SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the fiscal year ended May 31, 1996
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from __________ to __________
Commission File Number 0-16169
HARDING LAWSON ASSOCIATES GROUP, INC.
(formerly Harding Associates, Inc.)
(Exact name of registrant as specified in its charter)
Delaware 68-0132062
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation of organization)
7655 Redwood Boulevard, P.O. Box 578, Novato, California 94948
(Address of principal executive office)
Registrant's telephone number, including area code: (415) 892-0821
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Title of each class: Name of each exchange on which registered:
Common Stock, $0.01 par value The Nasdaq Stock Market
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 the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to the Form 10-K. [ X ]
Aggregate market value of the voting stock held by non-affiliates
of the registrant on August 20, 1996: $24,223,478.
Number of shares of the registrant's Common Stock outstanding as of
August 20, 1996: 4,982,327.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Company's Proxy Statement for the Annual Meeting of
Shareholders to be held on October 30, 1996, to be filed pursuant to Regulation
14A under the Securities Exchange Act of 1934, are incorporated by reference in
Part III.
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PART I
ITEM 1. BUSINESS.
Cautionary Statement Regarding Forward-Looking Statements
The statements in this report that are forward-looking are based on current
expectations, and actual results may differ materially. The forward-looking
statements include those regarding future demand for the Company's services, the
impact of a possible loss of any of several federal contracts, the possible
impact of current and future claims against the Company based upon negligence
and other theories of liability and the possibility of the Company's making
acquisitions during the next 12 to 18 months. Forward-looking statements involve
numerous risks and uncertainties that could cause actual results to differ
materially, including, but not limited to, the possibilities that the demand for
the Company's services may decline as a result of possible changes in general
and industry specific economic conditions and the effects of competitive
services and pricing; one or more current or future claims made against the
Company may result in substantial liabilities; and such other risks and
uncertainties as are described in reports and other documents filed by the
Company from time to time with the Securities and Exchange Commission.
Business
Harding Lawson Associates Group, Inc. (formerly Harding Associates, Inc.)
provides comprehensive engineering, environmental, and construction services
related to the protection of environmental media potentially impacted by
industrial and agricultural operations, the assessment and remediation of
contaminated sites, and the management of hazardous and solid wastes. The
Company also provides civil, transportation, and geotechnical engineering
services, and services during construction, either independently or in support
of the Company's environmental, waste management, and civil services.
The Company was originally incorporated in California in 1959, and
reincorporated in Delaware in July 1987. Its principal executive offices are
located at 7655 Redwood Boulevard, Novato, California 94945, and its telephone
number is (415) 892-0821. Unless the context otherwise requires, the term
"Company" as used herein refers to Harding Lawson Associates Group, Inc. and its
wholly owned subsidiaries Harding Lawson Associates, Inc., Harding Lawson
Associates Infrastructure, Inc. (formerly Alpha Engineering Group, Inc.),
Harding Lawson Associates International, Inc. (formerly Harding International,
Inc.) and its subsidiaries Harding Lawson Australia Pty. Ltd., Harding Lawson
Singapore Pte Ltd, Harding Lawson de Mexico S.A. de C.V., Harding Lawson
Australia Pty. Ltd., 76% ownership in HLA-Envirosciences Pty Limited, and
Harding Lawson de Mexico's 51% ownership in Grupo Industrial de Ingenieria
Ecologica III, HLA & Inconsa S.A. de C.V. ("GRIECO").
The Company provides its clients a full range of environmental services to
comprehensively support management of hazardous materials, hazardous wastes,
solid wastes and waste waters, and effect the remediation of environmental
problems related to the management of these wastes. The Company provides these
services to clients that are constructing, operating or closing facilities
and/or properties and also to clients that have ownership or responsibility for
abandoned or historical industrial operations or hazardous waste disposal sites.
These services may be performed for new, expanding, or discontinued operations
or in connection with the transfer of ownership.
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During the early stage of a project, the Company may perform site assessments or
audits, and may prepare site characterization reports or environmental planning
and permitting documents in response to federal, state or local regulations.
Following site characterization, the Company may provide risk assessment and
regulatory services to develop and negotiate cleanup standards. The Company may
assist its clients to evaluate cleanup options, select and negotiate remedies
with regulatory agencies, and provide a design for site remediation. The Company
may provide its clients with construction and/or construction management
services and may provide operation and maintenance of remedial systems.
The Company also provides engineering services with a focus on civil engineering
related to infrastructure, which includes civil, transportation, process,
sanitary, structural, electrical, and mechanical engineering disciplines from
planning through construction administration. The Company's engineering services
are most frequently applied to the design of highways, bridges and other
transportation systems, and to the design and construction of industrial waste
water treatment and air pollution control equipment.
The Company's services are provided to private and public sector clients through
a staff of 930 full time professional and support personnel located in 28 U.S.
cities in Alabama, Alaska, Arizona, California, Colorado, Florida, Hawaii,
Illinois, Nevada, New Jersey, New Mexico, North Carolina, Oregon, Pennsylvania,
Texas, Utah, Virginia, and Washington, and five cities in Australia, one in
Indonesia, one in Singapore, and one in Mexico. During the fiscal year ended May
31, 1996, the Company performed services for over 1,100 industrial and
governmental clients.
The Company often provides services for its major clients under arrangements
involving continuing service agreements. Such arrangements are usually on a
"Time-and-Materials", "Cost-Plus-Fixed-Fee", or a "Fixed-Price" basis, and are
usually terminable on advance notice by either party. The majority of the
Company's projects are on a Time-and-Materials basis, under which the Company
bills its clients at fixed hourly rates plus subcontracted services and
materials used. Fixed-Price arrangements, under which the Company agrees to
perform a stated service for a set price regardless of the time and materials
cost involved, carry the risk that the cost to the Company for performing the
agreed-upon services may exceed the set price, but also carry the benefit of
potentially higher profit.
The Company provides consulting and engineering services to clients through its
staff of engineers and scientists who possess a diverse range of education and
professional experience. Project teams are organized to utilize applicable
talent from the Company's staff. Qualified subcontractors are utilized to
provide special technical resources that the Company either does not possess or
cannot cost effectively provide to its clients in a specific geographic area.
The Company's environmental and waste services, carried out primarily through
Harding Lawson Associates and the Company's international units, include:
remedial programs (site characterization and risk assessment, remedial
engineering, design and construction management); waste disposal facility
siting, permitting, design and closure; air quality management; site audits and
assessments; regulatory compliance and environmental permitting and monitoring.
The Company's infrastructure services carried out through Harding Lawson
Associates Infrastructure and certain international units, include:
transportation, structural, municipal, electrical and mechanical engineering and
construction administration. Other services include: geotechnical engineering
and water resources engineering. The Company has broad capabilities in computer
applications and technical information management to support its consulting and
engineering services.
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Environmental Services
Regulatory Background
Public concern over human health and the environment has led federal, state and
local governments to enact legislation to correct and prevent environmental
problems with particular emphasis on the generation, handling, disposal and
cleanup of hazardous waste and hazardous substances. These laws and their
implementing regulations affect industries and governmental bodies that
manufacture, use, or dispose of toxic substances and other waste materials. Due
to the complex nature of these regulations, demand is created for the Company's
services. A significant portion of the Company's business is driven by federal,
state, and local programs and regulations. Significant changes in policies
affecting these programs or administrative actions affecting the sponsorship or
funding of these programs could have a material adverse effect on the Company's
business. The following federal legislation most affects the Company's business:
Comprehensive Environmental Response, Compensation, and Liability Act of 1980
("CERCLA," also known as "Superfund") and Superfund Amendments and
Reauthorization Act of 1986 ("SARA"). Superfund addresses problems created by
past waste disposal practices by providing a means for identifying and cleaning
up hazardous substances at designated sites. Superfund authorizes the
Environmental Protection Agency ("EPA") to compel responsible parties to
remediate hazardous substances and places responsibility for this remediation on
the owners and operators of such sites and generators of the waste (identified
as potentially responsible parties, or "PRPs") and provides for penalties for
non-compliance with EPA orders.
Superfund was reauthorized as part of the 1991 federal budget appropriating $5.1
billion through 1994. Since then, funding has been authorized by Congress
annually while debate over reauthorization has carried on. Significant changes
to the statute are expected when or if reauthorized. The Company is not able to
ascertain the effect of the proposed reauthorization or the lack of
reauthorization at this time.
Resource Conservation and Recovery Act of 1976 ("RCRA") and Hazardous and Solid
Waste Amendments of 1984 ("HSWA"). RCRA was the first federal effort to regulate
the treatment, storage and disposal of hazardous waste. It places
"cradle-to-grave" responsibility for hazardous waste on the generators of such
wastes and provides regulations for permitting, transporting, treating, storing
and disposing of hazardous wastes in controlled facilities.
The Clean Air Act ("CAA") and the Clean Air Act Amendments ("CAAA"). The CAA
empowered the EPA to establish and enforce national air quality standards and to
require states to set toxic air emission limits on facilities not meeting these
national standards. The CAAA of 1990 require certain facilities which emit air
pollutants to obtain operating permits and mandate that the EPA develop
guidelines and procedures relating to acid rain, urban air pollution, and air
toxic emissions by the year 2000. Although implementation and enforcement of the
CAAA have been slow, the CAAA increased demand for the Company's air quality
services during the 1996 fiscal year.
Other Federal and State Regulations. The Company's services are also utilized by
its clients in complying with, among others, the following federal laws: the
Toxic Substances Control Act, the Clean Water Act, the National Environmental
Policy Act, the Safe Drinking Water Act, the Occupational Safety and Health Act
and the Hazardous Material Transportation Act. Many other federal regulations
and policies have been established to cover more detailed aspects of hazardous
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waste legislation. Complimentary state laws have also been enacted. The State of
California, for example, has consistently been a leader in passing and
implementing state hazardous waste legislation. Similar laws in other states
address such topics as air pollution control, underground storage tanks, water
quality, solid waste, hazardous materials, surface impoundments, site cleanup
and waste discharge.
Hazardous Waste Management
In the 1996 fiscal year, 63% of the Company's gross revenues have been derived
from services relating to the restoration (assessment and remediation) of
contaminated sites. Projects where Superfund, RCRA or similar enforcement
regulations are driving the need for site restoration comprise the majority of
these revenues, while sites where "leaking underground tank" regulations are
causing the need for remediation comprise a smaller portion of these revenues.
The Company's hazardous waste management services include the following:
Site Characterization. The Company provides a range of services needed to
determine the nature and extent of contamination at hazardous waste sites.
Risk Assessment. Assessing the risks which hazardous chemicals pose to human
health and the environment is critical to selecting appropriate remedial
technologies. Risk assessment involves quantifying the hazard posed by the
presence and movement of chemicals in disposal or release areas, and expected
concentrations to which people or the environment may be exposed.
Construction Management. The Company manages construction of remedial and
pollution control systems and waste disposal facilities through its construction
management group.
Other Environmental Services.
Operating Facilities Services. The Company provides a broad range of services to
industrial clients to help them comply with federal or state environmental
regulations, to reduce their costs of environmental compliance, and to employ
more efficient processes to reduce, recover, or recycle industrial waste or
by-products.
Waste Disposal Facility Permitting, Design and Closure. The Company provides a
comprehensive range of services related to siting, permitting, designing,
operating, closing and post closure monitoring of solid and hazardous waste
disposal facilities such as landfills, landfarms and incinerators.
Environmental Permitting and Monitoring. The Company's services are frequently
required to comply with the National Environmental Policy Act and other state
and local regulations related to the assessment of environmental impacts or
anticipated environmental impacts.
Air Quality Management. Air pollution is increasingly recognized as the type of
contamination that has the greatest impact on human health and the environment.
The Clean Air Act Amendments of 1990 are expected to increase the market for air
quality related services which are provided by the Company.
Site Assessments and Site Audits. The site assessment market is large but
fluctuates with the real estate market. It is highly competitive and price
driven. The Company seeks to provide these services only to responsible clients
where the scope of the engagement and fees can be negotiated, and liability
risks properly managed.
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Regulatory Compliance. Regulatory compliance, evaluations, audits and support
are a viable market which the Company expects will show modest growth as more
facilities are brought under regulatory controls and more companies decide that
an ongoing environmental auditing program will reduce environmental liabilities.
Lead Paint/Asbestos Management. The asbestos and lead-based paint markets are
highly competitive with limited barriers for new entrants. The Company offers
this service to select clients as part of its comprehensive environmental
services.
Infrastructure
Infrastructure/Transportation Engineering. The Company's civil engineers provide
services relating to transportation including street, road and highway design,
traffic engineering and traffic signal design, corridor studies, and
construction administration; design of structures including bridges, piers and
marine terminal facilities and other structures; storm drainage design including
drainage basin studies and hydrologic analysis, and storm water treatment; and
railroad engineering including design railroad trackage, railroad bridges,
railroad yard design, and intermodal facilities. The Company believes that these
services will be in increasing demand in the future as the country moves to
repair its deteriorating infrastructure and as funding becomes available as a
result of the Intermodal Surface Transportation Efficiency Act ("ISTEA"), which
Congress signed into law in December of 1991. The $155 billion, six year ISTEA
provides federal aid to states on highway and mass transit projects. ISTEA is
scheduled for renewal in October of 1997. The Company anticipates that its
civil/infrastructure practice may benefit from this legislation and additional
proposed legislation in the future.
Geotechnical Engineering. The Company's geotechnical engineers use advanced
exploration tools, laboratory testing and analytical methods to evaluate soil
and rock for foundations and for use in construction.
Customers and Marketing
The Company's client base includes private-sector companies that comprised 51%
of gross revenue in fiscal 1996. Non-regulatory federal governmental bodies
provided 31% of gross revenues, including Department of Defense agencies, 13%
came from state and local governments, and 5% from international clients. The
Company's 15 largest clients accounted for approximately 45% of the Company's
revenues in fiscal 1996, 49% in fiscal 1995 and 53% in fiscal 1994.
Approximately 33% of its revenues during fiscal 1996 were derived from the
Company's five largest clients compared to 39% in fiscal 1995 and 1994.
In fiscal 1996, the Department of the Army accounted for approximately 20% of
the Company's gross revenue. Revenue from this client, which accounted for 26%
of gross revenue in fiscal 1995 and 29% in fiscal 1994, was generated under
various contracts in various locations which were negotiated independently of
each other. While the loss of all work related to this client could have a
material adverse effect on the Company, the contracts are with separate
divisions or units of the Army and the loss of one contract would not
necessarily affect other contracts at other locations. During fiscal 1994 and
1995, certain of these Department of the Army contracts began to diminish and
were substantially completed in fiscal 1996. The Company has been successful in
replacing some of these contracts although tasking and/or funding under the new
contracting vehicles has been slow in developing. If the Company is unsuccessful
in replacing a significant portion of the remainder of these contracts, or if
funding is delayed under current contracting vehicles, a material decline in
revenues could result. No other client accounted for 5% or more of gross
revenues in fiscal 1996, 1995, or 1994.
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The Company's marketing efforts are carried out by a full-time staff of
marketing personnel and by senior technical and management professionals. The
Company also participates in industrial trade shows and technical conferences,
and publishes certain technical literature to support its marketing program.
Backlog
The Company often provides services on major long-term contracts or continuing
service agreements that provide for authorization of funding on a task or fiscal
period basis. At May 31, 1996, the Company had over $65 million of authorized
gross revenue backlog compared with $70 million at May 31, 1995, and $59 million
at May 31, 1994. Authorized gross revenue backlog, most of which is expected to
be completed within the next 12 months, includes only such contracts where work
authorization has been received. The Company can make no assurances, however,
that work represented by backlog will not be delayed or cancelled. Because such
authorizations are generally for periods considerably shorter than the duration
of the work the Company expects to perform for a particular client, the Company
does not feel that backlog figures are necessarily indicative of future
revenues. In addition to authorized backlog, the Company has certain contracting
vehicles that include substantial unauthorized amounts not included in backlog.
