates also agreed
to vote all Shares held by them in favor of the Merger. WMX also agreed to
cancel, without payment of any separate consideration, the Warrants and any
rights it may have to purchase additional shares of Common Stock.
OTHER SERVICES
In 1997, OHMR received from WMX and its affiliates $23,663,946 for
remediation and construction services performed by OHMR. OHMR paid $6,867,570 to
WMX and its affiliates for engineering-related and disposal services under the
preferred provider provisions of the Standstill Agreement.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a)(1) The following consolidated financial statements of the Company and its
subsidiaries are included in Item 8:
Consolidated Balance Sheets -As of December 31, 1997 and 1996
Consolidated Statements of Operations -For the Years Ended December
31, 1997, 1996 and 1995
Consolidated Statements of Changes in Shareholders' Equity -For the
Years Ended December 31, 1997, 1996 and 1995
Consolidated Statements of Cash Flows -For the Years Ended December
31, 1997, 1996 and 1995
Notes to Consolidated Financial Statements
Report of Independent Auditors
(a)(2) The following consolidated financial statement schedule of the Company
and its subsidiaries is submitted herewith:
Schedule II Valuation and Qualifying Accounts -- For the
Years Ended December 31, 1997, 1996 and 1995
All other schedules for which provision is made in the applicable
accounting regulation of the Securities and Exchange Commission are not required
under the related instructions or are inapplicable and therefore have been
omitted.
(a)(3) Exhibits
50
<PAGE> 53
The following Exhibits are included in this Annual Report on Form 10-K:
EXHIBIT EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
2.1 Agreement of Merger dated as of May 6, 1994 by and between OHM
Corporation, a Delaware corporation and the Registrant
[incorporated by reference to Exhibit 2(a) to the Registrant's
Annual Report on Form 10-K for the year ended December 31,
1994].
2.2 Agreement and Plan of Reorganization among OHM Corporation,
Rust Remedial Services, Inc., Enclean Environmental Services
Group, Inc., Rust Environmental, Inc., and Rust International
Inc. dated December 5, 1994 [incorporated by reference to
Appendix B to the Registrant's Proxy Statement for its Annual
Meeting of Shareholders to be held May 11, 1995].
2.3 Amendment dated as of May 4, 1995 to the Agreement and Plan of
Reorganization dated as of December 5, 1994 by and among OHM
Corporation, Rust Remedial Services Inc., Enclean
Environmental Services Group, Inc., Rust Environmental, Inc.,
and Rust International Inc. [incorporated by reference to
Exhibit 2 to the Registrant's Quarterly Report on Form 10-Q
for the quarter ended March 31, 1995].
2.4 Amendment No. 2 dated as of July 27, 1995 to the Agreement and
Plan of Reorganization dated as of December 5, 1994 by and
among OHM Corporation, Rust Remedial Services Inc., Enclean
Environmental Services Group, Inc., Rust Environmental, Inc.,
and Rust International Inc. [incorporated by reference to
Exhibit 10(a) to the Registrant's Quarterly Report on Form
10-Q for the quarter ended September 31, 1995].
2.5 Amendment No. 3, Settlement and Release Agreement dated as of
March 22, 1996 to the Agreement and Plan of Reorganization
dated December 5, 1994 by and among OHM Corporation, OHM
Remediation Services Corp., Rust Remedial Services Inc., Rust
International Inc. and WMX Technologies, Inc. [incorporated by
reference to Exhibit 2.5 to the Registrant's Annual Report on
Form 10-K for the year ended December 31, 1995].
2.6 Standstill and Non-Competition Agreement by and among the
Registrant, WMX Technologies, Inc., and Rust International
Inc., dated May 30, 1995 [incorporated by reference to Exhibit
10(c) to the Registrant's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1995].
2.7 Warrant Agreement by and between WMX Technologies, Inc., and
the Registrant dated May 30, 1995 [incorporated by reference
to Exhibit 10(d) to the Registrant's Quarterly Report on Form
10-Q for the quarter ended June 30, 1995].
2.8 Stock Purchase Agreement by and between the Huizenga Family
Foundation, Inc. and OHM Corporation dated as of March 28,
1995 [incorporated by reference to Exhibit 10(a) to the
Registrant's Quarterly Report on Form 10-Q for the quarter
ended March 31, 1995].
2.9 Stock Purchase Agreement by and between H. Wayne Huizenga and
OHM Corporation dated as of March 28, 1995 [incorporated by
reference to Exhibit 10(b) to the Registrant's Quarterly
Report on Form 10-Q for the quarter ended March 31, 1995].
2.10 Agreement and Plan of Merger, dated January 15, 1998, by and
among the Registrant, International Technology Corporation and
IT-Ohio, Inc. [incorporated by reference to Exhibit 1 to the
Registrant's Current Report on Form 8-K filed on January 21,
1998].
2.11 Share Repurchase Agreement, dated as of January 15, 1998, by
and among the Registrant, International Technology
Corporation, Waste Management, Inc. and Rust International,
Inc. [incorporated by reference to Exhibit 2 to the
Registrant's Current Report on Form 8-K filed on January 21,
1998].
- ------------------
* Indicates a management contract or compensatory plan or arrangement
required to be filed pursuant to Item 14 of Form 10-K.
51
<PAGE> 54
EXHIBIT EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
2.12 Company Voting Agreement, dated as of January 15, 1998, by and
among the Registrant, International Technology Corporation,
James L. Kirk, Joseph R. Kirk, H. Wayne Huizenga and The
Huizenga Family Foundation [incorporated by reference to
Exhibit 3 to the Registrant's Current Report on Form 8-K filed
on January 21, 1998].
2.13 Parent Voting Agreement, dated as of January 15, 1998, by and
among International Technology Corporation, the Registrant and
certain stockholders of International Technology Corporation
affiliated with The Carlyle Group [incorporated by reference
to Exhibit 4 to the Registrant's Current Report on Form 8-K
filed on January 21, 1998].
2.14 Letter Agreement, dated January 15, 1998, by and between the
Registrant and H. Wayne Huizenga [incorporated by reference to
Exhibit 5 to the Registrant's Current Report on Form 8-K filed
on January 21, 1998].
2.15 Amended and Restated Share Repurchase Agreement, dated as of
February 11, 1998, by and among the Registrant, International
Technology Corporation, Waste Management, Inc. and Rust
International, Inc.
2.16 Second Amended and Restated Share Repurchase Agreement, dated
as of February 17, 1998, by and among the Registrant,
International Technology Corporation, Waste Management, Inc.
and Rust International, Inc.
3.1 Amended and Restated Articles of Incorporation of the
Registrant dated May 19, 1994 [incorporated by reference to
Exhibit 3(i) to the Registrant's Annual Report on Form 10-K
for the year ended December 31, 1994].
3.2 Amended and Restated Regulations of the Registrant
[incorporated by reference to Annex 1 to the Registrant's
Proxy Statement on Schedule 14A for its 1997 Annual Meeting].
4.1 Indenture dated as of October 1, 1986 between Registrant and
United States Trust Company of New York, Trustee, relating to
the Registrant's 8% Convertible Subordinated Debentures due
October 1, 2006 [incorporated by reference to Exhibit 4(a) to
the Registrant's Annual Report on Form 10-K for the year ended
December 31, 1986].
4.2 Specimen Debenture Certificate [incorporated by reference to
Exhibit 4(b) to the Registrant's Amendment No. 1 to
Registration Statement on Form S-1, No. 33-8296].
4.3 First Supplemental Indenture dated as of May 20, 1994 by and
among the Registrant and United States Trust Company of New
York [incorporated by reference to Exhibit 4(c) to the
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1994].
4.4 Specimen Common Stock Certificate [incorporated by reference
to Exhibit 4.4 to the Registrant's Quarterly Report on Form
10-Q for the quarter ended March 31, 1996].
10.1* OHM Corporation 1986 Stock Option Plan, as amended and
restated as of May 10, 1994 [incorporated by reference to
Appendix 2 to the Registrant's Proxy Statement for its Annual
Meeting held May 10, 1994].
10.2* OHM Corporation Nonqualified Stock Option Plan for Directors
[incorporated by reference to Exhibit 10(c) to the
Registrant's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1992].
10.3* OHM Corporation Retirement Savings Plan, as amended and
restated as of January 1, 1994 [incorporated by reference to
Exhibit 10(c) to the Registrant's Annual Report on Form 10-K
for the year ended December 31, 1994].
10.4* Amendment No. 1 to OHM Corporation Retirement Savings Plan, as
amended and restated as of January 1, 1994 [incorporated by
reference to Exhibit 10(a) to the Registrant's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1995].
10.5* Amendment No. 2 to OHM Corporation Retirement Savings Plan, as
amended and restated as of January 1, 1994 [incorporated by
reference to Exhibit 10.5 to the Registrant's Annual Report on
Form 10-K for the year ended December 31, 1995].
- ------------------
* Indicates a management contract or compensatory plan or arrangement
required to be filed pursuant to Item 14 of Form 10-K.
52
<PAGE> 55
EXHIBIT EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
10.6* OHM Corporation Retirement Savings Plan Trust Agreement
between Registrant and National City Bank, as Trustee, as
amended and restated effective July 1, 1994 [incorporated by
reference to Exhibit 10(d) to the Registrant's Annual Report
on Form 10-K for the year ended December 31, 1994].
10.7* OHM Corporation Directors' Deferred Fee Plan [incorporated by
reference to Exhibit 10(e) to the Registrant's Annual Report
on Form 10-K for the year ended December 31, 1994].
10.8* Amendment No. 1 to OHM Corporation Directors' Deferred Fee
Plan [incorporated by reference to Exhibit 10(b) to the
Registrant's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1995].
10.9* Form of Amended and Restated Indemnification Agreements
entered into between Registrant and its Directors and
Executive Officers [incorporated by reference to Exhibit 10.9
to the Registrant's Annual Report on Form 10-K for the year
ended December 31, 1995].
10.10* Form of Employment Agreements providing certain severance
benefits in the event of a change of control entered into
between Registrant and certain of its executive officers
[incorporated by reference to Exhibit 10.10 to the
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1995].
10.11 Revolving Credit Agreement dated as of May 31, 1995 among OHM
Corporation and OHM Remediation Services Corp., and the banks
named therein, Citicorp USA, Inc., as Administrative Agent and
Bank of America Illinois, as Issuing and Paying Agent and
Co-Agent [incorporated by reference to Exhibit 10(e) to the
Registrant's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1995].
10.12 Amendment No. 1 dated as of October 16, 1995 to the Revolving
Credit Agreement dated as of May 31, 1995 among OHM
Corporation and OHM Remediation Services Corp., and the banks
named therein, Citicorp USA, Inc., as Administrative Agent and
Bank of America Illinois, as Issuing and Paying Agent and
Co-Agent [incorporated by reference to Exhibit 10(b) to the
Registrant's Quarterly Report on Form 10-Q for the quarter
ended September 31, 1995].
10.13 Security Agreement dated as of May 11, 1993, among OHM
Corporation, OHM Remediation Services Corp. and Continental
Bank N.A., as Administrative Agent [incorporated by reference
to Exhibit 10(b) to the Registrant's Quarterly Report on Form
10-Q for the quarter ended June 30, 1993].
10.14 First Amendment dated as of May 4, 1994 to Security Agreement
dated as of May 11, 1993 by and between the Registrant, OHM
Remediation Services Corp., and Bank of America Illinois as
Issuing and Paying Agent [incorporated by reference to Exhibit
10.14 to the Registrant's Annual Report on Form 10-K for the
year ended December 31, 1995].
10.15 Second Amendment dated as of May 31, 1995 to Security
Agreement dated as of May 11, 1993 by and between the
Registrant, OHM Remediation Services Corp., and Bank of
America Illinois as Issuing and Paying Agent [incorporated by
reference to Exhibit 10(g) to the Registrant's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1995].
10.16 Pledge Agreement dated as of May 11, 1993, executed by the
Registrant in favor of Continental Bank N.A., as
Administrative Agent [incorporated by reference to Exhibit
10(c) to the Registrant's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1993].
10.17 First Amendment dated as of May 31, 1995 to Pledge Agreement
dated as of May 11, 1993 by and between the Registrant and
Bank of America Illinois as Issuing and Paying Agent
[incorporated by reference to Exhibit 10(f) to the
Registrant's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1995].
- ------------------
* Indicates a management contract or compensatory plan or arrangement
required to be filed pursuant to Item 14 of Form 10-K.
