SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No. ______)
Filed by the registrant [ ]
Filed by a party other than the registrant [X]
Check the appropriate box:
[ ] Preliminary proxy statement
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule
14a-12
EA Engineering, Science, and Technology, Inc.
(Name of Registrant as Specified in Its Charter)
Payment of filing fee (Check the appropriate box):
[X ] $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1),
or 14a-6(i)(2).
[ ] $500 per each party to the controversy pursuant to
Exchange Act Rule 14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act
Rule 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
--------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies.
--------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-22:1
--------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
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[ ] Check the box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which the
offsetting fee was paid previously. Identify the previous filing by
registration statement number, or the form or schedule and the date of
its filing.
(1) Amount previously paid: $ -0-
(2) Form, schedule, or registration statement no.:
(3) Filing party: EA Engineering, Science, and
Technology, Inc.
(4) Date filed: November 24, 1997
(1) Set forth the amount on which the filing fee is calculated and
state how it was determined.
<PAGE>
EA ENGINEERING, SCIENCE, AND TECHNOLOGY, INC.
11019 McCormick Road
Hunt Valley, Maryland 21031
NOTICE OF ANNUAL MEETING
JANUARY 14, 1998
TO THE STOCKHOLDERS:
Notice is hereby given that the Annual Meeting of Stockholders of EA
Engineering, Science, and Technology, Inc. will be held on January 14, 1998, at
9:00 a.m. EST, at Marriott's Hunt Valley Inn, 245 Shawan Road, Hunt Valley,
Maryland, for the following purposes:
1. To elect six directors to serve until the next annual meeting
and until their successors are elected and qualified;
2. To approve an increase in the number of shares of Common Stock
reserved for issuance under the Company's Amended and Restated
Stock Option Plan;
3. To ratify the appointment of Arthur Andersen LLP as
independent public accountants for the Company for the fiscal
year ending August 31, 1998; and
4. To transact such other business as may properly come before
the meeting or any adjournment or adjournments thereof.
Only holders of record of Common Stock as of the close of business on
November 17, 1997 are entitled to receive notice of and vote at the meeting or
any adjournment or adjournments thereof.
By Order of the Board of Directors.
/s/ Jack P. Adler
------------------------------
Jack P. Adler, Esq.
Vice President, Secretary and General Counsel
Dated at Baltimore, Maryland
December 1, 1997
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON,
PLEASE SIGN, DATE, AND RETURN THE ACCOMPANYING PROXY
PROMPTLY IN THE ENCLOSED POSTAGE PAID RETURN ENVELOPE.
<PAGE>
EA ENGINEERING, SCIENCE, AND TECHNOLOGY, INC.
PROXY STATEMENT
GENERAL INFORMATION
This Proxy Statement is furnished in connection with the solicitation by
and on behalf of the Board of Directors of EA Engineering, Science, and
Technology, Inc. (together with its wholly-owned subsidiaries, the "Company") of
proxies from the holders of the Company's common stock for use at the Annual
Meeting (the "Meeting") to be held on January 14, 1998, and any adjournment or
adjournments thereof. The giving of a proxy does not affect your right to vote
should you attend the Meeting in person, and the proxy may be revoked at any
time before it is voted by giving the Secretary of the Company a signed
instrument revoking the proxy or a signed proxy of a later date. Each properly
executed proxy not revoked will be voted in accordance with instructions
thereon. If no instructions are specified in the proxy, it is the intention of
the persons named in the accompanying proxy to vote FOR the election of the
nominees named herein as directors of the Company and FOR the matters described
in Items 2 and 3 in the Notice of Annual Meeting.
The Company's Annual Report to Stockholders for the fiscal year ended
August 31, 1997 (the "Annual Report"), containing audited consolidated financial
statements and the message of the Chairman of the Board and the President and
Chief Executive Officer, is being mailed to stockholders along with the Notice
of Annual Meeting and Proxy Statement. The consolidated financial statements and
discussion and analysis by management of the Company's financial condition and
results of operations contained in the Annual Report are incorporated herein by
reference.
The mailing address of the Company's principal executive office is:
11019 McCormick Road, Hunt Valley, Maryland 21031, and the approximate date on
which this Proxy Statement and the form of proxy are first being sent to
stockholders is December 3, 1997.
Only holders of record of the Company's Common Stock, par value $.01 per
share (the "Common Stock"), at the close of business on November 17, 1997, are
entitled to vote at the Meeting, one vote for each share of Common Stock so
held. On that date there were 6,228,458 shares of Common Stock outstanding.
PRINCIPAL STOCKHOLDERS
The following table shows, as of October 31, 1997, the total number of
shares of Common Stock beneficially owned by each person who was known by the
Board of Directors to own more than 5% of the Common Stock:
<TABLE>
<CAPTION>
Shares Beneficially
Name and Address of Owned Directly or Percent of
Beneficial Owner Indirectly Common Stock
---------------- ---------- ------------
<S> <C>
The Depository Trust Company (1) 3,322,510 53.3%
Box 20, Bowling Green Station
New York, New York 10004
Loren D. Jensen 1,552,980 24.9%
12 Burnbrae Road
Towson, Maryland 21204
Cleaveland D. Miller, Trustee 707,125(2) 11.3%
250 W. Pratt Street
Baltimore, Maryland 21201
</TABLE>
- ----------
(1) Cede & Co., the nominee of The Depository Trust Company, holds shares of
Common Stock for the accounts of various institutions participating in the
facilities of The Depository Trust Company.