Tasks under these contracts may or may not be authorized during fiscal 1997.
Seasonal Factors
Due primarily to more holidays and inclement weather conditions, the Company's
third quarter operating results are generally lower in comparison to other
quarters.
Competition
The Company competes with many companies of all sizes, none of which currently
dominates any particular market segment. While the Company competes primarily on
the basis of its reputation, a significant proportion of its projects are
competitively bid and the Company believes its services to be price competitive.
Potential Liability and Insurance
In performing consulting and engineering services for its clients, the Company
could potentially be liable for breach of contract, personal injury, property
damage, or negligence. The Company generally indemnifies its clients for losses
and expenses incurred by them as a result of the Company's negligence and, in
certain instances, the concurrent negligence of such clients. A significant
portion of the Company's activities relate to environmental and waste services.
These services involve significant risks to the Company for environmental
damage, personal injury, fines and costs imposed by regulatory agencies.
Although liabilities arising from environmental regulations are more directly
applicable to the Company's clients, such regulations under certain
circumstances could impose liability on the Company resulting, for example, from
a release or exacerbation of contamination or the improper handling of
contaminants during the course of the Company's work. Such liabilities can be
joint and several where other parties are involved. The Company maintains both a
health and safety program and a quality assurance and quality control program to
assist in reducing the risk of damage to persons and property and the potential
for resulting losses. In the opinion of management, adequate provision has been
made for all known liabilities that are currently expected to result from these
matters, and, in the aggregate, such claims are not expected to have a material
adverse impact on the financial position of the Company. The estimates used in
establishing these provisions could differ from actual results. Should these
provisions change significantly, the effect on operations for any quarterly or
annual reporting period could be material.
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Prior to May 1994, the Company was provided a professional liability insurance
policy through a wholly owned subsidiary of the Company, and as such, was self
insured for the liabilities covered by that policy. Currently, the Company is
provided a $5 million per occurrence professional liability and contractor's
pollution liability insurance policy through an unrelated, rated carrier. The
Company also maintains general liability insurance with an unrelated, rated
carrier.
Personnel
At the end of fiscal 1996, the Company employed approximately 930 regular,
full-time employees, including 577 engineers, scientists, and construction
contractors, 239 production support staff and 114 administrative and clerical
personnel. In addition to its full-time staff, the Company employs approximately
90 part-time or temporary personnel at any time as required, most of whom are
technical support personnel. Although the Company has undergone selected
downsizing over the past few years, it nevertheless maintains a continuous
recruiting program to attract qualified personnel.
None of the Company's employees are presently represented by a labor union. The
Company believes it has good employee relations.
ITEM 2. PROPERTIES.
The Company leases facilities at various locations in Alabama, Alaska, Arizona,
California, Colorado, Florida, Hawaii, Illinois, Nevada, New Jersey, New Mexico,
North Carolina, Oregon, Pennsylvania, Texas, Utah, Virginia, Washington, and in
Australia, Mexico and Singapore. These facilities have a combined area of
approximately 368,316 square feet. Aggregate lease expense for all of the
Company's facilities during the fiscal year ended May 31, 1996 was approximately
$5,607,692. The lease terms expire at various times through October 2003.
Historically, the Company has not experienced any difficulty in renewing leases
which have expired.
ITEM 3. LEGAL PROCEEDINGS.
On May 19, 1995, the Company filed a lawsuit in Texas State Court, Harris
County, Texas, entitled Harding Lawson Associates, Inc., a wholly owned
subsidiary of Harding Associates, Inc. vs. Bailey Site Settlors Committee, an
unincorporated association, seeking collection of approximately $1.0 million in
fees billed for engineering services performed. On June 21, 1995, lawsuits were
filed against the Company in Federal District Court, Jefferson County, Texas,
and in Texas State Court, Orange County, Texas, entitled Bailey Site Settlors
Committee vs. Harding Lawson Associates. The suit seeks monetary damages in the
amount of $7.9 million for alleged breach of contract and negligence in the
performance of certain engineering services. The suits filed in Jefferson and
Orange Counties have been dismissed or stayed. Subsequently, a counterclaim
containing similar allegations was filed against the Company in the Harris
County suit. The Company believes it has meritorious defenses to these
allegations. The Company is currently subject to certain other claims and
lawsuits arising in the ordinary course of business. In the opinion of
management, adequate provision has been made for all known liabilities that are
currently expected to result from these claims and lawsuits, and in the
aggregate such claims are not expected to have a material effect on the
financial position of the Company. The estimates used in establishing these
provisions could differ from actual results. Should these provisions change
significantly, the effect on operations for any quarterly or annual reporting
period could be material.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted during the fourth quarter of the fiscal year covered
by this report to a vote of the security holders through the solicitation of
proxies or otherwise.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
Market Information
The Company's common stock is traded on the Nasdaq Stock Market under the symbol
HRDG. The following table sets forth the range of high and low sale prices of
the Company's common stock.
High Low
Fiscal year ended May 31, 1995:
First Quarter $ 7.00 $ 5.25
Second Quarter 8.00 5.75
Third Quarter 7.25 5.25
Fourth Quarter 6.50 5.25
Fiscal year ended May 31, 1996:
First Quarter $ 7.50 $ 5.38
Second Quarter 7.63 6.63
Third Quarter 7.50 5.88
Fourth Quarter 7.00 5.63
Fiscal year ending May 31, 1997:
First Quarter through
August 20, 1996 $ 6.63 $ 5.00
Holders
As of August 20, 1996 there were 686 record holders of the Company's common
stock. The closing price of the Company's stock on August 20, 1996 was $5.63 as
reported on the Nasdaq Stock Market.
Dividends
The Company has not paid any cash dividends on its common stock during the last
ten years. The Board of Directors currently intends to retain all earnings for
reinvestment in the Company's business and has no present intention of paying
cash dividends in the foreseeable future.
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ITEM 6. SELECTED FINANCIAL DATA.
The following table sets forth selected financial data of the Company for the
years ended May 31, 1992 through 1996. The data presented below should be read
in conjunction with the consolidated financial statements of the Company,
including notes thereto.
Summary Financial Information
(In thousands, except per share data)
Fiscal Years Ended May 31,
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
Income Statement Data:
Gross revenue $120,708 $130,554 $115,561 $115,657 $112,386
Net revenue 85,655 92,455 79,944 82,605 83,257
Operating income 839 4,595 1,353 580 7,147
Income before provision for
income taxes and minority
interest 1,647 4,907 1,656 821 6,473
Net income 953 2,972 1,002 497 3,917
Net income per common
share $0.20 $ 0.62 $0.21 $0.10 $0.81
Average common shares
outstanding 4,851 4,806 4,851 4,856 4,827
Balance Sheet Data:
Working capital $35,521 $33,369 $29,394 $32,729 $29,230
Total assets 60,364 60,788 61,486 59,812 59,717
Short-term debt --- --- 2,030 --- ---
Shareholders' equity 44,357 42,685 38,975 39,541 37,761
Dividends
The Company has not paid any cash dividends on its common stock during the last
ten years. The Board of Directors currently intends to retain all earnings for
reinvestment in the Company's business and has no present intention of paying
cash dividends in the foreseeable future.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
Cautionary Statement Regarding Forward-Looking Statements
The statements in this report that are forward-looking are based on current
expectations, and actual results may differ materially. The forward-looking
statements include those regarding future demand for the Company's services, the
impact of a possible loss of any of several federal contracts, the possible
impact of current and future claims against the Company based upon negligence
and other theories of liability and the possibility of the Company's making
acquisitions during the next 12 to 18 months. Forward-looking statements involve
numerous risks and uncertainties that could cause actual results to differ
materially, including, but not limited to, the possibilities that the demand for
the Company's services may decline as a result of possible changes in general
and industry specific economic conditions and the effects of competitive
services and pricing; one or more current or future claims made against the
Company may result in substantial liabilities; and such other risks and
uncertainties as are described in reports and other documents filed by the
Company from time to time with the Securities and Exchange Commission.
Results of Operations
General--The following table sets forth, for the periods indicated, (i) the
percentage which certain items in the consolidated income statements of the
Company bear to net revenue, and (ii) the percentage increase (decrease) in the
dollar amount of such items from year to year.
Percentage of Percentage
Net Revenues Increase/(Decrease)
Fiscal Year Fiscal Year
1996 1995
vs vs
1996 1995 1994 1995 1994
---- ---- ---- ---- ----
Net revenue 100.0% 100.0% 100.0% (7.4)% 15.6%
Costs and expenses
Payroll and benefits 68.9 68.1 66.8 (6.2) 17.9
General expenses 30.1 26.9 31.5 3.5 (1.1)
Operating income/margin 1.0 5.0 1.7 (81.7) 239.6
Net interest income 0.9 0.3 0.4 158.6 3.0
Income before provision for
taxes and minority interest 1.9 5.3 2.1 (66.4) 196.3
Provision for taxes 0.8 2.1 0.8 (61.3) 196.5
Net income 1.1 3.2 1.3 (67.9) 196.6
Gross Revenue--Gross revenue includes, as an adjunct to the Company's labor
services, the revenue on services subcontracted to third parties that will be
reimbursed under terms of the Company's contracts and revenue from the
utilization of certain non-labor items. Due to competitive market conditions,
the contribution to net revenue derived from the sale of subcontracted services
and certain non-labor items has declined to 6.4% of net revenue in fiscal 1996
compared with 6.8% and 8.4% in fiscal 1995 and 1994 respectively. The Company
believes there will continue to be downward pressure on net revenue derived from
such sources. Net revenue, which is a more accurate measure of revenue earned
for services provided directly by the Company, is recorded by deducting from
gross revenue the costs of services contracted to third parties. Gross revenue
related to outside services as a percent of total gross revenue was 30.4%, 30.7%
and 33.4% in 1996, 1995, and 1994, respectively.
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Net Revenue--Net revenue totaled $85.7 million in fiscal 1996, a decrease of
$6.8 million or 7.4% from 1995. The decrease in fiscal 1996 was due primarily to
an 11% decline in domestic net revenue partially offset by an increase of 127%
in international net revenue. Excluding international operations, the Company
experienced both lower demand and lower prices for its services. Net revenue
derived from public sector clients in fiscal 1996 declined by approximately 23%
over the prior year and accounted for 45% of total net revenue for fiscal 1996
compared to 54% and 51% for fiscal 1995 and 1994, respectively. The decline in
net revenue from public sector clients was essentially due to a decrease in
revenue from public agency contracts resulting from a decline in awards of new
public agency contracts and funding on existing federal agency contracts as well
as government inefficiencies due to shutdowns and the lengthy budget impasse and
continuing legislative gridlock with regard to environmental regulations. Net
revenue from private sector clients improved by 1% over 1995. Operations in
Southern California and in the Midwest experienced particular improvement.
International sales accounted for 6% of the Company's net revenue in fiscal 1996
compared with 2% in fiscal 1995 and no sales in 1994. Virtually all
international sales were attributable to operations in Australia acquired by the
Company in November 1994.
Fiscal 1995 net revenue was $92.5 million, an increase of $12.5 million from net
revenue of $79.9 million in fiscal 1994. The increase in net revenue in fiscal
1995 was due to acquisitions completed in May of 1994 and in the second fiscal
quarter of 1995 and, to a lesser extent, the fact that fiscal 1995 consisted of
53 weeks versus 52 weeks in the prior fiscal year. Excluding the effect of
acquisitions, the Company experienced slightly higher prices for its services
which were partially offset by lower demand. Net revenue derived from public
sector clients in fiscal 1995 increased by approximately 25% compared to fiscal
1994. Private sector sales were up slightly compared to fiscal 1994, reversing
the trend of declining private sector sales experienced in the two years prior
to fiscal 1995.
A significant portion of the services provided by the Company to its public
sector clients are performed under a relatively small number of larger contracts
compared to private sector clients. During fiscal 1997, certain of these public
sector contracts will be substantially completed. The Company has been awarded
certain contracts that potentially could offset revenue which will be lost under
nearly completed contracts. However, if the Company is unsuccessful in realizing
the full potential of these contracts or winning new contracts, or if funding
delays are experienced on previously awarded federal contracts, a material
decline in revenue could result. Further, while the Company has seen improved
private sector activity, management believes that this sector will be strongly
influenced by general economic conditions and any congressional action regarding
pending environmental regulations in the U.S. Site restoration work, which
encompasses characterization through feasibility studies, design engineering,
and remediation continued to represent the most significant portion of the
Company's activity but was slightly lower as a percent of net revenue in fiscal
1996 compared to prior years.
Operating Income--Operating income in fiscal 1996 of $0.8 million and an
operating margin of 1.0% were both lower than fiscal 1995 results. The fiscal
1996 results were negatively impacted by certain downsizing expenses including
expenses of $0.4 million related to staff reductions and $1.0 million from the
write-down of facility leases in the fourth quarter. Excluding those items,
operating income in fiscal 1996 was lower by $2.4 million or approximately 52%
compared to the prior year. Operating margin excluding downsizing charges was
2.6% compared to 5.0% in the previous fiscal year. The decline in operating
income and margin primarily reflects lower revenues without a commensurate
decline in operating expenses. The Company's international operations negatively
impacted both operating income and margins in fiscal 1996.
<PAGE>
Operating income in fiscal 1995 of $4.6 million and an operating margin of 5.0%
were both improved from fiscal 1994 results. The fiscal 1994 results were
negatively impacted by certain downsizing and reorganization expenses in the
fourth quarter. Excluding the effect of those items, operating income in fiscal
1995 improved by $1.4 million or approximately 43% from the prior year with the
operating margin improving from 4.0% in fiscal 1994. The fiscal 1995 operating
margin improvement primarily reflected lower operating costs, which resulted
from the Company's cost reduction and downsizing efforts. These efforts produced
lower general expenses and a higher efficiency in staff utilization in fiscal
1995 compared to fiscal 1994. Operations acquired in May 1994 and during fiscal
1995 did not have a material impact on operating income but did negatively
impact operating margins for the year.
Interest Income (Expense)--Net Interest income in 1996 of $0.8 million reflected
an increase of $0.5 million from fiscal 1995 as a result of higher average cash
balance and to a lesser extent higher interest rates. Net interest income in
1995 and 1994 was $0.3 million.
Income Taxes--The effective tax rate was 45.5% for fiscal 1996, and 39.5% for
fiscal years 1995 and 1994. The effective tax rate in fiscal 1996 reflects the
impact of losses from the start-up of certain international operations for which
no tax benefit has been realized.
Net Income--Net income of $1.0 million in fiscal 1996 was $2.0 million lower
than the prior year. The decline was primarily due to lower net revenues. Net
income of $3.0 million in 1995 was $2.0 million higher than the prior year
primarily due to lower operating expenses.
Net income per common share was $.20 in 1996 compared to $.62 in 1995, and $.21
in 1994. Weighted average shares outstanding were 4,851,000, 4,806,000, and
4,851,000 in 1996, 1995, and 1994, respectively.
Liquidity and Capital Resources
Net cash provided by operating activities was $8.0 million in fiscal 1996
compared to $8.7 million in 1995 and $2.5 million in 1994. The decrease in cash
provided by operations in fiscal 1996 compared to 1995 was primarily related to
the Company's lower earnings offset by a significant improvement in the
Company's collection of accounts receivable compared to a year ago. The increase
in cash provided by operations in fiscal 1995 compared to fiscal 1994 was
primarily related to the Company's improved earnings together with a significant
improvement in the Company's collection of accounts receivable compared to
fiscal 1994, and lower tax payments in fiscal 1995. The lower tax payments
resulted primarily from the realization of certain deferred tax assets.