53
<PAGE> 56
EXHIBIT EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
10.18 Intercreditor Agreement dated May 31, 1995 by and among
Citicorp USA, Inc., as administrative agent, Bank of America
Illinois, as issuing and paying agent and WMX Technologies,
Inc. [incorporated by reference to Exhibit 10(h) to the
Registrant's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1995].
10.19 Guaranty Agreement by and among the Registrant and WMX
Technologies, Inc., dated May 30, 1995 [incorporated by
reference to Exhibit 10(i) to the Registrant's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1995].
10.20 Reimbursement Agreement dated as of May 31, 1995 among WMX
Technologies, Inc., OHM Corporation, and OHM Remediation
Services Corp. [incorporated by reference to Exhibit 10(j) to
the Registrant's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1995].
10.21 Security Agreement dated as of May 31, 1995 by and between the
Registrant, OHM Remediation Services Corp., and WMX
Technologies, Inc. [incorporated by reference to Exhibit 10(k)
to the Registrant's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1995].
10.22 Pledge Agreement dated as of May 31, 1995 by and between the
Registrant and WMX Technologies, Inc. [incorporated by
reference to Exhibit 10(l) to the Registrant's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1995].
10.23 Master Loan and Security Agreement dated May 11, 1993, between
OHM Remediation Services Corp. and BOT Financial Corporation
[incorporated by reference to Exhibit 10(d) to the
Registrant's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1993].
10.24 Amendment No. 1 to Master Loan and Security Agreement dated as
of January 19, 1995 between BOT Financial Corporation and OHM
Remediation Services Corp. [incorporated by reference to
Exhibit 10(g) to the Registrant's Quarterly Report on Form
10-Q for the quarter ended June 30, 1995].
10.25 Promissory Note dated December 23, 1993 executed by OHM
Remediation Services Corp. in favor of BOT Financial
Corporation [incorporated by reference to Exhibit 10(m) to the
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1993].
10.26 Promissory Note dated December 28, 1994 executed by OHM
Remediation Services Corp. in favor of BOT Financial
Corporation [incorporated by reference to Exhibit 10(r) to the
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1994].
10.27 Loan and Security Agreement dated as of August 1, 1994 by and
between OHM Remediation Services Corp. and Internationale
Nederlanden Lease Structured Finance B.V. [incorporated by
reference to Exhibit 10(b) to the Registrant's Quarterly
Report on Form 10-Q for the quarter ended September 30, 1994].
10.28 Promissory Note dated August 31, 1994 executed by OHM
Remediation Services Corp. in favor of Internationale
Nederlanden Lease Structured Finance B.V. [incorporated by
reference to Exhibit 10(c) to the Registrant's Quarterly
Report on Form 10-Q for the quarter ended September 30, 1994].
10.29 Continuing Corporate Guaranty dated as of August 1, 1994
executed by OHM Corporation in favor of Internationale
Nederlanden Lease Structured Finance B.V. [incorporated by
reference to Exhibit 10(d) to the Registrant's Quarterly
Report on Form 10-Q for the quarter ended September 30, 1994].
10.30 Purchase Agreement dated as of December 15, 1992, among OHM
Corporation, NSC Corporation, NSC Industrial Services Corp.,
Waste Management, Inc., and The Brand Companies, Inc.
[incorporated by reference to Exhibit 10(j) to the
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1992].
- ------------------
* Indicates a management contract or compensatory plan or arrangement
required to be filed pursuant to Item 14 of Form 10-K.
54
<PAGE> 57
EXHIBIT EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
10.31 Stock Purchase Agreement dated December 17, 1992, among OHM
Corporation and Chemical Waste Management, Inc. [incorporated
by reference to Exhibit 10(k) to the Registrant's Annual
Report on Form 10-K for the year ended December 31, 1992].
10.32* OHM Corporation 1996 Management Incentive Plan [incorporated
by reference to Exhibit 10.32 to the Registrant's Annual
Report on Form 10-K for the year ended December 31, 1995].
10.33* OHM Corporation Executive Retirement Plan, dated as of January
1, 1996 [incorporated by reference to Exhibit 10.33 to the
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1995].
10.34* OHM Corporation Retirement and Incentive Compensation Plan
[incorporated by reference to Exhibit 10.33 to the
Registrant's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1996].
10.35* OHM Corporation Incentive Stock Plan [incorporated by
reference to Exhibit 10.34 to the Registrant's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1996].
10.36* Employment Agreement, dated August 21, 1996, between Joseph R.
Kirk and OHM Corporation [incorporated by reference to Exhibit
10 to the Registrant's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1996].
10.37 Equipment Agreement, dated as of December 24, 1996, between
BTM Capital Corporation and OHM Remediation Services Corp.
[incorporated by reference to Exhibit 10.37 to the
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1996].
10.38 Supplement No. 01 to the Equipment Agreement, dated as of
December 24, 1996, between BTM Capital Corporation and OHM
Remediation Services Corp. [incorporated by reference to
Exhibit 10.38 to the Registrant's Annual Report on Form 10-K
for the year ended December 31, 1996].
10.39 Stock Purchase Agreement, dated June 17, 1997, by and among
OHM Corporation, Beneco Enterprises, Inc., Bennie Smith, Jr.,
Robert Newberry and Scott Doxey [incorporated by reference to
Exhibit 2.1 to the Registrant's Report on Form 8-K filed on
July 2, 1997].
10.40 Amendment No. 2 and Waiver, dated as of August 12, 1997, to
the Revolving Credit Agreement, dated as of May 31, 1995, by
and among OHM Corporation and OHM Remediation Services Corp.,
and the banks named therein, Citicorp USA, Inc., as
Administrative Agent and Bank of America National Trust and
Savings Association (successor by merger to Bank of America
Illinois), as Issuing and Paying Agent and Co-Agent
[incorporated by reference to Exhibit 10.40 to the
Registrant's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1997].
10.41 Third Amendment, dated as of August 12, 1997, to Security
Agreement, dated as of May 11, 1993, by and among OHM
Corporation, OHM Remediation Services Corp., Beneco
Enterprises, Inc., Citicorp USA, Inc. as Administrative Agent
and Bank of America National Trust and Savings Association
(successor by merger to Bank of America Illinois) as Issuing
and Paying Agent and Co-Agent [incorporated by reference to
Exhibit 10.41 to the Registrant's Quarterly Report on Form
10-Q for the quarter ended September 30, 1997].
10.42 Second Amendment, dated as of August 12, 1997, to Pledge
Agreement, dated as of May 11, 1993, by and between OHM
Corporation and Bank of America National Trust and Savings
Association (successor by merger to Bank of America Illinois),
as Issuing and Paying Agent [incorporated by reference to
Exhibit 10.42 to the Registrant's Quarterly Report on Form
10-Q for the quarter ended September 30, 1997].
- ------------------
* Indicates a management contract or compensatory plan or arrangement
required to be filed pursuant to Item 14 of Form 10-K.
55
<PAGE> 58
EXHIBIT EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
10.43 Guaranty, dated as of August 12, 1997, by Beneco Enterprises,
Inc., in favor of the banks under the Revolving Credit
Agreement, as amended as of August 12, 1997 by and among OHM
Corporation and OHM Remediation Services Corp., and the banks
named therein, Citicorp USA, Inc., as Administrative Agent and
Bank of America National Trust and Savings association
(successor by merger to bank of American Illinois), as Issuing
and Paying Agent and Co-Agent [incorporated by reference to
Exhibit 10.43 to the Registrant's Quarterly Report on Form
10-Q for the quarter ended September 30, 1997].
10.44* OHM Corporation Incentive Stock Plan, effective as of August
15, 1996 [incorporated by reference to Annex 2 to the
Registrant's Proxy Statement on Schedule 14A for its 1997
Annual Meeting].
10.45* OHM Corporation 1986 Option Plan, as amended and restated
[incorporated by reference to Annex 3 to the Registrant's
Proxy Statement on Schedule 14A for its 1997 Annual Meeting].
21 Subsidiaries of the Registrant.
23 Consent of Ernst & Young LLP.
24 Powers of Attorney of certain directors of the Company.
27 Financial Data Schedule.
(b) There were no reports on Form 8-K filed during the three months ended
December 31, 1997.
(c) The response to this portion of Item 14 is included as Exhibits to this
report.
- ------------------
* Indicates a management contract or compensatory plan or arrangement
required to be filed pursuant to Item 14 of Form 10-K.
56
<PAGE> 59
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
OHM CORPORATION
By: /s/ STEVEN E. HARBOUR
------------------------------------
Steven E. Harbour-Vice President,
Legal and Secretary
February 27, 1998
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on February 27, 1998.
* JAMES L. KIRK
- -----------------------------------------------------
James L. Kirk-Chairman of the Board, President and Chief Executive Officer
* PHILIP O. STRAWBRIDGE
- -----------------------------------------------------
Philip O. Strawbridge-Vice President and Chief Financial and Administrative
Officer (Principal Financial Officer)
* KRIS E. HANSEL
- -----------------------------------------------------
Kris E. Hansel-Vice President and Controller (Principal Accounting Officer)
* WILLIAM P. HULLIGAN
- -----------------------------------------------------
William P. Hulligan-Director
* HERBERT A. GETZ
- -----------------------------------------------------
Herbert A. Getz-Director
* IVAN W. GORR
- -----------------------------------------------------
Ivan W. Gorr-Director
* CHARLES D. HOLLISTER
- -----------------------------------------------------
Charles D. Hollister-Director
* JOSEPH R. KIRK
- -----------------------------------------------------
Joseph R. Kirk-Director
* RICHARD W. POGUE
- -----------------------------------------------------
Richard W. Pogue-Director
* CHARLES W. SCHMIDT
- -----------------------------------------------------
Charles W. Schmidt-Director
* The undersigned, by signing his name hereto does sign and execute this
report pursuant to Powers of Attorney executed on behalf of the
above-named directors and contemporaneously herewith filed with the
Securities and Exchange Commission.
/s/ STEVEN E. HARBOUR February 27, 1998
- -----------------------------------------------------
Steven E. Harbour, Attorney-in-Fact
57
<PAGE> 60
OHM CORPORATION
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E Column F
- -------- -------- -------- -------- -------- --------
Additions
---------
Balance at Charged to Charged to (2) Balance
Beginning Costs and Other Deductions at End
Description of Period Expenses Accounts (1) Describe of Period
- ----------- --------- -------- ------------ -------- ---------
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1997
Allowance for Uncollectible Accounts $ 24,928 $ 24,858 $ -- $ 34,339 $ 15,447
Year ended December 31, 1996
Allowance for Uncollectible Accounts $ 25,911 $ 5,343 $ 1,208 $ 7,534 $ 24,928
Year ended December 31, 1995
Allowance for Uncollectible Accounts $ 26,063 $ 2,931 $ 2,628 $ 5,711 $ 25,911
</TABLE>
(1) Adjustments made as a result of the acquisition of the hazardous and
nuclear waste remediation service business of Rust International Inc.
(2) Uncollectible accounts charged against the valuation reserve.
58
<PAGE> 61
COMMISSION FILE NUMBER 1-9654
-----------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
FORM 10-K
ANNUAL REPORT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED
DECEMBER 31, 1997
---------------------
OHM CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
---------------------
EXHIBITS
---------------------
<PAGE> 62
The following Exhibits are included in this Annual Report on Form 10-K:
Exhibit Exhibit
Number Description
- ------ -----------
2.1 Agreement of Merger dated as of May 6, 1994 by and between OHM
Corporation, a Delaware corporation and the Registrant
[incorporated by reference to Exhibit 2(a) to the Registrant's
Annual Report on Form 10-K for the year ended December 31,
1994].
2.2 Agreement and Plan of Reorganization among OHM Corporation,
Rust Remedial Services, Inc., Enclean Environmental Services
Group, Inc., Rust Environmental, Inc., and Rust International
Inc. dated December 5, 1994 [incorporated by reference to
Appendix B to the Registrant's Proxy Statement for its Annual
Meeting of Shareholders to be held May 11, 1995].
2.3 Amendment dated as of May 4, 1995 to the Agreement and Plan of
Reorganization dated as of December 5, 1994 by and among OHM
Corporation, Rust Remedial Services Inc., Enclean
Environmental Services Group, Inc., Rust Environmental, Inc.,
and Rust International Inc. [incorporated by reference to
Exhibit 2 to the Registrant's Quarterly Report on Form 10-Q
for the quarter ended March 31, 1995].