(2) Cleaveland D. Miller holds 702,000 of these shares as the trustee of
irrevocable trusts for the benefit of each of Loren D. Jensen's three
children.
1
<PAGE>
ELECTION OF DIRECTORS
The six persons named in the following table have been designated as
nominees for election to the Board of Directors, each to serve for a one-year
term and until his successor is duly elected and qualified. All of the nominees
listed below currently serve as directors of the Company. If any of such
nominees declines or becomes unable to serve, the persons named in the proxy
will vote for the election of any substitute nominee designated by the Board of
Directors. The Company has no reason to believe that any nominee will decline or
be unable to serve.
<TABLE>
<CAPTION>
Shares
Name, Age, Principal Occupation Served as Beneficially Owned (1)
During Past Five Years, and Director -----------------------------
Other Corporate Directorships Since Amount Percent
------------------------------------- -------- ---------- ---------
<S> <C>
Edmund J. Cashman, Jr., Age 61; Senior 1986 47,875 *
Executive Vice President and Director of Legg
Mason, Inc.; Senior Executive Vice President of
Legg Mason Wood Walker, Incorporated; Director,
Bartlett Capital Trust, Inc.
Donald A. Deieso, Ph.D., Age 48; President and 1997 50,000
Chief Executive Officer
Loren D. Jensen, Ph.D., Age 60; Chairman of 1973 1,552,980 24.9%
the Board
Rudolph P. Lamone, Ph.D., Age 66; Chairman 1986 12,450 *
of the Board, Michael D. Dingman Center for
Entrepreneurship, University of Maryland
College of Business and Management
Cleaveland D. Miller, Esq., Age 59; Chairman, 1997 5,125 *
Semmes, Bowen & Semmes, a Professional
Corporation; Director, Barry's Jewelers, Inc.
George G. Radcliffe, Age 73; Chairman of the 1990 12,900 *
Board, Emeritus, The Baltimore Life Insurance
Company; Trustee Emeritus of The Johns Hopkins
University
All executive officers and directors of the Company 1,729,600(2) 27.7%
as a group (8 individuals)
- --------------
</TABLE>
* Less than 1%
(1) Based upon information supplied by each director and executive officer of
the Company as of October 31, 1997. Unless otherwise noted, all shares
indicated are held with sole voting and sole investment power.
(2) Includes 1,634,800 shares for which directors and executive officers have
sole voting and dispositive powers and presently exercisable option shares
of 12,000, 50,000, 12,000, 4,000, 12,000, and 4,800 for Messrs. Cashman,
Deieso, Lamone, Miller, Radcliffe, and Spadaro, respectively.
2
<PAGE>
Certain Transactions
The Company leases approximately 32,400 square feet of office space which
serves as its Loveton, Maryland, regional office in Sparks, Maryland, from
Ecolair Limited Partnership (the "Partnership"), a Maryland limited partnership
of which Loren D. Jensen is the general partner. The remaining limited partners
are Dr. Jensen's three children. For the year ended August 31, 1997, the
Company's rent payments (including approximately $238,000 in pass-through taxes
and operating expenses) to the Partnership were approximately $655,400. Under
new lease terms negotiated in April 1997, the Partnership significantly reduced
rentals to the Company and agreed to provide various capital improvements in
consideration of extension of the lease until 2006. The terms were retroactive
to January 1, 1997.
The Company leases approximately 43,700 square feet of office space in Hunt
Valley, Maryland, from Merrymack Limited Partnership, a Maryland limited
partnership of which Loren D. Jensen is the general partner and Ecolair Limited
Partnership is the limited partner. This space serves as the Company's corporate
headquarters, along with its training center, as well as providing office
facilities for certain professional, technical, administrative, and operations
staff. New lease terms, retroactive to January 1, 1997, were negotiated in April
1997. Pursuant to the new terms, which included significant rate reductions and
certain capital improvements, the lease was extended until 2006. Total rent
payments (including approximately $388,000 in pass-through taxes and operating
expenses) for the year ended August 31, 1997 were approximately $776,400.
On March 1, 1990, the Company leased a 16,500 square foot facility adjacent
to its existing facility in Sparks, Maryland, from ARE Sparks Limited
Partnership, a Pennsylvania limited partnership of which Loren D. Jensen is the
general partner and Ecolair Limited Partnership is the limited partner. In March
1991, the facility renovation was completed and now serves as the Company's
laboratory. New lease terms, retroactive to January 1, 1997, were negotiated in
April 1997. Pursuant to the new terms, which included significant rate
reductions and certain capital improvements, the lease was extended until 2005.
Total rent payments (including approximately $339,000 in pass-through taxes and
operating expenses) during fiscal 1997 were approximately $584,600.
Legg Mason Capital Management Group, with which Edmund J. Cashman is
affiliated, provides investment advice to the Company from time to time.
Semmes, Bowen & Semmes (SB&S), with which Cleaveland D. Miller is
affiliated, provided legal services to the Company during fiscal 1997.
At the request of its former primary lender and in order to maintain its
favorable relationship with this lender, the Company in December 1996 purchased
from this lender the secured loans of three EA officers, including Messrs.
Spadaro and Hammalian. These interest-free demand loans, in the aggregate amount
of $301,000, are secured by pledges of the Company's common stock.