The Company currently has a $20 million line of credit with a commercial bank,
at prime or LIBOR rates, that expires in October 1997. There were no borrowings
under the line as of May 31, 1996, or 1995, and as such, the entire $20 million
was available to the Company. Had the Company borrowed under its line in May of
fiscal 1996 and 1995, the interest rate would have been 5.4% and 6.1%,
respectively. In connection with an acquisition completed in May 1994, the
Company borrowed $2 million under its line of credit and retired debt in a
similar amount that was assumed with an acquisition. Such amount remained
outstanding as of May 31, 1994, leaving $18 million available to the Company.
The effective interest rate in May 1994 was 5.8%. Amounts outstanding at the end
of fiscal 1994 were fully repaid by the end of the second quarter of fiscal
1995. The Company's credit agreement provides certain covenants relating to,
among other things, financial performance and the maintenance of certain
financial ratios. The Company was in compliance with all covenants pertaining to
the credit line agreement at May 31, 1996 and 1995.
<PAGE>
The Company invested $1.6 million and $3.1 million in the purchase of capital
assets, including acquisitions, in 1996 and 1995 respectively. The Company
invested $3.6 million in the purchase of capital assets, including acquisitions,
in 1994.
In fiscal 1996, the Company used net cash of $0.1 million for financing
activities, which primarily consisted of capital lease payments recorded in the
Company's Australia operations. The Company used net cash of $1.8 million for
financing activities in fiscal year 1995 and $2.2 million in 1994. The cash used
in financing activities in 1995 included approximately $2.0 million for the
repayment of the Company's borrowings in 1994. The Company used net cash of $2.2
million for financing activities in fiscal year 1994. The cash used in financing
activities in 1994 included approximately $2.2 million for the repurchase of
shares of the Company's common stock and approximately $0.3 million resulting
from the net reduction in acquired debt offset by $0.3 million received from
common stock sold to employees.
The Company is a consulting engineering services firm engaged in providing
environmental, infrastructure and geotechnical related services, and encounters
potential liability including claims for errors and omissions resulting from
construction defects, construction cost overruns, or environmental or other
damage in the normal course of business. The Company is a party to lawsuits and
is aware of potential exposure related to certain claims. In the opinion of
management, adequate provision has been made for all known liabilities that are
currently expected to result from these matters and, in the aggregate, such
claims are not expected to have a material impact on the financial position and
liquidity of the Company. Prior to May 1994, the Company was provided a
professional liability insurance policy through a wholly owned subsidiary of the
Company, and as such, was self insured for the liabilities covered by that
policy. Currently, the Company is provided a $5 million per occurrence
professional liability and contractor's pollution liability insurance policy
through an unrelated, rated carrier. The Company also maintains general
liability insurance with an unrelated, rated carrier.
The Company believes that its available cash and cash equivalents as well as
cash generated from operations and its available credit line will be sufficient
to meet the Company's cash requirements for the current fiscal year. During
fiscal 1997, the Company intends to actively continue its search for
acquisitions to expand its geographical representation and enhance its technical
capabilities. The Company expects to utilize a portion of its liquidity over the
next 12 to 18 months for capital expenditures, including acquisitions.
Inflation
The Company's operations have not been, and in the foreseeable future are not
expected to be, materially affected by inflation.
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
HARDING LAWSON ASSOCIATES GROUP, INC.
Consolidated Statements of Income
(In thousands, except per share data)
Years Ended May 31,
1996 1995 1994
- --------------------------------------------------------------------------------
Gross revenue $120,708 $130,554 $115,561
Less: Cost of outside
services 35,053 38,099 35,617
- --------------------------------------------------------------------------------
Net revenue 85,655 92,455 79,944
- --------------------------------------------------------------------------------
Costs and Expenses:
Payroll and benefits 59,033 62,945 53,409
General expenses 25,783 24,915 25,182
- --------------------------------------------------------------------------------
Total costs and expenses 84,816 87,860 78,591
- --------------------------------------------------------------------------------
Operating income 839 4,595 1,353
Interest income,
net of interest expense of
$39 in 1996, $47 in 1995 and
$1 in 1994 808 312 303
- --------------------------------------------------------------------------------
Income before provision for
income taxes and minority
interest 1,647 4,907 1,656
Provision for income taxes 750 1,939 654
Minority interest in net loss
of subsidiaries (56) (4) ---
- --------------------------------------------------------------------------------
Net income $ 953 $2,972 $1,002
================================================================================
Net income per common share $ 0.20 $ 0.62 $ 0.21
================================================================================
Shares used in per-share
calculation 4,851 4,806 4,851
================================================================================
The accompanying notes are an integral part of the consolidated
financial statements.
<PAGE>
HARDING LAWSON ASSOCIATES GROUP, INC.
Consolidated Balance Sheets
(In thousands, except share data)
May 31, 1996 May 31, 1995
- --------------------------------------------------------------------------------
ASSETS
Current Assets:
Cash and cash equivalents $19,012 $12,648
Accounts receivable,
less allowance for doubtful accounts
of $725 in 1996 and $802 in 1995
and including retentions of $4,335
in 1996 and $4,741 in 1995. 23,355 27,540
Unbilled work in progress,
less allowance for amounts unbillable
of $751 in 1996 and 1995 4,152 6,185
Prepaid expenses 1,304 925
Deferred income taxes 1,474 2,235
- --------------------------------------------------------------------------------
Total current assets 49,297 49,533
- --------------------------------------------------------------------------------
Equipment 21,021 21,208
Less accumulated depreciation (16,677) (16,766)
- --------------------------------------------------------------------------------
Net equipment 4,344 4,442
- --------------------------------------------------------------------------------
Deposits and other assets 6,723 6,813
- --------------------------------------------------------------------------------
Total assets $60,364 $60,788
================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $2,754 $3,383
Accrued expenses 5,936 5,642
Accrued compensation 5,086 6,518
Income taxes payable --- 621
- --------------------------------------------------------------------------------
Total current liabilities 13,776 16,164
- --------------------------------------------------------------------------------
Other liabilities 1,983 1,715
- --------------------------------------------------------------------------------
Total liabilities 15,759 17,879
- --------------------------------------------------------------------------------
Commitments and Contingencies (Note 10)
Minority interest in subsidiaries 248 224
- --------------------------------------------------------------------------------
Shareholders' Equity:
Preferred stock--$.01 par value;
authorized 1,000,000 shares;
issued and outstanding--none --- ---
Common stock--$.01 par value;
authorized 10,000,000 shares;
issued and outstanding 4,845,207
in 1996, and 4,719,320 in 1995. 48 47
Additional paid-in capital 18,142 17,424
Retained earnings 26,167 25,214
- --------------------------------------------------------------------------------
Total shareholders' equity 44,357 42,685
- --------------------------------------------------------------------------------
Total liabilities and
shareholders' equity $60,364 $60,788
================================================================================
The accompanying notes are an integral part of the consolidated
financial statements.
<PAGE>
HARDING LAWSON ASSOCIATES GROUP, INC.
Consolidated Statements of Shareholders' Equity
(In thousands, except share data)
Total
Additional Share-
Common Stock Paid-in Retained holders'
Shares Amount Capital Earnings Equity
- --------------------------------------------------------------------------------
Balance May 31, 1993 4,808,395 $48 $18,253 $21,240 $39,541
- --------------------------------------------------------------------------------
Common stock issued
to employees or to
a defined contribution
pension plan for the
benefit of employees 95,896 1 618 619
Shares repurchased and
retired (301,500) (3) (2,184) (2,187)
Net income 1,002 1,002
- --------------------------------------------------------------------------------
Balance May 31, 1994 4,602,791 $46 $16,687 $22,242 $38,975
- --------------------------------------------------------------------------------
Stock options exercised 4,000 --- 4 4
Common stock issued to
employees or to a defined
contribution pension plan
for the benefit of
employees 112,529 1 733 734
Net income 2,972 2,972
- --------------------------------------------------------------------------------
Balance May 31, 1995 4,719,320 $47 $17,424 $25,214 $42,685
- --------------------------------------------------------------------------------
Stock options exercised 1,000 --- 1 1
Common stock issued to
employees or to a defined
contribution pension plan
for the benefit of
employees 124,887 1 717 718
Net income 953 953
- --------------------------------------------------------------------------------
Balance May 31, 1996 4,845,207 $48 $18,142 $26,167 $44,357
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of the consolidated
financial statements.
<PAGE>
HARDING LAWSON ASSOCIATES GROUP, INC.
Consolidated Statements of Cash Flows
(In thousands)
- --------------------------------------------------------------------------------
Years Ended May 31,
1996 1995 1994
- --------------------------------------------------------------------------------
OPERATING ACTIVITIES
Net income $953 $2,972 $1,002
Adjustments to reconcile net income
to net cash provided by
operating activities:
Depreciation and amortization 2,522 3,264 3,957
Deferred income tax 670 862 (938)
Changes in operating assets and
liabilities:
Net accounts receivable and unbilled
work in progress 6,218 3,556 190
Prepaid expenses (378) 548 (618)
Accrued compensation (1,433) 976 324
Accounts payable and other liabilities 301 (2,866) (710)
Income taxes payable (621) 464 (994)
Other, net (184) (1,067) 327
- --------------------------------------------------------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 8,048 8,709 2,540
- --------------------------------------------------------------------------------
INVESTING ACTIVITIES
Purchase of equipment, net (1,591) (1,431) (1,914)
Investment in acquisitions,
net of cash acquired --- (1,683) (1,688)
- --------------------------------------------------------------------------------
NET CASH USED IN INVESTING ACTIVITIES (1,591) (3,114) (3,602)
- --------------------------------------------------------------------------------
FINANCING ACTIVITIES
Proceeds from sale of common stock 2 195 286
Repurchase of common stock --- --- (2,187)
Proceeds from borrowings --- --- 2,000
Principal payments on capital
lease obligations (95) --- ---
Repayment of debt --- (2,038) (2,316)
- --------------------------------------------------------------------------------
NET CASH USED IN FINANCING ACTIVITIES (93) (1,843) (2,217)
- --------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 6,364 3,752 (3,279)
Cash and cash equivalents at
beginning of year 12,648 8,896 12,175
- --------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $19,012 $12,648 $ 8,896
================================================================================
During fiscal 1996 the Company recorded lease obligations of $423 in connection
with lease agreements to acquire vehicles and equipment.
The accompanying notes are an integral part of the consolidated
financial statements.
<PAGE>
HARDING LAWSON ASSOCIATES GROUP, INC.
Notes to Consolidated Financial Statements, May 31, 1996
Note 1 - Summary of Significant Accounting Policies
- ---------------------------------------------------
Principles of Consolidation - The consolidated financial statements include the
accounts of the Company and its majority owned subsidiaries. All intercompany
accounts and transactions have been eliminated.
Revenue Recognition - Gross revenue is recognized as in-house labor hours are
incurred on projects. It also includes the revenue from services subcontracted
to third parties that will be reimbursed under terms of the Company's contracts
and revenue from the utilization of certain non-labor items. Net revenue is
recorded by deducting from gross revenue the cost of services subcontracted to
third parties. Fixed price and cost type contract overruns or efficiencies are
recognized in the period when such results are reasonably determinable.
Depreciation - Equipment is recorded at cost. Depreciation is computed by the
straight-line method based on the estimated useful lives of the assets,
primarily between three and seven years.
Income Taxes - Effective June 1, 1993 the Company adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" (SFAS No. 109).
Under Statement 109, the liability method is used to account for income taxes.
Under this method, deferred tax assets and liabilities are determined based on
differences between the financial reporting and tax bases of assets and
liabilities and are measured using the enacted tax rates and laws that will be
in effect when the differences are expected to reverse. Prior to adoption of
Statement 109, the Company accounted for income taxes under Financial Accounting
Standards No. 96, "Accounting for Income Taxes". The adoption of SFAS No. 109
did not have a material effect on the consolidated financial position or
operations of the Company.
Earnings Per Share - The calculation of earnings per share is based upon the
average shares outstanding during the year plus the net effect of dilutive stock
options. The calculation uses the modified treasury stock method using the
average market price.
Cash and Cash Equivalents - Cash and cash equivalents include short-term
investments with a maturity at acquisition of less than three months.
Intangible Assets - Goodwill represents the excess of the purchase price over
the fair value of the net assets of various entities acquired by the Company.
The Company currently amortizes goodwill on a straight line basis over its
expected useful life which is between 15 to 40 years. Other intangibles, if any,
recorded in connection with acquisitions are amortized on a straight line basis
over the estimated useful lives of the respective assets for not more than 15
years. The Company regularly reviews the individual components of its intangible
assets and recognizes, on a current basis, any diminution in value.
Use of Estimates -- The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Accounts which require the use of significant judgment by
management include, but are not limited to, allowances for doubtful accounts and
amounts unbillable and claims reserves. Actual results could differ from those
estimates.
<PAGE>
Industry Segment Information - The Company is a single segment entity providing
engineering consulting services, including environmental, construction
management, civil/infrastructure and geotechnical services. Approximately 6% of
the Company's net revenue was recognized in foreign countries in fiscal 1996,
approximately 2% in 1995 and none in 1994.
Accounting for Stock-Based Compensation -- In October 1995, the Financial
Accounting Standards Board issued Statement No. 123, "Accounting for Stock-Based
Compensation" ("FAS 123"), which will be effective for years beginning after
December 15, 1995. FAS 123 allows a company to adopt a new fair value based
method or continue to measure compensation cost for its stock-based compensation
plans using the intrinsic value based method of accounting prescribed by
Accounting Principles Board Opinion No. 25 ("APB No. 25"). The Company expects
to continue to follow APB No. 25 in its fiscal 1997 financial statements but
will be required to make pro forma disclosures of net income or loss as if the
fair value based method had been applied.
Long-Lived Assets -- In March 1995, the Financial Accounting Standards Board
issued Statement No. 121, "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to Be disposed Of," which requires impairment losses
to be recorded on long-lived assets used in operations such as property,
equipment and improvements and intangible assets, when indicators of impairment
are present and the undiscounted cash flows estimated to be generated by those
assets are less than the carrying amount of the assets. The Company will adopt
Statement 121 in the first quarter of fiscal 1997. Based on current
circumstances, management does not believe the effect of such adoption will be
material.
Concentrations of Credit Risk - The Company's receivables reflect its client
mix, which includes a variety of industrial concerns and various agencies of the
Federal Government. One client, the Department of the Army, accounted for
approximately 20%, 26% and 29% of the Company's revenue in fiscal 1996, 1995 and
1994, respectively. Credit is extended based on evaluation of the client's
financial condition and generally collateral is not required. Credit losses are
provided for in the financial statements and consistently have been within
management's expectations.
Fiscal Year - The Company uses a 52 - 53 week fiscal year that ends on May 31.
Fiscal year 1996 was comprised of 52 weeks.
Note 2 - Borrowings
- -------------------
Bank Credit Line - The Company has a line of credit with its bank under which it
can borrow amounts up to $20 million.
Under the terms of the line of credit which expires in October 1997, the Company
is required, among other things, to maintain minimum working capital, current
ratio and tangible net worth levels and is not to exceed a defined maximum debt
to tangible net worth ratio. Borrowings under the line will be secured by
certain of the Company's assets and will be at either the bank's prime rate or
LIBOR at the Company's option. The interest rate at which the Company could
borrow funds was 5.4%, 6.1% and 5.8% at May 31, 1996, 1995, and 1994,
respectively.