2.4 Amendment No. 2 dated as of July 27, 1995 to the Agreement and
Plan of Reorganization dated as of December 5, 1994 by and
among OHM Corporation, Rust Remedial Services Inc., Enclean
Environmental Services Group, Inc., Rust Environmental, Inc.,
and Rust International Inc. [incorporated by reference to
Exhibit 10(a) to the Registrant's Quarterly Report on Form
10-Q for the quarter ended September 31, 1995].
2.5 Amendment No. 3, Settlement and Release Agreement dated as of
March 22, 1996 to the Agreement and Plan of Reorganization
dated December 5, 1994 by and among OHM Corporation, OHM
Remediation Services Corp., Rust Remedial Services Inc., Rust
International Inc. and WMX Technologies, Inc. [incorporated by
reference to Exhibit 2.5 to the Registrant's Annual Report on
Form 10-K for the year ended December 31, 1995].
2.6 Standstill and Non-Competition Agreement by and among the
Registrant, WMX Technologies, Inc., and Rust International
Inc., dated May 30, 1995 [incorporated by reference to Exhibit
10(c) to the Registrant's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1995].
2.7 Warrant Agreement by and between WMX Technologies, Inc., and
the Registrant dated May 30, 1995 [incorporated by reference
to Exhibit 10(d) to the Registrant's Quarterly Report on Form
10-Q for the quarter ended June 30, 1995].
2.8 Stock Purchase Agreement by and between the Huizenga Family
Foundation, Inc. and OHM Corporation dated as of March 28,
1995 [incorporated by reference to Exhibit 10(a) to the
Registrant's Quarterly Report on Form 10-Q for the quarter
ended March 31, 1995].
2.9 Stock Purchase Agreement by and between H. Wayne Huizenga and
OHM Corporation dated as of March 28, 1995 [incorporated by
reference to Exhibit 10(b) to the Registrant's Quarterly
Report on Form 10-Q for the quarter ended March 31, 1995].
2.10 Agreement and Plan of Merger, dated January 15, 1998, by and
among the Registrant, International Technology Corporation and
IT-Ohio, Inc. [incorporated by reference to Exhibit 1 to the
Registrant's Current Report on Form 8-K filed on January 21,
1998].
2.11 Share Repurchase Agreement, dated as of January 15, 1998, by
and among the Registrant, International Technology
Corporation, Waste Management, Inc. and Rust International,
Inc. [incorporated by reference to Exhibit 2 to the
Registrant's Current Report on Form 8-K filed on January 21,
1998].
2.12 Company Voting Agreement, dated as of January 15, 1998, by and
among the Registrant, International Technology Corporation,
James L. Kirk, Joseph R. Kirk, H. Wayne Huizenga and The
Huizenga Family Foundation [incorporated by reference to
Exhibit 3 to the Registrant's Current Report on Form 8-K filed
on January 21, 1998].
2.13 Parent Voting Agreement, dated as of January 15, 1998, by and
among International Technology Corporation, the Registrant and
certain stockholders of International Technology Corporation
affiliated with The Carlyle Group [incorporated by reference
to Exhibit 4 to the Registrant's Current Report on Form 8-K
filed on January 21, 1998].
2.14 Letter Agreement, dated January 15, 1998, by and between the
Registrant and H. Wayne Huizenga [incorporated by reference to
Exhibit 5 to the Registrant's Current Report on Form 8-K filed
on January 21, 1998].
2.15 Amended and Restated Share Repurchase Agreement, dated as of
February 11, 1998, by and among the Registrant, International
Technology Corporation, Waste Management, Inc. and Rust
International, Inc.
2.16 Second Amended and Restated Share Repurchase Agreement, dated
as of February 17, 1998, by and among the Registrant,
International Technology Corporation, Waste Management, Inc.
and Rust International, Inc.
- ----------------------
* Indicates a management contract or compensatory plan or arrangement
required to be filed pursuant to Item 14 of Form 10-K.
<PAGE> 63
3.1 Amended and Restated Articles of Incorporation of the
Registrant dated May 19, 1994 [incorporated by reference to
Exhibit 3(i) to the Registrant's Annual Report on Form 10-K
for the year ended December 31, 1994].
3.2 Regulations of the Registrant [incorporated by reference to
Exhibit 3(ii) to the Registrant's Annual Report on Form 10-K
for the year ended December 31, 1994].
4.1 Indenture dated as of October 1, 1986 between Registrant and
United States Trust Company of New York, Trustee, relating to
the Registrant's 8% Convertible Subordinated Debentures due
October 1, 2006 [incorporated by reference to Exhibit 4(a) to
the Registrant's Annual Report on Form 10-K for the year ended
December 31, 1986].
4.2 Specimen Debenture Certificate [incorporated by reference to
Exhibit 4(b) to the Registrant's Amendment No. 1 to
Registration Statement on Form S-1, No. 33-8296].
4.3 First Supplemental Indenture dated as of May 20, 1994 by and
among the Registrant and United States Trust Company of New
York [incorporated by reference to Exhibit 4(c) to the
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1994].
4.4 Specimen Common Stock Certificate [incorporated by reference
to Exhibit 4.4 to the Registrant's Quarterly Report on Form
10-Q for the quarter ended March 31, 1996].
10.1* OHM Corporation 1986 Stock Option Plan, as amended and
restated as of May 10, 1994 [incorporated by reference to
Appendix 2 to the Registrant's Proxy Statement for its Annual
Meeting held May 10, 1994].
10.2* OHM Corporation Nonqualified Stock Option Plan for Directors
[incorporated by reference to Exhibit 10(c) to the
Registrant's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1992].
10.3* OHM Corporation Retirement Savings Plan, as amended and
restated as of January 1, 1994 [incorporated by reference to
Exhibit 10(c) to the Registrant's Annual Report on Form 10-K
for the year ended December 31, 1994].
10.4* Amendment No. 1 to OHM Corporation Retirement Savings Plan, as
amended and restated as of January 1, 1994 [incorporated by
reference to Exhibit 10(a) to the Registrant's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1995].
10.5* Amendment No. 2 to OHM Corporation Retirement Savings Plan, as
amended and restated as of January 1, 1994 [incorporated by
reference to Exhibit 10.5 to the Registrant's Annual Report on
Form 10-K for the year ended December 31, 1995].
10.6* OHM Corporation Retirement Savings Plan Trust Agreement
between Registrant and National City Bank, as Trustee, as
amended and restated effective July 1, 1994 [incorporated by
reference to Exhibit 10(d) to the Registrant's Annual Report
on Form 10-K for the year ended December 31, 1994].
10.7* OHM Corporation Directors' Deferred Fee Plan [incorporated by
reference to Exhibit 10(e) to the Registrant's Annual Report
on Form 10-K for the year ended December 31, 1994].
10.8* Amendment No. 1 to OHM Corporation Directors' Deferred Fee
Plan [incorporated by reference to Exhibit 10(b) to the
Registrant's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1995].
- ----------------------
* Indicates a management contract or compensatory plan or arrangement
required to be filed pursuant to Item 14 of Form 10-K.
<PAGE> 64
10.9* Form of Amended and Restated Indemnification Agreements
entered into between Registrant and its Directors and
Executive Officers [incorporated by reference to Exhibit 10.9
to the Registrant's Annual Report on Form 10-K for the year
ended December 31, 1995].
10.10* Form of Employment Agreements providing certain severance
benefits in the event of a change of control entered into
between Registrant and certain of its executive officers
[incorporated by reference to Exhibit 10.10 to the
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1995].
10.11 Revolving Credit Agreement dated as of May 31, 1995 among OHM
Corporation and OHM Remediation Services Corp., and the banks
named therein, Citicorp USA, Inc., as Administrative Agent and
Bank of America Illinois, as Issuing and Paying Agent and
Co-Agent [incorporated by reference to Exhibit 10(e) to the
Registrant's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1995].
10.12 Amendment No. 1 dated as of October 16, 1995 to the Revolving
Credit Agreement dated as of May 31, 1995 among OHM
Corporation and OHM Remediation Services Corp., and the banks
named therein, Citicorp USA, Inc., as Administrative Agent and
Bank of America Illinois, as Issuing and Paying Agent and
Co-Agent [incorporated by reference to Exhibit 10(b) to the
Registrant's Quarterly Report on Form 10-Q for the quarter
ended September 31, 1995].
10.13 Security Agreement dated as of May 11, 1993, among OHM
Corporation, OHM Remediation Services Corp. and Continental
Bank N.A., as Administrative Agent [incorporated by reference
to Exhibit 10(b) to the Registrant's Quarterly Report on Form
10-Q for the quarter ended June 30, 1993].
10.14 First Amendment dated as of May 4, 1994 to Security Agreement
dated as of May 11, 1993 by and between the Registrant, OHM
Remediation Services Corp., and Bank of America Illinois as
Issuing and Paying Agent [incorporated by reference to Exhibit
10.14 to the Registrant's Annual Report on Form 10-K for the
year ended December 31, 1995].
10.15 Second Amendment dated as of May 31, 1995 to Security
Agreement dated as of May 11, 1993 by and between the
Registrant, OHM Remediation Services Corp., and Bank of
America Illinois as Issuing and Paying Agent [incorporated by
reference to Exhibit 10(g) to the Registrant's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1995].
10.16 Pledge Agreement dated as of May 11, 1993, executed by the
Registrant in favor of Continental Bank N.A., as
Administrative Agent [incorporated by reference to Exhibit
10(c) to the Registrant's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1993].
10.17 First Amendment dated as of May 31, 1995 to Pledge Agreement
dated as of May 11, 1993 by and between the Registrant and
Bank of America Illinois as Issuing and Paying Agent
[incorporated by reference to Exhibit 10(f) to the
Registrant's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1995].
10.18 Intercreditor Agreement dated May 31, 1995 by and among
Citicorp USA, Inc., as administrative agent, Bank of America
Illinois, as issuing and paying agent and WMX Technologies,
Inc. [incorporated by reference to Exhibit 10(h) to the
Registrant's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1995].
10.19 Guarantee Agreement by and among the Registrant and WMX
Technologies, Inc., dated May 30, 1995 [incorporated by
reference to Exhibit 10(i) to the Registrant's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1995].
10.20 Reimbursement Agreement dated as of May 31, 1995 among WMX
Technologies, Inc., OHM Corporation, and OHM Remediation
Services Corp. [incorporated by reference to Exhibit 10(j) to
the Registrant's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1995].
- ----------------------
* Indicates a management contract or compensatory plan or arrangement
required to be filed pursuant to Item 14 of Form 10-K.
<PAGE> 65
10.21 Security Agreement dated as of May 31, 1995 by and between the
Registrant, OHM Remediation Services Corp., and WMX
Technologies, Inc. [incorporated by reference to Exhibit 10(k)
to the Registrant's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1995].
10.22 Pledge Agreement dated as of May 31, 1995 by and between the
Registrant and WMX Technologies, Inc. [incorporated by
reference to Exhibit 10(l) to the Registrant's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1995].
10.23 Master Loan and Security Agreement dated May 11, 1993, between
OHM Remediation Services Corp. and BOT Financial Corporation
[incorporated by reference to Exhibit 10(d) to the
Registrant's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1993].
10.24 Amendment No. 1 to Master Loan and Security Agreement dated as
of January 19, 1995 between BOT Financial Corporation and OHM
Remediation Services Corp. [incorporated by reference to
Exhibit 10(g) to the Registrant's Quarterly Report on Form
10-Q for the quarter ended June 30, 1995].
10.25 Promissory Note dated December 23, 1993 executed by OHM
Remediation Services Corp. in favor of BOT Financial
Corporation [incorporated by reference to Exhibit 10(m) to the
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1993].
10.26 Promissory Note dated December 28, 1994 executed by OHM
Remediation Services Corp. in favor of BOT Financial
Corporation [incorporated by reference to Exhibit 10(r) to the
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1994].
10.27 Loan and Security Agreement dated as of August 1, 1994 by and
between OHM Remediation Services Corp. and Internationale
Nederlanden Lease Structured Finance B.V. [incorporated by
reference to Exhibit 10(b) to the Registrant's Quarterly
Report on Form 10-Q for the quarter ended September 30, 1994].
10.28 Promissory Note dated August 31, 1994 executed by OHM
Remediation Services Corp. in favor of Internationale
Nederlanden Lease Structured Finance B.V. [incorporated by
reference to Exhibit 10(c) to the Registrant's Quarterly
Report on Form 10-Q for the quarter ended September 30, 1994].
10.29 Continuing Corporate Guaranty dated as of August 1, 1994
executed by OHM Corporation in favor of Internationale
Nederlanden Lease Structured Finance B.V. [incorporated by
reference to Exhibit 10(d) to the Registrant's Quarterly
Report on Form 10-Q for the quarter ended September 30, 1994].