Management of the Company believes that the terms and conditions of the
transactions between the Company and entities with which certain of its
directors are affiliated were on terms and conditions at least as favorable to
the Company as could have been obtained from third parties and were in the best
interests of the Company.
The Board of Directors recommends a vote "FOR" the election of the above
nominees as directors of the Company.
3
<PAGE>
BOARD ORGANIZATION AND COMPENSATION
Organization
The Board of Directors held eight meetings during the fiscal year ended
August 31, 1997. Each incumbent director attended at least 75% of the meetings
of the Board of Directors and of its committees of which he was a member. In
addition, the Company has an Audit Committee and a Compensation Committee, but
does not have a Nominating Committee.
The Audit Committee of the Board of Directors, composed of Messrs. Radcliffe
(Chairman), Cashman, and Lamone, met once during the fiscal year ended August
31, 1997. The Audit Committee reviews with Arthur Andersen LLP, the Company's
independent auditors, the audit plan and the internal accounting controls for
the Company and its subsidiaries, as well as the Company's consolidated
financial statements and management letter. The Audit Committee reports to the
Board of Directors. It also recommends to the Board of Directors the selection
of independent auditors for the Company.
The Compensation Committee of the Board of Directors, composed of Messrs.
Lamone (Chairman), Cashman, and Radcliffe, met two times during the fiscal year
ended August 31, 1997. This Committee periodically reviews the Company's
management compensation and reports its actions or recommendations to the Board
of Directors. The Committee also approves the general salary scale for employees
of the Company.
In addition, the Committee has been authorized to grant options under the
Company's Amended and Restated Stock Option Plan and to make stock awards under
the Company's 1995 Stock Incentive Plan. See "EXECUTIVE MANAGEMENT
COMPENSATION."
Compensation
Each non-employee director of the Company receives a fee of $1,000 for each
meeting of the Board of Directors of the Company which he attends. In addition,
each non-employee director receives $1,000 for attendance at each meeting of any
directors' committee on which he serves that is not held on the day of a Board
meeting.
In addition to such fees, under the Non-Employee Director Stock Option Plans
(1993 and 1995), each director who is newly elected to the Board and who, at
that time, is not an employee of the Company is automatically granted an option
to purchase 4,000 shares of Common Stock when he or she becomes a director.
Further, each non-employee director is granted an option to purchase 1,000
shares of Common Stock as of the date of each annual meeting of stockholders at
which such director is reelected. All such options have an exercise price equal
to the market price of the Common Stock on the date of grant and vest
immediately upon grant.
EXECUTIVE MANAGEMENT COMPENSATION
Compensation Committee Report
The Compensation Committee (the "Committee") of the Board of Directors of
the Company is pleased to present its report on executive compensation. The
Committee report outlines the components of the Company's Executive Officer
Compensation programs, including the specific relationship of corporate
performance to executive compensation and describes the Committee's basis for
the compensation awarded to the Chairman of the Board and the President and
Chief Executive Officer during 1997.
4
<PAGE>
General
The Committee is responsible for developing and implementing the Company's
executive compensation policies. These policies are designed to enhance the
profitability of the Company while at the same time providing competitive levels
of compensation to attract and retain highly qualified executives. By closely
aligning the financial interests of the executive officers with those of the
Company's stockholders, the Committee seeks to increase stockholder value and to
provide meaningful incentives to the executives.
The Committee seeks to realize this objective both by the use of short-term
incentives in the form of base salary and incentive compensation--and long-term
incentives in the form of stock option grants.
Base Salary
Salaries of executive officers are initially based on experience and
competitive conditions. Salaries are reviewed annually and adjusted to reflect
the performance of the executive and by considering salaries for comparable
positions in other companies. In fiscal 1997, base salaries for executive
officers were increased approximately 3.5% over the salaries paid in fiscal
1996. This does not include payments to Dr. Deieso as President and Chief
Executive Officer, for which there was no equivalent position in fiscal 1996.
Incentive Compensation
The Compensation Committee paid a bonus to management in fiscal 1997 as a
result of the Company exceeding its profit targets for the final five months of
fiscal 1997.
For fiscal 1998, the Compensation Committee approved a performance-based
incentive compensation plan for the Company's corporate staff, branch managers,
and project managers. The plan is based on operating income goals.
For corporate staff, bonus potential ranges from 15% to 50% of base salary.
Eligible employees would be entitled to incentive compensation only if the
Company achieves at least 70% of its fiscal 1998 income target.
For branch managers, bonus potential is up to 25% of base salary. Eligible
employees would be entitled to incentive compensation only if 70% of branch
income target is achieved.
For project managers, bonus compensation is discretionary. Eligible
employees would be evaluated for incentive compensation based upon the extent to
which goals for new orders, project profitability, and cash management have been
achieved.
Stock Options
The Company must, in order to compete with other companies in the
environmental industry, attract and retain highly qualified managers,
scientists, engineers, and technicians. There is keen competition in the
environmental industry for these professionals, particularly those who are both
highly trained and able to create business opportunities. Hence, the Company
grants stock options to a wide range of employees, particularly key management,
believing it is desirable to provide key employees with long-term incentives
tied to the Company's performance and stockholder value.
The Committee uses the grant of stock options under the Company's Stock
Option Plan to provide long-term incentives to increase stockholder value. In
determining the number of options to grant, the Committee bases its decision on
the performance of the individual executive and the executive's potential to
improve stockholder value. Typically, options do not immediately vest at the
time the options are granted. Vesting occurs in equal installments over a
three-year period.