<PAGE>
At May 31, 1996 and 1995, there were no borrowings under the Company's line of
credit, and as such, the entire $20 million was available to the Company. In
connection with an acquisition completed in May 1994, the Company borrowed $2
million under its line of credit and retired debt in a similar amount assumed
with the acquisition. Such amount remained outstanding as of May 31, 1994,
leaving $18 million available to the Company. Amounts outstanding at the end of
fiscal 1994 were fully repaid by the end of the second quarter of fiscal 1995.
At May 31, 1996, 1995 and 1994, the Company was in compliance with all debt
covenants relating to its credit agreements. The credit facility was renewed in
October 1995 under substantially the same terms and conditions as its previous
facility.
Interest paid by the Company was $39,000, $52,000 and $1,000 in fiscal years
1996, 1995, and 1994.
Note 3 - Valuation and Qualifying Accounts
- ------------------------------------------
The activity for the past three fiscal years in the allowance for doubtful
accounts, which is deducted from accounts receivable, and the allowance for
amounts unbillable, which is deducted from unbilled work in progress, is as
follows (in thousands):
- --------------------------------------------------------------------------------
Write-offs
of
Balance at Charged Uncol- Balance
Beginning to lectable at End
Description of Period Expense Accounts of Period
- --------------------------------------------------------------------------------
Year ended May 31, 1996
Allowance for doubtful accounts $ 802 $ 68 $(145) $ 725
Allowance for amounts unbillable 751 --- --- 751
Year ended May 31, 1995
Allowance for doubtful accounts $1,303 $ 154 $(655) $ 802
Allowance for amounts unbillable 751 --- --- 751
Year ended May 31, 1994
Allowance for doubtful accounts $1,407 $ 82 $(186) $1,303
Allowance for amounts unbillable 801 --- (50) 751
<PAGE>
Note 4 - Income Taxes
- ---------------------
The provision for income tax consists of the following (in thousands):
- --------------------------------------------------------------------------------
Years Ended May 31,
1996 1995 1994
- --------------------------------------------------------------------------------
Current:
Federal $ (4) $ 964 $1,496
Foreign 78 --- ---
State & Local 6 150 96
- --------------------------------------------------------------------------------
80 1,114 1,592
- --------------------------------------------------------------------------------
Deferred:
Federal 639 655 (938)
Foreign (56) --- ---
State & Local 87 170 ---
- --------------------------------------------------------------------------------
670 825 (938)
- --------------------------------------------------------------------------------
TOTAL $ 750 $1,939 $ 654
================================================================================
Income (loss) before provision for income taxes and minority interest is as
follows (in thousands):
- --------------------------------------------------------------------------------
Years Ended May 31,
1996 1995 1994
- --------------------------------------------------------------------------------
Domestic $1,808 $5,073 $1,656
Foreign (161) (166) ---
- --------------------------------------------------------------------------------
TOTAL $1,647 $4,907 $1,656
================================================================================
A reconciliation between the statutory federal income tax rate and the
effective income tax rates is as follows:
- --------------------------------------------------------------------------------
Years Ended May 31,
1996 1995 1994
- --------------------------------------------------------------------------------
Statutory federal income tax rate 34.0% 34.0% 34.0%
State and local income taxes, net of
federal tax benefits 6.8 5.5 5.5
Foreign taxes 5.1 --- ---
Tax exempt interest (6.5) (0.7) (2.0)
Goodwill amortization 1.6 0.5 1.6
Other, net 4.5 0.2 0.4
- --------------------------------------------------------------------------------
Effective income tax rates 45.5% 39.5% 39.5%
================================================================================
<PAGE>
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 are as follows (in thousands):
- --------------------------------------------------------------------------------
Years Ended May 31,
1996 1995
- --------------------------------------------------------------------------------
Deferred Tax Liabilities:
Prepaid expenses $(95) $(77)
Deferred revenue (817) ---
Deferred state taxes (378) (284)
- --------------------------------------------------------------------------------
Total Deferred Tax Liabilities (1,290) (361)
- --------------------------------------------------------------------------------
Deferred Tax Assets:
Allowances for doubtful accounts
and amounts unbillable 575 610
Depreciation and amortization of intangibles 534 575
Employee benefits 1,678 1,490
Interest on tax audit --- 74
Claims reserves 1,030 958
Rental inducements 316 310
Other, net 475 332
- --------------------------------------------------------------------------------
Total Deferred Tax Assets 4,608 4,349
- --------------------------------------------------------------------------------
Net Deferred Assets $3,318 $3,988
================================================================================
The Company recorded no valuation allowance related to deferred taxes at May 31,
1996 and 1995. Management believes that the Company will be able to realize the
recorded balance of the net deferred tax assets through future taxable income.
Income taxes paid were as follows (in thousands):
1996 $1,069
1995 521
1994 2,449
Note 5 - Deposits and Other Assets
- ----------------------------------
Deposits and other assets consist of the following (in thousands):
- --------------------------------------------------------------------------------
May 31,
1996 1995
- --------------------------------------------------------------------------------
Goodwill and other intangibles, net of
accumulated amortization of $2,478 in 1996
and $2,069 in 1995 $4,189 $4,570
Deferred income taxes 1,844 1,753
Deposits and other 690 490
- --------------------------------------------------------------------------------
Total $6,723 $6,813
================================================================================
<PAGE>
Note 6 - Other Liabilities
- --------------------------
Other liabilities consist of the following (in thousands):
- --------------------------------------------------------------------------------
May 31,
1996 1995
- --------------------------------------------------------------------------------
Claims reserves $1,736 $1,564
Other liabilities --- 151
Long-term portion of capital
lease obligations 247 ---
- --------------------------------------------------------------------------------
Total $1,983 $1,715
================================================================================
Note 7 - Defined Contribution Pension Plan
- ------------------------------------------
The Company has a defined contribution pension plan that covers substantially
all of its employees. The Company's contributions to the plan are discretionary
and may be in the form of cash payments or the Company's common stock. The
amounts charged to operations for this plan were $633,000 for 1996, $739,000 for
1995, and $450,000 for 1994. The contributions for 1996, 1995 and 1994 were made
in the form of the Company's common stock.
Note 8 - Acquisitions
- ---------------------
The Company did not make any acquisitions in fiscal 1996.
In November 1994, the Company acquired 76.3% of the outstanding common stock of
Envirosciences Pty Limited ("EPL"), an Australian company, for cash, plus future
payments contingent on future earnings of EPL. EPL provides a wide range of
environmental services through a network of five offices located in the major
metropolitan areas of New South Wales and Queensland, Australia. This
acquisition was accounted for as a purchase and, accordingly, the results of
operations from the date of the acquisition have been included in the Company's
consolidated financial statements. Had this acquisition taken place on June 1,
1994, the Company's 1995 results of operations would not have been materially
different.
In May 1994, the Company acquired certain assets and assumed certain liabilities
of Alpha Engineering Group, Inc. ("Alpha"), a Washington corporation for cash
plus future payments, contingent on future earnings of the unit. Alpha provides
consulting services specializing in civil, transportation and municipal
engineering. In September 1993, the Company acquired the outstanding common
stock of Cross/Tessitore & Associates, Inc. ("CTA"), a Florida corporation, for
cash. CTA is a south Florida firm providing multidisciplinary expertise in air
quality management and air pollution control. These acquisitions were accounted
for as purchases and, accordingly, the results of operations from the dates of
acquisitions were included in the Company's consolidated financial statements.
Had these acquisitions taken place on June 1, 1993, the Company's 1994 results
of operations would not have been materially different.
The acquisitions completed in fiscal 1995, and 1994 were not material to the
Company's operations or financial position either individually or in the
aggregate in the year acquired.
<PAGE>
Note 9 - Common Stock
- ---------------------
Stock Option Plans - In July 1987, the Company adopted, and the shareholders
approved, the 1987 Stock Option Plan which provides for the granting of stock
options to employees and non-employee directors at no less than the fair market
value of the common stock on the grant date. A total of 525,000 shares of the
Company's common stock have been reserved for issuance under this plan.
In August 1988, the Company adopted the 1988 Stock Option and Restricted Stock
Option Plan which provides for the granting of stock options to employees. In
November 1989, the plan was amended to provide for the granting of options to
non-employee directors. Stock options may be incentive or non-statutory.
Non-statutory stock options may be restricted or non-restricted options. All
incentive stock options and non-restricted non-statutory stock options are to be
granted at no less than the fair market value of the common stock on the grant
date. Restricted stock options may be granted at a price determined by the Board
of Directors, but shall not be less than $1.00 per share. A total of 1,050,000
shares of the Company's common stock have been reserved for issuance under this
plan.
Under the Company's stock option plans, 648,625 options were exercisable at
May 31, 1996 at exercise prices ranging from $1.00 to $14.30.
- --------------------------------------------------------------------------------
Reserved Optioned Shares
but Number Range of
Unoptioned of Exercise
Shares Shares Prices
- --------------------------------------------------------------------------------
BALANCE MAY 31, 1993 532,750 843,750 $1.00 $15.25
- --------------------------------------------------------------------------------
Shares reserved 0
Options granted (397,000) 397,000 6.50 9.125
Options cancelled 111,000 (111,000) 7.00 15.25
Options exercised 0 0
- -------------------------------------------------------------------------------
BALANCE MAY 31, 1994 246,750 1,129,750 $1.00 $15.25
- --------------------------------------------------------------------------------
Shares reserved 0
Options granted (167,000) 167,000 5.50 7.25
Options cancelled 259,500 (259,500) 5.50 15.25
Options exercised 0 (4,000) 1.00 1.00
- --------------------------------------------------------------------------------
BALANCE MAY 31, 1995 339,250 1,033,250 $1.00 $14.30
- --------------------------------------------------------------------------------
Shares reserved 0
Options granted (57,000) 57,000 5.88 6.88
Options cancelled 79,250 (79,250) 5.50 14.13
Options exercised 0 (1,000) 1.00 1.00
- --------------------------------------------------------------------------------
BALANCE MAY 31, 1996 361,500 1,010,000 1.00 14.30
- --------------------------------------------------------------------------------
<PAGE>
Employee Stock Purchase Plan - The 1991 Employee Stock Purchase Plan (the 1991
Plan) was approved by the Company's Board of Directors and Shareholders. A total
of 150,000 shares of the Company's common stock had been originally reserved for
issuance pursuant to this plan at a price which is 85% of the stock's fair
market value, of which 149,432 shares have been purchased through fiscal 1996.
In November 1995 the Company's Shareholders approved an amendment authorizing an
additional 100,000 shares under the 1991 Plan; no shares had been issued against
this additional 100,000 shares as of May 31, 1996.
1995 Executive Stock Incentive Plan - In November 1995, the Company's
Shareholders approved a stock incentive plan which reserved 200,000 shares of
Common Stock of the Company to be awarded to selected executives of the Company
in lieu of regular or bonus compensation or in addition to regular or bonus
compensation. No shares were issued under this plan as of May 31, 1996.
Note 10 - Commitments and Contingencies
- ---------------------------------------
The Company leases certain premises under operating lease agreements, and
equipment under operating lease and capital lease agreements.
Equipment balances under capitalized lease arrangements net of accumulated
depreciation at May 31, 1996 amounted to $325.
Future minimum commitments under leasing arrangements at May 31,1996 were as
follows (in thousands):
1997 $113 $ 4,620
1998 134 3,334
1999 117 2,302
2000 28 1,711
2001 and thereafter -- 4,358
---- -------
Minimum commitments 392 $16,325
=======
Less amounts representing interest 64
Present value of minimum lease obligations 328
Less current portion of lease obligation
included in accrued expenses 81
----
Long term lease obligations included in
other liabilities at May 31,1996 $247
=====
Rental expense was $5.6 million in 1996, $5.5 million in 1995 and $5.1 million
in 1994. Lease terms expire between June 1996 and October 2004. Most leases
contain a renewal option at fair market value.
<PAGE>
The Company has a substantial number of U.S. Government contracts, under which
the costs are subject to audit. Management believes that the effect of
disallowed costs, if any, will not have a material adverse effect on the
financial position of the Company.
On May 19, 1995 the Company filed a lawsuit in Texas State Court, Harris County,
Texas, entitled Harding Lawson Associates, Inc. a wholly owned subsidiary of
Harding Associates, Inc., vs. Bailey Site Settlors Committee, an unincorporated
association, seeking collection of approximately $1.0 million in fees billed for
engineering services performed. On June 21, 1995, lawsuits were filed against
the Company in Federal District Court, Jefferson County, Texas and in Texas
State Court, Orange County, Texas, entitled Bailey Site Settlors Committee vs.
Harding Lawson Associates. The suit seeks monetary damages in the amount of $7.9
million for alleged breach of contract and negligence in the performance of
certain engineering services. The suits filed in Jefferson and Orange Counties
have been dismissed or stayed. Subsequently, a counterclaim containing similar
allegations was filed against the Company in the Harris County suit. The Company
believes it has meritorious defenses to these allegations. The Company is
currently subject to certain other claims and lawsuits arising in the ordinary
course of its business. In the opinion of management, adequate provision has
been made for all known liabilities that are currently expected to result from
these claims and lawsuits and in the aggregate such claims will not have a
material effect on the financial position of the Company. The estimates used in
establishing these provisions could differ from actual results. Should these
provisions change significantly, the effect on operations for any quarterly or
annual reporting period could be material.
Prior to May 1994, the Company was provided a professional liability insurance
policy through a wholly owned subsidiary of the Company, and as such, was self
insured for the liabilities covered by that policy. Currently, the Company is
provided a $5 million per occurrence professional liability and contractor's
pollution liability insurance policy through an unrelated, rated carrier. The
Company also maintains general liability insurance with an unrelated, rated
carrier.
<PAGE>
Note 11 - Selected Quarterly Financial Data (Unaudited)
- -------------------------------------------------------
The Company's fiscal quarters end on August 31, November 30, February 28, and
May 31. Selected quarterly financial data for fiscal 1996 and 1995 are
summarized as follows (in thousands, except per share data):
Quarterly Data
- --------------------------------------------------------------------------------
First Second Third Fourth
Quarter Quarter Quarter Quarter
- --------------------------------------------------------------------------------
YEAR ENDED MAY 31, 1996
Net revenue $22,708 $22,701 $20,237 $20,009
Operating income (loss) 1,356 1,375 (163) (1,729)
Net income (loss) 935 959 79 (1,020)
Net income (loss) per
common share $ 0.19 $ 0.20 $ 0.02 $ (0.21)
Weighted average shares
outstanding 4,804 4,871 4,866 4,865
- --------------------------------------------------------------------------------
YEAR ENDED MAY 31, 1995
Net revenue $23,011 $24,099 $22,169 $23,176
Operating income 1,452 1,450 536 1,157
Net income 890 908 376 798
Net income per common share $ 0.18 $ 0.19 $ 0.08 $ 0.17
Weighted average shares
outstanding 4,824 4,793 4,804 4,804
- --------------------------------------------------------------------------------
The Company recorded $1.4 million in expenses in the fourth quarter of fiscal
1996 associated with downsizing of certain operations.
<PAGE>
Report of Ernst & Young LLP, Independent Auditors
Shareholders and Board of Directors
Harding Lawson Associates Group, Inc.
Novato, California
We have audited the accompanying consolidated balance sheets of Harding Lawson
Associates Group, Inc. as of May 31, 1996 and 1995, and the related consolidated
statements of income, shareholders' equity, and cash flows for each of the three
years in the period ended May 31, 1996. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Harding
Lawson AssociatesGroup, Inc. at May 31, 1996 and 1995, and the consolidated
results of its operations and its cash flows for each of the three years in the
period ended May 31, 1996, in conformity with generally accepted accounting
principles.