10.30 Purchase Agreement dated as of December 15, 1992, among OHM
Corporation, NSC Corporation, NSC Industrial Services Corp.,
Waste Management, Inc., and The Brand Companies, Inc.
[incorporated by reference to Exhibit 10(j) to the
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1992].
10.31 Stock Purchase Agreement dated December 17, 1992, among OHM
Corporation and Chemical Waste Management, Inc. [incorporated
by reference to Exhibit 10(k) to the Registrant's Annual
Report on Form 10-K for the year ended December 31, 1992].
10.32* OHM Corporation 1996 Management Incentive Plan [incorporated
by reference to Exhibit 10.32 to the Registrant's Annual
Report on Form 10-K for the year ended December 31, 1995].
10.33* OHM Corporation Executive Retirement Plan, dated as of January
1, 1996 [incorporated by reference to Exhibit 10.33 to the
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1995].
- ----------------------
* Indicates a management contract or compensatory plan or arrangement
required to be filed pursuant to Item 14 of Form 10-K.
<PAGE> 66
10.34* OHM Corporation Retirement and Incentive Compensation Plan
[incorporated by reference to Exhibit 10.33 to the
Registrant's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1996].
10.35* OHM Corporation Incentive Stock Plan [incorporated by
reference to Exhibit 10.34 to the Registrant's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1996].
10.36* Employment Agreement, dated August 21, 1996, between Joseph R.
Kirk and OHM Corporation [incorporated by reference to Exhibit
10 to the Registrant's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1996].
10.37 Equipment Agreement, dated as of December 24, 1996, between
BTM Capital Corporation and OHM Remediation Services Corp.
[incorporated by reference to Exhibit 10.37 to the
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1996].
10.38 Supplement No. 01 to the Equipment Agreement, dated as of
December 24, 1996, between BTM Capital Corporation and OHM
Remediation Services Corp. [incorporated by reference to
Exhibit 10.38 to the Registrant's Annual Report on Form 10-K
for the year ended December 31, 1996].
10.39 Stock Purchase Agreement, dated June 17, 1997, by and among
OHM Corporation, Beneco Enterprises, Inc., Bennie Smith, Jr.,
Robert Newberry and Scott Doxey [incorporated by reference to
Exhibit 2.1 to the Registrant's Report on Form 8-K filed on
July 2, 1997].
10.40 Amendment No. 2 and Waiver, dated as of August 12, 1997, to
the Revolving Credit Agreement, dated as of May 31, 1995, by
and among OHM Corporation and OHM Remediation Services Corp.,
and the banks named therein, Citicorp USA, Inc., as
Administrative Agent and Bank of America National Trust and
Savings Association (successor by merger to Bank of America
Illinois), as Issuing and Paying Agent and Co-Agent
[incorporated by reference to Exhibit 10.40 to the
Registrant's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1997].
10.41 Third Amendment, dated as of August 12, 1997, to Security
Agreement, dated as of May 11, 1993, by and among OHM
Corporation, OHM Remediation Services Corp., Beneco
Enterprises, Inc., Citicorp USA, Inc. as Administrative Agent
and Bank of America National Trust and Savings Association
(successor by merger to Bank of America Illinois) as Issuing
and Paying Agent and Co-Agent [incorporated by reference to
Exhibit 10.41 to the Registrant's Quarterly Report on Form
10-Q for the quarter ended September 30, 1997].
10.42 Second Amendment, dated as of August 12, 1997, to Pledge
Agreement, dated as of May 11, 1993, by and between OHM
Corporation and Bank of America National Trust and Savings
Association (successor by merger to Bank of America Illinois),
as Issuing and Paying Agent [incorporated by reference to
Exhibit 10.42 to the Registrant's Quarterly Report on Form
10-Q for the quarter ended September 30, 1997].
10.43 Guaranty, dated as of August 12, 1997, by Beneco Enterprises,
Inc., in favor of the banks under the Revolving Credit
Agreement, as amended as of August 12, 1997 by and among OHM
Corporation and OHM Remediation Services Corp., and the banks
named therein, Citicorp USA, Inc., as Administrative Agent and
Bank of America National Trust and Savings association
(successor by merger to bank of American Illinois),
- ----------------------
* Indicates a management contract or compensatory plan or arrangement
required to be filed pursuant to Item 14 of Form 10-K.
<PAGE> 67
as Issuing and Paying Agent and Co-Agent [incorporated by
reference to Exhibit 10.43 to the Registrant's Quarterly
Report on Form 10-Q for the quarter ended September 30, 1997].
10.44* OHM Corporation Incentive Stock Plan, effective as of August
15, 1996 [incorporated by reference to Annex 2 to the
Registrant's Proxy Statement on Schedule 14A for its 1997
Annual Meeting].
10.45* OHM Corporation 1986 Option Plan, as amended and restated
[incorporated by reference to Annex 3 to the Registrant's
Proxy Statement on Schedule 14A for its 1997 Annual Meeting].
21 Subsidiaries of the Registrant.
23 Consent of Ernst & Young LLP.
24 Powers of Attorney of certain directors of the Company.
27 Financial Data Schedule.
(b) There were no reports on Form 8-K filed during the three months ended
December 31, 1997.
(c) The response to this portion of Item 14 is included as Exhibits to this
report.
- ----------------------
* Indicates a management contract or compensatory plan or arrangement
required to be filed pursuant to Item 14 of Form 10-K.
<PAGE> 1
EXHIBIT 2.15
AMENDED AND RESTATED SHARE REPURCHASE AGREEMENT
AMENDED AND RESTATED SHARE REPURCHASE AGREEMENT (this "Agreement"), dated
as of February 11, 1998, among OHM Corporation, an Ohio corporation (the
"Company"), Waste Management, Inc., a Delaware corporation ("WMX"), Rust
International Inc., a Delaware corporation ("Rust"), Rust Remedial Services
Holding Company Inc., a Delaware corporation (the "Shareholder"), and
International Technology Corporation, a Delaware corporation ("Parent").
WHEREAS, certain of the parties are party to the Share Repurchase
Agreement, dated as of January 15, 1998, among OHM Corporation, Waste
Management, Inc., Rust International Inc., and International Technology
Corporation (the "Original Agreement"), and certain of the parties to this
Agreement are also parties to the Standstill and Non-Competition Agreement,
dated as of May 30, 1995, among the Company, WMX and Rust (the "Standstill
Agreement"); and
WHEREAS, concurrently with the execution of the Original Agreement, the
Company, Parent and IT-Ohio, Inc., an Ohio corporation ("Merger Sub"), entered
into an Agreement and Plan of Merger, dated as of January 15, 1998 (as it may be
amended from time to time, the "Merger Agreement"), which provides that Merger
Sub will make a tender offer (the "Offer") for 13,933,000 shares of Common
Stock, par value $0.10 per share, of the Company ("Shares") and that, subsequent
to the consummation of the Offer, Merger Sub will merge with and into the
Company (the "Merger" and, collectively with the Offer and the other
transactions contemplated by the Merger Agreement, the "Merger Transactions");
and
WHEREAS, the Shareholder is the record holder of an aggregate of 9,668,000
Shares (the "Shareholder Shares"); and
WHEREAS, Parent, the Company, WMX and the Shareholder wish, as a part of
the Merger Transactions, to provide for the repurchase by the Company from the
Shareholder, concurrently with the payment to BankBoston, N.A., as Depositary
for the Offer on behalf of holders of Shares tendering into the Offer, of the
aggregate purchase price for all Shares purchased in the Offer (the "Payment
Time"), of 5,235,381 Shareholder Shares (the "Repurchased
<PAGE> 2
Shares"), in a manner that will increase the aggregate number of Shares acquired
for cash in the Merger Transactions and make it possible for the Merger
Consideration (as defined in the Merger Agreement) to consist solely of shares
of Parent Common Stock (as defined in the Merger Agreement); and
WHEREAS, the parties intend for WMX and the Shareholder, considered
together, not to receive any greater consideration per Share in the Merger
Transactions than the other holders of Shares, and that for Shareholder not to
receive any greater amount of cash consideration per Share in the Merger
Transactions than the other holders of Shares; and
WHEREAS, in order to facilitate consummation of the Merger Transactions,
WMX and the Shareholder wish to agree (i) to vote or cause to be voted the
Shareholder Shares and any other shares of capital stock of the Company held by
either of them so as to facilitate consummation of the Merger Transactions, (ii)
except as provided in this Agreement, not to transfer or otherwise dispose of or
permit to be transferred or otherwise disposed of any of the Shareholder Shares,
or any other shares of capital stock of the Company, acquired by either of them
hereafter and prior to the Effective Time (as defined in the Merger Agreement),
(iii) to deliver to Parent an irrevocable proxy to vote the Shareholder Shares
and any other shares of capital stock of the Company acquired by the Shareholder
or WMX hereafter and prior to the Effective Time, and (iv) to amend or
terminate, as the case may be, certain agreements to which certain of the
parties hereto are parties, and (v) to make certain other agreements, all as
provided for herein.
NOW, THEREFORE, for good and valuable consideration, the receipt,
sufficiency and adequacy of which is hereby acknowledged, the parties hereto
hereby amend and restate the Original Agreement, ab initio, as follows:
ARTICLE I
Definitions; Representations and Warranties
1.1 Definitions. Terms used herein but not defined herein shall have the
respective meanings ascribed to such terms in the Merger Agreement.
-2-
<PAGE> 3
1.2 Representations of WMX and the Shareholder. WMX and the Shareholder
jointly and severally represent and warrant to the Company that (a) the
Shareholder owns beneficially and of record (as such term is defined in the
Securities Exchange Act of 1934, as amended (the "1934 Act")) 9,668,000 Shares
free and clear of all liens, claims, charges, security interests or other
encumbrances (each, a "Lien") and, except for this Agreement and the warrants to
purchase Shares (the "Warrants") issued pursuant to the Warrant Agreement, dated
as of May 30, 1995, among the Company and WMX (the "Warrant Agreement"), there
are no options, warrants or other rights, agreements, arrangements or
commitments of any character to which WMX or the Shareholder is a party relating
to the pledge or disposition of any shares of capital stock of the Company and,
except for the Standstill Agreement and this Agreement, there are no voting
trusts or voting agreements to which WMX or the Shareholder is a party with
respect to any shares of capital stock of the Company; (b) neither WMX nor the
Shareholder beneficially owns any shares of capital stock of the Company other
than the Shareholder Shares, in the case of the Shareholder, and the Warrants,
in the case of WMX, and, except for the Warrants held by WMX, neither has any
options, warrants or other rights to acquire any additional shares of capital
stock of the Company or any security exercisable for or convertible into shares
of capital stock of the Company; (c) WMX and the Shareholder have full power and
authority to enter into, execute and deliver this Agreement and to perform fully
their respective obligations under this Agreement; and (d) this Agreement has
been duly executed and delivered by each of WMX, the Shareholder and Rust,
constitutes the legal, valid and binding obligation of WMX, the Shareholder and
Rust and is enforceable against each of them in accordance with its terms. The
foregoing representations shall survive consummation of the Merger Transactions
and the other transactions contemplated by this Agreement.
1.3 Representations of the Company. The Company represents and warrants
to WMX and the Shareholder that (a) the Company has full power and authority to
enter into, execute and deliver this Agreement and to perform fully its
obligations under this Agreement, (b) this Agreement has been duly executed and
delivered by the Company, constitutes the legal, valid and binding obligation of
the Company and is enforceable against it in accordance with its terms, and (c)
the Company has obtained all consents, approvals,
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<PAGE> 4
permits and authorizations required to be obtained by the Company pursuant to
any law, regulation, contract, agreement or instrument in connection with the
execution and delivery of this Agreement. The foregoing representations shall
survive consummation of the Merger Transactions and the other transactions
contemplated by this Agreement.
ARTICLE II
The Repurchase and the Offer
2.1 Repurchase of Shares. (a) Subject to the terms and conditions of
this Agreement, including the conditions set forth in Section 2.3, the Company
agrees to purchase from the Shareholder, and the Shareholder agrees to sell to
the Company (such purchase and sale transaction, the "Repurchase"), the
Repurchased Shares, free and clear of any Liens at a purchase price of $11.50
per Repurchased Share, or such greater price per Repurchased Share as may be
paid in the Offer (the "Repurchase Price").