5
<PAGE>
Chairman of the Board Compensation
The Committee established the salary of Dr. Jensen for fiscal year 1997 on
the basis of the Committee's assessment of his performance as Chairman,
President and Chief Executive Officer until March 1, 1997 and Chairman of the
Board thereafter, measured by the Company's financial condition, results of
operation, and success in achieving strategic objectives. The Committee also
considered the responsibilities associated with Dr. Jensen's position, as well
as the level of compensation paid to the chairmen of the board of other
companies in the environmental industry. During fiscal year 1997, Dr. Jensen did
not receive bonus compensation or an increase in base salary.
Chief Executive Officer Compensation
The Committee established the salary of Dr. Deieso for fiscal year 1997 on
the basis of the Committee's assessment of his performance, measured by the
Company's financial condition, results of operation, and success in achieving
strategic objectives. The Committee also considered the responsibilities
associated with Dr. Deieso's position, as well as the level of compensation paid
to the chief executive officers of other companies in the environmental
industry.
During 1997 Dr. Deieso received a bonus payment of $75,000. This payment was
$25,000 in excess of the minimum $50,000 bonus to which Dr. Deieso was entitled
under terms of his employment agreement with the Company (see "Employment
Agreements" below). The Board awarded this incremental amount to Dr. Deieso in
recognition of the rapid turnaround in the Company's financial condition for
which he was responsible.
The Compensation Committee
Rudolph P. Lamone, Chairman
George G. Radcliffe
Edmund J. Cashman, Jr.
Compensation Committee Interlocks and Insider Participation
Except as otherwise described herein ("ELECTION OF DIRECTORS-Certain
Transactions"), there are no affiliations between the Company and the members of
the Compensation Committee.
6
<PAGE>
EXECUTIVE OFFICERS OF THE COMPANY
The executive officers of the Company as of November 1, 1997 and related
information are as follows:
Donald A. Deieso, Ph.D., 48, President and Chief Executive Officer. Dr. Deieso
joined the Company in March 1997 as President and Chief Executive Officer. He
has over 25 years experience in the environmental field. Prior to joining EA,
Dr. Deieso was the President and Chief Executive Officer of Metcalf & Eddy
Companies, Inc. (from 1993-1997) and, prior thereto (from 1989-1992), of the
Research-Cottrell Companies. His career includes senior positions in the U.S.
Environmental Protection Agency (EPA), the N.J. Department of Environmental
Protection, Consolidated Edison of New York, and Rutgers University. He is
currently a member of the U.S. EPA's Clear Air Act Advisory Committee, Chairman
of the U.S. Department of Commerce- sponsored Environmental Technologies Trade
Advisory Committee (ETTAC), and a member of the Congressional Superfund Advisory
Council. Dr. Deieso also serves on the boards of several trade associations and
is a Trustee of the New Jersey Symphony Orchestra.
Loren D. Jensen, Ph.D., 60, Chairman of the Board. Dr. Jensen is the founder of
the Company and served as its Chairman, President, and Chief Executive Officer
since operations began in 1973 until 1991. In June 1991, Dr. Jensen became
Chairman and Chief Executive Officer. In October 1995, he assumed the titles of
Chairman, President, and Chief Executive Officer, and in March 1997, Dr. Jensen
was named Chairman of the Board. Dr. Jensen has over 37 years experience in the
analysis and management of environmental problems for industry and government.
Shamseddin Shahid-Saless, Executive Vice President of Sales and Marketing. Mr.
Saless joined the Company in April 1997 as Executive Vice President of Sales and
Marketing with more than 25 years experience in the industry. From 1994 to 1997,
he was Senior Vice President and Director of Metcalf & Eddy's Central and
Western Regions. Prior thereto (from 1989 to 1994), Mr. Saless was President of
WW Engineering and Science. Mr. Saless also serves as Vice President of EA
International, Inc.
Joseph A. Spadaro, CPA, 47, Executive Vice President, Chief Financial Officer,
Treasurer and Assistant Secretary. Mr. Spadaro joined the Company in 1982 as the
Corporate Controller. In 1983, Mr. Spadaro was elected Vice President of Finance
and Administration and in September 1986, he was elected Executive Vice
President, Chief Financial Officer, and Treasurer. Mr. Spadaro became Assistant
Secretary in October 1994.
7
<PAGE>
SUMMARY COMPENSATION TABLE
The following table sets forth certain information concerning executive
compensation for services during each of the Company's last three fiscal years
to (i) those persons serving as chief executive officer of the Company during
fiscal 1997; (ii) those persons who were among the four most highly compensated
executive officers during fiscal 1997 and who earned an annual salary and bonus
exceeding $100,000; and (iii) one additional person who would have been among
the four most highly compensated executive officers during fiscal 1997, but who
was not serving as such at the end of fiscal 1997.