/s/ Ernst & Young LLP
San Francisco, California
July 2, 1996
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information set forth under the caption "Proposal No. 1: Election of
Directors" under the sections entitled "General," "Security Ownership of
Management," "The Directors", and "Compliance with Section 16(a) of the
Securities Exchange Act of 1934" of the definitive Proxy Statement for the
Annual Meeting of Shareholders to be held on October 30, 1996, which is to be
filed pursuant to regulation 14A under the Securities Exchange Act of 1934 (the
"Proxy Statement"), is incorporated by reference.
ITEM 11. EXECUTIVE COMPENSATION.
The information set forth under the caption "Proposal No. 1: Election of
Directors -- Compensation of Directors and Executive Officers" of the Proxy
Statement is incorporated by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information set forth under the caption "Proposal No. 1: Election of
Directors" under the headings "Security Ownership of Management" and "Principal
Shareholders" of the Proxy Statement is incorporated by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information set forth under the caption "Proposal No. 1: Election of
Directors -- Certain Relationships and Related Transactions" of the Proxy
Statement is incorporated by reference.
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) (i) Consolidated Financial Statements
The following consolidated financial statements of the Company are included in
Item 8, above.
Consolidated Balance Sheets, May 31, 1996 and 1995
Consolidated Statements of Income for the years ended May 31, 1996, 1995, and
1994
Consolidated Statements of Shareholders' Equity for the years ended May 31,
1996, 1995, and 1994
Consolidated Statements of Cash Flows for the years ended May 31, 1996, 1995,
and 1994
Notes to Consolidated Financial Statements
Report of Independent Auditors
(ii) Financial Statement Schedules
All schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission are not required under the
related instructions or are inapplicable, and therefore have been omitted.
(iii) Exhibits
All of the Exhibits listed below, other than those marked with an
asterisk, were filed as Exhibits to (a) the Company's Registration Statement on
Form S-1 (Registration No. 33-15852), as filed with the Securities and Exchange
Commission (the "Commission") on July 16, 1987 (the Registration Statement) and
subsequently amended on August 14, 18, and 19, 1988, (b) the Company's 1988
Annual Report on Form 10-K, as filed with the Commission on August 28, 1988, or
(c) the Company's 1994 Annual Report on Form 10-K, as filed with the Commission
on August 25, 1994, and are incorporated herein by reference. Exhibits marked
with a single asterisk are attached as Exhibits to this Annual Report.
3.1 Restated Certificate of Incorporation of the Company, incorporated by
reference from amendment No. 1 to the Company's Registration Statement
on Form S-1 under the 1933 Act, Registration No. 33-15852, which was
filed with the Commission on August 14, 1987 ("Amendment No. 1"),
where it appears as Exhibit 3(a) thereto.
3.2* Amendment to Restated Certificate of Incorporation changing the
Company's name from Harding Associates, Inc. to Harding Lawson
Associates Group, Inc.
3.3 Bylaws of the Company, incorporated by reference from Amendment No. 1,
where they appear as Exhibit 3(c) thereto.
<PAGE>
10.1@ Harding Lawson Associates Group, Inc. 1987 Stock Option Plan,
incorporated by reference from the Company's 1988 Annual Report on
Form 10-K, as filed with the Commission on August 28, 1988 ("1988 Form
10-K"), where it appears as Exhibit 4(b) thereto.
10.2@ Harding Lawson Associates Group, Inc. revised 1988 Stock Option and
Restricted Stock Option Plan incorporated by reference from the
Company's 1994 Annual Report on Form 10-K, as filed with the
Commission on August 25, 1994 ("1994 Form 10-K"), where it appears as
Exhibit 10.2 thereto.
10.3* Amendment to the Harding Lawson Associates Group, Inc. 1991 Employee
Stock Purchase Plan.
10.4@ Amendment to the Non-Qualified Deferred Compensation Plan of the
Company (formerly referred to as the Non-Qualified Deferred Bonus Plan
II) incorporated by reference from the Company's 1995 Annual Report on
Form 10-K, as filed with the Commission on August 25, 1995 ("1995 Form
10-K"), where it appears as Exhibit 10.7 thereto.
10.5@ Employment Agreement between the Company and Donald L. Schreuder
dated June 29, 1994, incorporated by reference from the Company's 1994
Form 10-K.
10.6@ Form of Directors' and Officers' Indemnification Agreements,
incorporated by reference from the Registration Statement where it
appears as Exhibit 10(a) thereto.
10.7 Insurance policy issued to the Company by American International
Specialty Lines Insurance Company for the period May 1, 1994 to June
30, 1995, incorporated by reference from the 1994 Form 10-K, where it
appears as Exhibit 10.11 thereto.
10.8* Line of credit agreement with Wells Fargo
Bank, N.A. dated October 31, 1995. 10.9*@ 1995 Executive Stock
Incentive Plan approved by the Company's Shareholders in November
1995. 11.* Computation of Per Share Earnings. 21.* Subsidiaries of the
Registrant.
23.* Consent of Ernst and Young. 27.* Financial Data Schedule.
* Exhibits are attached to this Annual Report.
@ Management contracts and compensatory plans or arrangements required to be
filed as Exhibits in compliance with Item 14(a)(3).
The Company will provide a copy of any exhibit upon request and payment of the
Company's reasonable expenses of furnishing such exhibit.
(b) Reports on Form 8-K
Date of Report Item Reported
None
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
HARDING LAWSON ASSOCIATES GROUP, INC.
Date: August 29, 1996 By: /s/ Donald L. Schreuder
Donald L. Schreuder
President and Chief Executive Officer
Date: August 29, 1996 By: /s/ Gregory A. Thornton
Gregory A. Thornton
Vice President and Chief Financial Officer
(Principal Accounting Officer)
<PAGE>
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 the dates indicated.
/s/ James M. Edgar Director 8-25-96
James M. Edgar
/s/ Donald K. Stager Director 8-28-96
Donald K. Stager
/s/ Richard S. Harding Director and Chairman 8-21-96
Richard S. Harding Emeritus
Director
Adm. Stuart F. Platt (Ret.)
/s/ Richard D. Puntillo Chairman of the Board 8-28-96
Richard D. Puntillo
/s/ Donald L. Schreuder President, Chief Executive 8-29-96
Donald L. Schreuder Officer and Director
/s/ Barton W. Shackelford Director 8-28-96
Barton W. Shackelford
<PAGE>
Index to Exhibits
Exhibit No. Exhibit
3.2 Amendment to Restated Certificate of Incorporation
changing the Company's name from Harding
Associates, Inc. to Harding Lawson Associates
Group, Inc.
10.3 Amendments to the Harding Lawson Associates Group,
Inc. 1991 Employee Stock Purchase Plan.
10.8 Line of credit agreement with Wells Fargo Bank,
N.A. dated October 31, 1995.
10.9 1995 Executive Stock Incentive Plan approved by
the Company's shareholders in November 1995.
11. Computation of Per Share Earnings.
21. Subsidiaries of the Registrant.
23. Consent of Ernst and Young.
27. Financial Data Schedule (Electronic filing only)
Exhibit 3.2
CERTIFICATE OF AMENDMENT
OF
RESTATED CERTIFICATE OF INCORPORATION
* * * * *
Harding Associates, Inc., a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware, DOES HEREBY
CERTIFY:
FIRST: That the Board of Directors of Harding Associates, Inc. at a meeting
duly held on August 22, 1995, adopted a resolution proposing and declaring
advisable the following amendment to the Restated Certificate of Incorporation
of said corporation:
RESOLVED, that the Restated Certificate of Incorporation of Harding
Associates, Inc. be amended by changing the First Article thereof so that, as
amended, said Article shall be and read as follows:
The name of this Corporation is Harding Lawson Associates Group, Inc.
SECOND: That thereafter, pursuant to resolution of its Board of Directors,
the annual meeting of the stockholders of said corporation was duly called and
held on November 1, 1995 at which meeting the necessary number of shares as
required by statute were voted in favor of the amendment.
THIRD: That said amendment was duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
IN WITNESS WHEREOF, said Harding Associates, Inc. has caused this
certificate to be signed by Patricia A. England, its Secretary, this 2nd day of
November, 1995.
Harding Associates, Inc.
By /s/ Patricia A. England
Secretary
Exhibit 10.3
HARDING LAWSON ASSOCIATES GROUP, INC.
1991 EMPLOYEE STOCK PURCHASE PLAN
The following constitutes the provisions of the Harding Lawson Associates
Group, Inc. 1991 Employee Stock Purchase Plan:
1. Purpose.
The purpose of the Plan is to foster continued cordial employee
relations by providing employees of Harding Lawson Associates Group, Inc. and
Participating Subsidiaries with an opportunity to purchase Common Stock of
Harding Lawson Associates Group, Inc. through payroll deductions. It is the
intention of Harding Lawson Associates Group, Inc. that the Plan qualify as an
"Employee Stock Purchase Plan" under Section 423 of the Internal Revenue Code of
1986, as amended. The provisions of the Plan shall accordingly be construed so
as to extend and limit participation in a manner consistent with the
requirements of that section of the Code and the regulations promulgated
thereunder.
2. Definitions.
(a) "Board" means the Board of Directors of the Corporation.
(b) "Code" means the Internal Revenue Code of 1986, as amended.
(c) "Committee" means the committee designated by the Board to administer
this Plan.
(d) "Compensation" means the annualized biweekly pay of an Employee,
including salary deferrals under a 401(k) plan.
(e) "Corporation" means Harding Lawson Associates Group, Inc.
(f) "Employee" means any person, including an officer, customarily employed
for at least twenty hours per week and more than five months in a
calendar year by the Corporation or its Participating Subsidiaries.
(g) "Offering Period" shall have the meaning assigned in Section 4 hereof.
(h) "Option Grant Date" means the first business day of each Offering
Period under the Plan.
(i) "Participant" shall have the meaning assigned in Section 5 hereof.
(j) "Participating Subsidiary" means all wholly owned domestic subsidiaries
of the Corporation (determined by reference to Section 424 of the Code)
designated by the Board to be a participating subsidiary.
(k) "Plan" means the Harding Lawson Associates Group, Inc. 1991 Employee
Stock Purchase Plan.
(l) "Purchase Date" means the last business day of each Offering Period
under the Plan.
<PAGE>
3. Eligibility.
Any employee who is employed by the Corporation or its Participating
Subsidiaries on the first day of an Offering Period and who has continuously
been an Employee throughout the immediately preceding six calendar month period
shall be eligible to participate in the Plan during such Offering Period,
subject to the requirements of Section 5 hereof and the limitations imposed by
Section 423(b) of the Code.
4. Offering Period.
Absent action by the Board, there shall be two Offering Periods in each
calendar year, commencing on the first business days on or after July 1 and
January 1 and ending on the last business day of such six-month period. The
Board of Directors of the Corporation shall have the power to change the
duration of Offering Periods with respect to future offerings without
stockholder approval if such change is announced at least seven days prior to
the scheduled beginning of the first offering Period to be affected.
5. Participation.
(a) An eligible Employee may become a Participant in the Plan by
completing a subscription agreement authorizing payroll deduction in the form
provided by the Corporation and filing it with the Director of Human Resources
of the Corporation at the Corporation's principal offices located at 7655
Redwood Boulevard, Novato, California 94945 at least ten days prior to a new
Offering Period.
(b) Payroll deductions for a Participant shall commence with the first
payroll following the Option Grant Date and shall end with the Purchase Date of
the offering, unless sooner terminated by the Participant as provided in Section
10 hereof, or by the Corporation.
6. Payroll Deductions.
(a) At the time a Participant files his or her subscription agreement,
he or she shall elect to have payroll deductions made on each payday during the
Offering Period in an amount equal to (i) five dollars ($5.00) each pay period
or (ii) a fixed integral multiple of five dollars ($5.00) each pay period,
provided that the aggregate of such payroll deductions during the Offering
Period shall not exceed ten percent (10%) of the aggregate Compensation which he
or she would otherwise have received during said Offering Period, or such lesser
percent as the Board may set from time to time.
(b) All payroll deductions authorized by a Participant shall be
credited to his or her account under the Plan. A Participant may not make any
additional payments into such account.
(c) No interest shall accrue for the benefit of a Participant on
the payroll deductions of a Participant.
(d) A Participant may discontinue his or her participation in the
Plan as provided in Section 10 hereof.
<PAGE>
7. Grant of Option.
(a) On each Option Grant Date, each Participant in the Plan shall be
granted an option to purchase (at the per share option price) the number of
shares of the Corporation's Common Stock determined by dividing (i) fifteen
percent (15%) of the Participant's Compensation by (ii) eighty-five percent
(85%) of the fair market value of a share of the Corporation's Common Stock on
such Option Grant Date; but in no event shall such number be greater than the
amount permitted under Section 7(b) of this Plan. Fair market value of a share
of the Corporation's Common Stock shall be determined as provided in Section
7(c) herein.
(b) Exceptions. Any provisions of the Plan to the contrary notwith=
standing, no option shall be granted to an Employee which:
(i) would cause such Employee (or any other person
whose stock ownership would be attributed to such Employee pursuant to
Section 424(d) of the Code), immediately after the grant, to own shares
and/or hold outstanding options to purchase shares (under this Plan or
any other plan maintained by the Corporation or a subsidiary of the
Corporation) possessing five percent (5%) or more of the total combined
voting power or value of all classes of shares of the Corporation or of
any subsidiary of the Corporation; or
(ii) permits the Employee's rights to purchase shares
under all such "employee stock purchase plans" (as defined in Section
423 of the Code) of the Corporation and its subsidiaries to accrue
(i.e., become exercisable) at a rate which exceeds Twenty-Five Thousand
Dollars ($25,000) of the fair market value of such shares (determined
at the time such option is granted) for each calendar year in which
such option is outstanding at any time.
(c) The option price per share of such shares shall be the lower of:
(i) 85% of the fair market value of a share of the Corporation's Common Stock at
the Option Grant Date; or (ii) 85% of the fair market value of a share of the
Corporation's Common Stock at the Purchase Date. The fair market value of the
Corporation's Common Stock on said dates shall be the closing price on the
National Association of Securities Dealers Automated Quotation System for such
date, or if no sale is made on such date, the corresponding closing price on the
first preceding date on which the Corporation's Common Stock was sold.
(d) Any excess contributions remaining in the Employee's account after
the purchase of the shares on the Purchase Date will be held by the Corporation
and combined with the Employee's contributions in his or her account under the
Plan to be used to purchase shares in the next Offering Period.
8. Exercise of Option.
Unless a Participant withdraws from the Plan as provided in Section 10
hereof, and except as provided in Section 7(b) hereof, his or her option for the
purchase of shares will be exercised automatically for the number of whole
shares which the accumulated payroll deductions in his or her account could
purchase at the applicable option price on the Purchase Date. During his or her
lifetime, a Participant's option to purchase shares hereunder is exercisable
only by him or her.
<PAGE>
9. Restrictions on Resale; Delivery of Certificates.
Shares purchased under the Plan may not be sold, transferred or
assigned for six months after the Purchase Date. As promptly as practicable
after the Purchase Date of each Offering Period, the Corporation shall arrange
the delivery of shares to an escrow account or to a third party nominee with
book entry for individual accounts. Participants will receive prompt
confirmation of the shares purchased and information about their account
including procedures for transfer or delivery of their shares after the six
month holding period has lapsed.
10. Withdrawal; Termination of Employment.
(a) A Participant may withdraw all, but not less than all, of the
payroll deductions credited to his or her account under the Plan at any time
prior to the Purchase Date by giving written notice to the Corporation on a form
provided for such purpose. After receipt of his or her notice of withdrawal, all
of the Participant's payroll deductions credited to his or her account will be
paid to him or her promptly, his or her option for the current period will be
automatically cancelled, and no further payroll deductions for the purchase of
shares will be made during the Offering Period.
(b) Upon termination of the Participant's employment for any reason,
including retirement, permanent disability or death, the payroll deductions
credited to his or her account will be returned to him or her or, in the case of
his or her death, to the person or persons entitled thereto under Section 13
hereof, and his or her option will be automatically cancelled.