(b) If for any reason the Company has not repurchased the
Repurchased Shares immediately prior to the Effective Time (as defined in the
Merger Agreement), the Company shall take such action as may be necessary at
such time to purchase the Repurchased Shares at the Repurchase Price for cash at
such time, so that the Repurchased Shares shall have been acquired by the
Company, Parent or Merger Sub prior to the Effective Time.
2.2 Repurchase Closing. (a) The delivery of the Repurchased Shares (the
"Repurchase Closing") shall take place at the offices of Sullivan & Cromwell,
125 Broad Street, New York, New York at the Payment Time.
(b) At the Repurchase Closing:
(i) The Shareholder shall deliver to the Company
certificates representing the Repurchased Shares, duly endorsed and in
form for transfer to the Company; and
(ii) The Company shall pay to the Shareholder, by wire
transfer, to an account designated by the Shareholder no fewer than two
business days prior to the Repurchase Closing, immediately available
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<PAGE> 5
funds equivalent to the Repurchase Price multiplied by the number of
Repurchased Shares.
2.3 Conditions to the Repurchase. (a) The respective obligations of the
Company and the Shareholder to consummate the Repurchase are subject to the
fulfillment of each of the following conditions, any or all of which may be
waived in whole or in part by the Company or the Shareholder, as the case may
be, to the extent permitted by applicable law:
(i) Concurrently with the Repurchase Closing, Merger Sub
shall have paid for Shares pursuant to the Offer.
(ii) No United States or state court or other Governmental
Entity (as defined in the Merger Agreement) of competent jurisdiction
shall have enacted, issued, promulgated, enforced or entered any statute,
rule, regulation, judgment, decree, injunction or other order (whether
temporary, preliminary or permanent) which is in effect and prohibits
consummation of the transactions contemplated by the Merger Agreement or
this Agreement.
(b) The obligation of the Company to consummate the Repurchase is
subject to the condition that the representations and warranties of WMX and the
Shareholder contained in Section 1.2 are true and accurate in all material
respects as of the date hereof and as of the Repurchase Closing, provided,
however, that the foregoing condition may be waived in whole or in part by the
Company.
(c) The obligation of WMX and the Shareholder to consummate the
Repurchase is subject to the condition that the representations and warranties
of the Company contained in Section 1.3 are true and accurate in all material
respects as of the date hereof and as of the Repurchase Closing, provided,
however, that the foregoing condition may be waived in whole or in part by WMX
by the Shareholder.
2.4 The Tender Offer. WMX and the Shareholder agree that they will not,
in the aggregate, tender more than 2,142,141 Shares into the Offer.
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<PAGE> 6
ARTICLE III
The Merger
3.1 Agreement to Vote Shares. In addition to and notwithstanding the
provisions of Section 1.2 of the Standstill Agreement, WMX and the Shareholder
agree that during the term of this Agreement they consent to and approve the
voting of the Shareholder Shares and any New Shares (as defined in Section 4.2),
(a) in favor of adoption of the Merger Agreement and in favor of consummation of
the Merger Transactions at every meeting of the shareholders of the Company at
which such matters are considered and at every adjournment thereof or in
connection with any written consent of the shareholders of the Company, (b) in
favor of the election to the Company's Board of Directors of such number of
Parent Representatives as Parent is permitted to cause to be elected to the
Company's Board of Directors pursuant to Section 1.4 of the Merger Agreement,
(c) against any action or agreement that would compete with, impede, interfere
with or attempt to discourage the Merger Transactions, or inhibit the timely
consummation of the Merger Transactions, (d) against any action or agreement
that would result in a breach in any material respect of any covenant,
representation or warranty or any other obligation of the Company under the
Merger Agreement and (e) against any merger, consolidation, business
combination, reorganization, recapitalization, liquidation or sale or transfer
of any material assets of the Company or its subsidiaries, except for the Merger
Transactions. The Shareholder agrees to deliver to Parent upon request a proxy
substantially in the form attached hereto as Exhibit A, which proxy shall be
irrevocable during the term of this Agreement to the fullest extent permitted
under Ohio law.
3.2 No Voting Trusts. WMX and the Shareholder agree that they will not,
nor will they permit any entity under their control to, deposit any of the
Shareholder Shares or any New Shares held by them or any entity under their
control in a voting trust or subject any of the Shareholder Shares or any New
Shares held by them or any entity under their control to any arrangement with
respect to the voting of the Shareholder Shares that could result in a
shareholder's vote or action by consent of the shareholders of the Company in
opposition to or in competition with the consummation of the Merger
Transactions.
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<PAGE> 7
3.3 No Proxy Solicitations. WMX and the Shareholder agree that they will
not, nor will they permit any entity under their respective control to, (a)
solicit proxies or become a "participant" in a "solicitation" (as such terms are
defined in Regulation 14A under the 1934 Act) in opposition to or in competition
with the consummation of the Merger Transactions or otherwise encourage or
assist any party in taking or planning any action which would compete with,
impede, interfere with or attempt to discourage the Merger Transactions or
inhibit the timely consummation of the Merger Transactions, (b) directly or
indirectly encourage, initiate or cooperate in a shareholders' vote or action by
consent of the Company's shareholders in opposition to or in competition with
the consummation of the Merger Transactions, or (c) become a member of a "group"
(as such term is used in Section 13(d) of the 1934 Act) with respect to any
voting securities of the Company for the purpose of opposing or competing with
the consummation of the Merger Transactions.
3.4 Waiver of Dissenters' Rights. The Shareholder hereby unconditionally
and irrevocably waives its rights pursuant to Sections 1701.84 et seq. of the
Ohio General Corporation Law to exercise appraisal rights or dissenters' rights
with respect to the Offer, the Merger, or the other transactions contemplated by
the Merger Agreement.
ARTICLE IV
Other Agreements
4.1 No Transfer or Encumbrance. In addition to and notwithstanding the
provisions of Section 1.8 of the Standstill Agreement, WMX and the Shareholder
agree not to transfer, sell, offer, exchange, pledge or otherwise dispose of or
encumber any of the Warrants, Shareholder Shares or New Shares on or after the
date hereof and during the term of this Agreement, except for tenders in
accordance with Section 2.4, unless the transferee agrees in writing in form
satisfactory to the Company and Parent to be bound by the terms of this
Agreement.
4.2 No Additional Purchases or Acquisitions. In addition to and
notwithstanding the provisions of Sections 1.1 and 2.4 of the Standstill
Agreement, WMX and the Shareholder agree that they will not purchase or
otherwise
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<PAGE> 8
acquire beneficial ownership of any Shares or any other capital stock of the
Company after the execution of this Agreement ("New Shares"), nor will WMX or
the Shareholder voluntarily acquire the right to vote or share in the voting of
any Shares or any other capital stock of the Company other than the Shareholder
Shares, unless (in either case) WMX or the Shareholder, as the case may be,
agrees to deliver to the Board of Directors of the Company immediately after
such purchase or acquisition an irrevocable proxy in the form attached hereto as
Exhibit A with respect to such New Shares. WMX and the Shareholder also agree
that any New Shares acquired or purchased by them shall be subject to the terms
of this Agreement to the same extent as if they constituted Shareholder Shares.
4.3 First Amendment to Standstill Agreement. The Standstill Agreement is
hereby amended ab initio, as of the execution of this Agreement, to amend
Section 1.4 thereof by adding the following clause to the end of such Section:
", except the Amended and Restated Share Repurchase Agreement, dated
February 11, 1998, among OHM Corporation, Waste Management, Inc., Rust
International Inc., Rust Remedial Services Holding Company Inc. and
International Technology Corporation."
4.4 Second Amendment to Standstill Agreement. The Standstill Agreement
is hereby further amended ab initio, as of the occurrence of the Repurchase
Closing, to delete therefrom Sections 2.1 through 2.7 thereof in their entirety.
4.5 Third Amendment to Standstill Agreement. The Standstill Agreement is
hereby further amended ab initio, as of the Repurchase Closing, to delete
therefrom Sections 3.1, 3.2 and 3.3 thereof in their entirety.
4.6 Release from Intercreditor Agreement. WMX and the Shareholder hereby
consent to the payment by the Company of a pro rata taxable distribution (the
"NSC Distribution") to holders of record of the Shares of all of the shares of
common stock, par value $0.01 per share, of NSC Corporation held by the Company
(the "NSC Shares") and waive their rights to reimbursement pursuant to the
Reimbursement Agreement, dated as of May 31, 1995, among the Company,
Remediation and WMX, and the Intercreditor
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<PAGE> 9
Agreement, dated as of May 31, 1995, among WMX, the Administrative Agent and the
Issuing and Paying Agent, and hereby release the NSC Shares from any security
interest (pursuant to pledge agreements or otherwise) which WMX may have with
respect to such NSC Shares. WMX agrees to execute any documents reasonably
necessary to give effect to the provisions of this Section, promptly upon
request therefor made by the Company.
4.7 Termination of the Guaranty Agreement. The parties hereby agree that
the Guaranty Agreement, dated as of May 30, 1995, between the Company and WMX,
shall be terminated effective as of the Common Termination Date.
4.8 Cancellation of The Warrants.
(a) The parties hereby agree that the Warrant Agreement shall be
terminated and the Warrants shall be canceled effective as of the date on which
the Guaranty, made as of May 31, 1995, by WMX in favor of the Banks listed
therein (the "Guaranty"), terminates in accordance with Section 10(a) thereof
(such date, the "Common Termination Date"), without the payment of any separate
consideration therefor. The parties hereby agree to use their reasonable best
efforts to cause the events specified in Section 10(a) of the Guaranty to occur
prior to the second business day subsequent to the Effective Time.
(b) WMX agrees not to exercise its rights pursuant to Sections 3.1
or 3.2 of the Warrant Agreement prior to the earlier to occur of (i) the second
business day subsequent to the Effective Time, and (ii) the termination of the
Merger Agreement in accordance with its terms.
(c) WMX agrees not to exercise its rights pursuant to Section 2.2
of the Warrant Agreement with respect to the Merger Transactions prior to the
second business day subsequent to the Effective Time.
(d) WMX hereby waives its rights under Sections 2.1 through 2.7 of
the Warrant Agreement with respect to the NSC Distribution.
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<PAGE> 10
ARTICLE V
Miscellaneous
5.1 Specific Performance. Each party hereto acknowledges that it will be
impossible to measure in money the damage to the other party if a party hereto
fails to comply with any of the obligations imposed by this Agreement, that
every such obligation is material and that, in the event of any such failure,
the other party will not have an adequate remedy at law or damages. Accordingly,
each party hereto agrees that injunctive relief or other equitable remedy, in
addition to remedies at law or damages, is the appropriate remedy for any such
failure and will not oppose the granting of such relief on the basis that the
other party has an adequate remedy at law. Each party hereto agrees that it will
not seek, and agrees to waive any requirement for, the securing or posting of a
bond in connection with any other party's seeking or obtaining such equitable
relief.
5.2 Entire Agreement. This Agreement and the Standstill Agreement (as
herein amended) supersede all prior agreements, written or oral, among the
parties hereto with respect to the subject matter hereof and contains the entire
agreement among the parties with respect to the subject matter hereof. This
Agreement may not be amended, supplemented or modified, and no provisions hereof
may be modified or waived, except by an instrument in writing signed by all the
parties hereto. No waiver of any provisions hereof by any party shall be deemed
a waiver of any other provisions hereof by any such party, nor shall any such
waiver be deemed a continuing waiver of any provision hereof by such party.
5.3 Notices. Any notice, request, instruction or other document to be
given hereunder by any party to the others shall be in writing and delivered
personally or sent by registered or certified mail, postage prepaid, or by
facsimile:
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<PAGE> 11
if to WMX, the Shareholder or Rust:
Herbert A. Getz
Waste Management, Inc.
3003 Butterfield Road
Oak Brook, Illinois 60523
Telecopier: (630) 572-9130
with a copy to:
John H. Bitner
Bell, Boyd & Lloyd
Three First National Plaza
70 West Madison Street, Suite 3300
Chicago, Illinois 60602-4207
Telecopier: (312) 372-2098
if to the Company:
Steven E. Harbour
OHM Corporation
5445 Triangle Parkway, Suite 400
Norcross, Georgia 30092
Telecopier: (770) 849-3110
with a copy to:
Joseph B. Frumkin
Sullivan & Cromwell
125 Broad Street
New York, New York 10004
Telecopier: (212) 558-3588
and a copy to:
Thomas C. Daniels
Jones Day Reavis & Pogue
North Point
901 Lakeside Avenue
Cleveland, Ohio 44114
Telecopier: (216) 579-0212
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<PAGE> 12
if to Parent:
James G. Kirk
International Technology Corporation
2790 Mosside Boulevard
Monroeville, PA 15146-2792
Telecopier: (412) 858-3978
with a copy to:
Peter F. Ziegler
Gibson, Dunn & Crutcher LLP
333 South Grand Avenue
Los Angeles, California 90071
Telecopier: (213) 229-7520
or to such other persons or addresses as may be designated in writing by the
party to receive such notice as provided above.