<TABLE>
<CAPTION>
Name and Principal Year Annual Compensation Long-Term All Other
Position in 1997 Compensation Awards Compensation (1)
--------------------- ----- ----------------------------------------- -------------------------- ----------------
Other Restricted
Annual Stock Option
Salary ($) Bonus ($) Compensation Awards Shares
---------- --------- ------------ ------ ------
<S> <C>
Loren D. Jensen, Ph.D.......... 1997 282,000 -- -- -- -- 4,500
Chairman of the Board 1996 282,000 -- -- -- -- 4,306
(Formerly Chairman, President 1995 278,900 4,300 -- -- -- 4,740
and Chief Executive Officer)
Donald A. Deieso, Ph.D.(2).... 1997 137,500 75,000 -- -- 200,000 --
President and Chief Executive 1996 -- -- -- -- -- --
Officer 1995 -- -- -- -- -- --
Joseph A. Spadaro, CPA......... 1997 180,000 30,000 -- -- -- 4,360
Executive Vice President, Chief 1996 175,200 -- -- -- -- 3,924
Financial Officer, Treasurer, and 1995 164,300 2,500 -- -- 5,000 48,101
Assistant Secretary
Stephen J. Hammalian, Ph.D.(3). 1997 81,416 -- -- -- -- 121,798
Former Executive Vice President 1996 144,200 -- -- -- -- 4,422
and Secretary 1995 137,300 2,100 -- -- 5,000 40,822
Shamseddin Shahid-Saless(4).... 1997 82,211 25,000 -- -- 75,000 --
Executive Vice President of
Sales and Marketing 1996 -- -- -- -- -- --
1995 -- -- -- -- -- --
- ------------------------------- -------- ----------- ----------- ---------- ------------ ------------ ----------------
</TABLE>
(1) Includes cash payments made upon exercise of non-qualified stock options
during fiscal 1995 for all except Loren D. Jensen. Includes the Company's
matching contributions under its 401(k) Employee Savings Plan. Includes
severance and payout of vacation accrual for Stephen J. Hammalian.
(2) Donald A. Deieso joined the Company effective March 1, 1997.
(3) Stephen J. Hammlian separated from the Company effective March 20, 1997.
(4) Shamseddin Shahid-Saless joined the Company effective April 14, 1997.
8
<PAGE>
STOCK-BASED INCENTIVE COMPENSATION PLAN
The following table sets forth certain information about grants of options
to purchase shares of Common Stock in the last fiscal year to those executive
officers previously named.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Individual Grants in 1997 Grant Date Value
% of Total
Options Grant Date
Granted Exercise or Present
Options (#) to Employees Base Price Expiration Value(1)
Name Granted in Fiscal Year ($/share) Date ($)
---- ------- -------------- --------- ---- ---
<S> <C>
Loren D. Jensen -- -- -- -- --
Donald A. Deieso 200,000 40.6 2.25 2/25/07 $176,500
Joseph A. Spadaro -- -- -- -- --
Stephen J. Hammalian -- -- -- -- --
Shamseddin Shahid-Saless 75,000 15.2 2.00 4/3/07 $60,100
- ------------------------ ------ ---- ---- ------ -------
</TABLE>
(1) Based on the Black-Scholes option valuation model. In applying this
valuation model, the Company has assumed an expected volatility index of
0.6; a risk-free rate of return ranging from 6.04% to 6.68%; no dividend
yield; and exercise of the option as vesting occurs. The actual value, if
any, that an executive officer may receive is dependent on the excess of
the stock price over the exercise price. Use of this model should not be
viewed as a forecast of the future performance of the Company's stock
price.
9
<PAGE>
The following table sets forth certain information regarding the number
and value, as of August 31, 1997, of unexercised options to purchase shares of
Common Stock held by the previously named executive officers.
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR
AND AUGUST 31, 1997 OPTION VALUES
<TABLE>
<CAPTION>
Value of Unexercised
Number of Unexercised in-the-Money
Options at 8/31/97 Options at 8/31/97(1)
(#) ($)
--------------------------------- -----------------------------
Shares
Acquired on Value
Name Exercise (#) Realized ($) Exercisable(2) Unexercisable(2) Exercisable Unexercisable
---- ------------ ------------ -------------- ---------------- ----------- -------------
<S> <C>
Loren D. Jensen -- -- -- -- -- --
Donald A. Deieso -- -- 50,000 150,000 -- --
Joseph A. Spadaro -- -- 4,833 1,667 -- --
Stephen J. Hammalian -- -- -- -- -- --
Shamseddin Shahid-Saless -- -- -- 75,000 -- --
- ------------------------ ------------- ------------ -------------- ---------------- ------------ -------------
</TABLE>
(1) Based on a closing NASDAQ price of $2.00 per share of Common Stock on
August 31, 1997. Values are calculated by subtracting the exercise price
from the fair market value of the stock as of the fiscal year-end.
(2) All options issued prior to one or both fiscal 1994 stock splits have
been adjusted to reflect two 3 for 2 stock splits, each effected in the
form of a 50% stock dividend issued on February 23, 1994 and July 5, 1994.
Employment Agreements and Change-in-Control Arrangements
On February 17, 1997, the Company entered into an Employment Agreement
with Donald A. Deieso. The Agreement, effective March 1, 1997, provides that Dr.
Deieso will serve as President and Chief Executive Officer of EA Engineering,
Science, and Technology, Inc. Base salary under the Agreement is at the initial
annual rate of $275,000. The amount may be increased from time to time at the
sole discretion of the Board of Directors.
In addition to base salary, the Agreement provides for a bonus for
services rendered during each fiscal year. The amount of the bonus shall be
determined at the sole discretion of the Board. Guidelines for earning the bonus
will be agreed on by the Board and Dr. Deieso at the beginning of each fiscal
year. Under the Agreement, Dr. Deieso is entitled to a bonus of up to 50% of his
base salary each fiscal year. However, for the first fiscal year ended August
31, 1997, a bonus amount of not less than $50,000 is payable to Dr. Deieso.