(c) A Participant's withdrawal from an offering will not have any
effect upon his or her eligibility to participate in a succeeding offering or in
any similar plan which may hereafter be adopted by the Corporation.
11. Stock.
(a) The maximum number of shares of the Corporation's Common Stock
which may be sold pursuant to options exercised under the Plan shall be 250,000
shares, subject to adjustment upon changes in capitalization of the Corporation
as provided in Section 16 hereof. The shares to be sold to Participants in the
Plan may be, at the election of the Corporation, either treasury shares or
shares authorized but unissued. In addition, the officers of the Corporation are
authorized to acquire shares of the Corporation's Common Stock in the open
market for resale under this Plan. If the total number of shares which would
otherwise be subject to options granted pursuant to Section 7(a) hereof at the
Option Grant Date exceeds the number of shares then available under the Plan
(after deduction of all shares for which options have been exercised or are then
outstanding), the Corporation shall make a pro rata allocation of the shares
remaining available for option grant in a uniform and equitable manner. In such
event, the Corporation may reduce the rate of payroll deductions as appropriate.
(b) The Participant will have no interest or voting right in shares
covered by his or her option until such option has been exercised.
(c) Shares to be delivered to a Participant under the Plan will be
registered in the name of the Participant or in the name of the Participant and
another person of legal age as joint tenants, with right of survivorship.
<PAGE>
12. Administration.
(a) The Plan shall be administered by the Board. The Board, however,
may at any time appoint a Committee and delegate to such Committee some or all
of the administrative powers possessed by the Board under the provisions of the
Plan. Members of the Committee shall serve for such term as the Board may
determine and shall be subject to removal by the Board at any time. The Board
may also at any time terminate the functions of the Committee and reassume all
powers and authority previously delegated to the Committee. Acts approved in
writing by a majority of the members of the Committee shall be valid acts of the
Committee. The Plan shall be administered in a manner that assures all
Participants the same rights and privileges.
(b) The administration, interpretation or application of the Plan by
the Board or its Committee shall be final, conclusive and binding upon all
Participants. Members of the Board or its Committee who are eligible Employees
are permitted to participate in the Plan.
(c) No member of the Board or its Committee shall be liable for any
action or determination made in good faith with respect to the Plan or any
option granted under it. In addition to such other rights of indemnification as
they may have as directors or as members of the Committee, the members of the
Committee shall be indemnified by the Corporation against the reasonable
expenses, including attorneys' fees actually and necessarily incurred in
connection with the defense of any action, suit or proceeding, or in connection
with any appeal therein, to which they or any of them may be a party by reason
of any action taken or failure to act under or in connection with the Plan or
any option granted thereunder, and against all amounts paid by them in
settlement thereof or paid by them in satisfaction of a judgment in any such
action, suit or proceeding, except in relation to matters as to which it shall
be adjudged in such action, suit or proceeding that such Committee member is
liable to the Corporation.
(d) All costs and expenses incurred in administering the Plan shall be
paid by the Corporation. The Board or the Committee, if any is appointed, may
request advice or assistance or employ such other persons as are necessary for
proper administration of the Plan.
13. Designation of Beneficiary.
(a) A Participant may file a written designation of a beneficiary who
is to receive any shares and cash, if any, from the Participant's account under
the Plan in the event of such Participant's death after the Purchase Date but
prior to delivery to him or her of such shares and cash. In addition, a
Participant may file a written designation of a beneficiary who is to receive
any cash from the Participant's account under the Plan in the event of such
Participant's death before the Purchase Date.
(b) Such designation of beneficiary may be changed by the Participant
at any time by written notice. In the event of the death of a Participant in the
absence of a valid designation of a beneficiary who is living at the time of
such Participant's death, the Corporation shall deliver such shares and/or cash
to the executor or administrator of the estate of the Participant.
<PAGE>
14. Transferability.
Neither the payroll deductions credited to a Participant's account nor
any rights with regard to the exercise of an option or to receive shares under
the Plan may be assigned, transferred, pledged or otherwise disposed of in any
way (other than by will, the laws of descent and distribution, or as provided in
Section 13 hereof) by the Participant. Any such attempt at assignment, transfer,
pledge or other disposition shall be void and without effect, except that the
Board or its Committee may treat such act as an election to withdraw funds in
accordance with Section 10 hereof.
15. Use of Funds.
All payroll deductions received or held by the Corporation under the
Plan may be used by the Corporation for any corporate purpose.
16. Changes in Capitalization.
In the event of any stock dividend, stock split, spin-off,
recapitalization, merger, consolidation, exchange of shares or the like, the
number of shares then subject to options previously granted and the number of
authorized shares remaining available to be sold shall be increased or decreased
appropriately, with such other adjustment as may be deemed necessary or
equitable by the Board.
17. Amendment.
The Board may at any time amend the Plan. No such amendment may make
any change in any option previously granted which adversely affects the rights
of any Participant without such Participant's consent, nor may an amendment be
made without prior or subsequent approval of the stockholders if such amendment
would:
(a) Materially increase the number of shares that may be
issued under the Plan (other than as provided in Section 16 above); or
(b) Materially modify the requirements as to eligibility for
participation in the Plan; or
(c) Materially increase the benefits accruing to Participants
under the Plan.
Approval of the stockholders may be obtained by the favorable vote of a
majority of the voting stock present or represented and entitled to vote at any
regular or special meeting of stockholders, or by the written consent of a
majority of the outstanding voting stock.
18. Termination.
The Board may at any time terminate the Plan. No such termination will
affect options previously granted.
19. Notices.
All notices or other communications by a Participant to the Corporation
in connection with the Plan shall be deemed to have been duly given when
received in the form specified by the Corporation at the location, or by the
person, designated by the Corporation for the receipt thereof.
<PAGE>
20. Government and Other Regulations.
The Plan, and the grant and exercise of the rights to purchase shares
hereunder, and the Corporation's obligation to sell and deliver shares upon the
exercise of rights to purchase shares, shall be subject to all applicable
federal, state and foreign laws, rules and regulations, and to such approvals by
any regulatory or government agency as may, in the opinion of counsel for the
Corporation, be required. Any amendments requiring stockholder approval shall
take effect only subject to such approval.
21. Effective Date of Plan.
The Plan shall become effective when adopted by the Board, but no
option to purchase granted under it shall be exercisable until the Plan has been
approved by the stockholders of the Corporation. Approval of the stockholders
may be obtained by the favorable vote of a majority of the voting stock present
or represented and entitled to vote at any regular or special meeting of
stockholders, or by the written consent of a majority of the outstanding voting
stock.
Exhibit 10.8
CREDIT AGREEMENT
THIS AGREEMENT is entered into as of October 31, 1995, by and between
HARDING ASSOCIATES, INC., a Delaware corporation ("Borrower"), and WELLS FARGO
BANK, NATIONAL ASSOCIATION ("Bank").
RECITAL
Borrower has requested from Bank the credit accommodations described below
(collectively, the "Credits"), and Bank has agreed to provide the Credits to
Borrower on the terms and conditions contained herein.
NOW, THEREFORE, for valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, Bank and Borrower hereby agree as follows:
ARTICLE I
THE CREDITS
SECTION 1.1. LINE OF CREDIT.
(a) Line of Credit. Subject to the terms and conditions of this Agreement,
Bank hereby agrees to make advances to Borrower from time to time up to and
including October 31, 1997, not to exceed at any time the aggregate principal
amount of Twenty Million and No/100 Dollars ($20,000,000.00) ("Line of Credit"),
the proceeds of which shall be used for short term working capital and other
general uses. Borrower's obligation to repay advances under the Line of Credit
shall be evidenced by a promissory note substantially in the form of Exhibit A
attached hereto ("Line of Credit Note"), all terms of which are incorporated
herein by this reference.
(b) Borrowing and Repayment. Borrower may from time to time during the term
of the Line of Credit borrow, partially or wholly repay its outstanding
borrowings, and reborrow, subject to all of the limitations, terms and
conditions contained herein or in the Line of Credit Note; provided however,
that the total outstanding borrowings under the Line of Credit shall not at any
time exceed the maximum principal amount available thereunder, as set forth
above.
(c) Prepayment. Borrower may prepay principal on the Line of Credit solely
in accordance with the provisions of the Line of Credit Note.
(d) Term Loan Subfeature. Subject to the terms and conditions of the Line
of Credit, Bank hereby agrees to convert advances under the Line of Credit to a
loan or series of loans to Borrower in the aggregate principal amount of TEN
MILLION AND NO/100 DOLLARS ($10,000,000.00) (each, a "Term Loan" and
collectively, the "Term Loans"). Borrower's obligation to repay each Term Loan
shall be evidenced by a promissory note substantially in the form of Exhibit B
attached hereto (each, a "Term Note" and collectively, the "Term Notes"), all
terms of which are incorporated herein by this reference. Bank's commitment to
grant Term Loans shall terminate on October 31, 1997. The principal amount of
each Term Loan shall be repaid in accordance with the provisions of the
respective Term Note and shall be amortized over a five (5) year term; provided
however, that no Term Loan shall have a maturity date occurring later than
October 31, 2002. Each Term Loan shall be in the minimum principal amount of
FIVE HUNDRED THOUSAND AND NO/100 DOLLARS ($500,000.00). The aggregate
outstanding principal balance of all Term Loans shall be reserved under the Line
of Credit and shall not be available for advances thereunder. Borrower may
prepay principal on the Term Loans solely in accordance with the provisions of
the Term Note.
<PAGE>
(e) Letter of Credit Subfeature. As a subfeature under the Line of Credit,
Bank agrees from time to time during the term thereof to issue stand-by letters
of credit for the account of Borrower to finance insurance and performance bond
requirements (each, a "Letter of Credit" and collectively, "Letters of Credit");
provided however, that the form and substance of each Letter of Credit shall be
subject to approval by Bank, in its sole discretion; and provided further, that
the aggregate undrawn amount of all outstanding Letters of Credit shall not at
any time exceed Five Million and No/100 Dollars ($5,000,000.00), provided
however, that no Letter of Credit shall have an expiration date subsequent to
April 30, 1998. The undrawn amount of all Letters of Credit shall be reserved
under the Line of Credit and shall not be available for borrowings thereunder.
Each Letter of Credit shall be subject to the additional terms and conditions of
the Letter of Credit Agreement and related documents, if any, required by Bank
in connection with the issuance thereof (each, a "Letter of Credit Agreement"
and collectively, "Letter of Credit Agreements"). Each draft paid by Bank under
a Letter of Credit shall be deemed an advance under the Line of Credit and shall
be repaid by Borrower in accordance with the terms and conditions of this
Agreement applicable to such advances; provided however, that if advances under
the Line of Credit are not available, for any reason whatsoever, at the time any
draft is paid by Bank, then the full amount of such draft shall be immediately
due and payable, together with interest thereon, from the date such amount is
paid by Bank to the date such amount is fully repaid by Borrower, at the rate of
interest applicable to advances under the Line of Credit. In such event Borrower
agrees that Bank, at Bank's sole discretion, may debit any demand deposit
account maintained by Borrower with Bank for the amount of any such draft.
SECTION 1.2. FOREIGN EXCHANGE FACILITY.
(a) Foreign Exchange Facility. Subject to the terms and conditions of this
Agreement, Bank hereby agrees to make available to Borrower a facility (the
"Foreign Exchange Facility") under which Bank, from time to time up to and
including October 31, 1997, will enter into foreign exchange contracts for the
account of Borrower for the purchase and/or sale by Borrower in United States
dollars of foreign currencies designated by borrower provided however, that the
maximum amount of all outstanding foreign exchange contracts shall not at any
time exceed an aggregate of One Million and No/100 United States Dollars
(US$1,000,000.00). No foreign exchange contract shall be executed for a term in
excess of three (3) months or for a term which extends beyond October 31, 1997.
Borrower shall have a "Delivery Limit" under the Foreign Exchange Facility not
to exceed at any time the aggregate principal amount of Three Hundred Thousand
and No/100 United States Dollars (US$300,000.00), which Delivery Limit reflects
the maximum principal amount of Borrower's foreign exchange contracts which may
mature during any two (2) day period. All foreign exchange transactions shall be
subject to the additional terms of a Foreign Exchange Agreement, substantially
in the form of Exhibit C attached hereto ("Foreign Exchange Agreement"), all
terms of which are incorporated herein by this reference.
(b) Settlement. Each foreign exchange contract under the Foreign Exchange
Facility shall be settled on its maturity date by Bank's debit to any demand
deposit account maintained by Borrower with Bank.
SECTION 1.3. INTEREST/FEES.
(a) Interest. The outstanding principal balance of the Line of Credit and
Term Loan(s) shall bear interest at the respective rates of interest set forth
in the Line of Credit Note and Term Note(s).
(b) Computation and Payment. Interest shall be computed on the basis of a
360-day year, actual days elapsed. Interest shall be payable at the times and
place set forth in the Line of Credit Note and Term Note(s) (collectively, the
"Notes").
<PAGE>
(c) Documentation Fee. Borrower shall pay to Bank a non-refundable
documentation fee for the Line of Credit equal to $40,000.00, which
documentation fee shall be due and payable in full upon execution of this
agreement.
(d) Letter of Credit Fees. Borrower shall pay to Bank (i) fees upon the
issuance of each Letter of Credit equal to one and one-quarter percent (1.25%)
per annum (computed on the basis of a 360-day year, actual days elapsed) of the
face amount thereof, (ii) fees upon the payment or negotiation by Bank of each
draft under any Letter of Credit equal to the greater of two percent (2%) of the
amount of such draft or $540.00 and (iii) fees upon the occurrence of any other
activity with respect to any Letter of Credit (including without limitation, the
transfer, amendment or cancellation of any Letter of Credit) determined in
accordance with Bank's standard fees and charges then in effect for such
activity.
SECTION 1.4. COLLECTION OF PAYMENTS. Borrower authorizes Bank to collect
all principal, interest and fees due under each Credit by charging Borrower's
demand deposit account number 4518-050042 with Bank, or any other demand deposit
account maintained by Borrower with Bank, for the full amount thereof. Should
there be insufficient funds in any such demand deposit account to pay all such
sums when due, the full amount of such deficiency shall be immediately due and
payable by Borrower.
SECTION 1.5. COLLATERAL. As security for all indebtedness of Borrower to
Bank pursuant to this Agreement, Borrower grants to Bank security interests of
first priority in all Borrower's accounts receivable and other rights to payment
and all proceeds of the foregoing. All of the foregoing shall be evidenced by
and subject to the terms of such security agreements, financing statements,
deeds of trust and other documents as Bank shall reasonably require, all in form
and substance satisfactory to Bank. Borrower shall reimburse Bank immediately
upon demand for all costs and expenses incurred by Bank in connection with any
of the foregoing security, including without limitation, filing and recording
fees and costs of appraisals, audits and title insurance.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
Borrower makes the following representations and warranties to Bank,
which representations and warranties shall survive the execution of this
Agreement and shall continue in full force and effect until the full and final
payment, and satisfaction and discharge, of all obligations of Borrower to Bank
subject to this Agreement.
SECTION 2.1. LEGAL STATUS. Borrower is a corporation, duly organized
and existing and in good standing under the laws of the State of Delaware, and
is qualified or licensed to do business (and is in good standing as a foreign
corporation, if applicable) in all jurisdictions in which such qualification or
licensing is required or in which the failure to so qualify or to be so licensed
could have a material adverse effect on Borrower.