5.4 Miscellaneous.
(a) This Agreement shall be deemed a contract made under, and for
all purposes shall be construed in accordance with, the laws of the State of
Ohio applicable to agreements executed in and solely to be performed within such
State.
(b) If any provision of this Agreement or the application of such
provision to any person or circumstances shall be held invalid or unenforceable
by a court of competent jurisdiction, such provision or application shall be
unenforceable only to the extent of such invalidity or unenforceability and the
remainder of the provision held invalid or unenforceable and the application of
such provision to persons or circumstances, other than the party as to which it
is held invalid, and the remainder of this Agreement, shall not be affected.
(c) This Agreement may be executed in one or more counterparts,
each of which shall be deemed to be an original but all of which together shall
constitute one and the same instrument.
(d) This Agreement shall terminate automatically upon the
termination of the Merger Agreement. This Agreement may be terminated by the
Company at any time if
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<PAGE> 13
WMX or the Shareholder shall have failed to comply with any of their respective
covenants or agreements contained in this Agreement. This Agreement may be
terminated by WMX or the Shareholder at any time if the Company shall have
failed to comply with any of its covenants or agreements contained in this
Agreement.
(e) Each party hereto shall execute and deliver such additional
documents as may be necessary or desirable to effect the transactions
contemplated by this Agreement.
(f) All Section headings herein are for convenience of reference
only and are not part of this Agreement, and no construction or reference shall
be derived therefrom.
(g) The obligations of the parties set forth in this Agreement
shall not be effective or binding upon any party hereto until after such time as
the Merger Agreement is executed and delivered by the Company, Parent and Merger
Sub, and the parties agree that there is not and has not been any other
agreement, arrangement or understanding between the parties hereto with respect
to the matters set forth herein.
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<PAGE> 14
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first written above.
OHM CORPORATION
By:__________________________________
Name:
Title:
WASTE MANAGEMENT, INC.
By:__________________________________
Name:
Title:
RUST INTERNATIONAL INC.
By:__________________________________
Name:
Title:
RUST REMEDIAL SERVICES
HOLDING COMPANY INC.
By:__________________________________
Name:
Title:
<PAGE> 15
INTERNATIONAL TECHNOLOGY
CORPORATION
By:__________________________________
Name:
Title:
<PAGE> 16
(EXHIBIT A)
FORM OF PROXY
The undersigned, for consideration received, hereby appoints Anthony J.
DeLuca and James G. Kirk and each of them my proxies, with power of substitution
and resubstitution, to vote all shares of Common Stock of OHM Corporation, an
Ohio corporation (the "Company"), [and [insert any other Shares (as defined in
the Amended and Restated Share Repurchase Agreement) or other shares of capital
stock of the Company owned by the Shareholder)]] owned by the undersigned at the
Special Meeting of Shareholders of the Company to be held [insert date, time and
place] and at any adjournment thereof IN FAVOR OF adoption of the Agreement and
Plan of Merger, dated as of January 15, 1998 (the "Merger Agreement"), among the
Company, International Technology Corporation ("Parent") and IT-Ohio, Inc., IN
FAVOR OF consummation of the Merger Transactions, IN FAVOR OF [List such number
of Parent Representatives (as defined in Section 1.4 of the Merger Agreement) as
Parent is permitted to cause to be elected to the Company's Board of Directors
pursuant to Section 1.4 of the Merger Agreement], and AGAINST [insert
description of any action or agreement that would compete with, impede,
interfere with or attempt to discourage the Merger Transactions or inhibit the
timely consummation of the Merger Transactions or any action or agreement that
would result in a breach in any material respect of any covenant, representation
or warranty or any other obligation of the Company under the Merger Agreement or
any merger, consolidation, business combination, reorganization,
recapitalization, liquidation or sale or transfer of any material assets of the
Company or its subsidiaries]. This proxy is coupled with an interest, revokes
all prior proxies granted by the undersigned and is irrevocable until such time
as the Amended and Restated Share Repurchase Agreement, dated as of February __,
1998 among the undersigned and the Company terminates in accordance with its
terms.
Dated _________, 1998
RUST REMEDIAL SERVICES HOLDING
COMPANY INC.
By:__________________________________
Name:
Title:
<PAGE> 1
EXHIBIT 2.16
SECOND AMENDED AND RESTATED SHARE REPURCHASE AGREEMENT
SECOND AMENDED AND RESTATED SHARE REPURCHASE AGREEMENT (this "Second
Amended and Restated Agreement"), dated as of February 17, 1998, among OHM
Corporation, an Ohio corporation (the "Company"), Waste Management, Inc., a
Delaware corporation ("WMX"), Rust International Inc., a Delaware corporation
("Rust"), Rust Remedial Services Holding Company Inc., a Delaware corporation
(the "Shareholder"), and International Technology Corporation, a Delaware
corporation ("Parent").
WHEREAS, certain of the parties are party to that certain Share
Repurchase Agreement, dated as of January 15, 1998, among OHM Corporation, Waste
Management, Inc., Rust International Inc. and International Technology
Corporation (the "Original Agreement"), and certain of the parties to this
Agreement are also parties to the Standstill and Non-Competition Agreement,
dated as of May 30, 1995, among the Company, WMX and Rust (the "Standstill
Agreement"); and
WHEREAS, the Original Agreement was amended and restated as of February
11, 1998 (the "Amended and Restated Agreement," the Original Agreement, as
amended and restated by the Amended and Restated Agreement and this Second
Amended and Restated Agreement, being hereinafter referred to as this
"Agreement"); and
WHEREAS, concurrently with the execution of the Original Agreement, the
Company, Parent and IT-Ohio, Inc., an Ohio corporation ("Merger Sub"), entered
into an Agreement and Plan of Merger, dated as of January 15, 1998 (as it may be
amended from time to time, the "Merger Agreement"), which provides that Merger
Sub will make a tender offer (the "Offer") for 13,933,000 shares of Common
Stock, par value $0.10 per share, of the Company ("Shares") and that, subsequent
to the consummation of the Offer, Merger Sub will merge with and into the
Company (the "Merger" and, collectively with the Offer and the other
transactions contemplated by the Merger Agreement, the "Merger Transactions");
and
WHEREAS, the Shareholder is the record holder of an aggregate of
9,668,000 Shares (the "Shareholder Shares"); and
<PAGE> 2
WHEREAS, Parent, the Company, WMX and the Shareholder wish, as a part
of the Merger Transactions, to provide for the repurchase by the Company from
the Shareholder, concurrently with the payment to BankBoston, N.A., as
Depositary for the Offer on behalf of holders of Shares tendering into the
Offer, of the aggregate purchase price for all Shares purchased in the Offer
(the "Payment Time"), of 5,235,381 Shareholder Shares (the "Repurchased
Shares"), subject to the provisions of Section 2.4(c), in a manner that will
increase the aggregate number of Shares acquired for cash in the Merger
Transactions and make it possible for the Merger Consideration (as defined in
the Merger Agreement) to consist solely of shares of Parent Common Stock (as
defined in the Merger Agreement); and
WHEREAS, the parties intend for WMX and the Shareholder, considered
together, not to receive any greater consideration per Share in the Merger
Transactions than the other holders of Shares have the opportunity to receive,
and that for Shareholder not to receive any greater amount of cash consideration
per Share in the Merger Transactions than the other holders of Shares have the
opportunity to receive; and
WHEREAS, in order to facilitate consummation of the Merger
Transactions, WMX and the Shareholder wish to agree (i) to cause to be tendered
into the Offer certain of the Shareholder Shares on the terms and in the manner
set forth herein, (ii) to vote or cause to be voted the Shareholder Shares and
any other shares of capital stock of the Company held by either of them so as to
facilitate consummation of the Merger Transactions, (iii) except as provided in
this Agreement, not to transfer or otherwise dispose of or permit to be
transferred or otherwise disposed of any of the Shareholder Shares, or any other
shares of capital stock of the Company, acquired by either of them hereafter and
prior to the Effective Time (as defined in the Merger Agreement), (iv) to
deliver to Parent an irrevocable proxy to vote the Shareholder Shares and any
other shares of capital stock of the Company acquired by the Shareholder or WMX
hereafter and prior to the Effective Time, (v) to amend or terminate, as the
case may be, certain agreements to which certain of the parties hereto are
parties, and (vi) to make certain other agreements, all as provided for herein.
NOW, THEREFORE, for good and valuable consideration, the receipt,
sufficiency and adequacy of which is
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<PAGE> 3
hereby acknowledged, the parties hereto hereby amend and restate the Original
Agreement, ab initio, as follows:
ARTICLE I
Definitions; Representations and Warranties
1.1 Definitions. Terms used herein but not defined herein shall have the
respective meanings ascribed to such terms in the Merger Agreement.
1.2 Representations of WMX and the Shareholder. WMX and the Shareholder
jointly and severally represent and warrant to the Company that (a) the
Shareholder owns beneficially and of record (as such term is defined in the
Securities Exchange Act of 1934, as amended (the "1934 Act")) 9,668,000 Shares
free and clear of all liens, claims, charges, security interests or other
encumbrances (each, a "Lien") and, except for this Agreement and the warrants to
purchase Shares (the "Warrants") issued pursuant to the Warrant Agreement, dated
as of May 30, 1995, among the Company and WMX (the "Warrant Agreement"), there
are no options, warrants or other rights, agreements, arrangements or
commitments of any character to which WMX or the Shareholder is a party relating
to the pledge or disposition of any shares of capital stock of the Company and,
except for the Standstill Agreement and this Agreement, there are no voting
trusts or voting agreements to which WMX or the Shareholder is a party with
respect to any shares of capital stock of the Company; (b) neither WMX nor the
Shareholder beneficially owns any shares of capital stock of the Company other
than the Shareholder Shares, in the case of the Shareholder, and the Warrants,
in the case of WMX, and, except for the Warrants held by WMX, neither has any
options, warrants or other rights to acquire any additional shares of capital
stock of the Company or any security exercisable for or convertible into shares
of capital stock of the Company; (c) WMX and the Shareholder have full power and
authority to enter into, execute and deliver this Agreement and to perform fully
their respective obligations under this Agreement; and (d) this Agreement has
been duly executed and delivered by each of WMX, the Shareholder and Rust,
constitutes the legal, valid and binding obligation of WMX, the Shareholder and
Rust and is enforceable against each of them in accordance with its terms. The
foregoing representations shall survive consummation of the Merger
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<PAGE> 4
Transactions and the other transactions contemplated by this Agreement.
1.3 Representations of the Company. The Company represents and warrants
to WMX and the Shareholder that (a) the Company has full power and authority to
enter into, execute and deliver this Agreement and to perform fully its
obligations under this Agreement, (b) this Agreement has been duly executed and
delivered by the Company, constitutes the legal, valid and binding obligation of
the Company and is enforceable against it in accordance with its terms, and (c)
the Company has obtained all consents, approvals, permits and authorizations
required to be obtained by the Company pursuant to any law, regulation,
contract, agreement or instrument in connection with the execution and delivery
of this Agreement. The foregoing representations shall survive consummation of
the Merger Transactions and the other transactions contemplated by this
Agreement.
ARTICLE II
The Repurchase and the Offer
2.1 Repurchase of Shares. Subject to the terms and conditions of this
Agreement, including the conditions set forth in Section 2.3 and the provisions
of Section 2.4(c):
(a) The Company agrees to purchase from the Shareholder, and the
Shareholder agrees to sell to the Company (such purchase and sale transaction,
the "Repurchase"), the Repurchased Shares, free and clear of any Liens at a
purchase price of $11.50 per Repurchased Share, or such greater price per
Repurchased Share as may be paid in the Offer (the "Repurchase Price").
(b) If for any reason the Company has not repurchased the
Repurchased Shares immediately prior to the Effective Time (as defined in the
Merger Agreement), or the Repurchased Shares have not been purchased in the
Offer, the Company shall take such action as may be necessary at such time to
purchase the Repurchased Shares at the Repurchase Price for cash at such time,
so that the Repurchased Shares shall have been acquired by the Company, Parent
or Merger Sub prior to the Effective Time.