Per the terms of the Agreement, Dr. Deieso received options to purchase
200,000 shares of the Company's common stock. Of the options, 50,000 shares
vested upon the effective date of his Employment Agreement, and the balance will
vest, in equal installments, over a four-year period. If Dr. Deieso is employed
by the Company
10
<PAGE>
on February 17, 1998, and subject to the approval of the Board, options for
150,000 shares of the Company's common stock will be awarded to him. Of these,
25% will vest one year after award, and the balance will vest over a three-year
period in equal installments of 37,500 shares of Common Stock per year. If Dr.
Deieso is employed by the Company on February 17, 1999, and subject to the
approval of the Board, options for 50,000 shares of the Company's common stock
will be awarded to him. Of these, 25% will vest one year after award, and the
balance will vest over a three-year period in equal installments of 12,500
shares per year.
This Agreement further provides that, if Dr. Deieso's employment is
terminated without cause, he will receive a severance payment equal to his then
current base salary for a period of eighteen months from the date his employment
terminates. If Dr. Deieso terminates his employment within thirty days of a
"Change of Control," he will be entitled to receive his then current base salary
for a period of two years from the date of his termination of employment.
"Change of Control" is defined to occur only if any person or entity acquires
more than 45% of the voting power of the Company's common stock.
Pursuant to the terms of his offer of employment dated April 11, 1997, the
Company agreed with Shamseddin Shahid-Saless that, if his employment is
terminated as a result of a "Change of Control" (as defined above), he will be
entitled to receive his then current base salary and benefits for a period of
one year from the date of termination of employment.
11
<PAGE>
PERFORMANCE GRAPH
The following graph compares the performance of the Company's common stock
to the index for the NASDAQ Stock Market and a self-defined peer group index.
The graph and the following table are for the Company's last five fiscal years.
The table assumes that the value of an investment in the Company's common stock
and in each index was $100 at August 31, 1992 and that all dividends, if any,
were reinvested.
[PERFORMANCE CHART]
<TABLE>
<CAPTION>
8/92 8/93 8/94 8/95 8/96 8/97
---- ---- ---- ---- ---- ----
<S> <C>
The Company 100 278 735 390 193 147
Peer Group 100 97 125 171 218 269
NASDAQ U.S. 100 132 137 185 209 291
- ----------- ---- ---- ---- ---- ---- ----
</TABLE>
(1) Companies included in the peer group index are Ecology & Environment,
Inc., EMCON Associates, GZA Geoenvironmental Tech, Inc., TRC Companies,
Inc., Tetra Tech, Inc., Versar, Inc., Roy F Weston, Inc., Harding
Associates, Inc., and ICF Kaiser International, Inc.. The peer group
utilized in constructing the above graph consists of the same companies
as used by the Company in preparing past performance graphs.
(2) Assumes that $100 was invested on August 31, 1992 at the closing sales
price of the Company's common stock and of the stocks in each index,
and that all dividends, if any, were reinvested. Returns are measured
through the last trading day of each of the Company's fiscal years. No
cash dividends have been declared on the Company's common stock.
12
<PAGE>
APPROVAL OF AN INCREASE IN THE NUMBER OF SHARES OF COMMON STOCK RESERVED
FOR ISSUANCE UNDER THE COMPANY'S AMENDED AND RESTATED STOCK OPTION PLAN
On January 10, 1995, the stockholders approved amendments to the current
Company Stock Option Plan (the "Option Plan"). The Amended and Restated Plan
replaced the prior Stock Option Plan. The number of shares of Common Stock
available for issuance under the Option Plan was not, however, greater than the
number of shares of Common Stock available for issuance under the prior Stock
Option Plan; the primary change accomplished by the Option Plan was to permit
the Plan's administrator to grant incentive stock options in addition to
non-qualified stock options. Following is a general summary of the Stock Option
Plan.
The Company now seeks the approval of the stockholders to increase the
number of shares of Common Stock available for issuance under the Option Plan
from 898,200 to 1,248,200. The purpose of this increase is to assure the Company
will have adequate shares of Common Stock available for issuance under the
Option Plan to recruit and retain highly qualified employees. The Company
believes that this form of long-term incentive award is well calculated to
increase stockholder value.
The purpose of the Option Plan is to serve as an employment incentive and to
encourage stock ownership by certain key officers and employees of the Company
and of its subsidiary corporations so that they may increase their proprietary
interest in the Company's success.
Administration
The Option Plan is administered by the Compensation Committee of the Board
of Directors (the "Committee") who will be authorized to designate those
individuals eligible to participate in the Plan and to determine the types,
numbers, and terms of awards granted under the Option Plan. The Committee is
composed of not less than three (3) nor more than five (5) non-officer employees
who are not eligible to receive any awards under the Option Plan.
Amendment and Termination
Subject to certain terms and conditions set forth in the Option Plan, the
Board of Directors may amend, discontinue, or terminate the Plan at any time.
Such termination shall not affect the validity of any stock option agreement
then outstanding.
Eligibility
Officers and key employees of the Company and its subsidiaries as designated
by the Committee are eligible to participate in the Option Plan.