SECTION 2.2. AUTHORIZATION AND VALIDITY. This Agreement, the Notes, and
each other document, contract and instrument required hereby or at any time
hereafter delivered to Bank in connection herewith (collectively, the "Loan
Documents") have been duly authorized, and upon their execution and delivery in
accordance with the provisions hereof will constitute legal, valid and binding
agreements and obligations of Borrower or the party which executes the same,
enforceable in accordance with their respective terms.
<PAGE>
SECTION 2.3. NO VIOLATION. The execution, delivery and performance by
Borrower of each of the Loan Documents do not violate any provision of any law
or regulation, or contravene any provision of the Articles of Incorporation or
By-Laws of Borrower or result in any breach of or default under any contract,
obligation, indenture or other instrument to which Borrower is a party or by
which Borrower may be bound.
SECTION 2.4. LITIGATION. There are no pending, or to the best of
Borrower's knowledge threatened, actions, claims, investigations, suits or
proceedings by or before any governmental authority, arbitrator, court or
administrative agency which could have a material adverse effect on the
financial condition or operation of Borrower other than those disclosed by
Borrower to Bank in writing prior to the date hereof.
SECTION 2.5. CORRECTNESS OF FINANCIAL STATEMENT. The financial
statement of Borrower dated May 31, 1995, a true copy of which has been
delivered by Borrower to Bank prior to the date hereof, (a) is complete and
correct and presents fairly the financial condition of Borrower, (b) discloses
all liabilities of Borrower that are required to be reflected or reserved
against under generally accepted accounting principles, whether liquidated or
unliquidated, fixed or contingent, and (c) has been prepared in accordance with
generally accepted accounting principles consistently applied. Since the date of
such financial statement there has been no material adverse change in the
financial condition of Borrower, nor has Borrower mortgaged, pledged, granted a
security interest in or otherwise encumbered any of its assets or properties
except in favor of Bank or as otherwise permitted by Bank in writing.
SECTION 2.6. INCOME TAX RETURNS. Borrower has no knowledge of any pending
assessments or adjustments of its income tax payable with respect to any year.
SECTION 2.7. NO SUBORDINATION. There is no agreement, indenture, contract
or instrument to which Borrower is a party or by which Borrower may be bound
that requires the subordination in right of payment of any of Borrower's
obligations subject to this Agreement to any other obligation of Borrower.
SECTION 2.8. PERMITS, FRANCHISES. Borrower possesses, and will hereafter
possess, all permits, franchises and licenses required and rights to all
trademarks, trade names, patents, and fictitious names, if any, necessary to
enable it to conduct the business in which it is now engaged in compliance with
applicable law.
SECTION 2.9. ERISA. Borrower is in compliance in all material respects with
all applicable provisions of the Employee Retirement Income Security Act of
1974, as amended or recodified from time to time ("ERISA"); Borrower has not
violated any provision of any defined employee pension benefit plan (as defined
in ERISA) maintained or contributed to by Borrower (each, a "Plan"); no
Reportable Event as defined in ERISA has occurred and is continuing with respect
to any Plan initiated by Borrower; Borrower has met its minimum funding
requirements under ERISA with respect to each Plan; and each Plan will be able
to fulfill its benefit obligations as they come due in accordance with the Plan
documents and under generally accepted accounting principles.
SECTION 2.10. OTHER OBLIGATIONS. Borrower is not in default on any
obligation for borrowed money, any purchase money obligation or any other
material lease, commitment, contract, instrument or obligation.
<PAGE>
SECTION 2.11. ENVIRONMENTAL MATTERS. Except as disclosed by Borrower to
Bank in writing prior to the date hereof, Borrower is in compliance in all
material respects with all applicable Federal or state environmental, hazardous
waste, health and safety statutes, and any rules or regulations adopted pursuant
thereto, which govern or affect any of Borrower's operations and/or properties,
including without limitation, the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, the Superfund Amendments and
Reauthorization Act of 1986, the Federal Resource Conservation and Recovery Act
of 1976, the Federal Toxic Substances Control Act and the California Health and
Safety Code, as any of the same may be amended, modified or supplemented from
time to time. None of the operations of Borrower is the subject of any Federal
or state investigation evaluating whether any remedial action involving a
material expenditure is needed to respond to a release of any toxic or hazardous
waste or substance into the environment. Borrower has no material contingent
liability in connection with any release of any toxic or hazardous waste or
substance into the environment.
ARTICLE III
CONDITIONS
SECTION 3.1. CONDITIONS OF INITIAL EXTENSION OF CREDIT. The obligation of
Bank to grant any of the Credits is subject to the fulfillment to Bank's
satisfaction of all of the following conditions: (a) Approval of Bank Counsel.
All legal matters incidental to the granting of each of the Credits shall be
satisfactory to Bank's counsel. (b) Documentation. Bank shall have received, in
form and substance satisfactory to Bank, each of the following, duly executed:
(i) This Agreement and the Notes; (ii) Corporate Borrowing Resolution; (iii)
Sweep Authorization Agreement; and (iv) Such other documents as Bank may require
under any other Section of this Agreement. (c) Financial Condition. There shall
have been no material adverse change, as determined by Bank, in the financial
condition or business of Borrower, nor any material decline, as determined by
Bank, in the market value of any collateral required hereunder or a substantial
or material portion of the assets of Borrower.
SECTION 3.2. CONDITIONS OF EACH EXTENSION OF CREDIT. The obligation of Bank
to make each extension of credit requested by Borrower hereunder shall be
subject to the fulfillment to Bank's satisfaction of each of the following
conditions: (a) Compliance. The representations and warranties contained herein
and in each of the other Loan Documents shall be true on and as of the date of
the signing of this Agreement and on the date of each extension of credit by
Bank pursuant hereto, with the same effect as though such representations and
warranties had been made on and as of each such date, and on each such date, no
Event of Default as defined herein, and no condition, event or act which with
the giving of notice or the passage of time or both would constitute such an
Event of Default, shall have occurred and be continuing or shall exist. (b)
Documentation. Bank shall have received all additional documents which may be
required in connection with such extension of credit.
ARTICLE IV
AFFIRMATIVE COVENANTS
Borrower covenants that so long as Bank remains committed to extend credit
to Borrower pursuant hereto, or any liabilities (whether direct or contingent,
liquidated or unliquidated) of Borrower to Bank under any of the Loan Documents
remain outstanding, and until payment in full of all obligations of Borrower
subject hereto, Borrower shall, unless Bank otherwise consents in writing:
SECTION 4.1. PUNCTUAL PAYMENTS. Punctually pay all principal, interest,
fees or other liabilities due under any of the Loan Documents at the times and
place and in the manner specified therein.
<PAGE>
SECTION 4.2. ACCOUNTING RECORDS. Maintain adequate books and records in
accordance with generally accepted accounting principles consistently applied,
and permit any representative of Bank, at any reasonable time, to inspect, audit
and examine such books and records, to make copies of the same, and to inspect
the properties of Borrower.
SECTION 4.3. FINANCIAL STATEMENTS. Provide to Bank all of the following, in
form and detail satisfactory to Bank: (a) not later than 120 days after and as
of the end of each fiscal year, an audited financial statement of Borrower,
prepared by an independent certified public accountant acceptable to Bank, to
include income statement, balance sheet, Incident of Loss Report and 10K's; (b)
not later than 60 days after and as of the end of each fiscal quarter, a
financial statement of Borrower, prepared by Borrower, to include income
statement, balance sheet, Incident of Loss Report and 10Q's; and (c) from time
to time such other information as Bank may reasonably request.
SECTION 4.4. COMPLIANCE. Preserve and maintain all licenses, permits,
governmental approvals, rights, privileges and franchises necessary for the
conduct of its business; and comply with the provisions of all documents
pursuant to which Borrower is organized and/or which govern Borrower's continued
existence and with the requirements of all laws, rules, regulations and orders
of any governmental authority applicable to Borrower and/or its business.
SECTION 4.5. INSURANCE. Maintain and keep in force insurance of the types
and in amounts customarily carried in lines of business similar to that of
Borrower, including but not limited to fire, extended coverage, public
liability, flood, property damage and workers' compensation, with all such
insurance carried with companies and in amounts satisfactory to Bank, and
deliver to Bank from time to time at Bank's request schedules setting forth all
insurance then in effect.
SECTION 4.6. FACILITIES. Keep all properties useful or necessary to
Borrower's business in good repair and condition, and from time to time make
necessary repairs, renewals and replacements thereto so that such properties
shall be fully and efficiently preserved and maintained.
SECTION 4.7. TAXES AND OTHER LIABILITIES. Pay and discharge when due any
and all indebtedness, obligations, assessments and taxes, both real or personal,
including without limitation Federal and state income taxes and state and local
property taxes and assessments, except such (a) as Borrower may in good faith
contest or as to which a bona fide dispute may arise, and (b) for which Borrower
has made provision, to Bank's satisfaction, for eventual payment thereof in the
event Borrower is obligated to make such payment.
SECTION 4.8. FINANCIAL CONDITION. Maintain Borrower's financial condition
as follows using generally accepted accounting principles consistently applied
and used consistently with prior practices, except to the extent modified by the
following definitions: (a) Current Ratio not at any time less than 1.5 to 1.0,
with "Current Ratio" defined as total current assets divided by total current
liabilities. (b) Working Capital not at any time less than $21,000,000.00, with
"Working Capital" defined as total current assets minus total current
liabilities. (c) Tangible Net Worth not at any time less than $26,000,000.00,
with "Tangible Net Worth" defined as the aggregate of total stockholders' equity
plus subordinated debt less any intangible assets. (d) Total Liabilities divided
by Tangible Net Worth not at any time greater than 1.0 to 1.0, with "Total
Liabilities" defined as the aggregate of current liabilities and non-current
liabilities less subordinated debt, and with "Tangible Net Worth" defined as the
aggregate of total equity plus subordinated debt less any intangible assets. (e)
EBITDA Coverage Ratio not less than 1.5 to 1.0 as of each fiscal year end, with
<PAGE>
"EBITDA" defined as net profit before tax plus interest expense (net of
capitalized interest expense), depreciation expense and amortization expense,
and with "EBITDA Coverage Ratio" defined as EBITDA divided by the aggregate of
total interest expense plus the prior period current maturity of long-term debt
and the prior period current maturity of subordinated debt. (f) Profitable
operations on an annual basis, with no two quarters of consecutive losses.
SECTION 4.9. NOTICE TO BANK. Promptly (but in no event more than five (5)
days after the occurrence of each such event or matter) give written notice to
Bank in reasonable detail of: (a) the occurrence of any Event of Default, or any
condition, event or act which with the giving of notice or the passage of time
or both would constitute an Event of Default; (b) any change in the name or the
organizational structure of Borrower; (c) the occurrence and nature of any
Reportable Event or Prohibited Transaction, each as defined in ERISA, or any
funding deficiency with respect to any Plan; or (d) any termination or
cancellation of any insurance policy which Borrower is required to maintain, or
any uninsured or partially uninsured loss through liability or property damage,
or through fire, theft or any other cause affecting Borrower's property.
ARTICLE V
NEGATIVE COVENANTS
Borrower further covenants that so long as Bank remains committed to extend
credit to Borrower pursuant hereto, or any liabilities (whether direct or
contingent, liquidated or unliquidated) of Borrower to Bank under any of the
Loan Documents remain outstanding, and until payment in full of all obligations
of Borrower subject hereto, Borrower will not without Bank's prior written
consent:
SECTION 5.1. USE OF FUNDS. Use any of the proceeds of any of the Credits
except for the purposes stated in Article I hereof.
SECTION 5.2. CAPITAL EXPENDITURES. Make any additional investment in fixed
assets in any fiscal year in excess of an aggregate of $7,000,000.00, except for
those acquired through mergers and acquisitions. Investments in fixed assets not
prohibited by this Section, and not made through mergers and acquisitions, shall
consist only of (a) cash purchases by Borrower (no financing) and/or (b)
purchases subject to purchase money security interests including capital lease
transactions.
SECTION 5.3. OTHER INDEBTEDNESS. Create, incur, assume or permit to exist
any indebtedness or liabilities resulting from borrowings, loans or advances,
whether secured or unsecured, matured or unmatured, liquidated or unliquidated,
joint or several, except the liabilities of Borrower to Bank and any other
liabilities of Borrower existing as of the date of this Agreement and previously
disclosed to Bank and except for stock option loans not in excess of an
aggregate of $1,000,000.00.
SECTION 5.4. INDEBTEDNESS OF WHOLLY OWNED SUBSIDIARIES. Permit wholly owned
subsidiaries of Borrower to create, incur, assume or permit to exist any
indebtedness or liabilities resulting from borrowings, loans, advances, whether
secured or unsecured, matured or unmatured, liquidated or unliquidated, joint or
several, except for working capital lines of credit with commercial banks to
wholly owned subsidiaries of Borrower not to exceed an aggregate principal
amount of $1,000,000.00.
SECTION 5.5. MERGER, CONSOLIDATION, TRANSFER OF ASSETS. Merge into or
consolidate with any corporation or other entity; make any substantial change in
nature of Borrower's business; acquire all or substantially all of the assets of
any corporation or other entity where such acquisition occurs on a "hostile"
basis (that is, not approved by the target company's board of directors).
<PAGE>
SECTION 5.6. GUARANTIES. Guarantee or become liable in any way as surety,
endorser, accommodation endorser or otherwise for, nor pledge or hypothecate any
assets of Borrower as security for, any liabilities or obligations of any other
person or entity other than a wholly owned subsidiary of Borrower not to exceed
an aggregate amount of $5,000,000.00.
SECTION 5.7. LOANS, ADVANCES, INVESTMENTS. Make any loans or advances to or
investments in any person or entity, except to various joint ventures or general
partnerships in which Borrower is a joint venturer or general partner in the
ordinary course of business.
SECTION 5.8. PLEDGE OF ASSETS. Mortgage, pledge, grant or permit to exist a
security interest in, or lien upon, all or any portion of Borrower's assets now
owned or hereafter acquired, except any of the foregoing in favor of Bank or
which is existing as of, and disclosed to Bank in writing prior to, the date
hereof.
ARTICLE VI
EVENTS OF DEFAULT
SECTION 6.1. The occurrence of any of the following shall constitute an
"Event of Default" under this Agreement: (a) Borrower shall fail to pay when due
any principal, interest, fees or other amounts payable under any of the Loan
Documents. (b) Any representation or warranty made by Borrower hereunder shall
prove to be incorrect in any material respect when made. (c) Any material
default in the performance of or compliance with any obligation, agreement or
other provision contained herein (other than those referred to in subsections
(a) and (b) above), and with respect to any such default which by its nature can
be cured, such default shall continue for a period of twenty (20) days from its
occurrence. (d) Any material default in the payment or performance of any
obligation, or any defined event of default, under the terms of any contract or
instrument (other than any of the Loan Documents) pursuant to which Borrower has
incurred any debt or other liability to any person or entity, including Bank.