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<PAGE> 5
2.2 Repurchase Closing. (a) Subject to Section 2.4(c), the delivery of
the Repurchased Shares (the "Repurchase Closing") shall take place at the
offices of Sullivan & Cromwell, 125 Broad Street, New York, New York at the
Payment Time.
(b) At the Repurchase Closing:
(i) The Shareholder shall deliver to the Company
certificates or duly executed stock powers representing the Repurchased
Shares not tendered pursuant to a request pursuant to Section 2.4(c) (in
the case of certificates, duly endorsed and in form for transfer to the
Company); and
(ii) The Company shall pay to the Shareholder, by wire
transfer, to an account designated by the Shareholder no fewer than two
business days prior to the Repurchase Closing, immediately available funds
equivalent to the Repurchase Price multiplied by the number of Repurchased
Shares.
2.3 Conditions to the Repurchase. (a) The respective obligations of the
Company and the Shareholder to consummate the Repurchase are subject to the
fulfillment of each of the following conditions, any or all of which may be
waived in whole or in part by the Company or the Shareholder, as the case may
be, to the extent permitted by applicable law:
(i) Concurrently with the Repurchase Closing, Merger Sub
shall have paid for Shares pursuant to the Offer.
(ii) No United States or state court or other Governmental
Entity (as defined in the Merger Agreement) of competent jurisdiction
shall have enacted, issued, promulgated, enforced or entered any statute,
rule, regulation, judgment, decree, injunction or other order (whether
temporary, preliminary or permanent) which is in effect and prohibits
consummation of the transactions contemplated by the Merger Agreement or
this Agreement.
(b) The obligation of the Company to consummate the Repurchase is
subject to the condition that the representations and warranties of WMX and the
Shareholder
-5-
<PAGE> 6
contained in Section 1.2 are true and accurate in all material respects as of
the date hereof and as of the Repurchase Closing, provided, however, that the
foregoing condition may be waived in whole or in part by the Company.
(c) The obligation of WMX and the Shareholder to consummate the
Repurchase is subject to the condition that the representations and warranties
of the Company contained in Section 1.3 are true and accurate in all material
respects as of the date hereof and as of the Repurchase Closing, provided,
however, that the foregoing condition may be waived in whole or in part by WMX
by the Shareholder.
2.4 The Tender Offer. (a) WMX and the Shareholder shall cause to be
tendered into the Offer, prior to the expiration or termination of the Offer,
2,142,141 Shares, shall cause such Shares not to be withdrawn from the Offer
prior to the expiration or termination of the Offer, and shall not cause more
than 2,142,141 Shares to be tendered into the Offer, except to the extent (and
only to the extent) that a request is made pursuant to Sections 2.4(b) or (c).
(b) Promptly upon WMX's receipt by telecopier of a written request
from Parent and the Company therefor, WMX and the Shareholder shall, subject to
the terms hereof, cause to be tendered into the Offer an additional 2,290,478
Shares, or such lesser number of Shares as Parent and the Company may request,
accompanied by a letter of transmittal and supplemental letter of transmittal in
form reasonably satisfactory to Parent and the Company stating that of the
Shares accompanying such instruments the holder thereof is tendering only such
number of Shares as is necessary to cause the aggregate number of Shares
tendered into and accepted for payment in the Offer to be equal to 13,933,000.
WMX and the Shareholder shall cause such number of Shares not to be withdrawn
from the Offer prior to the expiration or termination of the Offer.
(c) Provided that Parent and the Company shall have previously
made (or they concurrently make) a request pursuant to Section 2.4(b) with
respect to 2,290,478 Shares, promptly upon WMX's receipt by telecopier of a
written request from Parent and the Company therefor, WMX and the Shareholder
shall cause to be tendered into the Offer such number of Repurchased Shares as
Parent and the Company shall reasonably estimate is necessary to be tendered in
order to
-6-
<PAGE> 7
cause the aggregate number of Shares tendered into the Offer to be equal to
13,933,000, accompanied by a letter of transmittal and supplemental letter of
transmittal in form reasonably satisfactory to Parent and the Company stating
that of the Repurchased Shares accompanying such instruments the holder thereof
is tendering only such number of Repurchased Shares as is necessary to cause the
aggregate number of Shares tendered into and accepted for payment in the Offer
to be equal to 13,933,000 and that such tender is subject to the condition
subsequent that all of the 4,432,619 Shares referred to in Sections 2.4(a) and
(b) are taken up and paid for in the Offer. WMX and the Shareholder shall cause
such number of Repurchased Shares not to be withdrawn from the Offer prior to
the expiration or termination of the Offer. In the event that Parent and the
Company make a request pursuant to this paragraph, the number of Repurchased
Shares repurchased at the Repurchase Closing shall be reduced by the number of
Repurchased Shares tendered into the Offer pursuant to this Section 2.4(c), and
any Repurchased Shares not accepted for payment in the Offer shall be purchased
by the Company, at the Repurchase Price, as promptly as practicable following
the payment for Shares in the Offer, but in any event not later than the date on
which the payment for Shares tendered by the Shareholder is transmitted to the
Shareholder by the Depositary for the Offer. The closing procedures set forth in
Section 2.2(b) shall be followed in respect of Repurchased Shares not accepted
for payment in the Offer.
ARTICLE III
The Merger
3.1 Agreement to Vote Shares. In addition to and notwithstanding the
provisions of Section 1.2 of the Standstill Agreement, WMX and the Shareholder
agree that during the term of this Agreement they consent to and approve the
voting of the Shareholder Shares and any New Shares (as defined in Section 4.2),
(a) in favor of adoption of the Merger Agreement and in favor of consummation of
the Merger Transactions at every meeting of the shareholders of the Company at
which such matters are considered and at every adjournment thereof or in
connection with any written consent of the shareholders of the Company, (b) in
favor of the election to the Company's Board of Directors of such number of
Parent Representatives as Parent is permitted to
-7-
<PAGE> 8
cause to be elected to the Company's Board of Directors pursuant to Section 1.4
of the Merger Agreement, (c) against any action or agreement that would compete
with, impede, interfere with or attempt to discourage the Merger Transactions,
or inhibit the timely consummation of the Merger Transactions, (d) against any
action or agreement that would result in a breach in any material respect of any
covenant, representation or warranty or any other obligation of the Company
under the Merger Agreement and (e) against any merger, consolidation, business
combination, reorganization, recapitalization, liquidation or sale or transfer
of any material assets of the Company or its subsidiaries, except for the Merger
Transactions. The Shareholder agrees to deliver to Parent upon request a proxy
substantially in the form attached hereto as Exhibit A, which proxy shall be
irrevocable during the term of this Agreement to the fullest extent permitted
under Ohio law.
3.2 No Voting Trusts. WMX and the Shareholder agree that they will not,
nor will they permit any entity under their control to, deposit any of the
Shareholder Shares or any New Shares held by them or any entity under their
control in a voting trust or subject any of the Shareholder Shares or any New
Shares held by them or any entity under their control to any arrangement with
respect to the voting of the Shareholder Shares that could result in a
shareholder's vote or action by consent of the shareholders of the Company in
opposition to or in competition with the consummation of the Merger
Transactions.
3.3 No Proxy Solicitations. WMX and the Shareholder agree that they will
not, nor will they permit any entity under their respective control to, (a)
solicit proxies or become a "participant" in a "solicitation" (as such terms are
defined in Regulation 14A under the 1934 Act) in opposition to or in competition
with the consummation of the Merger Transactions or otherwise encourage or
assist any party in taking or planning any action which would compete with,
impede, interfere with or attempt to discourage the Merger Transactions or
inhibit the timely consummation of the Merger Transactions, (b) directly or
indirectly encourage, initiate or cooperate in a shareholders' vote or action by
consent of the Company's shareholders in opposition to or in competition with
the consummation of the Merger Transactions, or (c) become a member of a "group"
(as such term is used in Section 13(d) of the 1934 Act) with
-8-
<PAGE> 9
respect to any voting securities of the Company for the purpose of opposing or
competing with the consummation of the Merger Transactions.
3.4 Waiver of Dissenters' Rights. The Shareholder hereby unconditionally
and irrevocably waives its rights pursuant to Sections 1701.84 et seq. of the
Ohio General Corporation Law to exercise appraisal rights or dissenters' rights
with respect to the Offer, the Merger, or the other transactions contemplated by
the Merger Agreement.
ARTICLE IV
Other Agreements
4.1 No Transfer or Encumbrance. In addition to and notwithstanding the
provisions of Section 1.8 of the Standstill Agreement, WMX and the Shareholder
agree not to transfer, sell, offer, exchange, pledge or otherwise dispose of or
encumber any of the Warrants, Shareholder Shares or New Shares on or after the
date hereof and during the term of this Agreement, except for tenders in
accordance with Section 2.4, unless the transferee agrees in writing in form
satisfactory to the Company and Parent to be bound by the terms of this
Agreement.
4.2 No Additional Purchases or Acquisitions. In addition to and
notwithstanding the provisions of Sections 1.1 and 2.4 of the Standstill
Agreement, WMX and the Shareholder agree that they will not purchase or
otherwise acquire beneficial ownership of any Shares or any other capital stock
of the Company after the execution of this Agreement ("New Shares"), nor will
WMX or the Shareholder voluntarily acquire the right to vote or share in the
voting of any Shares or any other capital stock of the Company other than the
Shareholder Shares, unless (in either case) WMX or the Shareholder, as the case
may be, agrees to deliver to the Board of Directors of the Company immediately
after such purchase or acquisition an irrevocable proxy in the form attached
hereto as Exhibit A with respect to such New Shares. WMX and the Shareholder
also agree that any New Shares acquired or purchased by them shall be subject to
the terms of this Agreement to the same extent as if they constituted
Shareholder Shares.
-9-
<PAGE> 10
4.3 First Amendment to Standstill Agreement. The Standstill Agreement is
hereby amended ab initio, as of the execution of this Agreement, to amend
Section 1.4 thereof by adding the following clause to the end of such Section:
", except the Share Repurchase Agreement, dated as of January 15, 1998,
among OHM Corporation, Waste Management, Inc., Rust International Inc. and
International Technology Corporation, the Amended and Restated Share
Repurchase Agreement, dated as of February 11, 1998, among OHM
Corporation, Waste Management, Inc., Rust International Inc., Rust
Remedial Services Holding Company Inc. and International Technology
Corporation and the Second Amended and Restated Share Repurchase
Agreement, dated February 17, 1998, among OHM Corporation, Waste
Management, Inc., Rust International Inc., Rust Remedial Services Holding
Company Inc. and International Technology Corporation."
4.4 Second Amendment to Standstill Agreement. The Standstill Agreement
is hereby further amended ab initio, as of the occurrence of the Repurchase
Closing, to delete therefrom Sections 2.1 through 2.7 thereof in their entirety.
4.5 Third Amendment to Standstill Agreement. The Standstill Agreement is
hereby further amended ab initio, as of the Repurchase Closing, to delete
therefrom Sections 3.1, 3.2 and 3.3 thereof in their entirety.
4.6 Release from Intercreditor Agreement. WMX and the Shareholder hereby
consent to the payment by the Company of a pro rata taxable distribution (the
"NSC Distribution") to holders of record of the Shares of all of the shares of
common stock, par value $0.01 per share, of NSC Corporation held by the Company
(the "NSC Shares") and waive their rights to reimbursement pursuant to the
Reimbursement Agreement, dated as of May 31, 1995, among the Company,
Remediation and WMX, and the Intercreditor Agreement, dated as of May 31, 1995,
among WMX, the Administrative Agent and the Issuing and Paying Agent, and hereby
release the NSC Shares from any security interest (pursuant to pledge agreements
or otherwise) which WMX may have with respect to such NSC Shares. WMX agrees to
execute any documents reasonably necessary to give effect to the
-10-
<PAGE> 11
provisions of this Section, promptly upon request therefor made by the Company.
4.7 Termination of the Guaranty Agreement. The parties hereby agree that
the Guaranty Agreement, dated as of May 30, 1995, between the Company and WMX,
shall be terminated effective as of the Common Termination Date.
4.8 Cancellation of The Warrants.
(a) The parties hereby agree that the Warrant Agreement shall be
terminated and the Warrants shall be canceled effective as of the date on which
the Guaranty, made as of May 31, 1995, by WMX in favor of the Banks listed
therein (the "Guaranty"), terminates in accordance with Section 10(a) thereof
(such date, the "Common Termination Date"), without the payment of any separate
consideration therefor. The parties hereby agree to use their reasonable best
efforts to cause the events specified in Section 10(a) of the Guaranty to occur
prior to the second business day subsequent to the Effective Time.