Types of Awards
The Option Plan provides for the potential grant by the Compensation
Committee of both incentive stock options, qualified as such under Section 422
of the Internal Revenue Code of 1986, as amended (the "Code"), and non-qualified
stock options. The exercise price of each share of all options awarded will be
one hundred percent (100%) of the fair market value of the shares of Common
Stock on the date of the grant of the option or, in the case of incentive stock
options granted to certain individuals who possess more than ten percent (10%)
of the total combined voting power of all classes of stock of the Company ("Ten
Percent Stockholders"), shall not be less than one hundred ten percent (110%) of
such fair market value. The fair market value per share of the Common Stock
shall be the average of the highest bid price and the lowest asking price on the
over-the-counter market as reported in The Wall Street Journal for trading on
the date the option is granted, as reported by NASDAQ. The term of each option
shall be fixed by the Committee but no stock option other than stock options
granted to Ten-Percent Shareholders shall be exercisable more than ten (10)
years from the date of grant of the option.
Grants of Awards
The Committee shall have the discretion to impose such terms and conditions
as it deems appropriate to any award granted under the Amended and Restated
Plan. Awards granted under the Option Plan may be granted either
13
<PAGE>
alone or in addition to any other award granted under the Plan or any other
benefit plan maintained by the Company.
Shares Subject to the Plan
The maximum number of shares of Common Stock that may be issued under the
Option Plan is 898,200 shares of the Company's Common Stock. On April 2, 1997,
subject to stockholder approval, the Board of Directors approved an increase in
the number of shares reserved under the Option Plan from 898,200 to 1,248,200
shares of Common Stock. This number is subject to adjustment in certain
circumstances, including stock splits, dividends, recapitalizations and major
corporate changes. The market value of a share of Common Stock based on the mean
of the high and low prices on the over-the-counter market as reported in The
Wall Street Journal on November 17, 1997 as reported by NASDAQ was $2.06.
Transferability
As in the past, no option shall be assignable or transferable except by will
or by the laws of descent and distribution. During the lifetime of an optionee,
an option shall be exercisable only by the optionee.
Change of Control
In the event an optionee ceases to be an employee due to death or
disability, normal retirement or for any reason within six (6) months of a
Change of Control (as defined in the Amended and Restated Plan), all outstanding
options shall, to the extent not previously vested, immediately become fully
vested, and shall remain so for a period of one (1) year from the date of
termination of employment, but in no event after their respective expiration
dates.
Federal Income Tax Consequences
A discussion of select federal income tax consequences arising from
participation in the Amended and Restated Plan follows.
Non-Qualified Options
An employee will not realize any taxable income upon the grant of a
nonstatutory stock option. An employee to whom shares of Common Stock are issued
upon exercise of a nonstatutory stock option will recognize taxable income at
the time of exercise in an amount equal to the difference between the fair
market value of the Common Stock at the time the stock is exercised and the
exercise price paid for the Common Stock. At that time the Company will receive
a corresponding Federal income tax deduction.
Incentive Stock Options
In general, an employee will not recognize taxable income at the time an
incentive stock option is granted or exercised except that the excess of the
fair market value of the Common Stock acquired upon exercise of an incentive
stock option over the exercise price is potentially subject to the alternative
minimum tax. If the employee holds the shares acquired pursuant to an incentive
stock option for at least two (2) years from the date of grant and for at least
one (1) year from the date of exercise, the employee's gain will be taxed as a
long-term capital gain in an amount equal to the difference between the exercise
price and the sale price. In that case, the Company is not entitled to a tax
deduction. If the employee disposes of the stock before the end of these holding
periods, he will recognize ordinary income upon sale of the stock and the
Company will be entitled to a corresponding tax deduction.
The Board of Directors recommends a vote "FOR" the increase in the number of
shares of Common Stock reserved for issuance from 898,200 to 1,248,200 under the
Company's Amended and Restated Stock Option Plan.
14
<PAGE>
APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors appointed the firm of Arthur Andersen LLP to act as
independent auditors for the Company for the fiscal year ended August 31, 1997.
The Board of Directors, upon recommendation of the Audit Committee, has selected
the firm of Arthur Andersen LLP to audit the consolidated financial statements
of the Company for the fiscal year ending August 31, 1998. A representative of
Arthur Andersen LLP is expected to be present at the Meeting, have an
opportunity to make a statement, and be available to respond to appropriate
questions.
The Board of Directors recommends a vote "FOR" the proposal to ratify the
appointment of Arthur Andersen LLP as independent auditors for the fiscal year
ending August 31, 1998.
Voting Procedures
Each proposal submitted to the Company's stockholders for a vote is deemed
approved if a majority of the shares of Common Stock of the Company present in
person or by proxy at a meeting at which a quorum is present votes in favor of
the proposal. The presence in person or by proxy of stockholders entitled to
cast a majority of all the votes entitled to be cast at the meeting constitutes
a quorum. A stockholder is entitled to one vote for each share owned.
Stockholder votes are tabulated by the Company's Registrar and Transfer
Agent. Proxies received by the Registrar, if such proxy is properly executed and
delivered, will be voted in accordance with the voting specifications made on
such Proxy. Proxies received by the Registrar on which no voting specification
has been made by the stockholder will be voted for all items discussed in the
Proxy Statement, in the manner stated on the proxy card. Stockholders who
execute and deliver proxies retain the right to revoke them by notice in writing
delivered to the Company's Secretary at any time before such proxies are voted.