(e) Any material default in the payment or performance of any obligation, or any
defined event of default, under any of the Loan Documents other than this
Agreement. (f) The filing of a notice of judgment lien against Borrower; or the
recording of any abstract of judgment against Borrower in any county in which
Borrower has an interest in real property; or the service of a notice of levy
and/or of a writ of attachment or execution, or other like process, against the
assets of Borrower; where such liens, levies and/or like processes exceed an
aggregate of ONE MILLION AND NO/100 DOLLARS ($1,000,000.00) and are not
satisfied, or discharged or stayed within ten (10) days from filing or
recordation thereof; or the entry of any judgement(s) against Borrower where
such judgement(s) exceed(s) an aggregate of FIVE MILLION AND NO/100 DOLLARS
($5,000,000.00) and is (are) not satisfied or discharged or stayed within 90
days from filing or recordation thereof. (g) Borrower shall become insolvent, or
shall suffer or consent to or apply for the appointment of a receiver, trustee,
custodian or liquidator of itself or any of its property, or shall generally
fail to pay its debts as they become due, or shall make a general assignment for
the benefit of creditors; Borrower shall file a voluntary petition in
bankruptcy, or seeking reorganization, in order to effect a plan or other
arrangement with creditors or any other relief under the Bankruptcy Reform Act,
Title 11 of the United States Code, as amended or recodified from time to time
("Bankruptcy Code"), or under any state or federal law granting relief to
debtors, whether now or hereafter in effect; or any involuntary petition or
proceeding pursuant to said Bankruptcy Code or any other applicable state or
federal law relating to bankruptcy, reorganization or other relief for debtors
is filed or commenced against Borrower, or Borrower shall file an answer
admitting the jurisdiction of the court and the material allegations of any
<PAGE>
involuntary petition; or Borrower shall be adjudicated a bankrupt, or an order
for relief shall be entered by any court of competent jurisdiction under said
Bankruptcy Code or any other applicable state or federal law relating to
bankruptcy, reorganization or other relief for debtors. (h) There shall exist or
occur any material event or condition which Bank in good faith believes,
impairs, or is substantially likely to materially impair, the prospect of
payment or performance by Borrower of its obligations under any of the Loan
Documents. (i) The dissolution or liquidation of Borrower; or Borrower, or any
of its directors, stockholders or members, shall take action seeking to effect
the dissolution or liquidation of Borrower. (j) Litigation loss estimates for
claims involving litigation against Borrower as reflected in Borrower's and/or
Redwood Insurance Ltd's (a Bermuda corporation and a wholly owned subsidiary of
Borrower) Incidence of Loss Report (currently shown by Borrower as "HLA
Reserves") shall at any time be estimated (based on a determination made by
Borrower's management and outside counsel) to exceed $7,500,000.00 as of the
most recent fiscal quarter's end.
SECTION 6.2. REMEDIES. Upon the occurrence of any Event of Default: (a) all
indebtedness of Borrower under each of the Loan Documents, any term thereof to
the contrary notwithstanding, shall at Bank's option and without notice become
immediately due and payable without presentment, demand, protest or notice of
dishonor, all of which are hereby expressly waived by Borrower; (b) the
obligation, if any, of Bank to extend any further credit under any of the Loan
Documents shall immediately cease and terminate; and (c) Bank shall have all
rights, powers and remedies available under each of the Loan Documents, or
accorded by law, including without limitation the right to resort to any or all
security for any of the Credits and to exercise any or all of the rights of a
beneficiary or secured party pursuant to applicable law. All rights, powers and
remedies of Bank may be exercised at any time by Bank and from time to time
after the occurrence of an Event of Default, are cumulative and not exclusive,
and shall be in addition to any other rights, powers or remedies provided by law
or equity.
ARTICLE VII
MISCELLANEOUS
SECTION 7.1. NO WAIVER. No delay, failure or discontinuance of Bank in
exercising any right, power or remedy under any of the Loan Documents shall
affect or operate as a waiver of such right, power or remedy; nor shall any
single or partial exercise of any such right, power or remedy preclude, waive or
otherwise affect any other or further exercise thereof or the exercise of any
other right, power or remedy. Any waiver, permit, consent or approval of any
kind by Bank of any breach of or default under any of the Loan Documents must be
in writing and shall be effective only to the extent set forth in such writing.
SECTION 7.2. NOTICES. All notices, requests and demands which any party is
required or may desire to give to any other party under any provision of this
Agreement must be in writing delivered to each party at the following address:
BORROWER: HARDING ASSOCIATES, INC.
7655 Redwood Boulevard
Novato, California 94945
Attn: Gregory A. Thornton
Vice President/Chief Financial Officer
<PAGE>
BANK: WELLS FARGO BANK, NATIONAL ASSOCIATION
San Francisco Regional Commercial Banking Office
420 Montgomery Street, 1st Floor
San Francisco, California 94163
Attn: Drew Metcalfe, Vice President
or to such other address as any party may designate by written notice to all
other parties. Each such notice, request and demand shall be deemed given or
made as follows: (a) if sent by hand delivery, upon delivery; (b) if sent by
mail, upon the earlier of the date of receipt or three (3) days after deposit in
the U.S. mail, first class and postage prepaid; and (c) if sent by telecopy,
upon receipt.
SECTION 7.3. COSTS, EXPENSES AND ATTORNEYS' FEES. Borrower shall pay to
Bank immediately upon demand the full amount of all payments, advances, charges,
costs and expenses, including reasonable attorneys' fees (to include outside
counsel fees and all allocated costs of Bank's in-house counsel), incurred by
Bank in connection with (a) the negotiation and preparation of this Agreement
and the other Loan Documents, Bank's continued administration hereof and
thereof, and the preparation of any amendments and waivers hereto and thereto,
(b) the enforcement of Bank's rights and/or the collection of any amounts which
become due to Bank under any of the Loan Documents, and (c) the prosecution or
defense of any action in any way related to any of the Loan Documents, including
without limitation, any action for declaratory relief, and including any of the
foregoing incurred in connection with any bankruptcy proceeding relating to
Borrower.
SECTION 7.4. SUCCESSORS, ASSIGNMENT. This Agreement shall be binding upon
and inure to the benefit of the heirs, executors, administrators, legal
representatives, successors and assigns of the parties; provided however, that
Borrower may not assign or transfer its interest hereunder without Bank's prior
written consent. Bank reserves the right to sell, assign, transfer, negotiate or
grant participations in all or any part of, or any interest in, Bank's rights
and benefits under each of the Loan Documents. In connection therewith, Bank may
disclose all documents and information which Bank now has or may hereafter
acquire relating to any of the Credits, Borrower or its business, or any
collateral required hereunder.
SECTION 7.5. ENTIRE AGREEMENT; AMENDMENT. This Agreement and the other Loan
Documents constitute the entire agreement between Borrower and Bank with respect
to the Credits and supersede all prior negotiations, communications, discussions
and correspondence concerning the subject matter hereof. This Agreement may be
amended or modified only by a written instrument executed by each party hereto.
SECTION 7.6. NO THIRD PARTY BENEFICIARIES. This Agreement is made and
entered into for the sole protection and benefit of the parties hereto and their
respective permitted successors and assigns, and no other person or entity shall
be a third party beneficiary of, or have any direct or indirect cause of action
or claim in connection with, this Agreement or any other of the Loan Documents
to which it is not a party.
SECTION 7.7. TIME. Time is of the essence of each and every provision of
this Agreement and each other of the Loan Documents.
SECTION 7.8. SEVERABILITY OF PROVISIONS. If any provision of this Agreement
shall be prohibited by or invalid under applicable law, such provision shall be
ineffective only to the extent of such prohibition or invalidity without
invalidating the remainder of such provision or any remaining provisions of this
Agreement.
<PAGE>
SECTION 7.9. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of California, except to the
extent Bank has greater rights or remedies under Federal law, whether as a
national bank or otherwise, in which case such choice of California law shall
not be deemed to deprive Bank of any such rights and remedies as may be
available under Federal law. IN WITNESS WHEREOF, the parties hereto have caused
this Agreement to be executed as of the day and year first written above.
HARDING ASSOCIATES, INC. WELLS FARGO BANK, NATIONAL
ASSOCIATION
By: __________________________ By: __________________________
Gregory A. Thornton Drew Metcalfe
Vice President/ Vice President
Chief Financial Officer
Exhibit 10.9
1995 EXECUTIVE STOCK INCENTIVE PLAN
Section 1. Purpose
This 1995 Executive Stock Incentive Plan (the "Plan") is intended as an
employment incentive and to encourage stock ownership by certain key officers
and employees (collectively, "Key Persons") of Harding Associates, Inc., a
Delaware corporation and its wholly owned domestic subsidiaries (collectively,
the "Company") so that they may increase their proprietary interest in the
success of the Company. In this way, the Company will be assisted in its efforts
to attract and retain highly qualified personnel and to further align the
executives' interest with that of the Company's stockholders.
Section 2. Administration
(a) The Plan shall be administered by the Compensation Committee (the
"Committee"), appointed by the Board of Directors from among the Directors,
consisting of not less than three members, each of whom shall be a
"disinterested person" within the meaning of Rule 16b-3 promulgated by the
Securities and Exchange Commission as in effect prior to May 1, 1991 ("Old Rule
16b-3"), and, effective upon the date when reliance on Old Rule 16b-3 is no
longer permitted, each member of the Committee shall be a "disinterested person"
within the meaning of Rule 16b-3, or such successor rule or regulation, as then
in effect.
(b) The Committee shall have full and complete authority in its discretion
to determine, among other things, the Key Persons to whom, and the time or times
at which, shares of the Company's common stock shall be awarded, the nature,
timing, price and size of such awards, and whether the awards shall be made in
lieu of regular compensation, bonus payments, or in addition thereto. The
Committee shall have full and complete authority to interpret the Plan, to
prescribe, amend, and rescind rules and regulations pertaining to it, and to
make all other determinations deemed necessary or desirable for the
administration of the Plan.
Section 3. Participation in the Plan
(a) Participation in the Plan shall be limited to such Key Persons as shall
from time to time be selected by the Committee.
(b) In determining the Key Persons to whom shares of the Company's common
stock shall be granted and the number of shares to be covered by each award, the
Committee shall take into consideration current position, current salary, value
of the services rendered and expected to be rendered to the Company,
recommendations of senior management, and other relevant factors.
(c) No member of the Board of Directors who is not also an officer or
employee of the Company shall be eligible to participate in the Plan.
Section 4. Common Stock Subject to the Plan
(a) The total number of shares of the authorized common stock of the
Company that may be issued pursuant to the Plan shall be 200,000 shares, and
such shares shall be reserved for that purpose. The stock to be awarded pursuant
to the Plan may be unissued shares or treasury shares.
<PAGE>
(b) In the event of changes in the number of shares of common stock of the
Company by reason of stock dividends, split ups, recapitalizations, mergers,
consolidations, combinations or exchanges of shares and the like, the Board of
Directors shall make such adjustments as shall be just and equitable in the
number of kind of shares reserved for award to Key Persons under the Plan and in
any other matters that relate to the stock awards and that are affected by the
changes referred to above.
Section 5. Securities Law Considerations
Neither the Plan nor the Company shall be obligated to issue any shares of
common stock pursuant to the Plan at any time unless and until all applicable
requirements imposed by any federal and state securities and other laws, rules
and regulations, by any regulatory agencies, or by any stock exchange upon which
the common stock may be listed, have been fully met. As a condition precedent to
any issuance of shares of common stock and delivery of certificates evidencing
such shares pursuant to the Plan, the Committee may require a Key Person to take
such action and to make any such representation as the Committee in its
discretion deems necessary or advisable to insure compliance with such
requirements. Key Persons are responsible for complying with all applicable
federal and state securities and other laws, rules and regulations in connection
with any offer, sale or other transfer of the shares of the common stock issued
pursuant to the Plan or any interest therein.
Section 6. Amendment
The Board of Directors has the right at any time and from time to time to
amend or modify the Plan, except that (a) no such amendment or modification
shall revoke or alter the terms of any stock award previously awarded in
accordance with the Plan, without the consent of the holder of the stock, and
(b) to the extent required for the Plan to comply or maintain compliance with
Old Rule 16b-3 or any successor rule or regulation, such amendment or
modification shall be subject to stockholder approval.
Section 7. Withholding Taxes
All taxes, if any, required to be withheld and payable with respect to the
award of stock will be deducted from the Key Person's salary. If at any time
such amounts are not adequate to cover taxes required to be withheld, the
participant shall make adequate and timely arrangement with the Company for the
payment of the excess as a condition of such award.
Section 8. Effectiveness of the Plan
The Plan shall become effective on the date the stockholders of the Company
approve the Plan by the affirmative votes of holders of a majority of the shares
present in person or represented by proxy and entitled to vote at a duly held
meeting of stockholders. The Plan will terminate ten (10) years after the
effective date unless sooner terminated by the Board.
Exhibit No. 11
HARDING LAWSON ASSOCIATES GROUP, INC.
COMPUTATION OF PER SHARE EARNINGS
(In thousands, except per share data)
Years Ended May 31,
1996 1995 1994
- --------------------------------------------------------------------------------
PRIMARY
Average shares outstanding 4,824 4,684 4,667
Net effect of dilutive stock options based
on the modified treasury stock method 27 122 184
- --------------------------------------------------------------------------------
TOTAL 4,851 4,806 4,851
================================================================================
Net income $ 953 $2,972 $1,002
================================================================================
Net income per common share $ 0.20 $ 0.62 $ 0.21
================================================================================
Exhibit No. 21
HARDING LAWSON ASSOCIATES GROUP, INC.
SUBSIDIARIES OF THE REGISTRANT
State or
Name Country of
Incorporation Doing Business Under
Harding Lawson Associates, Inc. Delaware Harding Lawson Associates, Inc.
Harding Lawson Associates Delaware Harding Lawson Associates
Infrastructure, Inc. Infrastructure, Inc.
Harding Lawson Associates Delaware Harding Lawson Associates
International, Inc. (formerly International, Inc.
Harding International, Inc.)
Harding Lawson Australia, Pty. Ltd. New South Harding Lawson Australia, Pty.
(wholly owned subsidiary of Wales, Ltd.
Harding Lawson Associates Australia
International, Inc.)
HLA-Envirosciences Pty Limited New South HLA-Envirosciences Pty Limited
(majority owned subsidiary of Wales,
Harding Lawson Australia, Australia
Pty. Ltd.)
Harding Lawson de Mexico S.A. City of Harding Lawson de Mexico S.A.
de C.V. (wholly owned subsidiary Mexico, de C.V.
Harding Lawson Associates Federal
International, Inc.) District
Grupo Industrial de Ingenieria City of GRIECO
Ecologica III, HLA & Iconsa S.A. Mexico,
de C.V. (majority owned subsidiary Federal
of Harding Lawson de Mexico S.A District
de C.V.)
Harding Lawson Singapore Pte Ltd Singapore Harding Lawson Singapore
Pte Ltd
HLA Venture, Inc. Delaware HLA Venture, Inc.
Harding Construction Services, Delaware (Dormant)
Inc.
Redwood Company, Ltd. Bermuda (Dormant)
Redwood Insurance, Ltd. Bermuda (Dormant)
(wholly owned subsidiary of
Redwood Company, Ltd.)
Integrated Software Systems, LLC Colorado Integrated Software Systems,
(Harding Lawson Associates, Inc. LLC
has a minority interest in LLC)
Exhibit No. 23
Consent of Ernst & Young LLP, Independent Auditors
We consent to the incorporation by reference in the Registration Statements on
Form S-8 dated April 15, 1988 pertaining to the 1987 Stock Option Plan; Form S-8
dated April 14, 1989, as amended on July 25, 1990 and December 24, 1991,
pertaining to the 1988 Stock Option and Restricted Stock Option Plan; Form S-8
dated June 5, 1996 pertaining to the Executive Stock Incentive Plan; Form S-8
dated April 17, 1988 pertaining to the Employee Stock Purchase Plan as amended
on December 24, 1991 and June 5, 1996; Form S-8 dated August 15, 1988 pertaining
to the Deferred Compensation and Profit Sharing Plan of Harding Lawson
Associates Group, Inc., of our report dated July 2, 1996, with respect to the
consolidated financial statements of Harding Lawson Associates Group, Inc.,
included in its Annual Report on Form 10-K for the year ended May 31, 1996.
San Francisco, California
August 23, 1996
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<FISCAL-YEAR-END> MAY-31-1996
<PERIOD-START> JUN-01-1995
<PERIOD-END> MAY-31-1996
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<ALLOWANCES> 1476
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<CURRENT-ASSETS> 49297
<PP&E> 21021
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0
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<COMMON> 48
<OTHER-SE> 44309
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