(b) WMX agrees not to exercise its rights pursuant to Sections 3.1
or 3.2 of the Warrant Agreement prior to the earlier to occur of (i) the second
business day subsequent to the Effective Time, and (ii) the termination of the
Merger Agreement in accordance with its terms.
(c) WMX agrees not to exercise its rights pursuant to Section 2.2
of the Warrant Agreement with respect to the Merger Transactions prior to the
second business day subsequent to the Effective Time.
(d) WMX hereby waives its rights under Sections 2.1 through 2.7 of
the Warrant Agreement with respect to the NSC Distribution.
ARTICLE V
Miscellaneous
5.1 Specific Performance. Each party hereto acknowledges that it will be
impossible to measure in money the damage to the other party if a party hereto
fails to comply with any of the obligations imposed by this Agreement, that
every such obligation is material and that,
-11-
<PAGE> 12
in the event of any such failure, the other party will not have an adequate
remedy at law or damages. Accordingly, each party hereto agrees that injunctive
relief or other equitable remedy, in addition to remedies at law or damages, is
the appropriate remedy for any such failure and will not oppose the granting of
such relief on the basis that the other party has an adequate remedy at law.
Each party hereto agrees that it will not seek, and agrees to waive any
requirement for, the securing or posting of a bond in connection with any other
party's seeking or obtaining such equitable relief.
5.2 Entire Agreement. This Agreement and the Standstill Agreement (as
herein amended) supersede all prior agreements, written or oral, among the
parties hereto with respect to the subject matter hereof and contains the entire
agreement among the parties with respect to the subject matter hereof. This
Agreement may not be amended, supplemented or modified, and no provisions hereof
may be modified or waived, except by an instrument in writing signed by all the
parties hereto. No waiver of any provisions hereof by any party shall be deemed
a waiver of any other provisions hereof by any such party, nor shall any such
waiver be deemed a continuing waiver of any provision hereof by such party.
5.3 Notices. Any notice, request, instruction or other document to be
given hereunder by any party to the others shall be in writing and delivered
personally or sent by registered or certified mail, postage prepaid, or by
facsimile:
if to WMX, the Shareholder or Rust:
Herbert A. Getz
Waste Management, Inc.
3003 Butterfield Road
Oak Brook, Illinois 60523
Telecopier: (630) 572-9130
-12-
<PAGE> 13
with a copy to:
John H. Bitner
Bell, Boyd & Lloyd
Three First National Plaza
70 West Madison Street, Suite 3300
Chicago, Illinois 60602-4207
Telecopier: (312) 372-2098
if to the Company:
Steven E. Harbour
OHM Corporation
5445 Triangle Parkway, Suite 400
Norcross, Georgia 30092
Telecopier: (770) 849-3110
with a copy to:
Joseph B. Frumkin
Sullivan & Cromwell
125 Broad Street
New York, New York 10004
Telecopier: (212) 558-3588
and a copy to:
Thomas C. Daniels
Jones Day Reavis & Pogue
North Point
901 Lakeside Avenue
Cleveland, Ohio 44114
Telecopier: (216) 579-0212
if to Parent:
James G. Kirk
International Technology Corporation
2790 Mosside Boulevard
Monroeville, PA 15146-2792
Telecopier: (412) 858-3978
-13-
<PAGE> 14
with a copy to:
Peter F. Ziegler
Gibson, Dunn & Crutcher LLP
333 South Grand Avenue
Los Angeles, California 90071
Telecopier: (213) 229-7520
or to such other persons or addresses as may be designated in writing by the
party to receive such notice as provided above.
5.4 Miscellaneous.
(a) This Agreement shall be deemed a contract made under, and for
all purposes shall be construed in accordance with, the laws of the State of
Ohio applicable to agreements executed in and solely to be performed within such
State.
(b) If any provision of this Agreement or the application of such
provision to any person or circumstances shall be held invalid or unenforceable
by a court of competent jurisdiction, such provision or application shall be
unenforceable only to the extent of such invalidity or unenforceability and the
remainder of the provision held invalid or unenforceable and the application of
such provision to persons or circumstances, other than the party as to which it
is held invalid, and the remainder of this Agreement, shall not be affected.
(c) This Agreement may be executed in one or more counterparts,
each of which shall be deemed to be an original but all of which together shall
constitute one and the same instrument.
(d) This Agreement shall terminate automatically upon the
termination of the Merger Agreement. This Agreement may be terminated by the
Company at any time if WMX or the Shareholder shall have failed to comply with
any of their respective covenants or agreements contained in this Agreement.
This Agreement may be terminated by WMX or the Shareholder at any time if the
Company shall have failed to comply with any of its covenants or agreements
contained in this Agreement.
-14-
<PAGE> 15
(e) Each party hereto shall execute and deliver such additional
documents as may be necessary or desirable to effect the transactions
contemplated by this Agreement.
(f) All Section headings herein are for convenience of reference
only and are not part of this Agreement, and no construction or reference shall
be derived therefrom.
(g) The obligations of the parties set forth in this Agreement
shall not be effective or binding upon any party hereto until after such time as
the Merger Agreement is executed and delivered by the Company, Parent and Merger
Sub, and the parties agree that there is not and has not been any other
agreement, arrangement or understanding between the parties hereto with respect
to the matters set forth herein.
-15-
<PAGE> 16
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first written above.
OHM CORPORATION
By:______________________________
Name:
Title:
WASTE MANAGEMENT, INC.
By:______________________________
Name:
Title:
RUST INTERNATIONAL INC.
By:______________________________
Name:
Title:
RUST REMEDIAL SERVICES
HOLDING COMPANY INC.
By:______________________________
Name:
Title:
-16-
<PAGE> 17
INTERNATIONAL TECHNOLOGY
CORPORATION
By:______________________________
Name:
Title:
-17-
<PAGE> 18
(EXHIBIT A)
FORM OF PROXY
The undersigned, for consideration received, hereby appoints Anthony J.
DeLuca and James G. Kirk and each of them my proxies, with power of substitution
and resubstitution, to vote all shares of Common Stock of OHM Corporation, an
Ohio corporation (the "Company"), [and [insert any other Shares (as defined in
the Second Amended and Restated Share Repurchase Agreement) or other shares of
capital stock of the Company owned by the Shareholder)]] owned by the
undersigned at the Special Meeting of Shareholders of the Company to be held
[insert date, time and place] and at any adjournment thereof IN FAVOR OF
adoption of the Agreement and Plan of Merger, dated as of January 15, 1998 (the
"Merger Agreement"), among the Company, International Technology Corporation
("Parent") and IT-Ohio, Inc., IN FAVOR OF consummation of the Merger
Transactions, IN FAVOR OF [List such number of Parent Representatives (as
defined in Section 1.4 of the Merger Agreement) as Parent is permitted to cause
to be elected to the Company's Board of Directors pursuant to Section 1.4 of the
Merger Agreement], and AGAINST [insert description of any action or agreement
that would compete with, impede, interfere with or attempt to discourage the
Merger Transactions or inhibit the timely consummation of the Merger
Transactions or any action or agreement that would result in a breach in any
material respect of any covenant, representation or warranty or any other
obligation of the Company under the Merger Agreement or any merger,
consolidation, business combination, reorganization, recapitalization,
liquidation or sale or transfer of any material assets of the Company or its
subsidiaries]. This proxy is coupled with an interest, revokes all prior proxies
granted by the undersigned and is irrevocable until such time as the Second
Amended and Restated Share Repurchase Agreement, dated as of February 17, 1998
among the undersigned and the Company terminates in accordance with its terms.
Dated _________, 1998
RUST REMEDIAL SERVICES HOLDING
COMPANY INC.
By:______________________________
Name:
Title:
<PAGE> 1
EXHIBIT 21
<PAGE> 2
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
OHM CORPORATION
SUBSIDIARIES OF THE REGISTRANT
DECEMBER 31, 1997
<TABLE>
<CAPTION>
State or Other
Name of Subsidiary Jurisdiction of Incorporation
------------------ -----------------------------
<S> <C>
OHM Remediation Services Corp. Ohio
Environmental Financial Services Corp. Delaware
Capital National Insurance Company Vermont
OHM Savannah River Corp. Ohio
Beneco Enterprises, Inc. Utah
OHM Environmental Resource Management Corp. Ohio
OHM International, Inc. Delaware
OHM Energy Services Corp. Ohio
</TABLE>
<PAGE> 1
EXHIBIT 23
<PAGE> 2
EXHIBIT 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the registration Statement
No. 33-12099 on Form S-8 dated April 11, 1989, Registration Statement No.
33-28025 on Form S-8 dated September 2, 1994, Registration Statement No.
33-24953 on Form S-8 dated September 2, 1994, Registration Statement No.
33-55371 on Form S-8 dated September 2, 1994, Registration Statement No.
33-55373 on Form S-8 dated September 2, 1994, Registration Statement No.
33-63233 on Form No. S-8 dated October 5, 1995, Registration Statement No.
333-15141 on Form S-8 dated October 30, 1996, and in the Registration
Statement No. 333-21227 on Form S-8 dated February 5, 1997, of our report
dated February 12, 1998, with respect to the consolidated financial
statements and schedule of OHM Corporation and subsidiaries included in
the Annual Report (Form 10-K) for the year ended December 31, 1997.
/s/ Ernst & Young LLP
Columbus, Ohio
February 25, 1998
<PAGE> 1
EXHIBIT 24
POWER OF ATTORNEY
The undersigned directors and officers of OHM Corporation, an Ohio
corporation (the "Company"), do hereby make, constitute and appoint Pamela K.M.
Beall, Kris E. Hansel, and Steven E. Harbour, and each of them, with full power
of substitution and resubstitution, as attorneys or attorney of the undersigned,
to execute and file, under the Securities Exchange Act of 1934, as amended, the
Company's Annual Report on Form 10-K, for the year ended December 31, 1997 and
all amendments or exhibits thereto, and any and all applications or other
documents to be filed with the Securities and Exchange Commission pertaining to
such Annual Report, with full power and authority to do and perform any and all
acts and things whatsoever necessary, appropriate or desirable to be done in the
premises, or in the name, place and stead of the said directors and officers,
hereby ratifying and approving the acts of said attorneys and any of them and
any substitute. This action may be executed in multiple counterparts, each of
which shall be deemed an original with respect to the person executing it.
IN WITNESS WHEREOF, the undersigned have subscribed these presents as
of the 26th day of February, 1998.
<TABLE>
<S> <C>
/s/ James L. Kirk /s/ Herbert A. Getz
- --------------------------------------- ---------------------------------------
James L. Kirk, Chairman of the Board Herbert A. Getz, Director
of Directors, President and
Chief Executive Officer /s/ Ivan W. Gorr
---------------------------------------
Ivan W. Gorr, Director
/s/ Philip O. Strawbridge
- --------------------------------------- /s/ Charles D. Hollister
Philip O. Strawbridge, Vice President, ---------------------------------------
Chief Financial and Administrative Charles D. Hollister, Director
Officer (Principal Financial Officer)
/s/ William P. Hulligan
---------------------------------------
/s/ Kris E. Hansel William P. Hulligan, Director
- ---------------------------------------
Kris E. Hansel, /s/ Joseph R. Kirk
Vice President and Controller Joseph R. Kirk, Director
(Principal Accounting Officer)
---------------------------------------
James E. Koenig, Director
/s/ Richard W. Pogue
---------------------------------------
Richard W. Pogue, Director
/s/ Charles W. Schmidt
---------------------------------------
Charles W. Schmidt, Director
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AND THE CONSOLIDATED STATEMENTS OF INCOME AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 31,784
<SECURITIES> 0
<RECEIVABLES> 132,268
<ALLOWANCES> 15,397
<INVENTORY> 13,285
<CURRENT-ASSETS> 185,845
<PP&E> 96,231
<DEPRECIATION> 39,621
<TOTAL-ASSETS> 319,779
<CURRENT-LIABILITIES> 108,787
<BONDS> 50,106
0
0
<COMMON> 2,742
<OTHER-SE> 154,154
<TOTAL-LIABILITY-AND-EQUITY> 319,779
<SALES> 0
<TOTAL-REVENUES> 526,691
<CGS> 0
<TOTAL-COSTS> 454,556
<OTHER-EXPENSES> 98,588
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,186
<INCOME-PRETAX> (31,639)
<INCOME-TAX> (10,442)
<INCOME-CONTINUING> (21,197)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (21,197)
<EPS-PRIMARY> (0.78)
<EPS-DILUTED> (0.78)
</TABLE>