Under applicable Delaware corporate law and the Charter and By-Laws of the
Company, proxies received by the Registrar specifying an abstention as to any
proposal will cause the shares so represented to be counted toward a quorum, but
are not counted as favorable votes and, therefore, have the same effect as a
vote against the proposal. To the extent holders or brokers having the right to
vote shares do not attend the meeting or return a proxy, such shares will not
count toward a quorum and, if a quorum is otherwise achieved, will have no
effect on the vote of the proposals considered at the meeting which shall be
based solely upon the vote of the shares represented at the meeting.
1999 Annual Meeting of Stockholders
If any stockholder intends to present a proposal for consideration at the
1999 Annual Meeting of Stockholders, such proposal must be received by the
Company on or before August 4, 1998, in order to be included in the Company's
Proxy Statement and form of proxy for such meeting. Nothing in this paragraph
shall be deemed to require the Company to include in its proxy statement and
form of proxy relating to the 1999 Annual Meeting of Stockholders any
stockholder proposal which does not meet all of the requirements for such
inclusion established by the Securities and Exchange Commission at that time in
effect.
As of the date of this Proxy Statement, the Board of Directors knows of no
matters, other than those stated above, that may be brought before the Meeting.
However, if other matters do properly come before the Meeting, the persons named
in the enclosed proxy will vote upon them in their discretion and in accordance
with their best judgment.
A copy of the Company's Form 10-K Annual Report filed with the Securities
and Exchange Commission, Washington, D.C., is available to stockholders free of
charge upon written request. Address requests to the Secretary of EA
Engineering, Science, and Technology, Inc., 11019 McCormick Road, Hunt Valley,
Maryland 21031.
15
<PAGE>
The cost of preparing and mailing the Notice of Meeting, Proxy Statement and
form of proxy will be paid by the Company. The Company will request banks,
brokers, fiduciaries, and similar persons to forward copies of such material to
beneficial owners of the Company's common stock in a timely manner and to
request authority for execution of proxies, and the Company will reimburse such
persons and institutions for their reasonable out-of-pocket expenses incurred in
connection therewith. To the extent necessary to assure sufficient
representation, officers and regular employees of the Company may solicit the
return of the proxies by telephone, telegram, or personal interview. The extent
of this solicitation by personal contact will depend upon the response to the
initial solicitation by mail. It is anticipated that the costs of such
solicitation, if undertaken, will not exceed $1,000.
By the Order of the Board of Directors.
/s/ Jack P. Adler
- ---------------------------------
Jack P. Adler, Esq.
Vice President, Secretary and General Counsel
Dated at Hunt Valley, Maryland
December 1, 1997
16
<PAGE>
Please mark
your vote as X
indicated in
this example
This proxy when properly executed will be voted in the manner directed herein by
the undersigned shareholder. If no direction is given, this proxy will be voted
FOR Proposals 1, 2 and 3.
<TABLE>
<S> <C>
1. ELECTION OF DIRECTORS. (INSTRUCTION: To withhold authority to vote for any individual
FOR all nominees WITHHOLD nominee, strike a line through the nominee's name in the list below.)
listed to the right AUTHORITY
(except as marked to vote for all nominees Nominees: E. Cashman, D. Deieso, L. Jensen, R. Lamone,
to the contrary) listed to the right C. Miller, G. Radcliffe
[ ] [ ]
</TABLE>
2. PROPOSAL TO INCREASE THE NUMBER OF SHARES OF COMMON STOCK reserved
for issuance under the Company's Amended and Restated Stock Option Plan.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3. PROPOSAL TO APPROVE THE APPOINTMENT OF ARTHUR
ANDERSEN LLP. as the independent public accountants of
the corporation.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
4. In their discretion, the Proxies are hereby authorized to
vote upon such other business as may properly come before
the meeting.
Please sign exactly as the name appears hereon. When shares are held
by joint tenants, both should sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full title as such. If a
corporation, please sign in full corporate name by President or other
authorized officer. If a partnership, please sign in partnership name by
authorized person.
Dated: , 199
_________________________________________ ____
__________________________________________________________
(Signature)
__________________________________________________________
(Signature if held jointly)
PLEASE MARK, SIGN, DATE AND MAIL THIS PROXY
CARD PROMPTLY USING THE ENCLOSED ENVELOPE.
(triangle) FOLD AND DETACH HERE (triangle)
YOUR VOTE IS IMPORTANT TO US. PLEASE COMPLETE, DATE AND
SIGN THE ABOVE PROXY CARD AND RETURN IT PROMPTLY IN THE
ACCOMPANYING ENVELOPE.
<PAGE>
[EA Engineering Logo]
EA ENGINEERING, SCIENCE, AND TECHNOLOGY, INC.
PROXY
This Proxy is solicited on Behalf of the Board of Directors.
The undersigned hereby appoints Jack P. Adler and Barbara L. Posner, or
either of them acting singly, as Proxies, each with the power to appoint his/her
substitute, and hereby authorizes them to represent and to vote as designated on
the reverse side, all the shares of common stock of EA Engineering, Science, and
Technology, Inc. held of record by the undersigned as of the close of business
on November 17, 1997, at the annual meeting of stockholders to be held on
January 14, 1998, or any adjournment thereof.
(continued on reverse side)
(triangle) FOLD AND DETACH HERE (triangle)
